Proxy Statement -Page
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 _
Check the appropriate box:
n Preliminary Proxy Statement
X 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 on June 19, 1998 at 1:00 p.m., in a posted room at the
Tampa Airport Marriott of Tampa, Florida.
As you may recall, in a Proxy Statement dated January 29,
1997, Capston Network Company, a Delaware corporation 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 over 96% of the 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 discussions with the management of several
potential acquisition candidates, Capston and its president, Ms.
Sally A. Fonner, have determined that a number of issues exist
that will make it difficult to negotiate an acceptable business
combination transaction. First, while the meeting was held in
full compliance with the amended by-laws that were 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 established an arbitrary upper limit on
the number of shares that could be issued in connection with a
business combination transaction and Capston has discovered that
this "one size fits all" approach results in unreasonable
expectations when negotiating with smaller companies and does not
provide sufficient flexibility when negotiating with larger
companies. Third, the reverse-split contemplated by the Plan
would have resulted in a large number of "odd lot" Stockholders
(Stockholders who own fewer than 100 shares) who would 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 did 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 and Ms. Fonner have
developed a revised plan (the "Revised Plan") whereby the Company
will be restructured as a "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 approved by the
Stockholders and successfully implemented, you may be able to
salvage some of the value that your Webcor shares once
represented, although there can be no assurance that the value of
your Webcor shares will ever increase. In any event, Capston and
Ms. Fonner 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 and Ms. Fonner intend to abandon the Revised
Plan in its entirety. The specific matters to be considered by
the Stockholders are:
1. To ratify the actions of Capston and Ms. Fonner in (i)
effecting a renewal, revival and restoration of the Company's
Certificate of Incorporation and (ii) filing the reports and
other documents necessary to bring the Company current with
respect to its reporting obligations under the Securities
Exchange Act of 1934;
2. To amend the Company's by-laws to authorize the election of a
single-member Board of Directors to serve until the total
stockholders' equity of the Company exceeds the sum of
$100,000;
3. To elect Sally A. Fonner, the president of Capston, to serve
as the sole member of the Board of Directors until the
completion of a business combination transaction of the type
contemplated by the Revised Plan;
4. To consider and vote upon proposed Amendments to the
Company's Certificate of Incorporation that will:
(a)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 of Common Stock issued and
outstanding;
(b) Increase the authorized Common Stock of the Company
to 25,000,000 shares;
(c)Increase the authorized Preferred Stock of the Company to
5,000,000 shares; and
(d)Authorize the Board of Directors to change the Company's
name without additional Stockholder approval in
connection with a business combination of the type
contemplated by the Revised Plan;
5. To consider and vote upon a proposal to issue approximately
300,000 shares of Common Stock to Ms. Fonner and other
persons designated by Capston as compensation for services
rendered and to be rendered in connection with the
development of the Plan, the Revised Plan and the management
of the Company pending completion of the business
combination;
6. To consider and vote upon a proposal that 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;
7. To consider and vote upon a proposal that will give the Board
of Directors discretionary authority to 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;
8. To consider and vote upon a proposal to adopt an Incentive
Stock Plan for the Company; and
9. To consider and vote upon any other matters that may properly
come before the meeting.
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 June 19, 1998
At 1:00 P.M.
Notice is hereby given that a Special Meeting of the
Stockholders of Webcor Electronics, Inc., an inactive Delaware
corporation (the "Company"), will be held on June 19, 1998 at
1:00 p.m., in a posted room at the Tampa Airport Mariott of
Tampa, Florida, for the following purposes:
1. To ratify the actions of Capston and Ms. Fonner in (i)
effecting a renewal, revival and restoration of the Company's
Certificate of Incorporation and (ii) filing the reports and
other documents necessary to bring the Company current with
respect to its reporting obligations under the Securities
Exchange Act of 1934;
2. To amend the Company's by-laws to authorize the election of a
single-member Board of Directors to serve until the total
stockholders' equity of the Company exceeds the sum of
$100,000;
3. To elect Sally A. Fonner, the president of Capston, to serve
as the sole member of the Board of Directors until the
completion of a business combination transaction of the type
contemplated by the Revised Plan;
4. To consider and vote upon proposed Amendments to the
Company's Certificate of Incorporation that will:
(a)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 of Common Stock issued and
outstanding;
(b) Increase the authorized Common Stock of the Company
to 25,000,000 shares;
(c)Increase the authorized Preferred Stock of the Company to
5,000,000 shares; and
(d)Authorize the Board of Directors to change the Company's
name without additional Stockholder approval in
connection with a business combination of the type
contemplated by the Revised Plan;
5. To consider and vote upon a proposal to issue approximately
300,000 shares of Common Stock to Ms. Fonner and other
persons designated by Capston as compensation for services
rendered and to be rendered in connection with the
development of the Plan and the Revised Plan and the
management of the Company pending completion of the business
combination;
6. To consider and vote upon a proposal that 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;
7. To consider and vote upon a proposal that will give the Board
of Directors discretionary authority to 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;
8. To consider and vote upon a proposal to adopt an Incentive
Stock Plan for the Company; and
9. To consider and vote upon any other matters that may properly
come before the meeting.
A record of Stockholders has been taken as of the close of
business on March 30, 1998, and only persons who were
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 April 6, 1998, 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 attend the Meeting, please mark your
vote, sign and date the enclosed Proxy Card and return it
promptly in the stamped envelope that has been enclosed 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 Company
________, 1998 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 April 3, 1998, in connection
with the solicitation by Capston Network Company, a Delaware
corporation ("Capston"), of proxies to be voted at a Special
Meeting of Stockholders (the "Meeting") to be held on June 19,
1998 at 1:00 p.m., in a posted room at the Tampa Airport Marriott
of Tampa, Florida,, and at any adjournment thereof. The Meeting
has been called by Capston and its president Ms. Sally A. Fonner
for the purpose of considering a plan proposed by Capston and Ms.
Fonner (the "Revised Plan") whereby the Company will be
restructured as a "public shell" 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 sought
Stockholder approval of a financial restructuring plan for Webcor
that contemplated a 1 for 11.57879 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 considered at a meeting of the stockholders held in Tampa,
Florida on March 10, 1997 and ultimately approved by
approximately 96% of the Stockholders who voted on the plan. As a
result, Capston has been actively seeking a business combination
opportunity for the Company since March 11, 1997.
As a result of discussions with the management of several
potential acquisition candidates, Capston and Ms. Fonner have
determined that a number of issues exist that will make it
difficult to negotiate an acceptable business combination
transaction. First, while the meeting was held in full compliance
with the amended by-laws that were 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 established an arbitrary upper limit on
the number of shares that could be issued in connection with a
business combination transaction and Capston has discovered that
this "one size fits all" approach results in unreasonable
expectations when negotiating with smaller companies and does not
provide sufficient flexibility when negotiating with larger
companies. Third, the reverse-split contemplated by the Plan
would have resulted in a large number of "odd lot" Stockholders
(Stockholders who own fewer than 100 shares) who would 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 did 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 and Ms. Fonner have
developed a revised plan (the "Revised Plan") whereby the Company
will be restructured as a "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 approved by the
Stockholders and successfully implemented, you may be able to
salvage some of the value that your Webcor shares once
represented, although there can be no assurance that the value of
your Webcor shares will ever increase. In any event, Capston and
Ms. Fonner 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
Michael Weber and Yanie Dubouchage have been selected to
serve as the designated proxies for the meeting. Mr. Weber is a
Tampa Bay attorney who has worked with Capston and Ms. Fonner in
connection with certain business matters and Ms. Dubouchage is
Ms. Fonner's personal assistant.
With respect to proposals 1 through 7, Proxies will be voted
only in accordance with the directions specified thereon. If any
additional matters are properly brought before the meeting,
Proxies will be voted in accordance with the judgment of the Mr.
Weber and Ms. Dubouchage. To avoid potential conflicts of
interest, Capston and Ms. Fonner do not intend to bring any
additional matters before the meeting.
