29
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Company X
Filed by a Party other than the Company 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 Company
(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 (the "Company"). The Meeting will
be held at TO BE DETERMINED, 1997, in the TO BE DETERMINED of the
TO BE DETERMINED, ____________., TO BE DETERMINED, Florida.
As you may recall, in a Proxy Statement dated January 29,
1997, Capston Network Company ("Capston") sought stockholder
approval of a financial restructuring plan for Webcor that
contemplated a 1 for 11.5879 reverse split and the issuance of a
90% equity interest in the Company to the stockholders of an
unidentified privately-held company. The plan proposed by Capston
was ultimately approved by the overwhelming majority of the
CompanyOs stockholders who voted on the proposal and Capston has
been actively seeking a business combination opportunity for the
Company since March 11, 1997.
As a result of negotiations with the management of several
potential acquisition candidates, Capston has determined that a
number of issues exist that will make it difficult to arrange a
suitable business combination transaction. First, while the
meeting was held in full compliance with the amended by-laws
adopted by Capston for purposes of the meeting, a full 50% quorum
of the stockholders was not present at the meeting in person or
by proxy and questions have been raised as to whether the one-
third quorum requirement of the amended by-laws was sufficient to
confirm the Plan. Second, the Plan establishes an arbitrary upper
limit on the number of shares that may be issued in connection
with a business combination transaction and Capston has
discovered that this Oone size fits allO approach results in
unreasonable expectations when it is negotiating with smaller
companies and does not provide sufficient flexibility when it is
negotiating with larger companies. Third, the reverse-split
contemplated by the Plan will result in a large number of Oodd
lotO stockholders (stockholders who own fewer than 100 shares)
who will not be counted as stockholders of record for purposes of
determining listing eligibility under new Nasdaq standards that
were adopted after the date of the original meeting. Finally, the
Plan does not provide a mechanism for the issuance of equity-
based incentives to the employees of an acquisition candidate in
connection with the completion of a business combination
transaction.
As a result of these discussions, Capston has developed a
revised plan (the "Revised 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. If this Revised Plan is successfully
implemented, you may be able to salvage some of the value that
your Webcor shares once represented. However, there can be no
assurance the Revised Plan will be approved by the Stockholders
or successfully implemented. Moreover, even if the Revised Plan
is approved and successfully implemented, there can be no
assurance that the value of your Webcor shares will increase. In
any event, Capston cannot go forward with the Revised Plan
without first obtaining stockholder approval. Therefore, it is
critically important that you read the enclosed Proxy Statement
and promptly mark your vote, sign and return your Proxy Card.
While the elements of the Revised Plan will be presented to
Stockholders as separate proposals, the Revised Plan is an
integrated whole and if all elements of the Revised Plan are not
approved, Capston intends to abandon the Revised Plan in its
entirety. The specific matters to be considered by the
Stockholders are:
1. To amend the CompanyOs by-laws to authorize the election of a
single-member Board of Directors and to elect Sally A.
Fonner, the president of Capston, to serve as the sole member
of the Board of Directors until the next Annual Meeting of
the Stockholders, or until her successor is elected and
qualified;
2. To consider and vote upon proposed an 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 1 share of new Common Stock for each 12
shares presently outstanding so that immediately thereafter
the Company will have approximately 300,000 shares issued and
outstanding;
3. To consider and vote upon a proposal to issue approximately
300,000 shares of Common Stock to persons designated by
Capston as compensation for services rendered and to be
rendered in connection with the implementation of the Plan;
4. To consider and vote upon a proposal which will give the
Board of Directors authority to pay an in-kind Finder's Fee
to unrelated third party finders who introduce the Company to
a suitable acquisition prospect.
5. To 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 an indeterminate number of
shares of Common Stock to unrelated third parties, all
without additional Stockholder approval, in connection with a
business combination transaction of the type contemplated by
the Plan; and
6. To consider and vote upon a proposal to adopt an Incentive
Stock Plan for the Company; and
7. To consider and vote upon a proposed Amendment to the
Company's Certificate of Incorporation that will increase the
authorized capital stock 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 YOUR VOTE, SIGN, DATE, AND RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED, SELF-ADDRESSED,
STAMPED ENVELOPE SO THAT THE PRESENCE OF A QUORUM MAY BE ASSURED
AND YOUR SHARES 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 Company
Sally A. Fonner, President
WEBCOR ELECTRONICS, INC.
1612 North Osceola Avenue
Clearwater, Florida 33755
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on _______, 1997
Notice is hereby given that a Special Meeting of the
Stockholders of Webcor Electronics, Inc., an inactive Delaware
corporation (the "Company"), will be held at TO BE DETERMINED,
______, 1997, in the TO BE DETERMINED of the TO BE DETERMINED.,
TO BE DETERMINED, Florida, for the following purposes:
1. To amend the CompanyOs by-laws to authorize the election of a
single-member Board of Directors and to elect Sally A.
Fonner, the president of Capston, to serve as the sole member
of the Board of Directors until the next Annual Meeting of
the Stockholders, or until her successor is elected and
qualified;
2. To consider and vote upon proposed an 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 1 share of new Common Stock for each 12
shares presently outstanding so that immediately thereafter
the Company will have approximately 300,000 shares issued and
outstanding;
3. To consider and vote upon a proposal to issue approximately
300,000 shares of Common Stock to persons designated by
Capston as compensation for services rendered and to be
rendered in connection with the implementation of the Plan;
4. To consider and vote upon a proposal which will give the
Board of Directors authority to pay an in-kind Finder's Fee
to unrelated third party finders who introduce the Company to
a suitable acquisition prospect.
5. To 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 an indeterminate number of
shares of Common Stock to unrelated third parties, all
without additional Stockholder approval, in connection with a
business combination transaction of the type contemplated by
the Plan; and
6. To consider and vote upon a proposal to adopt an Incentive
Stock Plan for the Company; and
7. To consider and vote upon a proposed Amendment to the
Company's Certificate of Incorporation that will increase the
authorized capital stock 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 _________, 1997, 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
_________, 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 33755.
If you do not expect to be present at the Meeting, please
mark your vote, sign and date the enclosed Proxy Card and return
it promptly in the enclosed stamped envelope which has been
provided for your convenience. The prompt return of Proxy Cards
will ensure the presence of a quorum and save Capston the expense
of further solicitation.
Clearwater, Florida By Order of Capston
Network Co.
________, 1997 Sally A. Fonner,
President
PROXY STATEMENT
This Proxy Statement is being mailed to all known
Stockholders of Webcor Electronics, Inc. ("Webcor" or the
"Company"), commencing on or about December __, 1997, in
connection with the solicitation by Capston Network Company
(OCapstonO) of proxies to be voted at a Special Meeting of
Stockholders (the OMeetingO) to be held in _________________,
Florida on ______, __, 1998, and at any adjournment thereof. The
Meeting has been called by Capston for the purpose of considering
a plan proposed by Capston (the ORevised PlanO) whereby the
Company will be restructured as a Oclean public shellO for the
purpose of effecting a business combination transaction with a
suitable privately-held company.
Introductory Note
In a Proxy Statement dated January 29, 1997, Capston Network
Company ("Capston") sought stockholder approval of a financial
restructuring plan for Webcor that contemplated a 1 for 11.5789
reverse split and the issuance of a 90% equity interest in the
Company to the stockholders of an unidentified privately-held
company (the OOriginal PlanO). The Original Plan was ultimately
approved by the overwhelming majority of the CompanyOs
stockholders who voted on the proposal and Capston has been
actively seeking a business combination opportunity for the
Company since March 11, 1997..
As a result of negotiations with the management of several
potential acquisition candidates, Capston has determined that a
number of issues exist that will make it difficult to arrange a
suitable business combination transaction. First, while the
meeting was held in full compliance with the amended by-laws
adopted by Capston for purposes of the meeting, a full 50% quorum
of the stockholders was not present at the meeting in person or
by proxy and questions have been raised as to whether the one-
third quorum requirement of the amended by-laws was sufficient to
confirm the Original Plan. Second, the Original Plan established
an arbitrary upper limit on the number of shares that may be
issued in connection with a business combination transaction and
Capston has discovered that this Oone size fits allO approach
results in unreasonable expectations when it is negotiating with
smaller companies and does not provide sufficient flexibility
when it is negotiating with larger companies. Third, the reverse-
split contemplated by the Original Plan will result in a large
number of Oodd lotO stockholders (stockholders who own fewer than
100 shares) who will not be counted as stockholders of record for
purposes of determining listing eligibility under new Nasdaq
standards that were adopted after the date of the Original
meeting. Finally, the Original Plan does not provide a mechanism
for the issuance of equity-based incentives to the employees of
an acquisition candidate in connection with the completion of a
business combination transaction.
As a result of these discussions, Capston has developed a
revised plan (the "Revised 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. If this Revised Plan is successfully
implemented, you may be able to salvage some of the value that
your Webcor shares once represented. However, Capston cannot go
forward with the Revised Plan without first obtaining stockholder
approval. Therefore, it is critically important that you read the
enclosed Proxy Statement and promptly mark your vote, sign and
return your Proxy Card.
Voting and Procedural Matters
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: (i) for the election of the
director nominee named herein; (ii) for a proposed 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 1 share of new Common Stock for each 12
shares presently outstanding; (iii) for ratification of a
proposal to issue approximately 300,000 shares of Common Stock to
persons designated by Capston as compensation for services
rendered and to be rendered in connection with the implementation
of the Revised Plan; (iv) for the ratification of a proposal
which will give the Board of Directors authority to pay an in-
kind Finder's Fee to unrelated third party finders who introduce
the Company to a suitable acquisition prospect, (v) for the
ratification of a proposal that will give the Board of Directors
discretionary authority to change the Company's name and issue an
indeterminate number of shares of Common Stock to unrelated third
parties in connection with a business combination transaction of
the type contemplated by the Revised Plan; (vi) for the proposal
to adopt an Incentive Stock Plan for the Company; (vii) for a
proposed Amendment to the Company's Certificate of Incorporation
that will increase the authorized capital stock to 25,000,000
shares of $0.01 par value Common Stock and 5,000,000 shares of
$0.01 par value Preferred Stock; and (viii) in the discretion of
such Proxies, for or against such other matters as may properly
come before the meeting. 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 ___________, there were issued, outstanding and
entitled to vote 3,476,370 shares of the CompanyOs common stock,
par value $.01 per share (the OCommon StockO). According to the
records of American Stock Transfer & Trust Company, the transfer
agent for the CompanyOs Common Stock, there are 779 record
holders entitled to vote at the meeting. Each share of Common
Stock entitles the holder to one vote on each matter presented
for consideration by the Stockholders. With the exception of
Capston, no Stockholder has indicated a pre-approval of the
proposals described in this Proxy Statement.
The proxy card provides space for a shareholder to withhold
voting for the nominee for the Board of Directors or to abstain
from voting for any proposal if the shareholder chooses to do so.
The election of a director will require a plurality of the votes
cast at the meeting and the proposed amendments to the
Certificate of Incorporation will require the affirmative vote of
a majority of the shares represented at the meeting in person or
by proxy. Each other matter to be submitted to the shareholders
requires the affirmative vote of a majority of the votes cast at
the meeting. For purposes of determining the number of votes cast
with respect to the proposed amendments to the Certificate of
Incorporation, abstentions, unless made by brokers, will be
counted as votes cast against the proposals. For purposes of
determining the number of votes cast with respect to any other
voting matter, only those cast OforO or OagainstO a proposal will
be included in the tabulation.
CONDUCT OF THE MEETING
At the date of this Proxy Statement, there are questions as
to whether Sally A. Fonner has been duly elected as the sole
director of the Company. Since Delaware law requires that
amendments to a corporationOs articles of incorporation be
proposed by the board of directors and then submitted to the
Stockholders for approval, Capston intends to call the Meeting to
order and request an immediate vote on, (i) the proposed
amendment to the CompanyOs by-laws that will authorize the
election of a single-member Board of Directors, and (ii) the
election of Sally A. Fonner to serve as the sole member of the
CompanyOs Board of Directors until the next annual meeting of the
Stockholders. If a Quorum is present at the Meeting and Ms.
Fonner is elected by the requisite Stockholder vote, the Meeting
will be adjourned for a brief period, Ms. Fonner will assume her
position as the sole director of the Company, the Board of
Directors will then consider the Revised Plan, recommend the
amendments described herein to the Stockholders and the Meeting
will be reconvened for the purpose of considering and voting on
the other proposals set forth herein. If a Quorum is not present,
the Meeting may be adjourned for up to 30 days to permit the
solicitation of additional proxies. If Capston is unable to
obtain sufficient proxies to constitute a Quorum, or if a Quorum
is present and Ms. Fonner is not elected by the requisite
Stockholder vote, then Capston will report the results of the
Meeting to the SEC and abandon all further efforts on behalf of
the Company.
SPECIAL INSTRUCTIONS FOR
BROKERAGE FIRMS, CUSTODIANS AND OTHER NOMINEES.
In connection with this Proxy Solicitation, Capston has made
every reasonable effort to ascertain the identities and mailing
addresses of the beneficial owners of shares of the CompanyOs
Common Stock that are held of record in Ostreet nameO or other
custodial accounts. With the assistance of American Stock
Transfer and Trust Co., Depository Trust Company and ADP Proxy
Services, all worthless securities positions have been restored
to the brokerage firms and other custodians who originally held
shares of the CompanyOs Common Stock on behalf of clients.
Nevertheless, past experience has demonstrated that brokerage
firms and custodians are not always able to readily identify and
communicate with the beneficial owners of securities that were
written off several years ago.
Based on its review of the SECOs Proxy Regulations, and
discussions with DTC, ADP and the Proxy Departments of several
large brokerage firms, Capston has concluded that the most
appropriate response from brokerage firms and other custodians
who hold shares of the CompanyOs Common Stock for the accounts of
unidentified or unlocatable clients will be to appear by Proxy
with respect to all shares held of record, and to refrain from
voting any shares of Common Stock that are held for the accounts
of unidentified or unlocatable clients. By following this
procedure, Capston believes that (i) the meeting will be less
likely to fail because of a lack of a Quorum, (ii) brokerage
firms and other custodians will not be required to exercise any
authority on behalf of unidentified or unlocatable clients, and
(iii) the ultimate decision making authority with respect to the
proposals set forth herein will be vested in a majority of the
identifiable and locatable owners of the CompanyOs Common Stock
who receive actual notice of the Meeting and vote on the
proposals set forth herein.
BROKERAGE FIRMS AND OTHER CUSTODIANS ARE URGED TO APPEAR BY PROXY
WITH RESPECT TO ALL SHARES OF THE COMPANYOS COMMON STOCK THAT ARE
HELD OF RECORD BY THEM, BUT TO REFRAIN FROM VOTING ANY SHARES OF
THE COMPANYOS COMMON STOCK THAT ARE HELD FOR THE ACCOUNT OF
UNIDENTIFIED OR UNLOCATABLE CLIENTS. THIS ACTION WILL HELP ASSURE
THE PRESENCE OF A QUORUM AND VEST THE ULTIMATE DECISION MAKING
AUTHORITY IN THOSE HOLDERS OF THE COMPANYOS COMMON STOCK WHO
RECEIVE ACTUAL NOTICE OF THE MEETING AND VOTE WITH RESPECT TO THE
PROPOSALS SET FORTH HEREIN.
Corporate Background Information
WEBCOR ELECTRONICS, INC. (the"Registrant") was incorporated
on December 3, 1971 under the laws of the State of Delaware. The
Company's business consisted of manufactuing and selling
cordless telephones, telephone accessories, electronic scales and
calculators. On April 8, 1982, the Company registered its stock
under Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act").The Registrant conducted an initial public
offering of its Common Stock in May, 1982 pursuant to a Form S-1
registration Statement under the Securities Act of 1933 (the
"Securities Act").
After pursuing its business for several years, the Registrant
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 (Brooklyn)
and designated as Case No. 89-10328. On October 16, 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 and the
trustee was discharged. 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, 1990. The Registrant has been totally inactive since
November 13, 1996.
During the pendancy of the Bankruptcy, the management of the
Registrant 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 the Registrant 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 CORP., 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 other Stockholder or former officer or director 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 the Registrant 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 Registrant has no assets, liabilities, management
or ongoing operations and has not engaged in any business
activities since February 1990, Capston believes that it may be
possible to recover some value for the Stockholders through the
adoption and implementation of a Revised Plan whereby the
Registrant 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 Registrant 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 Registrant
will incur significant costs and expenses, including the costs of
preparing the required business combination agreements and
related documents, the costs of preparing 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 Revised Plan is approved by the Stockholders, the
Registrant 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 Revised 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 Registrant, or to approve or disapprove the
terms of any business combination transaction that may be
negotiated by Capston on behalf of the Registrant. Consequently,
the Registrant'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 Registrant. Although Capston believes that the Registrant
will be able to enter into a business combination transaction
within 12 months after the approval of the Revised 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
Registrant will not restrict its search to any specific business,
industry or geographical location, and the Registrant 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
Registrant 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 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 Registrant will be able to
participate in only one business venture. This lack of
diversification should be considered a substantial risk inherent
in the Revised Plan because it will not permit the Registrant to
offset potential losses from one venture against gains from
another. Moreover, due to the Registrant's lack of any meaningful
financial, managerial or other resources, Capston believes the
Registrant 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.
Summary Description of Revised Plan
At the date of this Proxy Statement, the Company has
3,476,370 shares of Common Stock issued and outstanding. Since
Capston believes that (i) the owners of a Target Company will
ordinarily want to control at least 75% of the CompanyOs Common
Stock upon the completion of a business combination transaction,
and (ii) an ultimate capitalization in the 3,000,000 to 7,000,000
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 1 for 12 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 entity, and reduce the market
volatility of the Common Stock of the combined entity. These
factors, in turn, are expected to enhance the overall perception
of the Common Stock among institutional investors and brokerage
firms and enhance the combined entityOs ability to raise
additional equity capital. Accordingly, Capston will ask the
Stockholders to approve a proposed reverse split of all issued
and outstanding shares of Common Stock in the ratio of 1 share of
new Common Stock for each 12 shares presently outstanding so that
immediately thereafter the Company will have approximately
300,000 shares issued and outstanding.
No fractional shares will be issuable in conjunction with the
proposed 1 for 12 reverse split and all calculations that would
result in the issuance of a fractional share will be rounded up
to the next highest whole number. In addition, no Stockholder who
owned at least 100 shares of the CompanyOs Common Stock on the
Record Date for the Meeting will receive fewer than 100 shares as
a result of the proposed 1 for 12 reverse split and all
calculations that would result in the issuance of fewer than 100
shares to such a Stockholder will be rounded up to 100 shares.
THE REVERSE SPLIT PROCEDURES PROPOSED BY CAPSTON DO NOT TREAT
ALL STOCKHOLDERS EQUALLY AND ARE INHERENTLY UNFAIR. WHILE THESE
PROCEDURES ARE INTENDED TO MAXIMIZE THE NUMBER OF OROUND LOTO
STOCKHOLDERS AND FACILITATE FUTURE EFFORTS TO HAVE THE COMPANYOS
COMMON STOCK LISTED FOR TRADING ON THE NASDAQ SYSTEM OR AN
APPROPRIATE REGIONAL OR NATIONAL STOCK EXCHANGE, THERE CAN BE NO
ASSURANCE THAT THE COMPANY WILL EVER QUALIFY FOR SUCH A LISTING.
IF THE COMPANY IS ABLE TO CONCLUDE A BUSINESS COMBINATION OF THE
TYPE CONTEMPLATED BY THE REVISED PLAN, STOCKHOLDERS WHO OWN FEWER
THAN 1,100 SHARES OF STOCK WILL RECEIVE A GREATER PER SHARE
BENEFIT THAN STOCKHOLDERS WHO OWN MORE THAN 1,100 SHARES.
NOTWITHSTANDING THE FOREGOING, CAPSTON BELIEVES THAT THE
ADVANTAGES TO THE COMPANY OF HAVING A LARGE NUMBER OF OROUND LOTO
STOCKHOLDERS JUSTIFIES THE INEQUITABLE AND DISPROPORTIONATE
BENEFIT TO BE DERIVED BY THE COMPANYOS SMALL STOCKHOLDERS AT THE
EXPENSE OF THE COMPANYOS LARGE STOCKHOLDERS.
After reducing the number of outstanding shares to
approximately 300,000, the Revised Plan contemplates (i) the
issuance of approximately 300,000 additional shares to Capston;
(ii) the issuance of an indeterminate number of shares to the
owners of a Target Company (although it is anticipated that such
persons will ordinarily want to control at least 75% of the
CompanyOs Common Stock upon completion of a business combination
transaction); (iii) the payment of third-party findersO fees of
up to 5% of the number of shares issued to the owners of the
Target Company; and (iv) a change in the CompanyOs name to one
selected by the Target Company.
The determination of the number of shares to be issued in
connection with a business combination transaction is not an
exact science and entails a great deal of subjective business
judgment. In arriving at an optimal capital structure for a
business combination transaction, Capston will ordinarily
evaluate the strengths, weaknesses and growth potential of a
Target Company against similarly situated publicly-held companies
in the same market segment. Based on this analysis, Capston will
then attempt to estimate the stabilized market capitalization
that the Target Company can expect to achieve under reasonably
foreseeable circumstances. This value will then be risk weighted
by an appropriate factor and used to determine the number of
shares that can be issued by the Company if the goal is to reach
a target stabilized stock price of $5 to $10 per share. In the
case of a Target Company that can only reasonably expect a
stabilized market capitalization of $10 million to $15 million,
the number of shares issuable to the owners of the Target Company
will be much smaller than would be the case if the Target Company
could reasonably expect a stabilized market capitalization of $50
million to $75 million, or more. In any event, Capston does not
intend to enter into a transaction where it expects the
stabilized market price of the Common Stock to be less than $5
per share. There can be no assurance, however, that Capston will
be successful in meeting this performance benchmark, that its
subjective business judgments will prove to be accurate or that
its estimate of the stabilized market capitalization that a
Target Company can expect to achieve will prove to be reasonable.
The following table reflects the potential ownership of the
Existing Stockholders, Capston, the Target Company and the
Finders under several possible business combination scenarios:
75% to 80% to 90% to 95% to
Target Co.Target Co.Target Co.Target Co.
Stockholders Stockholders Stockholders
Stockholders
Existing Stockholders (estimated)300,000300,000300,000 300,000
Capston (estimated) 300,000 300,000 300,000 300,000
Target Company Stockholders1,800,0002,400,0005,400,00011,400,000
Finders EEE90,000 EE120,000 EE225,000EEE570,000
Total 2,490,000 3,120,000 6,225,00012,570,000
The potential business combination scenarios set forth above
are only intended to serve as examples of the range of business
combination transactions will be permissible under the Revised
Plan and it is possible that the final terms of a business
combination may fall outside of the range presented. Since
Capston has not yet identified a Target Company, or commenced any
discussions or negotiations with the owners thereof, it is
impossible to predict the ultimate structure of a future business
combination or to quantify the final interest of the Existing
Stockholders in the combined entity. Notwithstanding the
foregoing, CapstonOs interest in the combined entity will remain
approximately equal to the interest of the Existing Stockholders
and such interest may not be increased to the disadvantage of the
Existing Stockholders.
Acquisition Opportunities
In implementing a 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 existing
Stockholders of the Company will only own a small minority
interest in the combined entity. Moreover, in connection with the
acquisition transaction, all of the CompanyOs officers and
directors will ordinarily resign and be replaced by new officers
and directors without a vote of the existing Stockholders.
Capston does not intend to obtain the approval of the existing
Stockholders prior to consummating any acquisition or business
combination 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 combination transaction, although it
is expected that they will subsequently sell part or all of such
shares in open-market transactions.
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 resale 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 become 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 Otax freeO
reorganization under Sections 368 or 351 of the Internal Revenue
Code of 1986, as amended (the OCodeO). In order to obtain tax
free treatment under the Code, it will ordinarily 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 entity, which could
result in significant dilution in the ownership percentage 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 CompanyOs investigation of potential business
opportunities, Capston and its officers, directors and
consultants may meet personally with management and key
personnel, visit and inspect material facilities, obtain
independent analysis or verification of certain information
provided, check the references of management and key personnel,
and take other reasonable investigative measures, to the extent
of the CompanyOs limited resources and CapstonOs limited
expertise. The manner in which the Company participates in a
particular business opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and
other parties to the proposed transaction, and the relative
negotiating strength of the Company and such other parties.
With respect to any business combination negotiations,
Capston will ordinarily focus on the percentage of the Company
which the Target CompanyOs Stockholders would acquire in exchange
for their ownership interest in the Target Company. Depending
upon, among other things, the Target CompanyOs assets and
liabilities and the perceived future value of the combined
entityOs securities, the CompanyOs existing Stockholders will, in
all likelihood, only own a small minority interest in the
combined entity upon completion of the business combination
transaction. Therefore, any business combination effected by the
Company can be expected to have a significant dilutive effect on
the percentage ownership of the CompanyOs existing Stockholders.
Upon completion of a business combination transaction, there
can be no assurance that the combined entity will have sufficient
funds to undertake any significant business activities.
Accordingly, the combined entity may be required to either seek
additional debt or equity financing or obtain funding from third
parties, in exchange for which the combined entity might be
required to issue substantial additional equity securities. There
is no assurance that the combined entity will be able to obtain
additional financing on terms acceptable to its management.
It is anticipated that the investigation of various business
opportunities and the negotiation, drafting and execution of the
required business combination agreements, disclosure documents
and other instruments will require substantial management time
and attention and involve substantial costs for accountants,
attorneys and others. If a decision is made not to participate in
a particular business opportunity the costs incurred by the
Company in connection with the related investigation will not be
recoverable. Furthermore, even if an agreement is reached, the
failure to finalize and close on that agreement may result in the
complete loss of the related costs incurred by the Company.
NASDAQ Listing Requirements
In CapstonOs opinion, the Company and its Stockholders will
be better served by accepting a relatively small interest in a
large transaction, as opposed to a relatively large interest in a
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 larger companies are more likely to prosper than smaller
companies. Third, Capston believes that larger companies are
better suited to shell transactions than small companies.
Finally, Capston believes that a relatively business combination
transaction will be required to satisfy the minimum entry
standards for the NASDAQ Stock Market and other 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 Small Cap
Market:
Entry Standards for
NASDAQ Small Cap 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
Round Lot 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:
Entry Standards for
NASDAQ National Market System
Net Tangible Assets $6,000,000 $18,000,000 N/A
Market Capitalization N/A N/A$75,000,000, or
Total Assets N/A N/A$75,000,000 and
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
Round Lot Stockholders 400 400 400
Operating History (years) N/A 2 N/A
Since the size of the Target Company acquired by the Company
will, in large part, determine the market where the securities of
the combined entity will qualify for listing, Capston intends to
use all reasonable commercial efforts to identify and negotiate
with the largest possible business combination candidates.
Exemption from Rule 419
As a reporting issuer under the Exchange Act, the CompanyOs
proposed activities are not subject to SEC Rule 419 which was
adopted to strengthen the regulation of Oblind poolO 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.
Penny Stock Rules
Upon completion of a business combination transaction, the
stock of the combined entity may be governed by SEC rules for
OPenny StocksO (defined as Bulletin Board stocks that cost $5.00
or less per share and are issued by companies having less than
$5,000,000 in net tangible assets) which impose additional sales
practice burdens and requirements upon broker-dealers who sell
such securities to persons other than established customers and
accredited investors. Before effecting transactions covered by
the Penny Stock rules, a broker-dealer must make a special
suitability determination for each purchaser and receive the
purchaserOs written agreement to the transaction prior to the
sale. Consequently, the Penny Stock rules may affect the ability
of broker-dealers to effect market transactions in the stock of
the combined entity and also may affect the ability of persons
now owning or subsequently acquiring the stock of the combined
entity to resell such securities in any trading market that may
develop. Although the Company may have more than $5,000,000 in
net tangible assets after the completion of a business
combination transaction, which would exempt the stock of the
combined entity from the Penny Stock rules, there is no assurance
that the Company will ever be exempt from the Penny Stock rules.