Any Proxy on which no direction is specified will be voted:
(i) for the ratification of Capston's actions in restoring the
Company's Certificate of Incorporation and filing the Company's
required reports with the Securities and Exchange Commission (the
"SEC"), (ii) for the proposed amendment to the Company's by-laws
to permit the election of a single-member Board of Directors
(iii) for the election of Sally A. Fonner to serve as sole
director until the completion of a business combination
transaction of the type contemplated by the Revised Plan; (iv)
for the proposed Amendments to the Company's Certificate of
Incorporation; (v) for ratification of a proposal to issue
approximately 300,000 shares of Common Stock to Ms. Fonner and
other persons designated by Capston as compensation for services
rendered and to be rendered in connection the development of the
Plan, the Revised Plan and the management of the Company pending
completion of the business combination; (vi) 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, (vii)
for the ratification of a proposal that will give the Board of
Directors discretionary authority to 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; (viii) for the proposal to
adopt an Incentive Stock Plan for the Company; and (ix) 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 January 30, 1998, after adjusting for 481,014 shares of
treasury stock held by the Company, there were issued,
outstanding and entitled to vote 3,476,370 shares of the
Company's common stock, par value $.01 per share (the "Common
Stock"). According to American Stock Transfer & Trust Company,
the transfer agent for the Company's Common Stock, there are 831
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 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. For purposes of
determining the number of votes cast with respect to the proposed
amendments to the Certificate of Incorporation, abstentions will
be counted as votes cast against the proposals and broker non-
votes will be excluded from the tabulation. 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 any other
voting matter, only those cast "for" or "against" a proposal will
be included in the tabulation.
CONDUCT OF THE MEETING
The required quorum for the transaction of business at the
meeting is a majority of the issued and outstanding stock of the
Company, or 1,738,186 shares (the "Quorum"). Since Delaware law
requires that amendments to a corporation's articles of
incorporation be proposed by the board of directors and then
submitted to the Stockholders for approval, Ms. Fonner intends to
call the Meeting to order, determine whether a Quorum is present,
and then request an immediate vote on (i) the ratification of
Capston's actions in restoring the Company's Certificate of
Incorporation and filing the Company's required reports with the
SEC, (ii) the proposed amendment to the Company's by-laws that
will authorize the election of a single-member Board of
Directors, and (iii) the election of Ms. Fonner to serve as the
sole member of the Company's Board of Directors until the
completion of a business combination transaction. If a Quorum is
present at the Meeting and if 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 one or more periods of up to 30 days to permit the
solicitation of additional proxies. If Capston and Ms. Fonner are
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 and Ms. Fonner 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 Company's
Common Stock that are held of record in "street name" 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 Company's 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 beneficial owners of securities that were
written off in prior years.
Based on a review of the SEC's Proxy Regulations, and discussions
with legal counsel, DTC, ADP and the Proxy Departments of several
large brokerage firms, Ms. Fonner has concluded that the most
appropriate response from brokerage firms and other custodians
who hold shares of the Company's Common Stock for the accounts of
unidentified or non-locatable clients will be to appear by Proxy
with respect to all shares held of record, and to submit a formal
broker non-vote for any shares of Common Stock that are held for
the accounts of unidentified or non-locatable clients. By
following this procedure, Capston and Ms. Fonner believe 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
non-locatable 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 Company's 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 COMPANY'S COMMON STOCK THAT ARE
HELD OF RECORD BY THEM, BUT TO SUBMIT A FORMAL BROKER NON-VOTE
FOR ANY SHARES OF THE COMPANY'S 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 COMMON STOCK WHO
RECEIVE ACTUAL NOTICE OF THE MEETING AND VOTE WITH RESPECT TO THE
PROPOSALS SET FORTH HEREIN.
BACKGROUND INFORMATION ON WEBCOR
The Company was incorporated on December 3, 1971 under the
laws of the State of Delaware. The Company's business consisted
of manufacturing and selling cordless telephones, telephone
accessories, electronic scales and calculators. The Company
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") and concurrently
registered its Common Stock under Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act").
After pursuing its business for several years, the Company
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
October, 1990. The Company has been totally inactive since
November 13, 1996.
During the pendancy of the Bankruptcy, the Company did not
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 Company
did not 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 reporting company under the Exchange Act but was
seriously delinquent in its SEC reporting obligations.
Acting in its capacity as a Stockholder of the Company, and
without first receiving any consent, approval or authorization of
any other stockholder, or any 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 (the
"GCLD"). 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 and Ms. Fonner
determined that the only debt of the Company that was "secured or
imposed by its original certificate" was the obligation of the
Company to pay its Delaware taxes. Therefore, Capston paid past
due franchise taxes of $450.00 on behalf of the Company and Ms.
Fonner then filed a Certificate of Renewal, Revival, Extension
and Restoration of the Company's Certificate of Incorporation
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.
After restoring the Company's Certificate of Incorporation,
Capston retained the accounting firm of Want & Ender, CPAs, to
prepare audited financial statements for the Company and then
filed with the SEC an omnibus Annual Report on Form 10-K in order
to bring the Company current with respect to its reporting
obligations under the Exchange Act. Since then, Capston and Ms.
Fonner have filed with the SEC all quarterly and other reports
required by SEC regulations and as a result, the Company is now
current with respect to its reporting obligations. under the
Exchange Act.
The foregoing actions have been taken by Capston, acting in
its capacity as a stockholder, and by Ms. Fonner, acting in her
capacity as the sole stockholder, officer and director of
Capston, for the express purpose of calling and holding a meeting
of the Company's stockholders in conformity with the requirements
of Section 312(h) of the GCLD. Capston and Ms. Fonner have not
assumed general authority to act on behalf of the Company and
have taken no actions that are not required by statute, rule or
regulatory authority to be taken prior to the Meeting. As a
result, Capston and Ms. Fonner have voluntarily assumed statutory
liability under the GCLD and the Exchange Act and, accordingly,
must at all times comply with the obligations imposed thereby.
These obligations include, among others, the duty to act in a
manner that is in or not opposed to the best interest of the
Stockholders, to file with the SEC the periodic and other reports
required under Section 12 of the Exchange Act and to make timely,
full and fair disclosure of all material facts. In the event a
Quorum is not present at the meeting, or the stockholders reject
the Revised Plan, then Capston and Ms. Fonner intend to withdraw
the Certificate of Renewal, Revival, Extension and Restoration of
the Company's Certificate of Incorporation, file with the SEC a
Current Report on Form 8-K describing the results of the Meeting
and take no further action on behalf of the Company, thereby
restoring the status quo as it existed prior to restoration of
the Company's Certificate of Incorporation.
The National Quotation Bureau reported that on October 15,
1996 there was a closing ask of .10, with no closing bid. Even
though the Company's stock has been continuously listed on the
over NASD's Electronic Bulletin Board, there was no significant
market activity. Although since the updating of the Company's
records and last proxy, trading activity has been light, sporadic
and irregular. On February 9, 1998, according to Bloomberg there
were four market makers with the highest closing $.06 bid and
highest asking bid of $.42 asked.
BACKGROUND INFORMATION ON CAPSTON
Capston was incorporated in the State of Delaware on May 6,
1996 to serve as a corporate vehicle for the proposed business
activities of Ms. Sally A. Fonner in the restoration and
marketing defunct publicly-held corporations, commonly known as
shells. Before proceeding with the organization of Capston, Ms.
Fonner and her professional advisors spent several months
researching the subject of public shells in general and the
numerous problematic business practices that ordinarily make
public shells an unattractive alternative for established
companies that want to create a public market for their
securities. After completing this research and thoroughly
evaluating her options, Ms. Fonner concluded that it would be
possible to develop a business structure and strategy for defunct
public companies that would provide suitable privately-held
companies with a reasonable alternative to the more traditional
initial public offering, or "IPO," provide the shareholders of a
public shell a reasonable opportunity to realize some value from
their investment, and provide a reasonable profit to Capston in
light of the liabilities and risks assumed and the effort and
costs to be expended. Capston was then organized for the purpose
of effecting Ms. Fonner's business plan and this Proxy Statement
embodies the business structure and strategy developed by Capston
and Ms. Fonner.
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 and Ms.
Fonner within the preceding 18 months pursuant to a plan of
reorganization that is similar to the Revised Plan described in
this Proxy Statement. In addition, Capston and Ms. Fonner have
filed a substantially identical proxy statement for Marci
International Imports, Inc. and anticipate that the meeting of
Marci's stockholders will be conducted on the same date and at
the same place the meeting of Webcor's stockholders, although
such meetings will be held at different times. Moreover, Capston
and Ms. Fonner intend to file substantially identical proxy
statements for up to 12 additional companies within the next 12
months. While Capston is actively negotiating proposed business
combination agreements for Arnox and Bio-Response, and evaluating
several potential acquisitions for Marci and Webcor, none of the
pending transactions has closed at the date of this Proxy
Statement, none of the potential transactions is 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.
To avoid the conflicts of interest inherent in the management
of multiple shell companies, Capston and Ms. Fonner intend to
take an "inventory approach" to marketing. In general, Capston
and Ms. Fonner will not actively seek out potential business
combination candidates for a particular shell. Instead, it will
represent within its financial industry subgroup that it has a
number of shells available for suitable companies and then wait
for a brokerage firm, finder or other consultant to initiate
discussions relating to a specific private company. When Capston
receives an inquiry from an authorized representative of a
private company, it will first request preliminary due diligence
information, including a detailed business plan, financial
statements and financial projections. If the preliminary
information shows that the private company does not meet
Capston's minimum business activity and net worth standards,
discussions will terminate at that level. If, on the other hand,
the preliminary due diligence information establishes the
suitability of the private company, then discussions will proceed
to the next level where the private company will provide complete
due diligence information to Capston, and Capston will provide
complete due diligence information on all available shells to the
private company. Assuming that both sides are satisfied with the
information provided by the other, discussions will then move
from the general to the specific, the private company will select
the shell best suited to its needs, and negotiations will proceed
to deal terms and documentation issues.
While the inventory approach described above will minimize
the potential for conflicts of interest, it may increase the risk
that due diligence or bankruptcy issues will make one shell
managed by Capston and Ms. Fonner less attractive than another in
the eyes of a potential business combination partner. To the
extent that a potential business combination partner's due
diligence investigations uncover an unresolved legal problem or
other technical defect, Capston and Ms. Fonner will use
reasonable commercial efforts to correct the problem or defect.
There can be no assurance, however, that such efforts will be
successful or that a potential business combination partner will
ever select the Company. If Capston and Ms. Fonner conclude that
such problem or defect is incurable, then they may elect to
abandon the Company, de-register the Company's Common Stock by
filing a Form 15 with the SEC describing the problem or defect,
dissolve the Company in accordance with the GCLD and take no
further action on behalf of the Company.
Since the Company has no material assets or liabilities, no
operating staff and no intrinsic value other than its status as a
reporting issuer under the Exchange Act, the Revised Plan
contemplates triangular arrangement between the Company, Capston
and Ms. Fonner. Under this arrangement, Ms. Fonner, in her
individual capacity, will assume all of the powers and
responsibilities of the Company's board of directors, and accept
the fiduciary duties imposed on directors by the GCLD.
Concurrently, the Company will enter into a project management
agreement with Capston (the "PMA") that (i) retains Capston to
conduct the ministerial accounting and administrative functions
associated with maintaining the Company's status as a reporting
issuer under the Exchange Act, (ii) authorizes Capston to locate
and negotiate a business combination agreement with a suitable
privately held company, (iii) obligates Capston to pay, at its
sole risk, the costs and expenses associated with maintaining the
Company's status as a reporting issuer and locating and
investigating business combination opportunities, and (iv)
provides Capston, Ms. Fonner and their consultants with a
substantial interest in any economic gains that may arise from
their efforts on behalf of the Company.
While Capston will be employed to perform a variety of
ministerial administrative and management functions on behalf of
the Company, it will not be authorized to bind the Company.
Instead, all management functions will be delegated to Ms. Fonner
who, acting in her fiduciary capacity as the sole director of the
Company, will have the ultimate right and responsibility to
faithfully discharge the obligations of management and to accept
or reject business combination proposals on behalf of the
Company. Therefore, while the Stockholders of the Company will
have limited recourse to Capston under the PMA, they will be
afforded all of the protections provided by the GCLD.
In general, Ms. Fonner will be accountable to the
Stockholders as a fiduciary and consequently must exercise the
utmost good faith and integrity in handling the Company's
affairs. Notwithstanding the foregoing, Article Nine of the
Company's Certificate of Incorporation is intended to take full
advantage of the enabling provisions of the GCLD with respect to
limiting the personal liability of its officers, directors,
employees and agents. The Certificate provides that the Company
may indemnify any and all persons whom it shall have power to
indemnify from and against any and all expenses, liabilities or
other matters referred to or covered by Section 145 of the GCLD.
Thus, the Company may be prevented from recovering damages for
certain alleged errors or omissions by the Ms. Fonner. Under the
Company's by-laws, indemnification payments may only be made upon
a determination that the indemnified person acted in good faith
and in a manner such person reasonably believed to be in, or not
opposed to, the best interests of the Company and, with respect
to a criminal proceeding, had no reasonable cause to believe such
conduct was unlawful. Such determination shall be made (i) by a
majority of the disinterested members of the Board of Directors,
(ii) by independent legal counsel in a written opinion, or (iii)
by the Stockholders. It is the position of the SEC that
exculpation from and indemnification for liabilities arising
under the Federal securities laws and the rules and regulations
thereunder is against public policy and therefore unenforceable
DESCRIPTION OF PLAN OF REORGANIZATION
AND PROPOSED OPERATIONS
While the Company has no assets, liabilities, management or
ongoing operations and has not engaged in any business activities
since February 1990, Capston and Ms. Fonner believe that it may
be possible to recover some value for the Stockholders through
the adoption and implementation of a Revised Plan whereby the
Company will be restructured as a "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 (a "Target Company"). Notwithstanding the
foregoing, there can be no assurances that the Revised Plan will
be approved by the Stockholders, successfully implemented, or
that your Webcor shares will ever increase in value.
Capston and Ms. Fonner believe the Company will offer owners
of a Target 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 and Ms. Fonner are not aware of
any empirical statistical data that would independently confirm
or quantify their beliefs concerning the perceived value of
acquisition transaction for the owners of a Target Company. The
owners of any Target Company selected for a business combination
with the Company will incur significant costs and expenses,
including the costs of preparing the required business
combination agreements and related documents, the costs of
preparing 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
Company will be fully reactivated and then used as a corporate
vehicle to seek, investigate and, if the results of such
investigation warrant, effect a business combination with a
suitable privately-held company or other business opportunity
presented to it by persons or firms that seek the perceived
advantages of a publicly held corporation. The business
operations proposed in the 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 Board of Directors by Capston, or to approve or
disapprove the terms of any business combination transaction that
may be negotiated on behalf of the Company. Consequently, the
Company's potential success will be heavily dependent on the
efforts and abilities of Capston, Ms. Fonner and their
consultants, who will have virtually unlimited discretion in
searching for, negotiating and entering into a business
combination transaction. Capston, Ms. Fonner and their
consultants have had limited experience in the proposed business
of the Company. Although Capston and Ms. Fonner believe that the
Company 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 Company will not restrict its search to any specific
business, industry or geographical location, and the Company may
participate in a business venture of virtually any kind or
nature.
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 and Ms. Fonner anticipate that the Company will be able
to participate in only one business venture. This lack of
diversification should be considered a substantial risk inherent
in the Revised Plan because it will not permit the Company to
offset potential losses from one venture against gains from
another. Moreover, due to the Company's complete lack of
financial, managerial and other resources, Capston and Ms. Fonner
believe the Company will not be viewed as a suitable business
combination partner for either developing companies or
established business that are in need of substantial additional
capital.
Capston and Ms. Fonner anticipate that the selection of a
Target Company will be complex and extremely risky. Because of
general economic conditions, rapid technological advances being
made in some industries and shortages of available capital,
Capston and Ms. Fonner believe 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.