Fees to Capston and Others
Expense Reimbursement to Capston. No cash compensation has
been paid or accrued to Capston or any of its officers or
directors to date. Under the Revised Plan, the Company will be
obligated to reimburse Capston for the actual out-of-pocket
expenses incurred in connection with the reinstatement of the
CompanyOs certificate of incorporation, the preparation and
filing of the CompanyOs reports under the Exchange Act and the
negotiation and consummation of a business combination
transaction. In addition to the direct expense reimbursement from
the Company, Capston will ordinarily attempt to negotiate a
Omerger and acquisition feeO or Onon-accountable expense
allowanceO of up to $150,000 that will be payable solely by the
Target Company or other parties to a business combination
transaction. The amount of such fees and/or expense allowances,
if any, will be subject to direct negotiation between Capston and
the Target Company or such other parties. Accordingly, it is
impossible to predict whether such fees and/or expense allowances
will be paid or to estimate the potential amount of such
payments. Neither the Company nor any of the existing
Stockholders will have any claim to or interest in any fees or
expense allowances that are paid to Capston by the owners of any
business opportunity. THE ORIGINAL PLAN PROPOSED BY CAPSTON DID
NOT SPECIFICALLY PERMIT CAPSTON TO NEGOTIATE FOR OR RECEIVE ANY
MERGER AND ACQUISITION FEES OR NON-ACCOUNTABLE EXPENSE ALLOWANCES
AND THIS ASPECT OF THE REVISED PLAN WILL PROVIDE AN ADDITIONAL
BENEFIT TO CAPSTON THAT WAS NOT SPECIFICALLY CONTEMPLATED IN THE
ORIGINAL PLAN.
Stock Issuance to Capston. Subject to Stockholder approval,
the Company intends file a Form S-8 Registration Statement under
the Securities Act to register approximately 300,000 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 Revised Plan. Therefore, if Capston is
successful in arranging a business combination for the Company,
approximately fifty percent (50%) of the net value derived by the
CompanyOs Stockholders will vest in Capston and its officers,
directors and Stockholders and the remaining fifty percent (50%)
will inure to the benefit of the existing Stockholders of the
Company. THE ORIGINAL PLAN PROPOSED BY CAPSTON PROVIDED FOR THE
ISSUANCE OF 200,000 SHARES TO PERSONS DESIGNATED BY CAPSTON,
RATHER THAN THE APPROXIMATELY 300,000 SHARES PROVIDED FOR IN THE
REVISED PLAN. THIS ASPECT OF THE REVISED PLAN WILL PROVIDE AN
ADDITIONAL BENEFIT TO CAPSTON.
FinderOs Fees. As is customary in the industry, the Company
may pay a finderOs fee 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 CompanyOs Board of Directors
and will be in accordance with the standards discussed herein.
FinderOs fees in business combination transactions are
customarily between 2% and 5% of the total transaction value,
based upon various factors. If the Revised Plan is approved by
Stockholders, Capston intends to offer a graduated findersO fee
schedule to unrelated third party finders who introduce the
Company to a suitable acquisition prospect. Under the formula
proposed by Capston, the finders will receive up to 2% of the
total transaction value on transactions of $2 million or less; 3%
of the total transaction value on transactions of $2 million to
$4 million; 4% of the total transaction value on transactions of
$4 million to $6 million; and 5% of the total transaction value
on transactions of more than $6 million. Since the Company does
not have sufficient financial resources to pay such a finderOs
fee in cash, it is anticipated that any finderOs fees will be
paid with shares of the CompanyOs Common Stock which may be
registered under the Securities Act prior to issuance.
Notwithstanding the foregoing, no finderOs fees will be paid to
Capston or any of its officers, directors, employees, agents or
affiliates without the prior consent of the Stockholders. THE
ORIGINAL PLAN PROPOSED BY CAPSTON PROVIDED FOR THE PAYMENT OF
GRADUATED FINDERS FEES THAT DECREASED AS THE TOTAL TRANSACTION
VALUE INCREASED. THIS ASPECT OF THE REVISED PLAN WILL PROVIDE AN
ADDITIONAL BENEFIT TO THE FINDERS WHO INTRODUCE THE COMPANY TO A
SUITABLE ACQUISITION CANDIDATE.
Other Stock Issuances. Certain attorneys and other advisors
retained to represent the Company or a Target Company in
connection with a business combination transaction may agree to
accept shares of the CompanyOs Common Stock as full or partial
payment for professional fees associated with services rendered
to the Company or the Target Company. Such shares, if any, will
ordinarily be registered under the Securities Act prior to
issuance. If shares of the CompanyOs Common Stock are used to pay
professional fees, the level of dilution incurred by the existing
Stockholders will be increased. THE ORIGINAL PLAN PROPOSED BY
CAPSTON DID NOT SPECIFICALLY PROVIDE FOR THE PAYMENT OF LEGAL AND
OTHER PROFESSIONAL FEES WITH STOCK OF THE COMPANY.
RISK FACTORS
The Revised Plan proposed by Capston involves a high degree
of risk. Stockholders should carefully consider the following
factors, among others, before executing the Proxy Card enclosed
herewith.
Arbitrary and Inequitable Reverse Split Procedures. THE
REVERSE SPLIT PROCEDURES PROPOSED BY CAPSTON DO NOT TREAT ALL
STOCKHOLDERS EQUALLY AND ARE INHERENTLY UNFAIR. WHILE THESE
PROCEDURES ARE INTENDED TO MAXIMIZE THE NUMBER OF OROUND LOTO
STOCKHOLDERS AND FACILITATE FUTURE EFFORTS TO HAVE THE COMPANYOS
COMMON STOCK LISTED FOR TRADING ON THE NASDAQ SYSTEM OR AN
APPROPRIATE REGIONAL OR NATIONAL STOCK EXCHANGE, THERE CAN BE NO
ASSURANCE THAT THE COMPANY WILL EVER QUALIFY FOR SUCH A LISTING.
IF THE COMPANY IS ABLE TO CONCLUDE A BUSINESS COMBINATION OF THE
TYPE CONTEMPLATED BY THE REVISED PLAN, STOCKHOLDERS WHO OWN FEWER
THAN 1,100 SHARES OF STOCK WILL RECEIVE A GREATER PER SHARE
BENEFIT THAN STOCKHOLDERS WHO OWN MORE THAN 1,100 SHARES.
NOTWITHSTANDING THE FOREGOING, CAPSTON BELIEVES THAT THE
ADVANTAGES TO THE COMPANY OF HAVING A LARGE NUMBER OF OROUND LOTO
STOCKHOLDERS JUSTIFIES THE INEQUITABLE AND DISPROPORTIONATE
BENEFIT TO BE DERIVED BY THE COMPANYOS SMALL STOCKHOLDERS AT THE
EXPENSE OF THE COMPANYOS LARGE STOCKHOLDERS.
Increased Compensation to Capston. THE ECONOMIC BENEFITS TO
BE DERIVED BY CAPSTON UNDER THE REVISED PLAN ARE SIGNIFICANTLY
GREATER THAN THE ECONOMIC BENEFITS PROVIDED FOR IN THE ORIGINAL
PLAN. FIRST, CAPSTON WILL RECEIVE 300,000 SHARES OF COMMON STOCK
INSTEAD OF THE 200,000 SHARES PROVIDED FOR IN THE ORIGINAL PLAN.
SECOND, CAPSTON WILL BE AUTHORIZED TO NEGOTIATE AND RETAIN A
MERGER AND ACQUISITION FEE OR NON-ACCOUNTABLE EXPENSE ALLOWANCE
OF UP TO $150,000 THAT WILL BE PAYABLE SOLELY BY THE TARGET
COMPANY OR OTHER PARTIES TO A BUSINESS COMBINATION TRANSACTION
AND NEITHER THE COMPANY NOR ANY OF THE EXISTING STOCKHOLDERS WILL
HAVE ANY CLAIM TO OR INTEREST IN ANY FEES OR EXPENSE ALLOWANCES
THAT ARE PAID TO CAPSTON BY THE OWNERS OF ANY BUSINESS
OPPORTUNITY. WHILE CAPSTON BELIEVES THAT THE INCREASED LEVELS OF
COMPENSATION ARE JUSTIFIED UNDER THE CIRCUMSTANCES, ANY
ADDITIONAL ECONOMIC BENEFIT DERIVED BY CAPSTON WILL REDUCE THE
POTENTIAL ECONOMIC BENEFIT TO THE EXISTING STOCKHOLDERS.
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
Revised 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 a Target
Company or that such business if acquired, will prove to be
profitable. Although Capston and its officers, directors and
consultants have had limited 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 Revised 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. Since Capston has not identified any specific
operating business for acquisition by the Company, Stockholders
will not ordinarily be afforded the opportunity to pass upon the
merits of any business opportunity that is ultimately selected by
Capston and, therefore, Stockholders must rely upon the abilities
of Capston and its officers, directors and consultants.
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 Revised 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. Since Capston has not identified, or taken any
steps toward the acquisition of, any specific operating business,
ownership of the Common Stock involves an extremely high degree
of risk. The Company's proposed business is, in fact, a Blind
Pool over which the Stockholders will have no meaningful control.
It is anticipated that under most circumstances Stockholders will
not be afforded the opportunity to evaluate the merits of a
proposed business combination transaction. Therefore,
Stockholders must rely upon Capston to identify an acquisition
target and negotiate the terms of a business combination
transaction. If Capston is successful in its efforts to identify
an acquisition target and negotiate the terms of a business
combination transaction, Stockholders will not ordinarily be
afforded the opportunity to vote or otherwise grant or withhold
consent to the proposed transaction. Moreover, in the event that
a business combination transaction is effected in the form of a
Oreverse takeoverO Stockholders and prospective investors will
not receive full Exchange Act disclosure relating to the business
and financial affairs of the target company until Webcor files
its Annual Report on Form 10-K for the year of the business
combination transaction. Accordingly, Stockholders must rely
upon the abilities of Capston and its officers, directors and
consultants. Nevertheless, the Company will be required to file
a Form 8-K to disclose limited information concerning the
acquisition, including financial information on the acquired
company, within 15 days after the closing of the acquisition.
Limited Assets of the Company. As of the date of this Proxy
Statement, the Company has no material assets and it is not
anticipated that the Company will acquire any substantial assets
other than the assets of a Target Company. 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 CompanyOs
operating costs, including the costs associated with maintaining
the CompanyOs status as a public company, complying with filing
requirements of the SEC, investigating and evaluating business
opportunities and negotiating and drafting the necessary business
combination documentation. 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
CapstonOs resources are insufficient, the Company may be required
to seek additional 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 and the CompanyOs 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 any business that
the Company might choose to acquire. Accordingly, the Company
will be required to retain outside professionals to assist it
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 significant 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 OshellsO, neither the Company nor Capston has
solicited any proposals regarding the CompanyOs potential
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.
Bankruptcy Law Considerations. The Company filed a voluntary
petition under Chapter 11 of the Bankruptcy Act on February 01,
1989 which was subsequently converted to a case under Chapter 7
on October 01, 1990 and closed November 13, 1996. While this
Bankruptcy proceeding resulted in the sale of all corporate
assets and the use of the proceeds therefrom to pay corporate
liabilities, it did not formally OdischargeO the unpaid balance
of the CompanyOs debts. While Capston believes that legal actions
to enforce unpaid obligations of the Company are now barred by
statutes of limitation which require that suits to enforce
obligations be instituted within a specified period of time, the
existence of the prior bankruptcy will make the Odue diligenceO
process more complex and may make it more difficult for Capston
to negotiate a business combination transaction on favorable
terms.
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 CompanyOs
Common Stock in exchange for the Target CompanyOs stock or
assets. The Corporation Law of Delaware requires the affirmative
vote of the holders of at least a majority of the outstanding
shares of a Delaware corporationOs 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, it is anticipated that Capston will
have complete control over the CompanyOs combination policies and
procedures. Capston does not intend to seek a fairness opinion
in connection with any business combination transaction.
Dilution Resulting from Combination. It is anticipated that
any entity which satisfies the CompanyOs combination suitability
standards will possess assets and other indicia of value
substantially greater than those of the Company. Consequently,
any business combination will almost certainly result in a
substantial dilution in the percentage ownership and voting power
of the CompanyOs existing Stockholders in the combined entity. In
the aggregate, the CompanyOs existing Stockholders will probably
own a small minority percentage of the combined entityOs voting
securities, with a concomitant reduction in their power to elect
directors and otherwise to influence management policies.
Likely Change in Control. The successful completion of a
business combination will likely result in a change of control
resulting from the issuance of a large number of shares of the
CompanyOs authorized and unissued Common Stock. Any such change
in control is also likely to result in the resignation or removal
of the CompanyOs current Officers and Directors. In such an
event, no assurance can be given as to the experience or
qualifications of successor management in the operation of the
business, assets or property of the combined entity, although it
is likely that successor management will have greater experience
in the business of the combined entity 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 a business combination of the type
contemplated by the Revised Plan. 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 that Capston and its
advisors are successful in identifying and evaluating a suitable
Target Company, the Company will in all likelihood be required to
issue shares of its Common Stock in a business combination
transaction. Since the issuance of additional Common Stock will
result in a dilution of the ownership interest of the CompanyOs
existing Stockholders, it is unlikely the Company will be capable
of negotiating more than one business combination transaction.
Consequently, the CompanyOs lack of diversification may subject
it to economic fluctuation within a particular industry in which
the Target Company 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, CapstonOs principal business involves the
restructuring of defunct public companies as clean public shells
for the purpose of effecting business combination transactions
with 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 Makers. The CompanyOs securities may be quoted on
NASDOs 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 CompanyOs securities and there is no
assurance that Capston or the Target Company 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 Revised Plan
is approved by the Stockholders, the CompanyOs 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 Revised Plan is approved by the
Stockholders, approximately 98% of the CompanyOs authorized
shares of Common Stock will be available for acquisition of a
business opportunity, future financing activities, and other
corporate purposes. The Revised Plan specifically contemplates
the issuance of 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 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.
Penny Stock Rules. Upon completion of a business combination
transaction, the stock of the combined entity may be governed by
SEC rules for OPenny StocksO (defined as Bulletin Board stocks
that cost $5.00 or less per share and are issued by companies
having less than $5,000,000 in net tangible assets) which impose
additional sales practice burdens and requirements upon broker-
dealers who sell such securities to persons other than
established customers and accredited investors. Before effecting
transactions covered by the Penny Stock rules, a broker-dealer
must make a special suitability determination for each purchaser
and receive the purchaserOs written agreement to the transaction
prior to the sale. Consequently, the Penny Stock rules may affect
the ability of broker-dealers to effect market transactions in
the stock of the combined entity and also may affect the ability
of persons now owning or subsequently acquiring the stock of the
combined entity to resell such securities in any trading market
that may develop. Although the Company may have more than
$5,000,000 in net tangible assets after the completion of a
business combination transaction, which would exempt the stock of
the combined entity from the Penny Stock rules, there is no
assurance that the Company will ever be exempt from the Penny
Stock rules.
ELECTION OF DIRECTOR
Since a full 50% quorum of the stockholders was not present
in person or by proxy at the original meeting, there are
questions as to whether Sally A. Fonner has been duly elected as
the sole director of the Company. Accordingly, it will be
necessary to appoint at least one person to serve as a director
of the Company, subject to the provisions of the by-laws of the
Company, until the next Annual Meeting of the Stockholders, and
until the election and qualification of a successor board of
directors. CapstonOs sole nominee for membership on the Board of
Directors is Ms. Sally A. Fonner, the sole Stockholder and
president of Capston. A brief account of Ms. FonnerOs 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. Ms. Fonner has been
engaged for the last two years in the complex area of financing
rehabilitation providers. Ms. Fonner presently serves as the sole
director of Arnox Corporation and Bio-Response, Inc. Each of
these companies is a publicly-held shell that has been re-
activated by Capston within the preceding 18 months pursuant to a
plan of reorganization that is substantially identical to the
Revised Plan described in this Proxy Statement. In addition, Ms.
Fonner and Capston have filed a substantially identical proxy
statement for Marci International Imports, Inc. and anticipates
that the Marci meeting will be conducted prior to the date of the
Webcor Meeting. While Capston is actively negotiating proposed
business combination agreements for Arnox and Bio-Response, and
evaluating potential acquistitions for Marci and Webcor none of
the proposed transactions has closed at the date of this Proxy
Statement, none of the potential transactions are probable at the
date of this proxy statement and there can be no assurance that
one or more of these companies will not ultimately compete with
the Company for a business opportunity.
Board and Committee Activity, Structure and Compensation. Ms.
Fonner will receive no compensation for serving on the Board of
Directors, although she will likely be allocated a substantial
portion of the Compensation Shares provided for in the Revised
Plan. After the completion of a business combination transaction,
directors who are not 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.
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 MS. FONNER UNLESS THE STOCKHOLDER VOTES AGAINST
MS. FONNER OR ABSTAINS FROM VOTING. SINCE CAPSTON HAS PROPOSED
THE REVISED PLAN AS AN INTEGRATED WHOLE, CAPSTON MAY ELECT TO
ABANDON THE REVISED PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE
REVISED 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
75% and 95% of the CompanyOs 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 appropriate 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 1 for 12 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 CompanyOs ability to raise additional equity capital,
and attract new market makers and institutional Stockholders.
No fractional shares shall be issuable in conjunction with
the proposed 1 for 12 reverse split and all calculations that
would result in the issuance of fractional shares will be rounded
up to the next highest whole number. In addition, no Stockholder
who owned at least 100 shares of the CompanyOs Common Stock on
the Record Date for the Meeting shall receive fewer than 100
shares as a result of the proposed 1 for 12 reverse split and all
calculations that would result in the issuance of fewer than 100
shares to a Stockholder will be rounded up to 100 shares. While
the provisions relating to the rounding-up of stock positions to
a minimum of 100 shares will result in a disproportionate benefit
to the holders of more than 100 but fewer than 1,100 shares of
the CompanyOs Common Stock, these provisions will maximize the
number of Oround-lotO holders and facilitate the subsequent
efforts of a Target Company to obtain a NASDAQ or Exchange
listing in the future.
THE REVERSE SPLIT PROCEDURES PROPOSED BY CAPSTON DO NOT TREAT
ALL STOCKHOLDERS EQUALLY AND ARE INHERENTLY UNFAIR. WHILE THESE
PROCEDURES ARE INTENDED TO MAXIMIZE THE NUMBER OF OROUND LOTO
STOCKHOLDERS AND FACILITATE FUTURE EFFORTS TO HAVE THE COMPANYOS
COMMON STOCK LISTED FOR TRADING ON THE NASDAQ SYSTEM OR AN
APPROPRIATE REGIONAL OR NATIONAL STOCK EXCHANGE, THERE CAN BE NO
ASSURANCE THAT THE COMPANY WILL EVER QUALIFY FOR SUCH A LISTING.
IF THE COMPANY IS ABLE TO CONCLUDE A BUSINESS COMBINATION OF THE
TYPE CONTEMPLATED BY THE REVISED PLAN, STOCKHOLDERS WHO OWN FEWER
THAN 1,100 SHARES OF STOCK WILL RECEIVE A GREATER PER SHARE
BENEFIT THAN STOCKHOLDERS WHO OWN MORE THAN 1,100 SHARES.
NOTWITHSTANDING THE FOREGOING, CAPSTON BELIEVES THAT THE
ADVANTAGES TO THE COMPANY OF HAVING A LARGE NUMBER OF OROUND LOTO
STOCKHOLDERS JUSTIFIES THE INEQUITABLE AND DISPROPORTIONATE
BENEFIT TO BE DERIVED BY THE COMPANYOS SMALL STOCKHOLDERS AT THE
EXPENSE OF THE COMPANYOS LARGE 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 CompanyOs
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 CompanyOs 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 OprivateO company.
Other than the decrease in the total shares to be
outstanding, no substantive changes are being made in the rights
of the holders of Common Stock. Accordingly, upon the Effective
Date of the 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 CompanyOs
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.
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 CompanyOs 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 CompanyOs 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 1 for 12 reverse split. Stockholders have no right under
Delaware law or the Certificate of Incorporation to dissent from
a reverse split.
The affirmative vote of the holders of a majority of all
shares of Common Stock represented at the Meeting, in person or
by proxy, will be required to approve the proposed 1 for 12
reverse split. All shares voted OFOR,O OAGAINSTO or OABSTAINO
with respect to the proposal will be treated as Votes Cast. As a
result, shares voted OABSTAINO will be treated as votes OAGAINSTO
the proposal. Broker non-votes will be counted for purposes of
determining the presence or absence of a Quorum for the
transaction of business, but will not be counted for purposes of
determining the number of Votes Cast with respect to this
proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED REVERSE
SPLIT. THE PROXY ENCLOSED HEREWITH WILL BE VOTED FOR THE PROPOSED
REVERSE SPLIT UNLESS THE STOCKHOLDER VOTES AGAINST THE PROPOSAL
OR ABSTAINS FROM VOTING. SINCE CAPSTON HAS PROPOSED THE REVISED
PLAN AS AN INTEGRATED WHOLE, CAPSTON MAY ELECT TO ABANDON THE
REVISED PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE REVISED PLAN
ARE NOT APPROVED BY THE STOCKHOLDERS.
ISSUANCE OF COMPENSATION SHARES
As part of the Revised Plan, Capston proposes to issue
approximately 300,000 shares of Common Stock (OCompensation
SharesO) to individuals designated by Capston as compensation for
services rendered in connection with the implementation of the
Revised Plan. The actual number of Compensation Shares to be
issued to CapstonOs designees will equal the lesser of 300,000,
or 100% of the number of shares held by the Existing Stockholders
after completion of the reverse split described elsewhere herein.
The purpose of this proposed grant of Compensation Shares is to
increase the personal stake of the grantees in the Company since
the CompanyOs long-term business objectives will be wholly-
dependent upon their efforts, expertise and abilities. THE
ORIGINAL PLAN PROPOSED BY CAPSTON PROVIDED FOR THE ISSUANCE OF
200,000 SHARES TO PERSONS DESIGNATED BY CAPSTON, RATHER THAN THE
APPROXIMATELY 300,000 SHARES PROVIDED FOR IN THE REVISED PLAN.
THIS ASPECT OF THE REVISED PLAN WILL PROVIDE AN ADDITIONAL
BENEFIT TO CAPSTON.
Subject to Stockholder approval, the Company intends to file
a Form S-8 Registration Statement to register the 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 Revised 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 fifty percent (50%) of
the net value derived by the CompanyOs Stockholders will vest in
Capston and its officers, directors and consultants and the
remaining fifty percent (50%) will inure to the benefit of the
existing Stockholders of the Company.
CapstonOs designees will recognize income for federal tax
purposes at the time the Compensation Shares are issued. In
general, the amount of ordinary income recognized will equal the
fair market value of the Compensation Shares on the date of
grant. Thereafter, gain or loss (if any) from a disposition of
Compensation Shares 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 represented and voting at the Meeting, in
person or by proxy, will be required to approve the proposed
issuance of approximately 300,000 compensation shares to persons
designated by Capston. Only shares voted OFORO or OAGAINSTO the
proposal will be treated as Votes Cast. Accordingly, abstentions
and broker non-votes will be counted for purposes of determining
the presence or absence of a Quorum for the transaction of
business, but will not be counted for purposes of determining the
number of Votes Cast with respect to this proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
ISSUANCE OF APPROXIMATELY 300,000 COMPENSATION SHARES. THE PROXY
ENCLOSED HEREWITH WILL BE VOTED FOR THE PROPOSED ISSUANCE OF
APPROXIMATELY 300,000 COMPENSATION SHARES UNLESS THE STOCKHOLDER
VOTES AGAINST THE PROPOSAL OR ABSTAINS FROM VOTING. SINCE CAPSTON
HAS PROPOSED THE REVISED PLAN AS AN INTEGRATED WHOLE, CAPSTON MAY
ELECT TO ABANDON THE REVISED PLAN IN ITS ENTIRETY IF ALL ELEMENTS
OF THE REVISED PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
APPROVAL OF FINDERSO FEES
As is customary in the industry, the Revised Plan
contemplates the payment of findersO fees to unrelated third
parties who introduce the Company to a suitable Target Company.
If any such fees are paid, they will be approved by the CompanyOs
Board of Directors and will be in conformity with the standards
discussed below.
FinderOs fees in business combination transactions are
customarily between 2% and 5% of the total transaction value,
based upon various factors. If the Revised Plan is approved by
Stockholders, Capston intends to offer a graduated findersO fee
schedule to unrelated third party finders who introduce the
Company to a suitable acquisition prospect. Under the formula
proposed by Capston, the finders may receive up to 2% of the
total transaction value on transactions of $2 million or less; 3%
of the total transaction value on transactions of $2 million to
$4 million; 4% of the total transaction value on transactions of
$4 million to $6 million; and 5% of the total transaction value
on transactions of more than $6 million. Since the Company does
not have sufficient financial resources to pay such a finderOs
fee in cash, it is anticipated that any finderOs fees will be
paid with shares of the CompanyOs Common Stock which may be
registered under the Securities Act prior to issuance.
Notwithstanding the foregoing, no finderOs fees will be paid to
Capston or any of its officers, directors, employees, agents or
affiliates without the prior consent of the Stockholders. THE
ORIGINAL PLAN PROPOSED BY CAPSTON PROVIDED FOR THE PAYMENT OF
GRADUATED FINDERS FEES THAT DECREASED AS THE TOTAL TRANSACTION
VALUE INCREASED. THIS ASPECT OF THE REVISED PLAN WILL PROVIDE AN
ADDITIONAL BENEFIT TO THE FINDERS WHO INTRODUCE THE COMPANY TO A
SUITABLE ACQUISITION CANDIDATE.
Stockholders Entitled to Vote and Vote Required.
The affirmative vote of the holders of a majority of all
shares of Common Stock represented and voting at the Meeting, in
person or by proxy, will be required to approve the proposed
finderOs fee formula. Only shares voted OFORO or OAGAINSTO the
proposal will be treated as Votes Cast. Accordingly, abstentions
and broker non-votes will be counted for purposes of determining
the presence or absence of a Quorum for the transaction of
business, but will not be counted for purposes of determining the
number of Votes Cast with respect to this proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
FINDERSO FEE FORMULA. THE PROXY ENCLOSED HEREWITH WILL BE VOTED
FOR THE PROPOSED FINDERSO FEE FORMULA UNLESS THE STOCKHOLDER
VOTES AGAINST THE PROPOSAL OR ABSTAINS FROM VOTING. SINCE CAPSTON
HAS PROPOSED THE REVISED PLAN AS AN INTEGRATED WHOLE, CAPSTON MAY
ELECT TO ABANDON THE REVISED PLAN IN ITS ENTIRETY IF ALL ELEMENTS
OF THE REVISED 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 as 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 Stockholders 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 Stockholders
of the privately-held company, those Stockholders 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 company
that wants to establish a public market for its stock can start
with an existing Stockholder 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 Stockholders and brokers associated
with the public company, the Stockholders 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 Stockholders 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.
While the business combination transaction contemplated by
the Revised Plan may be structured as a merger or consolidation,
Capston believes that the reverse takeover format will be most
attractive to potential acquisition targets. Accordingly, Capston
is seeking prior Stockholder authorization for a reverse takeover
transaction that will involve the issuance of an indeterminate
number of shares of Common Stock to the owners of the Target
Company.