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.
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 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 and Ms. Fonner believe 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.
Although Capston, Ms. Fonner and their consultants have
general business, finance and acquisition experience,
Stockholders should be aware that Capston, Ms. Fonner and their
consultants have limited experience in the area of shell mergers
and 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, negotiating the terms of any
business combination agreements and 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.
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 and Ms. Fonner believe that (i) the owners of a Target
Company will ordinarily want to control at least 80% of the
Company's 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 and Ms. Fonner believe 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 and Ms. Fonner
believe 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 entity's ability to raise additional equity capital.
Accordingly, Capston and Ms. Fonner 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 Company's Common Stock on both
January 20, 1998, the original Record Date for the Meeting, and
on March 30, 1998, the final 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.
Capston and Ms. Fonner have developed the rounding procedures
described above for the express purpose of maximizing the number
of "round lot" stockholders, meaning stockholders who own 100 or
more shares. The underlying reasons for maximizing the number of
round lot holders are as follows. First, it will be difficult and
expensive for a holder of fewer than 100 shares to sell his
shares, particularly in the small-cap markets. Second, it will be
expensive for the Company to communicate with holders of fewer
than 100 shares. Third, the Nasdaq market and other regional and
national stock exchanges require between 300 and 2,500 round lot
stockholders as a condition precedent to listing. Finally, if the
Company were to effect a reverse split without using the rounding
procedures described above, there would be fewer than 200 round
lot holders of record, thereby making the Company less attractive
to a potential acquisition candidate. 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 1,200 shares of Common
Stock, these provisions will also maximize the number of "round-
lot" holders and facilitate the subsequent efforts of a Target
Company to obtain a Nasdaq or Exchange listing. Therefore,
Capston and Ms. Fonner believe that the rounding procedures are
reasonable under the circumstances.
THE REVERSE SPLIT PROCEDURES PROPOSED BY CAPSTON AND MS.
FONNER DO NOT TREAT ALL STOCKHOLDERS EQUALLY AND ARE INHERENTLY
UNFAIR. WHILE THESE PROCEDURES ARE INTENDED TO MAXIMIZE THE
NUMBER OF "ROUND LOT" STOCKHOLDERS AND FACILITATE FUTURE EFFORTS
TO HAVE THE COMPANY'S 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 1,200 SHARES OF STOCK WILL
RECEIVE A GREATER PER SHARE BENEFIT THAN STOCKHOLDERS WHO OWN
MORE THAN 1,200 SHARES. NOTWITHSTANDING THE FOREGOING, CAPSTON
AND MS. FONNER BELIEVE THAT THE ADVANTAGES TO THE COMPANY OF
HAVING A LARGE NUMBER OF "ROUND LOT" STOCKHOLDERS JUSTIFIES THE
INEQUITABLE AND DISPROPORTIONATE BENEFIT TO BE DERIVED BY THE
COMPANY'S SMALL STOCKHOLDERS AT THE EXPENSE OF THE COMPANY'S
LARGE STOCKHOLDERS.
After reducing the number of outstanding shares to
approximately 300,000, the Revised Plan contemplates (i) the
issuance of an equal number of 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 80% of the Company's
Common Stock upon completion of a business combination
transaction); (iii) the payment of third-party finders' fees of
up to 5% of the number of shares issued to the owners of the
Target Company; and (iv) a change in the Company's name to one
selected by management of 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 and Ms. Fonner will
ordinarily evaluate the strengths, weaknesses and growth
potential of the Target Company against similarly situated
publicly-held companies in the same market segment. Based on this
analysis, Capston and Ms. Fonner 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 and
Ms. Fonner 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:
POTENTIAL DILUTION TABLE
80% to 90% to 95% to
Target Co. Target Co. Target Co.
Stockholders Stockholders Stockholders
Shares Percent Shares Percent Shares Percent
Existing Stockholders (est.)300,0009.62%300,000 4.82%300,000
2.39%
Capston (est.) 300,000 9.62%300,000 4.82%300,000 2.39%
Target Company Stockholders2,400,00076.92%5,400,00086.75%11,
400,000 90.69%
Finders 120,000 3.85% 225,000 3.61% 570,000
4.53%
Total 3,120,000 100.00%6,225,000100.00%12,570,000
100.00%
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 and Ms. Fonner have 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, Capston's 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 Company's 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 "tax free"
reorganization under Sections 368 or 351 of the Internal Revenue
Code of 1986, as amended (the "Code"). 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 existing
Stockholders of the Company would retain less than 10% the
outstanding shares of the combined entity. See "Potential
Dilution Table," above. The Company intends to structure any
business combination in such manner as to minimize Federal and
state tax consequences to the Company and any Target Company.
As part of the Company's investigation of potential business
opportunities, Capston and its officers, directors and
consultants 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 Company's limited resources and Capston's 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 and Ms. Fonner will ordinarily focus on the percentage of
the Company which the Target Company's Stockholders would acquire
in exchange for their ownership interest in the Target Company.
Depending upon, among other things, the Target Company's assets
and liabilities and the perceived future value of the combined
entity's securities, the Company's 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 Company's 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.
Combination Suitability Standards
Subject only to the fiduciary obligations imposed by the
GCLD, Capston and Ms. Fonner will have virtually unlimited
discretion in screening and evaluating potential business
opportunities for the Company, and in negotiating the terms of a
business combination agreement on behalf of the Company.
Stockholders should be aware that the process of screening and
evaluating potential business opportunities and negotiating
business combination agreements is highly subjective and
dependent, in large part, on the particular facts and
circumstances surrounding a specific business opportunity.
Accordingly, Capston and Ms. Fonner have not established specific
and quantifiable combination suitability standards.
Notwithstanding the generality of the foregoing, Capston and Ms.
Fonner intend to focus their acquisition efforts on companies
that have sufficient assets, net worth and business history to
qualify the combined companies for listing on the Nasdaq Small
Cap Market. In addition, Capston and Ms. Fonner intend to use
their best efforts to negotiate a business combination structure
that they believe will be likely to result in a stabilized market
price of at least $5 per share for the stock of the combined
companies. There can be no assurance, however, that Capston and
Ms. Fonner will be successful in this regard or that their
subjective business judgments will prove to be accurate. These
risks are compounded by the fact that Capston and Ms. Fonner do
not intend to seek an independent appraisal or a fairness opinion
in connection with any business combination transaction.
Nasdaq Listing Requirements
As noted above, 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. Since it can be difficult to raise additional money
for a company that went public through a reverse takeover
transaction until performance is demonstrated, Capston and Ms.
Fonner believe the Company will be most useful in cases where the
purpose for establishing a public trading market is not related
to a perceived short-term need for additional capital.
In addition, Capston and Ms. Fonner believe the Company and
its Stockholders will be best 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 and Ms. Fonner believe that
the ongoing costs and expenses associated with reporting under
the Exchange Act can be a significant burden for a small company.
Second, Capston and Ms. Fonner believe that larger established
companies are more likely to prosper than smaller early-stage
companies. Finally, Capston and Ms. Fonner believe that a
relatively large 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
Alternative 1Alternative 2Alternative 3
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 Company's
proposed activities are not subject to SEC Rule 419 which was
adopted to strengthen the regulation of "blind pool" companies
which Congress has found to have been common vehicles for fraud
and manipulation in the penny stock market. The Company is not
subject to Rule 419 because it is not offering stock to the
public in an offering registered under the Securities Act.
Accordingly, Stockholders are not entitled to the substantive
protection provided by Rule 419.
Penny Stock Rules
Trading of the Company's Common Stock is presently governed
by the SEC's "Penny Stocks Rules" which apply to all Bulletin
Board stocks that cost less than $5.00 per share and are issued
by companies having less than $5,000,000 in net tangible assets.
Although the Company may have more than $5,000,000 in net
tangible assets after the completion of a business combination
transaction, there is no assurance that the Company will ever be
exempt from the Penny Stock rules. The Penny Stock Rules impose
substantial 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 purchaser's 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. Such factors may also have a material adverse
impact on the future market price of the Common Stock.
Fees to Capston and Others
No direct or indirect compensation has been paid or accrued
to Capston, Ms. Fonner or any of their employees, agents or
affiliates to date and except as set forth below, no direct or
indirect compensation will be payable to Capston, Ms. Fonner or
any of their employees, agents or affiliates in the future.
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 Ms. Fonner and other
persons designated by Capston as compensation for services
rendered in connection the development of the Plan, the Revised
Plan and the management of the Company pending completion of the
business combination. Therefore, if Capston and Ms. Fonner are
successful in arranging a business combination for the Company,
approximately fifty percent (50%) of the net value derived will
vest in Ms. Fonner and other persons designated by Capston, and
the remaining fifty percent (50%) will inure to the benefit of
the existing Stockholders of the Company. To the extent that
shares of Common Stock are issued to Ms. Fonner or any other
person who may be deemed to be an affiliate of Capston, such
shares will be treated as "control securities" under the
Securities Act and resales of such shares will be subject to the
volume, manner of sale and notice requirements of SEC Rule 144
for a period of 90 days after the closing of a business
combination transaction. THE ORIGINAL PLAN PROPOSED BY CAPSTON
AND MS. FONNER 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
AND MS. FONNER.
Acquisition Fees to Capston. Under the PMA, the Company will
not be obligated to reimburse Capston for the out-of-pocket
expenses incurred in connection with the reinstatement of the
Company's certificate of incorporation, the preparation and
filing of the Company's reports under the Exchange Act and the
investigation of business opportunities on behalf of the Company.
Notwithstanding the foregoing, Capston will ordinarily attempt to
negotiate a "merger and acquisition fee" or "non-accountable
expense allowance" of up to $250,000 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. IT DID, HOWEVER, OBLIGATE THE COMPANY TO REIMBURSE
CAPSTON FOR ALL OUT-OF-POCKET EXPENSES INCURRED BY CAPSTON ON
BEHALF OF THE COMPANY. NEVERTHELESS, THIS ASPECT OF THE REVISED
PLAN MAY PROVIDE AN ADDITIONAL BENEFIT TO CAPSTON AND MS. FONNER
THAT WAS NOT SPECIFICALLY CONTEMPLATED IN THE ORIGINAL PLAN.
Finder's Fees. As is customary in the industry, the Company
may pay a finder's 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 Company's Board of Directors
and will be in accordance with the standards discussed herein.
Finder's 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 and Ms. Fonner intend to offer a graduated
finders' fee schedule to unrelated third party finders who
introduce the Company to a suitable acquisition prospect. Under
the formula proposed by Capston and Ms. Fonner, 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 finder's fee in cash, it is
anticipated that any finder's fees will be paid with shares of
the Company's Common Stock which will ordinarily be registered
under the Securities Act prior to issuance. Notwithstanding the
foregoing, no finder's fees will be paid to Capston, Ms. Fonner
or any of their 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
who will be retained to represent the Company or a Target Company
in connection with a business combination transaction may agree
to accept shares of the Company's 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 Company's 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.
Special note regarding forward-looking statements. Certain
statements contained or incorporated by reference in this Proxy
Statement, including without limitation, statements containing
the words "believes," "anticipates," "expects" and words of
similar import, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act"). Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of the
Company, Capston or Ms. Fonner to be materially different from
any future results, performance or achievements expressed or
implied by such forward-looking statements. Certain of these
factors are discussed in more detail elsewhere in this Proxy
Statement. Given these uncertainties, stockholders are cautioned
not to place undue reliance on such forward-looking statements.
The Company, Capston and Ms. Fonner disclaim any obligation to
update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained
herein to reflect future events or developments.
Arbitrary and Inequitable Reverse Split Procedures. THE
REVERSE SPLIT PROCEDURES PROPOSED BY CAPSTON AND MS. FONNER DO
NOT TREAT ALL STOCKHOLDERS EQUALLY AND ARE INHERENTLY UNFAIR.
WHILE THESE PROCEDURES ARE INTENDED TO MAXIMIZE THE NUMBER OF
"ROUND LOT" STOCKHOLDERS AND FACILITATE FUTURE EFFORTS TO HAVE
THE COMPANY'S 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 1,200 SHARES OF STOCK WILL
RECEIVE A GREATER PER SHARE BENEFIT THAN STOCKHOLDERS WHO OWN
MORE THAN 1,200 SHARES. NOTWITHSTANDING THE FOREGOING, CAPSTON
AND MS. FONNER BELIEVE THAT THE ADVANTAGES TO THE COMPANY OF
HAVING A LARGE NUMBER OF "ROUND LOT" STOCKHOLDERS JUSTIFIES THE
INEQUITABLE AND DISPROPORTIONATE BENEFIT TO BE DERIVED BY THE
COMPANY'S SMALL STOCKHOLDERS AT THE EXPENSE OF THE COMPANY'S
LARGE STOCKHOLDERS.
Increased Compensation to Capston. THE ECONOMIC BENEFITS TO
BE DERIVED BY CAPSTON AND MS. FONNER UNDER THE REVISED PLAN ARE
SIGNIFICANTLY GREATER THAN THE ECONOMIC BENEFITS PROVIDED FOR IN
THE ORIGINAL PLAN. FIRST, CAPSTON AND MS. FONNER JOINTLY WILL
RECEIVE A TOTAL OF 300,000 SHARES OF COMMON STOCK INSTEAD OF THE
200,000 SHARES PROVIDED FOR IN THE ORIGINAL PLAN. SECOND, CAPSTON
AND MS. FONNER WILL BE AUTHORIZED TO NEGOTIATE AND RETAIN AN
ACQUISITION FEE OR NON-ACCOUNTABLE EXPENSE ALLOWANCE OF UP TO
$250,000 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 AND MS. FONNER BY THE OWNERS OF ANY BUSINESS
OPPORTUNITY. WHILE CAPSTON AND MS. FONNER BELIEVE THAT THE
INCREASED LEVELS OF COMPENSATION ARE JUSTIFIED UNDER THE
CIRCUMSTANCES, ANY ADDITIONAL ECONOMIC BENEFIT DERIVED BY CAPSTON
AND MS. FONNER WILL REDUCE THE POTENTIAL ECONOMIC BENEFIT TO THE
EXISTING STOCKHOLDERS.
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. While Capston is actively
evaluating potential acquisitions for the Company, none of the
potential transactions are probable at the date of this proxy
statement. Capston and Ms. Fonner have made no specific
acquisition plans and no specific industry or area of business
has been selected for investment. There is no assurance Capston,
Ms. Fonner and their 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 and Ms. Fonner have 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 and
Ms. Fonner to identify an acquisition target and negotiate the
terms of a business combination transaction. If Capston and Ms.
Fonner are successful in their 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 "reverse
takeover" 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, Ms. Fonner and their consultants.
Notwithstanding the foregoing, the Company will be required to
file a Current Report on Form 8-K to disclose limited information
concerning the acquisition within 15 days after the closing of
the acquisition. While the technical requirements of Form 8-K
will ordinarily allow the Company to file financial information
on the acquired company up to 60 days after the date of its
initial report on Form 8-K Capston does not intend to close any
business combination transaction until the financial information
required by Form 8-K is available for filing with the SEC.
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. No cash compensation
has been paid or accrued to Capston, Ms. Fonner or any of their
employees, agents or affiliates to date. Under the PMA, the
Company will not be obligated to reimburse Capston for the out-of-
pocket expenses incurred in connection with the reinstatement of
the Company's certificate of incorporation, the preparation and
filing of the Company's reports under the Exchange Act and the
investigation of business opportunities on behalf of the Company.
There is no assurance that Capston will have sufficient resources
to advance all required expenses and if Capston's resources are
insufficient, the Company may be required to seek 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 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 Company's success will be largely dependent on
the decisions made by Capston, Ms. Fonner and their consultants,
none of whom will devote their full time to the affairs of the
Company.