In connection with a business combination transaction, it is
almost certain that management of the Target Company will require
the Company to change its name to one selected by the Board of
Directors or Stockholders of the Target Company. Since it is also
almost certain that the Stockholders of the Target Company will
possess sufficient voting power to cause the Company to change
its name after the acquisition, Capston is seeking prior
Stockholder authorization for a change in the CompanyOs name that
is (i) a negotiated element of a business combination transaction
of the type contemplated by the Revised Plan, and (ii)
communicated to all Stockholders of the Company as soon as
possible following the consummation of the Revised 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 represented
and voting at the Meeting, in person or by proxy, will be
required to authorize the issuance of an indeterminate number of
shares of Common Stock to unrelated third parties in connection
with a business combination transaction of the type contemplated
by the Revised Plan. Only shares voted OFORO or OAGAINSTO the
proposal will be treated as Votes Cast. Accordingly, abstentions
and broker non-votes will be counted for purposes of determining
the presence or absence of a Quorum for the transaction of
business, but will not be counted for purposes of determining the
number of Votes Cast with respect to this proposal.
Authorization of Name Change. The affirmative vote of the
holders of a majority of all shares of Common Stock represented
and voting at the Meeting, in person or by proxy is required to
authorize an amendment to the CompanyOs Certificate of
Incorporation to effect a Change in the CompanyOs name that is
(i) a negotiated element of a business combination transaction of
the type contemplated by the Revised Plan, and (ii) communicated
to all Stockholders of the Company as soon as possible following
the consummation of the Revised Plan. All shares voted OFOR,O
OAGAINSTO or OABSTAINO with respect to the proposal will be
treated as Votes Cast. As a result, shares voted OABSTAINO will
be treated as votes OAGAINSTO the proposal. Broker non-votes will
be counted for purposes of determining the presence or absence of
a Quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect
to this proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED STOCK
ISSUANCE AND NAME CHANGE AUTHORIZATIONS. THE PROXY ENCLOSED
HEREWITH WILL BE VOTED FOR THE PROPOSED AUTHORIZATIONS UNLESS THE
STOCKHOLDER VOTES AGAINST EITHER PROPOSAL OR ABSTAINS FROM
VOTING. SINCE CAPSTON HAS PROPOSED THE REVISED PLAN AS AN
INTEGRATED WHOLE, CAPSTON MAY ELECT TO ABANDON THE REVISED PLAN
IN ITS ENTIRETY IF ALL ELEMENTS OF THE REVISED 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, of which 3,476,370
shares of Common Stock are presently issued and outstanding.
Accordingly, there are approximately 16,523,630 authorized shares
of Common Stock that are both unissued and not reserved for
future issuance. After giving pro forma effect to the proposed 1
for 12 reverse split and the compensation share issuance
described above, there would be approximately 600,000 shares of
Common Stock issued and outstanding and approximately 19,400,000
authorized shares of Common Stock that are both unissued and not
reserved for future issuance.
Capston believes that the Company is likely to need
substantial additional financing in the future, although the
amount and timing of the CompanyOs future financing requirements
is not presently ascertainable, Capston believes that an increase
in the authorized capitalization of the Company is desirable to
facilitate the CompanyOs future financing activities.
Accordingly, Capston proposes to increase the authorized Common
Stock of the Company from 20,000,000 shares of $.01 par value to
25,000,000 shares of $.01 par value Common Stock and to authorize
the issuance of up to 5,000,000 shares of $.01 par value
Preferred Stock. Under this proposal, the relative rights and
limitations of the holders of Preferred and Common Stock would
remain unchanged.
The proposed capitalization structure of the Company has been
recommended by Capston to increase the general desirability of
the Company to a private entity. 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 CompanyOs 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 represented and
voting in person or by proxy at the Meeting will be required to
approve the proposed increase in the CompanyOs authorized Common
Stock. All shares voted OFOR,O OAGAINSTO or OABSTAINO with
respect to the proposal will be treated as Votes Cast. As a
result, shares voted OABSTAINO will be treated as votes OAGAINSTO
the proposal. Broker non-votes will be counted for purposes of
determining the presence or absence of a Quorum for the
transaction of business, but will not be counted for purposes of
determining the number of Votes Cast with respect to this
proposal.
Authorization of Preferred Stock. The affirmative vote of the
holders of a majority of all shares of Common Stock represented
and voting in person or by proxy at the Meeting will be required
to approve the proposed authorization of 5,000,000 shares of $.01
par value Preferred Stock. All shares voted OFOR,O OAGAINSTO or
OABSTAINO with respect to the proposal will be treated as Votes
Cast. As a result, shares voted OABSTAINO will be treated as
votes OAGAINSTO the proposal. Broker non-votes will be counted
for purposes of determining the presence or absence of a Quorum
for the transaction of business, but will not be counted for
purposes of determining the number of Votes Cast with respect to
this proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
INCREASES IN THE REGISTRANTOS AUTHORIZED COMMON AND PREFERRED
STOCK. THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN FAVOR OF BOTH
PROPOSALS UNLESS THE STOCKHOLDER VOTES AGAINST EITHER OF THE
PROPOSALS OR ABSTAINS FROM VOTING. SINCE CAPSTON HAS PROPOSED THE
REVISED PLAN AS AN INTEGRATED WHOLE, CAPSTON MAY ELECT TO ABANDON
THE REVISED PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE REVISED
PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
PROPOSED INCENTIVE STOCK PLAN
As part of the Plan, Capston proposes to adopt an Incentive
Stock Plan (the OIncentive Stock PlanO) for the benefit of the
employees that will be employed by the Company after the
completion of a business combination of the type contemplated by
the Plan. Capston and its officers, directors, affiliates,
attorneys and consultants will not be eligible for incentive
awards under the proposed Incentive Stock Plan. A copy of the
proposed Incentive Stock Plan appears as an Exhibit to this proxy
statement and is incorporated herein by this reference. The
following summary is qualified in its entirety by reference to
the text of such plan.
The proposed Incentive Stock Plan provides for the grant of
(i) non-qualified stock options, (ii) incentive stock options,
(iii) shares of restricted stock, (iv) shares of phantom stock
and (v) stock bonuses (collectively, OIncentive AwardsO). In
addition, the Incentive Stock Plan permits the grant of cash
bonuses payable when a participant is required to recognize
income for federal income tax purposes in connection with the
vesting of shares of restricted stock or the grant of a stock
bonus. Full-time employees of the Company and its subsidiaries,
including officers and employee directors, will be eligible to
participate in the Incentive Stock Plan.
The proposed Incentive Stock Plan will be administered by a
Compensation Committee of the Board of Directors (the
OCommitteeO), which will consist of two or more directors, each
of whom shall be a Odisinterested personO within the meaning of
Rule 16b-3(c)(2)promulgated under Section 16 of the Securities
Exchange Act of 1934, as amended. The Committee will determine
which employees receive grants of Incentive Awards, the type of
Incentive Awards and bonuses granted and the number of shares
subject to each Incentive Award. The Incentive Stock Plan does
not prescribe any specific factors to be considered by the
Committee in determining who is to receive Incentive Awards and
the amount of such awards.
The proposed Incentive Stock Plan will permit the grant of
incentive equity awards covering a presently indeterminate number
of shares of Common Stock. If the proposed Incentive Stock Plan
is approved by the stockholders, the total number of shares
available for future grant will be calculated immediately after
the closing of a business combination transaction and equal 10%
of the total numer of shares of Common Stock outstanding on that
date.
Capston believes that the adoption and approval of the
proposed Incentive Stock Plan will make the Company more
attractive to a potential business combination candidate and that
the proposed Incentive Stock Plan will allow the Company to
emphasize equity-based compensation in structuring compensation
packages for its future employees. Capston believes that an
emphasis on equity-based compensation will yield the greatest
benefit for the shareholders, as the employeeOs compensation will
be directly dependent on the return on shareholdersO investments.
The class of persons who will be eligible to receive awards
under the proposed Incentive Stock Plan is limited to full-time
employees of the Company and its subsidiaries. On the date
hereof, the Company has no employees who are eligible to receive
awards under the proposed Incentive Stock Plan and it is not
anticipated that any employees will become eligible for awards
until after the completion of a business combination transaction.
Beyond the requirement that all participants be full-time
employees of the Company and its subsidiaries, the Committee will
have absolute discretion in selecting the persons to whom awards
will be granted and the terms of such awards.
Subject to the terms of the Incentive Stock Plan, the
Committee will also determine the prices, expiration dates and
other material features of the Incentive Awards granted under the
Plan. The Committee may, in its absolute discretion, (i)
accelerate the date on which an option granted under the
Incentive Stock Plan becomes exercisable, (ii) accelerate the
date on which a share of restricted stock or phantom stock vests
and waive any conditions imposed by the Committee on the vesting
of a share of restricted stock and (iii) grant Incentive Awards
to a participant on the condition that the participant surrender
to the Company for cancellation such other Incentive Awards
(including, without limitation, Incentive Awards with higher
exercise prices) as the Committee specifies.
The Committee will have the authority to interpret and
construe any provision of the Incentive Stock Plan and to adopt
such rules and regulations for administering the Incentive Stock
Plan as it deems necessary. All decisions and determinations of
the Committee are final and binding on all parties. The Company
will indemnify each member of the Committee against any cost,
expenses or liability arising out of any action, omission or
determination relating to the Incentive Stock Plan, unless such
action, omission or determination was taken or made in bad faith
and without reasonable belief that it was in the best interest of
the Company.
The Board may at any time amend the Incentive Stock Plan in
any respect; provided, that without the approval of the CompanyOs
shareholders, no amendment may (i) increase the number of shares
of Common Stock that may be issued under the Incentive Stock
Plan, (ii) materially increase the benefits accruing to
individuals holding Incentive Awards, or (iii) materially modify
the requirements as to eligibility for participation in the
Incentive Stock Plan. A summary of the most significant features
of the Incentive Awards and the tax consequences to recipients
thereof follows.
Non-Qualified and Incentive Stock Options. The exercise price
of each incentive stock option (OISOO) granted under the
Incentive Stock Plan is the fair market value (as defined) of a
share of Common Stock of the Company on the date on which such
ISO is granted. The exercise price of each non-qualified stock
option(ONQOO) granted under the Incentive Stock Plan will be
determined by the Committee. NQOs and ISOs are referred to herein
as OOptions.O Except in certain limited cases regarding grants of
ISOs, each ISO and NQO is exercisable for a period not to exceed
ten years. For each Option, the Committee will establish (i) the
term of each Option and (ii) the time or period of time in which
the Option will vest. The exercise price shall be paid in cash
or, subject to the approval of the Committee, in shares of Common
Stock valued at their fair market value on the date of exercise.
Except in the event of the death or disability (as defined)
of an optionee or the termination of the employment of an
optionee for cause (as defined), Options are exercisable only
while an optionee is employed by the Company or within one month
after such employment has terminated to the extent that such
Options were exercisable on the last day of employment. In the
event of the death or disability of an optionee, Options are
exercisable within one year after such death or disability to the
extent that such Options were exercisable on the last day of
employment. In the event of the termination of the employment of
an optionee for cause, all Options held by such optionee
terminate immediately. Options are not transferable other than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order.
Upon a change in control of the Company (a OChange in
ControlO), all Options become immediately exercisable. The
Incentive Stock Plan defines Change in Control to mean (i) a
Ochange in controlO as that term is defined in the federal
securities laws, (ii) the acquisition by any person, after the
effective date of the Incentive Stock Plan, of 20% or more of the
shares of voting securities of the Company, (iii) certain changes
in the composition of the Board as a result of a contested
election for positions on the Board or (iv) any other event which
the Committee determines to constitute a change in control of the
Company.
An optionee will not recognize any income for federal tax
purposes at the time an NQO is granted, nor will the Company be
entitled to a deduction at that time. However, when any part of
an NQO is exercised, the optionee will recognize ordinary income
in an amount equal to the difference between the exercise price
of the NQO and the fair market value of the shares received, and
the Company will recognize a tax deduction in the same amount.
A participant will not recognize any income at the time an
ISO is granted, nor upon a qualified exercise of an ISO. If a
participant does not dispose of the shares acquired by exercise
of an ISO within two years after the grant of the ISO and one
year after the exercise of the ISO, the exercise is qualified and
the gain or loss (if any) on a subsequent sale will be a long-
term capital gain or loss. Such gain or loss is the sum of the
sales proceeds less the exercise price for the stock sold. The
Company is not entitled to a tax deduction as the result of the
grant or qualified exercise of an ISO.
Restricted Stock. A grant of shares of restricted stock
represents the promise of the Company to issue shares of Common
Stock of the Company on a predetermined date (the OIssue DateO)
to a participant, provided the participant is continuously
employed by the Company until the Issue Date. Vesting of the
shares occurs on a second predetermined date (the OVesting DateO)
if the participant has been continuously employed by the Company
until that date. Prior to the Vesting Date, the shares are not
transferable by the participant and are subject to a substantial
risk of forfeiture. The Committee may, at the time shares of
restricted stock are granted, impose additional conditions to the
vesting of the shares, such as, for example, the achievement of
specified performance goals. Vesting of some portion, or all, of
the shares of restricted stock may occur upon the termination of
the employment of a participant other than for cause, prior to
the Vesting Date. If vesting does not occur, shares of restricted
stock are forfeited. Upon the occurrence of a Change in Control,
all shares of restricted stock which have not vested or been
forfeited will vest automatically.
A participant will not recognize any income for federal tax
purposes at the time shares of restricted stock are granted or
issued, nor will the Company be entitled to a tax deduction at
that time. However, when either the transfer restriction or the
forfeiture risk lapses, such as upon vesting, the participant
will recognize ordinary income in an amount equal to the fair
market value of the shares of restricted stock on the date on
which they vest. If, however, a participant files an appropriate
election under Section 83 (b) of the Internal Revenue Code of
1986 with the IRS within 30 days of the Issue Date of the
restricted stock, the participant will be deemed to have received
ordinary income in an amount equal to the fair market value of
the shares of restricted stock on the date on which they are
issued (the OElectionO). Gain or loss (if any) from a disposition
of restricted stock after the participant recognizes any ordinary
income (whether by vesting or an Election) will generally
constitute short- or long-term capital gain or loss. The Company
will be entitled to a tax deduction at the time the participant
recognizes ordinary income on the restricted stock, whether by
vesting or an Election.