Experience of Capston. Although Capston, Ms. Fonner and their
consultants have general business, finance and acquisition
experience, Stockholders should be aware that Capston, Ms. Fonner
and their 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 and
Ms. Fonner have received inquires from several companies seeking
to combine with publicly held "shells", neither Capston nor Ms.
Fonner have solicited any proposals regarding the Company's
potential combination with another business. There are no
assurances that Capston, Ms. Fonner and their 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 1,
1989 which was subsequently converted to a case under Chapter 7
on October 1, 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 "discharge" the unpaid balance
of the Company's debts. While Capston and Ms. Fonner believe 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 "due
diligence" 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 and Ms. Fonner. A
combination of the Company with another entity may be structured
as a merger or consolidation or involve the direct issuance of
the Company's Common Stock in exchange for the Target Company's
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 corporation's capital stock to
approve a merger or consolidation, except in certain situations
in which no vote of the Stockholders is necessary. Since
Stockholder approval is not required in connection with the
issuance of stock in exchange for stock or assets, it is
anticipated that Capston and Ms. Fonner will have complete
control over the Company's combination policies and procedures.
Capston and Ms. Fonner do 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 Capston's 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 Company's existing Stockholders in the combined entity. In
the aggregate, the Company's existing Stockholders will probably
own a small minority percentage of the combined entity's voting
securities, with a concomitant reduction in their power to elect
directors and otherwise to influence management policies. See
"Potential Dilution Table."
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
Company's authorized and unissued Common Stock. Any such change
in control is also likely to result in the resignation or removal
of the Company's 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, Ms. Fonner
and their consultants.
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 Ms. Fonner can offer no assurances that
market demand exists for a business combination of the type
contemplated by the Revised Plan. Capston and Ms. Fonner 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 Ms.
Fonner 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 Company's
existing Stockholders, it is unlikely the Company will be capable
of negotiating more than one business combination transaction.
Consequently, the Company's lack of diversification may subject
it to economic fluctuation within a particular industry in which
the Target Company conducts business.
Potential Conflicts of Interest. 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 and Ms. Fonner within the preceding 18
months pursuant to a plan of reorganization that is similar to
the Revised Plan described in this Proxy Statement. In addition,
Capston and Ms. Fonner have filed a substantially identical proxy
statement for Marci International Imports, Inc. and anticipates
that the meeting of Marci's stockholders will be conducted on the
same date and at the same place the meeting of Webcor's
stockholders, although such meetings will be held at different
times. Moreover, Capston and Ms. Fonner intend to file
substantially identical proxy statements for up to 12 additional
companies within the next 12 months. All of these activities may
be competitive with the proposed business activities of the
Company. Since the principal business of Capston and Ms. Fonner
involves the restructuring of defunct public companies as public
shells for the purpose of effecting business combination
transactions with suitable operating companies,as 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. October 15, 1996 there was a closing ask of $.10,
with no closing bid. Even though the Company's stock has been
continuously listed on the over NASD's Electronic Bulletin Board,
there was no significant market activity. Although since the
updating of the Company's records and last proxy, trading
activity has been light, sporadic and irregular. On February 9,
1998, according to Bloomberg there were four market makers with
the highest closing $.06 bid and highest asking bid of $.42
asked.
No Assurance of Public Market. According to National
Quotation Bureau, there was no significant market activity in the
Company's stock since June, 1989 with the bid on October 15, 1996
there was a closing ask of .10, with no closing bid. Even though
the Company's stock has been continuously listed on the over
NASD's Electronic Bulletin Board, there was no significant market
activity. Since the updating of the Company's records and last
proxy, trading activity has been light, sporadic and irregular.
On February 9, 1998, according to Bloomberg there were four
market makers with the highest closing $.06 bid and highest
asking bid of $.42.
There can be no assurance that an active and liquid trading
market for the Company's Common Stock will develop if Capston is
able to successfully implement the Revised Plan and conclude a
business acquisition transaction with a Target Company,. Even 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 Company's Certificate of
Incorporation will authorize the issuance of 25,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock. Any
Preferred Stock that is subsequently issued by the Company may be
subject to conversion into Common Stock on terms approved by the
Board of Directors. If the Revised Plan is approved by the
Stockholders, approximately 98% of the Company's 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. Trading of the Company's Common Stock is
presently governed by the SEC's "Penny Stocks Rules" which apply
to all Bulletin Board stocks that cost less than $5.00 per share
and are issued by companies having less than $5,000,000 in net
tangible assets. Although the Company may have more than
$5,000,000 in net tangible assets after the completion of a
business combination transaction, there is no assurance that the
Company will ever be exempt from the Penny Stock rules. The Penny
Stock Rules impose substantial 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 purchaser's
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.
Such factors may also have a material adverse impact on the
future market price of the Common Stock.
PROPOSAL ONE
RATIFICATION OF REINSTATEMENT, AND SEC FILINGS
Acting in its capacity as the beneficial owner of 5,000
shares of the Company's Common Stock, and without first receiving
any consent, approval or authorization of any former officer or
director of the Company, or any other Stockholder, Capston
effected a reinstatement of the Company's Certificate of
Incorporation on December 26, 1996. After restoring the Company's
Certificate of Incorporation, Capston retained the firm of Want &
Ender, P.C. to prepare an audited balance sheet of the Company
and the related statements of operations, changes in Shareholders
equity (deficit), and cash flows at the close of bankruptcy,
November 13, 1996. Capston then filed with the SEC an omnibus
Annual Report on Form 10-K for the fiscal years, March 31, ended
1989 through 1996 and has subsequently filed on behalf of the
Company all reports required to be filed under the Exchange Act.
In addition, Capston has prepared this Proxy Statement for
distribution to the Shareholders. In connection therewith,
Capston advanced all of the costs and expenses associated with
the preparation of audited financial statements for the Company,
together with all of the filing fees due to the SEC. As a result
of these actions, the Company has been brought current with
respect to its reporting obligations under the Exchange Act and
is once again in compliance with applicable SEC regulations with
respect to reporting.
The foregoing actions have been taken by Capston, acting in
its capacity as a stockholder, and Ms. Fonner, acting in her
capacity as the sole officer and director of Capston, for the
sole purpose of calling and holding a meeting of the Company's
stockholders in conformity with the requirements of Section
312(h) of the GCLD. Capston and Ms. Fonner have not assumed
general authority to act on behalf of the Company and have taken
no corporate actions that are not required by statute, rule or
regulatory authority to be taken prior to the Meeting. As a
result of these actions, Capston and Ms. Fonner have voluntarily
assumed statutory liability under the GCLD and the Exchange Act
and, accordingly, must at all times comply with the obligations
imposed thereby. These obligations include, among others, the
duty to act in a manner that is in or not opposed to the best
interest of the stockholders, to file with the SEC the periodic
and other reports required under Section 12 of the Exchange Act
and to make timely, full and fair disclosure of all material
facts. In the event a Quorum is not present at the meeting, or
the stockholders reject the Revised Plan, then Capston and Ms.
Fonner intend to withdraw the Certificate of Renewal, Revival,
Extension and Restoration of the Company's Certificate of
Incorporation, file with the SEC a Current Report on Form 8-K
describing the results of the Meeting and take no further action
on behalf of the Company, thereby restoring the status quo as it
existed prior to the original filing of the Certificate of
Renewal, Revival, Extension and Restoration of the Company's
Certificate of Incorporation.
Except as set forth above, Capston has taken no action and
exercised no powers on behalf of the Company. The foregoing
actions have been taken by Capston solely for the purpose of
calling a Special Meeting of the Shareholders for the purposes
set forth herein and insuring that the Special Meeting is called
and held in full compliance with the requirements of Delaware
law, the Exchange Act and applicable SEC rules and regulations.
This proposal is not intended to constitute a ratification of
any or all actions Capston and Ms. Fonner may have taken with
respect to the Company to date and the Stockholders are only
being asked to ratify the actions of Capston and Ms. Fonner in
(i) effecting a renewal, revival and restoration of the Company's
Certificate of Incorporation and (ii) filing the reports and
other documents necessary to bring the Company current with
respect to its reporting obligations under the Exchange Act.
If the ratification proposal is adopted by the requisite
stockholder vote, the ratification would limit the rights of the
Company and its shareholders to commence or maintain legal
actions against Capston or Ms. Fonner with respect to the
ratified actions. The proposal would not, however, reduce, limit
or eliminate Capston and Ms. Fonner's liabilities and
responsibilities under the GCLD or the federal securities laws.
Shareholders 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 ratify Capston's actions
in restoring the Company's Certificate of Incorporation and
filing the Company's required reports with the SEC. Only shares
voted "FOR" or "AGAINST" 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
RATIFICATION OF CAPSTON'S ACTIONS. THE PROXY ENCLOSED HEREWITH
WILL BE VOTED FOR THE PROPOSAL UNLESS THE STOCKHOLDER VOTES
AGAINST THE PROPOSAL OR ABSTAINS FROM VOTING. SINCE CAPSTON AND
MS. FONNER HAVE 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.
PROPOSAL TWO
AMENDMENT OF BY-LAWS
Due to personal liability issues and the unavailability of
insurance, small public companies frequently encounter
significant difficulties in recruiting third parties to serve as
members of their board of directors. These difficulties are
compounded in the case of the Company because (i) the prior
actions of Capston and Ms. Fonner were taken without first
receiving any consent, approval or authorization of any former
officer or director of the Company, (ii) the Company is a
reporting issuer that has no assets, ongoing business or
immediate business prospects, and (iii) the ultimate success of
the Company's business plan will depend on the abilities of
Capston and Ms. Fonner to identify a suitable combination target
and negotiate an acceptable combination agreement. Under these
circumstances, Capston and Ms. Fonner do not believe they would
be able to recruit additional persons to serve as members of the
Company's board of directors pending the completion of a business
combination transaction. Since Capston and Ms. Fonner are unable
to propose a slate of three individuals to serve as directors of
the Company directors pending the completion of a business
combination transaction, the Revised Plan contemplates the
election of Sally A. Fonner, the president of Capston, to serve
as the sole member of the Company's Board of Directors until the
1999 annual Meeting of the Shareholders, or until the election
and qualification of a successor board of directors. Since the
Company's By-laws presently require a minimum of three directors,
rather than the single director proposed under the Plan, it will
be necessary to amend ARTICLE II, Section 2. of the Company's By-
laws to read as follows:
Section 1. Number and Election of Directors. The total
number of directors constituting the entire Board of
Directors shall be not less than one (1) nor more than nine
(9), with the then-authorized number of directors being
fixed from time to time solely by or pursuant to a
resolution passed by the Board of Directors, provided,
however, that the total number of directors shall be not
less than three (3) during any period when the total
stockholders' equity in the corporation exceeds $100,000. At
any time when the Board of Directors consists of three (3)
or more members, the Board of Directors shall be divided
into three classes, designated Class I, Class II, and Class
III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors. Initially,
Class I directors shall be elected for a one-year term,
Class II directors for a two-year term and Class III
directors for a three-year term. Thereafter, Directors shall
be elected to serve for a term of three years and until
their successors are elected and qualified. A majority of
the Directors shall constitute a quorum for the transaction
of business. All resolutions adopted and all business
transacted by the Board of Directors shall require the
affirmative vote of a majority of the Directors present at
the meeting.
Shareholders 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
amendment to the Company's by-laws. Only shares voted "FOR" or
"AGAINST" 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
AMENDMENT TO THE COMPANY'S BY-LAWS. THE PROXY ENCLOSED HEREWITH
WILL BE VOTED FOR THE PROPOSED AMENDMENT UNLESS THE STOCKHOLDER
VOTES AGAINST THE PROPOSAL OR ABSTAINS FROM VOTING. SINCE CAPSTON
AND MS. FONNER HAVE 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.
PROPOSAL THREE
ELECTION OF SOLE 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. Capston's 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. Fonner's business
experience and education follows:
Ms. Sally A. Fonner, age 48, has been an independently
employed business consultant for most of the past fifteen years.
She graduated from Stephens University in 1969 with a Bachelor of
Arts Degree in Social Systems. After a stint in the private
sector, Ms. Fonner returned to further her education and obtained
her MBA Degree from the Executive Program of the University of
Illinois in 1979. In many of her assignments as a business
consultant, she is frequently engaged in dealings which involve
financiers and large monetary transactions. 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 and Ms. Fonner within the preceding 18
months pursuant to a plan of reorganization that is similar to
the Revised Plan described in this Proxy Statement. In addition,
Capston and Ms. Fonner have filed a substantially identical proxy
statement for Marci International Imports, Inc. and anticipates
that the meeting of Marci's stockholders will be conducted on the
same date and at the same place the meeting of Webcor's
stockholders, although such meetings will be held at different
times. While Capston is actively negotiating proposed business
combination agreements for Arnox and Bio-Response, and evaluating
potential acquisitions 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 as the sole
director of the Company, 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. Only shares voted "FOR" or "AGAINST" Ms. Fonner 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 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 AND MS. FONNER
HAVE 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.
PROPOSAL FOUR
AMENDMENTS TO CERTIFICATE OF INCORPORATION
4(a) 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 and Ms. Fonner believe that the
owners of a suitable target company will ordinarily want to
control at least 80% of the Company's Common Stock upon the
completion of a business combination transaction, and (ii)
Capston and Ms. Fonner believe an ultimate capitalization in the
2,500,000 to 5,000,000 share range is appropriate for a small
public company, Capston and Ms. Fonner believe 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 and Ms. Fonner
believe such action will optimize the number of shares issued and
outstanding after a business combination transaction, result in a
higher reported market price for the Common Stock of the combined
companies, and reduce the market volatility of the Common Stock
of the combined companies. These changes, in turn, are expected
to enhance the overall perception of the Common Stock among
institutional investors and larger brokerage firms. These goals,
if achieved, are expected to enhance the Company's ability to
raise additional equity capital, and attract new market makers
and institutional Stockholders.
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 Company's Common Stock on
both January 20, 1998, the original Record Date for the Meeting,
and on March 30, 1998, the final 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. The following table illustrates the
effect of the rounding procedures at various levels of stock
ownership and the disproportionate benefit to be derived by
holders of fewer than 1,200 shares.
Original StockStock Ownership After Reverse Split Net Benefit
Effective
Ownership Without RoundingWith RoundingFrom RoundingReverse Spli
t
12,000 1,000 1,000 - 1:12
1,200 100 100 - 1:12
900 75 100 25 1:9
600 50 100 50 1:6
300 25 100 75 1:3
100 9 100 91 1:1
Capston and Ms. Fonner have developed the rounding procedures
described above for the express purpose of maximizing the number
of "round lot" stockholders, meaning stockholders who own 100 or
more shares. The underlying reasons for maximizing the number of
round lot holders are as follows. First, it will be difficult and
expensive for a holder of fewer than 100 shares to sell his
shares, particularly in the small-cap markets. Second, it will be
expensive for the Company to communicate with holders of fewer
than 100 shares. Third, the Nasdaq market and other regional and
national stock exchanges require between 300 and 2,500 round lot
stockholders as a condition precedent to listing. Finally, if the
Company were to effect a reverse split without using the rounding
procedures described above, there would be fewer than 200 round
lot holders of record, thereby making the Company significantly
less attractive to a potential acquisition candidate. 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 1,200 shares of
Common Stock, these provisions will also maximize the number of
"round-lot" holders and facilitate the subsequent efforts of a
Target Company to obtain a Nasdaq or Exchange listing. Therefore,
Capston and Ms. Fonner believe that the rounding procedures are
reasonable under the circumstances.
THE REVERSE SPLIT PROCEDURES PROPOSED BY CAPSTON AND MS.