Phantom Stock. A share of phantom stock represents the right
to receive the economic equivalent of a grant of restricted
stock. Shares of phantom stock are subject to the same vesting
requirements as are shares of restricted stock. Upon vesting of a
share of phantom stock, the holder is entitled to receive cash in
an amount equal to the sum of (i) the fair market value of a
share of Common Stock as determined on the vesting date and (ii)
the aggregate amount of cash dividends paid in respect of a share
of Common Stock during the period commencing on the date of
grant, and ending on the vesting date. The cash payment for
phantom stock is treated the same as a cash bonus for federal
income tax purposes and creates a deduction to the Company when
paid. In addition, the value of a share of phantom stock (whether
or not vested) is paid immediately upon the occurrence of a
Change in Control of the Company. The Committee may not grant any
cash bonus in connection with the grant of shares of phantom
stock.
Stock and Cash Bonuses. Bonuses payable in stock may be
granted by the Committee and may be payable at such times and
subject to such conditions as the Committee determines. Upon the
receipt of a stock bonus, a participant will recognize ordinary
income for federal tax purposes in an amount equal to the fair
market value of the stock at the time it is received. The
Committee may grant, in connection with a grant of shares of
restricted stock, a cash OtaxO bonus, payable when an employee is
required to recognize income for federal income tax purposes with
respect to such shares. The tax bonus may not be greater than the
value of the shares of restricted stock at the time the income is
required to be recognized. Any such bonus will result in ordinary
income to the employee and a deduction to the Company. The grant
of a cash bonus shall not reduce the number of shares of Common
Stock with respect to which Options, shares of restricted stock,
shares of phantom stock or stock bonuses may be granted pursuant
to the Incentive Stock Plan.
In General. If any outstanding Option expires, terminates or
is canceled for any reason, the shares of Common Stock subject to
the unexercised portion of such Option shall again be available
for grants under the Incentive Stock Plan. If any shares of
restricted stock or phantom stock, or any shares of Common Stock
granted as a stock bonus are forfeited or canceled for any
reason, such shares shall again be available for grants under the
Incentive Stock Plan. Shares of Common Stock issued as a stock
bonus or on the exercise of options or on the vesting of a grant
of restricted stock are not available for future issuance under
the Incentive Stock Plan.
The Incentive Stock Plan provides for an adjustment in the
number of shares of Common Stock available to be issued under the
Incentive Stock Plan, the number of shares subject to Incentive
Awards, and the exercise prices of Options upon a change in the
capitalization of the Company, a stock dividend or spat, a merger
or combination of shares and certain other similar events. The
Incentive Stock Plan also provides for the termination of
Incentive Awards upon the occurrence of certain corporate events.
The Incentive Stock Plan provides that participants may elect
to satisfy certain federal income tax withholding requirements by
remitting cash to the Company. In addition, the Incentive Stock
Plan provides that, at the election of a participant, an
unrelated broker-dealer acting on behalf of the participant may
exercise Options granted to the participant and immediately sell
the shares acquired on account of the exercise to raise funds to
pay the exercise price of the Option and the amount of any
withholding tax which may be due on account of the exercise.
Shareholders Entitled to Vote and Vote Required for Approval.
The affirmative vote of the holders of a majority of all shares
of Common Stock represented and voting at the Meeting, in person
or by proxy, will be required to approve the proposed Incentive
Stock Plan. Only shares voted OFORO or OAGAINSTO the proposal
will be treated as Votes Cast. Accordingly, abstentions and
broker non-votes will be counted for purposes of determining the
presence or absence of a Quorum for the transaction of business,
but will not be counted for purposes of determining the number of
Votes Cast with respect to this proposal.
CAPSTON ASKS ALL SHAREHOLDERS TO APPROVE THE PROPOSED
INCENTIVE STOCK PLAN. THE PROXY ENCLOSED HEREWITH WILL BE VOTED
IN FAVOR OF THE PROPOSED INCENTIVE STOCK PLAN UNLESS THE
STOCKHOLDER VOTES AGAINST THE PROPOSAL OR ABSTAINS FROM VOTING.
SINCE CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE,
CAPSTON MAY ELECT TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL
ELEMENTS OF THE PLAN ARE NOT APPROVED BY THE SHAREHOLDERS.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
According to the records of American Stock Transfer & Trust
Company, the transfer agent for the CompanyOs Common Stock there
were 3,476,370 shares of the CompanyOs Common Stock issued and
outstanding on _________. The following table presents certain
information regarding the beneficial ownership of the CompanyOs
common stock by (i)each person known by the Capston to own
beneficially more than 5% of the outstanding shares of Common
Stock, (ii)each of the CompanyOs directors, and (iii) all
directors and officers as a group.
Name of Amount and Nature of Percent
Beneficial Owner (1) Beneficial Ownership of Class
Victor Reichenstein 985,507 27.00%
866 United Nations Plaza
Suite 307
New York, New York 10017
Capston Network Company 5,000 0.0014%
1612 N. Osceola Avenue
Clearwater, Fl
33755
The above information, with the exception of information relating
to the stock ownership of Capston, is taken the records of
American Stock Transfer & Trust Company, the transfer agent for
the CompanyOs Common Stock. The transfer agent and Capston have
no information which would indicate this information is not
accurate. Capston believes that each of the above-named
individuals has sole investment and voting power with regard to
the securities listed opposite his name.
ADDITIONAL INFORMATION
Additional materials enclosed herewith include (i) a copy of
the CompanyOs Annual Report on Form 10-K for the year ended
1997, as filed with the Securities and Exchange Commission
on June 25, 1997, a copy of the CompanyOs Quarterly Report on Form 10-
QSB for the period ended September 30, 1997, and (iii) a copy of
the proposed Incentive Stock Plan. The Form 10-K, Form 10-QSB and
proposed Incentive Stock Plan are incorporated herein by this
reference and all disclosures herein are qualified in their
entirety by reference to such documents.
This solicitation is being conducted by Capston on behalf the
Company. The cost of soliciting proxies will be advanced by
Capston and reimbursed by the Company if, as and when a suitable
business combination transaction is effected. The cost of this
solicitation including legal, accounting, printing, mailing and
other miscellaneous expenses are estimated at $20,000. To date,
CapstonOs out-of-pocket expenses have been approximately $3000.
There is no known opposition to the solicitation. 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.
Except as described under the caption OConduct of the MeetingO
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 -TO BE DETERMINED-
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 the Company WEBCOR ELECTRONICS,
INC. which the undersigned is entitled to vote at a special
meeting of Stockholders to be held at -TO BE DETERMINED-, in -TO
BE DETERMINED- and at any and all adjournments thereof:
1. FOR the proposed amendment to ARTICLE III, Section 1.
of the CompanyOs By-laws to permit a single-member Board
of Directors until such time as the total stockholdersO
equity of the Company exceeds $500,000;
nFOR nAGAINST nABSTAIN nBROKER
NON-VOTE
2. 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 nBROKER
NON-VOTE
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 12 shares
presently outstanding so that immediately thereafter
the Company will have approximately 300,000 shares of
Common Stock issued and outstanding;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
(b)To increase the authorized Common Stock of the
Company to 25,000,000 shares;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
(c)To increase the authorized Preferred Stock of the
Company to 5,000,000 shares;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
(d)To authorize the Board of Directors to change the
CompanyOs name without additional stockholder approval
in connection with a business combination transaction
of the type contemplated by the Revised Plan;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
3. PROPOSED COMPENSATION SHARE ISSUANCE. To approve the
issuance of approximately 300,000 shares of Common Stock
to persons designated by Capston as compensation for
services rendered in connection with the implementation
of the Revised Plan;
nFOR nAGAINST nABSTAIN nBROKER
NON-VOTE
4. TO consider and vote upon a proposal which will give
the Board of Directors authority to pay an in-kind
FinderOs Fee to unrelated third party finders who
introduce the Company to a suitable acquisition prospect;
nFOR nAGAINST nABSTAIN nBROKER
NON-VOTE
5. PROPOSED AUTHORIZATION OF STOCK ISSUANCE. To
authorize the Board of Directors to issue an
indeterminate number of shares of Common Stock to
unrelated third parties, all without prior stockholder
approval, in connection with a business combination of
the type contemplated by the Revised Plan;
nFOR nAGAINST nABSTAIN nBROKER
NON-VOTE
6. PROPOSED INCENTIVE STOCK PLAN. To approve the
proposed Incentive Stock Plan which will permit the grant
of incentive equity awards to eligible employees of the
Company.
nFOR nAGAINST nABSTAIN nBROKER
NON-VOTE
7. IN their discretion upon such other matters which may
properly come before the meeting and any adjournment
thereof.
nFOR nAGAINST nABSTAIN nBROKER
NON-VOTE
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.
___ I 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.
Webcor Electronics, Inc.
INCENTIVE STOCK PLAN
1. Purpose of the Plan
This Incentive Stock Plan is intended to promote the
interests of Webcor Electronics, Inc., a Delaware corporation
(the OCompanyO), by providing the employees of the Company, who
will be largely responsible for the management, growth and
protection of the business of the Company, with a proprietary
interest in the Company.
2. Definitions
As used in the Plan, the following definitions apply to the
terms indicated below:
(a)OBoard of DirectorsO shall mean the Board of Directors of
Webcor Electronics, Inc., a Delaware corporation.
(b)OCause,O when used in connection with the termination of
a ParticipantOs employment with the Company, shall mean the
termination of the ParticipantOs employment by the Company by
reason of (i) the conviction of the Participant by a court of
competent jurisdiction as to which no further appeal can be taken
of a crime involving moral turpitude; (ii) the proven commission
by the Participant of an act of fraud upon the Company; (iii) the
willful and proven misappropriation of any funds or property of
the Company by the Participant; (iv) the willful, continued and
unreasonable failure by the Participant to perform duties
assigned to him and agreed to by him; (v) the knowing engagement
by the Participant in any direct, material conflict of interest
with the Company without compliance with the CompanyOs conflict
of interest policy, if any, then in effect; (vi) the knowing
engagement by the Participant, without the written approval of
the Board of Directors of the Company, in any activity which
competes with the business of the Company or which would result
in a material injury to the Company; or (vii) the knowing
engagement in any activity which would constitute a material
violation of the provisions of the CompanyOs Policies and
Procedures Manual, if any, then in effect.
(c)OCash BonusO shall mean an award of a bonus payable in
cash pursuant to Section 10 hereof.
(d)OChange in ControlO shall mean:
(1)a Ochange in controlO of the Company, as that term is
contemplated in the federal securities laws; or
(2)the occurrence of any of the following events:
(A)any Person becomes, after the effective date of
this Plan, the Obeneficial ownerO (as defined in Rule 13d-
3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 20%
or more of the combined voting power of the CompanyOs
then outstanding securities; provided, that the
acquisition of additional voting securities, after the
effective date of this Plan, by any Person who is, as of
the effective date of this Plan, the beneficial owner,
directly or indirectly, of 20% or more of the combined
voting power of the CompanyOs then outstanding
securities, shall not constitute a OChange in ControlO of
the Company for purposes of this Section 2(d).
(B)a majority of individuals who are nominated by
the Board of Directors for election to the Board of
Directors on any date, fail to be elected to the Board of
Directors as a direct or indirect result of any proxy
fight or contested election for positions on the Board of
Directors, or
(C)the Board of Directors determines in its sole and
absolute discretion that there has been a change in
control of the Company.
(e)OCodeO shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(f)OCommitteeO shall mean the Compensation Committee of the
Board of Directors or such other committee as the Board of
Directors shall appoint from time to time to administer the Plan.
(g)OCommon StockO shall mean the CompanyOs Common Stock, par
value $.01 per share.
(h)OCompanyO shall mean Webcor Electronics, Inc., a Delaware
corporation, and each of its Subsidiaries, and its successors.
(i)OExchange ActO shall mean the Securities Exchange Act of
1934, as amended from time to time.
(j)the OFair Market ValueO of a share of Common Stock on any
date shall be (i) the closing sales price on the immediately
preceding business day of a share of Common Stock as reported on
the principal securities exchange on which shares of Common Stock
are then listed or admitted to trading or (ii) if not so
reported, the average of the closing bid and asked prices for a
share of Common Stock on the immediately preceding business day
as quoted on the National Association of Securities Dealers
Automated Quotation System (ONASDAQO) or (iii) if not quoted on
NASDAQ, the average of the closing bid and asked prices for a
share of Common Stock as quoted by the National Quotation
BureauOs OPink SheetsO or the National Association of Securities
DealersO OTC Bulletin Board System. If the price of a share of
Common Stock shall not be so reported, the Fair Market Value of a
share of Common Stock shall be determined by the Committee in its
absolute discretion.
(k)OIncentive AwardO shall mean an Option, a share of
Restricted Stock, a share of Phantom Stock, a Stock Bonus or Cash
Bonus granted pursuant to the terms of the Plan.
(l)OIncentive Stock OptionO shall mean an Option which is an
Oincentive stock optionO within the meaning of Section 422 of the
Code and which is identified as an Incentive Stock Option in the
agreement by which it is evidenced.
(m)OIssue DateO shall mean the date established by the
Committee on which certificates representing shares of Restricted
Stock shall be issued by the Company pursuant to the terms of
Section 7(d) hereof.
(n)ONon-Qualified Stock OptionO shall mean an Option which
is not an Incentive Stock Option and which is identified as a Non-
Qualified Stock Option in the agreement by which it is evidenced.
(o)OOptionO shall mean an option to purchase shares of
Common Stock of the Company granted pursuant to Section 6 hereof.
Each Option shall be identified as either an Incentive Stock
Option or a Non-Qualified Stock Option in the agreement by which
it is evidenced.
(p)OParticipantO shall mean a full-time employee of the
Company who is eligible to participate in the Plan and to whom an
Incentive Award is granted pursuant to the Plan, and, upon his
death, his successors, heirs, executors and administrators, as
the case may be, to the extent permitted hereby.
(q)OPersonO shall mean a Operson,O as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, and the rules and
regulations in effect from time to time thereunder.
(r)a share of OPhantom StockO shall represent the right to
receive in cash the Fair Market Value of a share of Common Stock
of the Company, which right is granted pursuant to Section 8
hereof and subject to the terms and conditions contained therein.
(s)OPlanO shall mean the Webcor Electronics, Inc. Incentive
Stock Plan, as it may be amended from time to time.
(t)OQualified Domestic Relations OrderO shall mean a
qualified domestic relations order as defined in the Code, in
Title I of the Employee Retirement Income Security Act, or in the
rules and regulations as may be in effect from time to time
thereunder.
(u)a share of ORestricted StockO shall mean a share of
Common Stock which is granted pursuant to the terms of Section 7
hereof and which is subject to the restrictions set forth in
Section 7 (c) hereof for so long as such restrictions continue to
apply to such share.
(v)OSecurities ActO shall mean the Securities Act of 1933,
as amended from time to time.
(w)OStock BonusO shall mean a grant of a bonus payable in
shares of Common Stock pursuant to Section 9 hereof.
(x)OSubsidiaryO or OSubsidiariesO shall mean any and all
corporations in which at the pertinent time the Company owns,
directly or indirectly, stock vested with 50% or more of the
total combined voting power of all classes of stock of such
corporations within the meaning of Section 424(f) of the Code..
(y)OVesting DateO shall mean the date established by the
Committee on which a share of Restricted Stock or Phantom Stock
may vest.
3. Stock Subject to the Plan
Under the Plan, the Committee may grant to Participants (i)
Options, (ii) shares of Restricted Stock, (iii) shares of Phantom
Stock, (iv) Stock Bonuses and (v) Cash Bonuses.
The Committee may grant Options, shares of Restricted Stock,
shares of Phantom Stock and Stock Bonuses under the Plan with
respect to a number of shares of Common Stock that in the
aggregate at any time does not exceed 10% of that number of
shares of Common Stock which equals 10% of the total numer of
shares of Common Stock outstanding immediately after the
completion of the first business combination transaction between
the Company and a third party acquisition candidate. The grant of
a Cash Bonus shall not reduce the number of shares of Common
Stock with respect to which Options, shares of Restricted Stock,
shares of Phantom Stock or Stock Bonuses may be granted pursuant
to the Plan.
If any outstanding Option expires, terminates or is canceled
for any reason, the shares of Common Stock subject to the
unexercised portion of such Option shall again be available for
grant under the Plan. If any shares of Restricted Stock or
Phantom Stock, or any shares of Common Stock granted in a Stock
Bonus are forfeited or canceled for any reason, such shares shall
again be available for grant under the Plan.
Shares of Common Stock issued under the Plan may be either
newly issued or treasury shares, at the discretion of the
Committee.
4. Administration of the Plan
The Plan shall be administered by a Committee of the Board of
Directors consisting of two or more persons, each of whom shall
be a Odisinterested personO within the meaning of Rule 16b-
3(c)(2) promulgated under Section 16 of the Exchange Act. The
Committee shall from time to time designate the employees of the
Company who shall be granted Incentive Awards and the amount and
type of such Incentive Awards.
The Committee shall have full authority to administer the
Plan, including authority to interpret and construe any provision
of the Plan and the terms of any Incentive Award issued under it
and to adopt such rules and regulations for administering the
Plan as it may deem necessary. Decisions of the Committee shall
be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate
the date on which any Option granted under the Plan becomes
exercisable, (ii) extend the date on which any Option granted
under the Plan ceases to be exercisable, (iii) accelerate the
Vesting Date or Issue Date, or waive any condition imposed
pursuant to Section 7(b) hereof, with respect to any share of
Restricted Stock granted under the Plan and (iv) accelerate the
Vesting Date or waive any condition imposed pursuant to Section 8
hereof, with respect to any share of Phantom Stock granted under
the Plan.
In addition, the Committee may, in its absolute discretion,
grant Incentive Awards to Participants on the condition that such
Participants surrender to the Committee for cancellation such
other Incentive Awards (including, without limitation, Incentive
Awards with higher exercise prices) as the Committee specifies.
Notwithstanding Section 3 hereof, Incentive Awards granted on the
condition of surrender of outstanding Incentive Awards shall not
count against the limits set forth in such Section 3 until Such
time as such Incentive Awards are surrendered.
Whether an authorized leave of absence, or absence in
military or government service, shall constitute termination of
employment shall be determined by the Committee in its absolute
discretion.
No member of the Committee shall be liable for any action,
omission, or determination relating to the Plan, and the Company
shall indemnify and hold harmless each member of the Committee
and each other director or employee of the Company to whom any
duty or power relating to the administration or interpretation of
the Plan has been delegated from and against any cost or expense
(including attorneysO fees) or liability (including any sum paid
in settlement of a claim with the approval of the Committee)
arising out of any action, omission or determination relating to
the Plan, unless, in either case, such action, omission or
determination was taken or made by such member, director or
employee in bad faith and without reasonable belief that it was
in the best interests of the Company.
5. Eligibility
The persons who shall be eligible to receive Incentive Awards
pursuant to the Plan shall be such full-time employees of the
Company as the Committee, in its absolute discretion, shall
select from time to time. At the date hereof, the Company does
not have any employees who are eligible to participate in the
Plan.
6. Options
The Committee may grant Options pursuant to the Plan, which
Options shall be evidenced by agreements in such form as the
Committee shall from time to time approve. Options shall comply
with and be subject to the following terms and conditions:
(a)Identification of Options
All Options granted under the Plan shall be clearly
identified in the agreement evidencing such Options as either
Incentive Stock Options or as Non-Qualified Stock Options.
(b)Exercise Price
The exercise price of any Non-Qualified Stock Option granted
under the Plan shall be such price as the Committee shall
determine on the date on which such Non-Qualified Stock Option is
granted; provided, that such price may not be less than the
minimum price required by law. Except as provided in Section 6(d)
hereof, the exercise price of any Incentive Stock Option granted
under the Plan shall be not less than 100% of the Fair Market
Value of a share of Common Stock on the date on which such
Incentive Stock Option is granted.
(c)Term and Exercise of Options
(1)Each Option shall be exercisable on such date or
dates, during such period and for such number of shares of
Common Stock as shall be determined by the Committee on the
day on which such Option is granted and set forth in the
agreement evidencing the Option; provided, however, that no
Option shall be exercisable after the expiration of ten years
from the date such Option was granted; and, provided,
further, that each Option shall be subject to earlier
termination, expiration or cancellation as provided in the
Plan.
(2)Each Option shall be exercisable in whole or in part
with respect to whole shares of Common Stock. The partial
exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
Upon the partial exercise of an Option, the agreement
evidencing such Option shall be returned to the Participant
exercising such Option together with the delivery of the
certificates described in Section 6(c)(5) hereof.
(3)An Option shall be exercised by delivering notice to
the CompanyOs principal office, to the attention of its
Secretary, no fewer than five business days in advance of the
effective date of the proposed exercise. Such notice shall be
accompanied by the agreement evidencing the Option, shall
specify the number of shares of Common Stock with respect to
which the Option is being exercised and the effective date of
the proposed exercise, and shall be signed by the
Participant. The Participant may withdraw such notice at any
time prior to the close of business on the business day
immediately preceding the effective date of the proposed
exercise, in which case such agreement shall be returned to
the Participant. Payment for shares of Common Stock purchased
upon the exercise of an Option shall be made on the effective
date of such exercise either (i) in cash, by certified check,
bank cashierOs check or wire transfer or (ii) subject to the
approval of the Committee, in shares of Common Stock owned by
the Participant and valued at their Fair Market Value on the
effective date of such exercise, or (iii) partly in shares of
Common Stock with the balance in cash, by certified check,
bank cashierOs check or wire transfer. Any payment in shares
of Common Stock shall be effected by the delivery of such
shares to the Secretary of the Company, duly endorsed in
blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the
Secretary of the Company shall require from time to time.
(4)Any Option granted under the Plan may be exercised by
a broker-dealer acting on behalf of a Participant if (i) the
broker-dealer has received from the Participant or the
Company a duly endorsed agreement evidencing such Option and
instructions signed by the Participant requesting the Company
to deliver the shares of Common Stock subject to such Option
to the broker-dealer on behalf of the Participant and
specifying the account into which such shares should be
deposited, (ii) adequate provision has been made with respect
to the payment of any withholding taxes due upon such
exercise and (iii) the broker-dealer and the Participant have
otherwise complied with Section 220.3(e)(4) of Regulation T,
12 CFR Part 220.
(5)Certificates for shares of Common Stock purchased
upon the exercise of an Option shall be issued in the name of
the Participant and delivered to the Participant as soon as
practicable following the effective date on which the Option
is exercised; provided, however, that such delivery shall be
effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United
States mail, addressed to the Participant.
(6)During the lifetime of a Participant each Option
granted to him shall be exercisable only by him. No Option
shall be assignable or transferable otherwise than by will or
by the laws of descent and distribution.
(d)Limitations on Grant of Incentive Stock Options
(1)The aggregate Fair Market Value of shares of Common
Stock with respect to which Oincentive stock optionsO (within
the meaning of Section 422, without regard to Section 422(d)
of the Code) are exercisable for the first time by a
Participant during any calendar year under the Plan (and any
other stock option plan of the Company, or any subsidiary of
the Company shall not exceed $100,000. Such Fair Market Value
shall be determined as of the date on which each such
Incentive Stock Option is granted. If such aggregate Fair
Market Value of shares of Common Stock underlying such
Incentive Stock Options exceeds $100,000, then Incentive
Stock Options granted hereunder to such Participant shall, to
the extent and in the order required by Regulations
promulgated under the Code (or any other authority having the
force of Regulations), automatically be deemed to be Non-
Qualified Stock Options, but all other terms and provisions
of such Incentive Stock Options shall remain unchanged. In
the absence of such Regulations (and authority), or if such
Regulations (or authority) require or permit a designation of
the options which shall cease to constitute Incentive Stock
Options, Incentive Stock Options shall, to the extent of such
excess and in the order in which they were granted,
automatically be deemed to be Non-Qualified Stock Options,
but all other terms and provisions of such Incentive Stock
Options shall remain unchanged.
(2)No Incentive Stock Option may be granted to an
individual if, at the time of the proposed grant, such
individual owns, directly or indirectly (based on the
attribution rules in Section 424(d) of the Code) stock
possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or any of its
subsidiaries, unless (i) the exercise price of such Incentive
Stock Option is at least 110% of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option
is granted and (ii) such Incentive Stock Option is not
exercisable after the expiration of five years from the date
such Incentive Stock Option is granted.
(e)Effect of Termination of Employment
(1)If the employment of a Participant with the Company
shall terminate for any reason other than Cause, Opermanent
and total disability (within the meaning of Section 22(e)(3)
of the Code) or the death of the Participant (i) Options
granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain
exercisable until the expiration of one month after such
termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall
expire at the close of business on the date of such
termination; provided, however, that no Option shall be
exercisable after the expiration of its term.
(2)If the employment of a Participant with the Company
shall terminate as a result of the Opermanent and total
disability (within the meaning of Section 22(e)(3) of the
Code) of the Participant, the voluntary retirement of the
Participant in accordance with the CompanyOs retirement
policy as then in effect or the death of the Participant (i)
Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall
remain exercisable until the expiration of one year after
such termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall
expire at the close of business on the date of such
termination; provided, however, that no Option shall be
exercisable after the expiration of its term.
(3)In the event of the termination of a ParticipantOs
employment for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on
the date of such termination.
(f) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, each Option
granted under the Plan and outstanding at such time shall become
fully and immediately exercisable and shall remain exercisable
until its expiration, termination or cancellation pursuant to the
terms of the Plan.
7. Restricted Stock
The Committee may grant shares of Restricted Stock pursuant
to the Plan. Each grant of shares of Restricted Stock shall be
evidenced by an agreement in such form as the Committee shall
from time to time approve. Each grant of shares of Restricted
Stock shall comply with and be subject to the following terms and
conditions:
(a)Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a
Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a
different Issue Date and/or Vesting Date for each class. Except
as provided in Sections 7(c) and 7(f) hereof, upon the occurrence
of the Issue Date with respect to a share of Restricted Stock, a
share of Restricted Stock shall be issued in accordance with the
provisions of Section 7(d) hereof. Provided that all conditions
to the vesting of a share of Restricted Stock imposed pursuant to
Section 7(b) hereof are satisfied, and except as provided in
Sections 7(c) and 7(f) hereof, upon the occurrence of the Vesting
Date with respect to a share of Restricted Stock, such share
shall vest and the restrictions of Section 7(c) hereof shall
cease to apply to such share.
(b)Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions, not
inconsistent with the provisions hereof, to the vesting of such
shares as it in its absolute discretion deems appropriate. By way
of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any class or classes of
shares of Restricted Stock, that the Participant or the Company
achieve certain performance criteria, such criteria to be
specified by the Committee at the time of the grant of such
shares.
(c)Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no
transfer of a ParticipantOs rights with respect to such share,
whether voluntary or involuntary, by operation of law or
otherwise, shall vest the transferee with any interest or right
in or with respect to such share, but immediately upon any
attempt to transfer such fights, such share, and all of the
rights related thereto, shall be forfeited by the Participant and
the transfer shall be of no force or effect.
(d)Issuance of Certificates
(1)Except as provided in Sections 7(c) or 7(f) hereof,
reasonably promptly after the Issue Date with respect to
shares of Restricted Stock, the Company shall cause to be
issued a stock certificate, registered in the name of the
Participant to whom such shares were granted, evidencing such
shares: provided, that the Company shall not cause to be
issued such a stock certificates unless it has received a
stock power duly endorsed in blank with respect to such
shares. Each such stock certificate shall bear the following
legend:
The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture and restrictions
against transfer) contained in the Webcor Electronics,
Inc. Incentive Stock Plan and an Agreement entered into
between the registered owner of such shares and Webcor
Electronics, Inc. A copy of the Plan and Agreement is on
file in the office of the Secretary of Webcor Electronics,
Inc. 1612 N. Osceola Avenue, Clearwater, FL 33755.
Such legend shall not be removed from the certificate
evidencing such shares until such shares vest pursuant to the
terms hereof.
(2)Each certificate issued pursuant to Paragraph 7
(d)(1) hereof, together with the stock powers relating to the
shares of Restricted Stock evidenced by such certificate,
shall be held by the Company. The Company shall issue to the
Participant a receipt evidencing the certificates held by it
which are registered in the name of the Participant.
(e)Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to
the terms hereof, the restrictions of Section 7(c) hereof shall
cease to apply to such share. Reasonably promptly after a share
of Restricted Stock vests pursuant to the terms hereof, the
Company shall cause to be issued and delivered to the Participant
to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Paragraph 7 (d)(1) hereof,
together with any other property of the Participant held by
Company pursuant to Section 7(d) hereof, provided, however, that
such delivery shall be effected for all purposes when the Company
shall have deposited such certificate and other property in the
United States mail, addressed to the Participant.
(f)Effect of Termination of Employment
(1)If the employment of a Participant with the Company
shall terminate for any reason other than Cause prior to the
vesting of shares of Restricted Stock granted to such
Participant, a portion of such shares, to the extent not
forfeited or canceled on or prior to such termination
pursuant to any provision hereof, shall vest on the date of
such termination. The portion referred to in the preceding
sentence shall be determined by the Committee at the time of
the grant of such shares of Restricted Stock and may be based
on the achievement of any conditions imposed by the Committee
with respect to such shares pursuant to Section 7(b). Such
portion may equal zero.
(2)In the event of the termination of a ParticipantOs
employment for Cause, all shares of Restricted Stock granted
to such Participant which have not vested as of the date of
such termination shall immediately be forfeited.
(g)Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of
Restricted Stock which have not theretofore vested (including
those with respect to which the Issue Date has not yet occur-red)
shall immediately vest.
8. Phantom Stock
The Committee may grant shares of Phantom Stock pursuant to
the Plan. Each grant of shares of Phantom Stock shall be
evidenced by an agreement in such form as the Committee shall
from time to time approve. Each grant of shares of Phantom Stock
shall comply with and be subject to the following terms and
conditions:
(a)Vesting Date
At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares into
classes and assign a different Vesting Date for each class.
Provided that all conditions to the vesting of a share of Phantom
Stock imposed pursuant to Section 8(c) hereof are satisfied, and
except as provided in Section 8(d) hereof, upon the occurrence of
the Vesting Date with respect to a share of Phantom Stock, such
share shall vest.
(b)Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant
shall be entitled to receive in cash, within 90 days of the date
on which such share vests, an amount in cash in a lump sum equal
to the sum of (i) the Fair Market Value of a share of Common
Stock of the Company on the date on which such share of Phantom
Stock vests and (ii) the aggregate amount of cash dividends paid
with respect to a share of Common Stock of the Company during the
period commencing on the date on which the share of Phantom Stock
was granted and terminating on the date on which such share
vests.
(c)Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions, not
inconsistent with the provisions hereof, to the vesting of such
shares as it, in its absolute discretion deems appropriate. By
way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any class or classes of
shares of Phantom Stock, that the Participant or the Company
achieve certain performance criteria, such criteria to be
specified by the Committee at the time of the grant of such
shares.
(d)Effect of Termination of Employment
(1)If the employment of a Participant with the Company
shall terminate for any reason other than Cause prior to the
vesting of shares of Phantom Stock granted to such
Participant a portion of such shares, to the extent not
forfeited or canceled on or prior to such termination
pursuant to any provision hereof, shall vest on the date of
such termination. The portion referred to in the preceding
sentence shall be determined by the Committee at the time of
the grant of such shares of Phantom Stock and may be based on
the achievement of any conditions imposed by the Committee
with respect to such shares pursuant to Section 8(c). Such
portion may equal zero.
(2)In the event of the termination of a ParticipantOs
employment for Cause, all shares of Phantom Stock granted to
such Participant which have not vested as of the date of such
termination shall immediately be forfeited.
(e)Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of
Phantom Stock which have not theretofore vested shall immediately
vest.
9. Stock Bonuses
The Committee may, in its absolute discretion, grant Stock
Bonuses in such amounts as it shall determine from time to time.
A Stock Bonus shall be paid at such time and subject to such
conditions as the Committee shall determine at the time of the
grant of such Stock Bonus. Certificates for shares of Common
Stock granted as a Stock Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such
Participant as soon as practicable after the date on which such
Stock Bonus is required to be paid.
10.Cash Bonuses
The Committee may, in its absolute discretion, grant in
connection with any grant of Restricted Stock or Stock Bonus or
at any time thereafter, a cash bonus, payable promptly after the
date on which the Participant is required to recognize income for
federal income tax purposes in connection with such Restricted
Stock or Stock Bonus, in such amounts as the Committee shall
determine from time to time; provided, however, that in no event
shall the amount of a Cash Bonus exceed the Fair Market Value of
the related shares of Restricted Stock or Stock Bonus on such
date. A Cash Bonus shall be subject to such conditions as the
Committee shall determine at the time of the grant of such Cash
Bonus.
11.Adjustment Upon Changes in Common Stock
(a)Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise
determines, if a Participant receives any securities or other
property (including dividends paid in cash) with respect to a
share of Restricted Stock, the Issue Date with respect to which
occurs prior to such event, but which has not vested as of the
date of such event, as a result of any dividend, stock split
recapitalization, merger, consolidation, combination, exchange of
shares or otherwise, such securities or other property will not
vest until such share of Restricted Stock vests, and shall be
held by the Company pursuant to Paragraph 7 (d) (2) hereof.
The Committee may, in its absolute discretion, adjust any
grant of shares of Restricted Stock, the Issue Date with respect
to which has not occurred as of the date of the occurrence of any
of the following events, or any grant of shares of Phantom Stock,
to reflect any dividend, stock split, recapitalization, merger,
consolidation, combination, exchange of shares or similar
corporate change as the Committee may deem appropriate to prevent
the enlargement or dilution of rights of Participants under the
grant.
(b)Outstanding Options, Increase or Decrease in Issued
Shares Without Consideration
Subject to any required action by the shareholders of the
Company, in the event of any increase or decrease in the number
of issued shares of Common Stock resulting from a subdivision or
consolidation of shares of Common Stock or the payment of a stock
dividend (but only on the shares of Common Stock), or any other
increase or decrease in the number of such shares effected
without receipt of consideration by the Company, the Committee
shall proportionally adjust the number of shares and the exercise
price per share of Common Stock subject to each outstanding
Option.
(c)Outstanding Options, Certain Mergers
Subject to any required action by the shareholders of the
Company, if the Company shall be the surviving corporation in any
merger or consolidation (except a merger of consolidation as a
result of which the holders of shares of Common Stock receive
securities of another corporation), each Option outstanding on
the date of such merger or consolidation shall entitle the
Participant to acquire upon exercise the securities which a
holder of the number of shares of Common Stock subject to such
Option would have received in such merger or consolidation.
(d)Outstanding Options, Certain Other Transactions
In the event of a dissolution or liquidation of the Company,
a sale of all or substantially all of the CompanyOs assets, a
merger or consolidation involving the Company in which the
Company is not the surviving corporation or a merger or
consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Common Stock
receive securities of another corporation and/or other property,
including cash, the Committee shall, in its absolute discretion,
have the power to:
(1)cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to such
event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the Participant to
whom such Option was granted an amount in cash, for each
share of Common Stock subject to such Option equal to the
excess of (A) the value, as determined by the Committee in
its absolute discretion, of the property (including cash)
received by the holder of a. share of Common Stock as a
result of such event over (B) the exercise price of such
Option; or
(2)provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then
exercisable) for an option on some or all of the property for
which such Option is exchanged and, incident thereto, make an
equitable adjustment as determined by the Committee in its
absolute discretion in the exercise price of the option, or
the number of shares or amount of property subject to the
option or, if appropriate, provide for a cash payment to the
Participant to whom such Option was granted in partial
consideration for the exchange of the Option.
(e)Outstanding Options. Other Changes
In the event of any change in the capitalization of the
Company or corporate change other than those specifically
referred to in Sections 11(b), (c) or (d) hereof, the Committee
may, in its absolute discretion, make such adjustments in the
number and class of shares subject to Options outstanding on the
date on which such change occurs and in the per share exercise
price of each such Option as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
(f)No Other Rights
Except as expressly provided in the Plan, no Participant
shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any
dividend, any increase or decrease in the number of shares of
stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as
expressly provided in the Plan, no issuance by the Company of
shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number of
shares of Common Stock subject to an Incentive Award or the
exercise price of any Option.
12.Rights as a Shareholder
No person shall have any rights as a shareholder with respect
to any shares of Common Stock covered by or relating to any
Incentive Award granted pursuant to this Plan until the date of
the issuance of a stock certificate with respect to such shares.
Except as otherwise expressly provided in Section 11 hereof, no
adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date
such stock certificate is issued.
13.No Special Employment Rights; No Right to Incentive Award
Nothing contained in the Plan or any Incentive Award shall
confer upon any Participant any right with respect to the
continuation of his employment by the Company or interfere in any
way with the right of the Company, subject to the terms of any
separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the
compensation of the Participant from the rate in existence at the
time of the grant of an Incentive Award.
No person shall have any claim or right to receive an
Incentive Award hereunder. The CommitteeOs granting of an
Incentive Award to a Participant at any time shall neither
require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time
nor preclude the Committee from making subsequent grants to such
Participant or any other Participant or other person.
14.Securities Matters
(a)The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of any shares of
Common Stock to be issued hereunder or to effect similar
compliance under any state laws. Notwithstanding anything herein
to the contrary, the Company shall not be obligated to cause to
be issued or delivered any certificates evidencing shares of
Common Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such
certificates is in compliance with all applicable laws,
regulations of governmental authority and the requirements of any
securities exchange on which shares of Common Stock are traded.
The Committee may require, as a condition of the issuance and
delivery of certificates evidencing shares of Common Stock
pursuant to the terms hereof, that the recipient of such shares
make such covenants, agreements and representations, and that
such certificates bear such legends, as the Committee, in its
sole discretion, deems necessary or desirable.
(b)The exercise of any Option granted hereunder shall only
be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of shares of Common
Stock pursuant to such exercise is in compliance with all
applicable laws, regulations of governmental authorities and the
requirements of any securities exchange on which shares of Common
Stock are traded. The Company may, in its sole discretion, defer
the effectiveness of any exercise of an Option granted hereunder
in order to allow the issuance of shares of Common Stock pursuant
thereto to be made pursuant to registration or an exemption from
registration or other methods for compliance available under
federal or state securities laws. The Company shall inform the
Participant in writing of its decision to defer the effectiveness
of the exercise of an Option granted hereunder. During the period
that the effectiveness of the exercise of an Option has been
deferred, the Participant may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect
thereto.
15.Withholding Taxes
Whenever shares of Common Stock are to be issued upon the
exercise of an Option, the occurrence of the Issue Date or
Vesting Date with respect to a share of Restricted Stock or the
payment of a Stock Bonus, the Company shall have the right to
require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax
requirements, if any, attributable to such exercise, occurrence
or payment prior to the delivery of any certificate or
certificates for such shares. In addition, upon the grant of a
Cash Bonus or the making of a payment with respect to a share of
Phantom Stock, the Company shall have the right to withhold from
any cash payment required to be made pursuant thereto an amount
sufficient to satisfy the federal, state and local withholding
tax requirements, if any, attributable to such exercise or grant.
16.Amendment of the Plan
The Board of Directors may at any time suspend or discontinue
the Plan or revise or amend it in any respect whatsoever,
provided, however, that without approval of the shareholders no
revision or amendment shall (i) except as provided in Section 11
hereof, increase the number of shares of Common Stock that may be
issued under the Plan, (ii) materially increase the benefits
accruing to individuals holding Incentive Awards granted pursuant
to the Plan or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
17.No Obligation to Exercise
The grant to a Participant of an Option shall impose no
obligation upon such Participant to exercise such Option.
18.Transfers Upon Death
Upon the death of a Participant, outstanding Incentive Awards
granted to such Participant may be exercised only by the
executors or administrators of the ParticipantOs estate or by any
person or persons who shall have acquired such right to exercise
by will or by the laws of descent and distribution. No transfer
by will or the laws of descent and distribution of any Incentive
Award, or the right to exercise any Incentive Award, shall be
effective to bind the Company unless the Committee shall have
been furnished with (a) written notice thereof and with a copy of
the will and/or such evidence as the Committee may deem necessary
to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the
Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the
Participant in connection with the grant of the Incentive Award.
19.Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any
proceeds received by the Company in connection with any Incentive
Award will be used for general corporate purposes.
20.Failure to Comply
In addition to the remedies of the Company elsewhere provided
for herein, failure by a Participant to comply with any of the
terms and conditions of the Plan or the agreement executed by
such Participant evidencing an Incentive Award, unless such
failure is remedied by such Participant within ten days after
having been notified of such failure by the Committee, shall be
grounds for the cancellation and forfeiture of such Incentive
Award, in whole or in part as the Committee, in its absolute
discretion, may determine.
21.Effective Date and Term of Plan
The Plan was adopted by the Board of Directors effective June
15, 1997, subject to approval by the shareholders of the Company
in accordance with applicable law, the requirements of Section
422 of the Code and the requirements of Rule 16b-3 under Section
16(b) of the Exchange Act. No Incentive Award may be granted
under the Plan after June 16, 2007. Incentive Awards may be
granted under the Plan at any time prior to the receipt of such
shareholder approval; provided, however, that each such grant
shall be subject to such approval. Without limitation on the
foregoing, no Option may be exercised prior to the receipt of
such approval, no share certificate shall be issued pursuant to a
grant of Restricted Stock or Stock Bonus prior to the receipt of
such approval and no Cash Bonus or payment with respect to a
share of Phantom Stock shall be paid prior to the receipt of such
approval. If the Plan is not approved by the CompanyOs
shareholders, then the Plan and all Incentive Awards then
outstanding hereunder shall forthwith automatically terminate and
be of no force and effect.
IN WITNESS WHEREOF, this Incentive Stock Plan has been
executed in Tampa, Florida this ___th day of June, 1998.
Webcor Electronics, Inc.
Sally A. Fonner, Sole Director