FONNER DO NOT TREAT ALL STOCKHOLDERS EQUALLY AND ARE INHERENTLY
UNFAIR. WHILE THESE PROCEDURES ARE INTENDED TO MAXIMIZE THE
NUMBER OF "ROUND LOT" STOCKHOLDERS AND FACILITATE FUTURE EFFORTS
TO HAVE THE COMPANY'S 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 1,200 SHARES OF STOCK WILL
RECEIVE A GREATER PER SHARE BENEFIT THAN STOCKHOLDERS WHO OWN
MORE THAN 1,200 SHARES. NOTWITHSTANDING THE FOREGOING, CAPSTON
AND MS. FONNER BELIEVE THAT THE ADVANTAGES TO THE COMPANY OF
HAVING A LARGE NUMBER OF "ROUND LOT" STOCKHOLDERS JUSTIFIES THE
INEQUITABLE AND DISPROPORTIONATE BENEFIT TO BE DERIVED BY THE
COMPANY'S SMALL STOCKHOLDERS AT THE EXPENSE OF THE COMPANY'S
LARGE STOCKHOLDERS.
Capston and Ms. Fonner believe that the proposed reverse
split will be beneficial to the Company by significantly reducing
the number of issued and outstanding shares of Common Stock,
reducing the expected level of price volatility, and otherwise
stabilizing the anticipated market price of the Common Stock.
Capston also believes the proposed reverse split would increase
the Company's posture and relative worth of its shares in the
eyes of the investment community, although there is a risk that
the market may not adjust the price of the Company's Common Stock
by the ratio of a reverse split. Capston is aware of instances
where only modest price appreciation per share has resulted from
a reverse stock split. Trading in the Common Stock thereafter
will be at prices determined by supply and demand and prevailing
market conditions, which will not necessarily result in the
Common Stock of the Company maintaining a market price in
proportion to the reverse split effected.
The Common Stock is currently registered under Section 12(g)
of the Exchange Act, and as a result, the Company is subject to
the periodic reporting and other requirements of the Act. The
proposed reverse split will not effect the registration of the
Common Stock under the Exchange Act, and the Company has no
present intention of terminating its registration under the
Exchange Act in order to become a "private" company.
Other than the decrease in the total shares to be
outstanding, no substantive changes are being made in the rights
of 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 Company's
Board of Directors, out of earnings and surplus legally available
therefor, any dividends payable either in cash, in property or in
shares of the capital stock of the Company.
As soon as practical after the effective date of a reverse
split, the Company will mail letters of transmittal to each
holder of record of a stock certificate or certificates which
represents issued shares of Common Stock outstanding on the
effective date. The letter of transmittal will contain
instructions for the surrender of such certificate or
certificates to the Company's transfer agent in exchange for the
certificates representing the number of whole shares of new
Common Stock into which the shares of Common Stock have been
converted as a result of a reverse split. No payment will be made
or new certificate issued to a Stockholder until he has
surrendered his outstanding certificates together with the letter
of transmittal to the Company's transfer agent.
4(b)&(c) Increase in Authorized Common and Preferred Stock
The authorized capitalization of the Company is presently
fixed at 20,000,000 shares of Common Stock, of which 3,476,370
shares are presently issued and outstanding, and 1,000,000 shares
of Preferred Stock, of which no shares are presently issued and
outstanding. Accordingly, there are approximately 16,523,630
authorized shares of Common Stock and 1,000,000 shares of
Preferred 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 and 1,000,000 shares of
Preferred Stock that are both unissued and not reserved for
future issuance.
Capston and Ms. Fonner believe that the Company is likely to
need substantial additional financing in the future, although the
amount and timing of the Company's future financing requirements
is not presently ascertainable, Capston and Ms. Fonner believe
that an increase in the authorized capitalization of the Company
is desirable to facilitate the Company's future financing
activities. Accordingly, Capston proposes to increase the
authorized Common Stock of the Company from 20,000,000 shares of
$.01 par value Common Stock to 25,000,000 shares, and to increase
the authorized Preferred Stock of the Company from 1,000,000
shares of $.01 par value Preferred Stock to 5,000,000 shares.
Under this proposal, the relative rights and limitations of the
holders of Preferred and Common Stock would remain unchanged.
The proposed capital structure of the Company has been
recommended by Capston and Ms. Fonner 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 Certificate of Incorporation
as to holders of Preferred Stock. Such additional shares may be
issued for cash, property or services, or any combination
thereof, and at such price as the Board deems reasonable under
the circumstances. The increase in authorized shares of Common
Stock and Preferred Stock has not been proposed for an anti-
takeover-related purpose and the Board and management have no
knowledge of any current efforts to obtain control of the Company
or to effect large accumulations of the Company's stock.
Nevertheless, the issuance of additional shares by the Company
may potentially have an anti-takeover effect by making it more
difficult to obtain Stockholder approval of various actions, such
as a merger or removal of management.
4(d) Authorization of Name Change
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 and Ms. Fonner are
seeking prior Stockholder authorization for a change in the
Company's name that is (i) a negotiated element of a business
combination transaction of the type contemplated by the 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 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 and Stockholders have
no right under Delaware law or the Certificate of Incorporation
to dissent from a reverse split. All shares voted "FOR,"
"AGAINST" or "ABSTAIN" with respect to the proposal will be
treated as Votes Cast. As a result, shares voted "ABSTAIN" will
be treated as votes "AGAINST" 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.
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 Company's authorized Common
Stock from 20,000,000 shares to 25,000,000 shares. All shares
voted "FOR," "AGAINST" or "ABSTAIN" with respect to the proposal
will be treated as Votes Cast. As a result, shares voted
"ABSTAIN" will be treated as votes "AGAINST" 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.
Increase in 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 increase in the Company's authorized
Preferred Stock from 1,000,000 shares to 5,000,000 shares. All
shares voted "FOR," "AGAINST" or "ABSTAIN" with respect to the
proposal will be treated as Votes Cast. As a result, shares voted
"ABSTAIN" will be treated as votes "AGAINST" 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 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 Company's Certificate of
Incorporation to effect a Change in the Company's 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 "FOR,"
"AGAINST" or "ABSTAIN" with respect to the proposal will be
treated as Votes Cast. As a result, shares voted "ABSTAIN" will
be treated as votes "AGAINST" 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 EACH OF THE PROPOSED
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION. THE PROXY
ENCLOSED HEREWITH WILL BE VOTED FOR EACH PROPOSAL UNLESS THE
STOCKHOLDER VOTES AGAINST A PROPOSAL OR ABSTAINS FROM VOTING.
SINCE CAPSTON AND MS. FONNER HAVE 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.
PROPOSAL FIVE
COMPENSATION SHARE ISSUANCE
As part of the Revised Plan, Capston proposes to issue
approximately 300,000 shares of Common Stock ("Compensation
Shares") to Ms. Fonner and other individuals designated by
Capston as compensation for services rendered in connection with
the development of the Plan, the Revised Plan and the management
of the Company pending completion of the business combination.
The actual number of Compensation Shares to be issued to
Capston's 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 Ms. Fonner and other individuals
designated by Capston in the Company since the Company's long-
term business objectives will be wholly-dependent upon their
efforts, expertise and abilities. THE ORIGINAL PLAN 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 AND MS. FONNER.
Subject to Stockholder approval of the Compensation Share
issuance, the Company intends to file a Registration Statement on
Form S-8 to register the Compensation Shares under the Securities
Act. Thereafter, the Compensation Shares will be issued from time
to time to Ms. Fonner and other 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 and Ms. Fonner are successful in arranging a business
combination for the Company, approximately fifty percent (50%) of
the net value derived by the Company's Stockholders will vest in
Ms. Fonner and other individuals designated by Capston and the
remaining fifty percent (50%) will inure to the benefit of the
existing Stockholders of the Company. To the extent that shares
of Common Stock are issued to Ms. Fonner or any other person who
may be deemed to be an affiliate of Capston, such shares will be
treated as "control securities" under the Securities Act and
resales of such shares will be subject to the volume, manner of
sale and notice requirements of SEC Rule 144 for a period of 90
days after the closing of a business combination transaction.
Ms. Fonner and the other individuals designated by Capston
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 Ms.
Fonner and other persons designated by Capston. Only shares voted
"FOR" or "AGAINST" 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
AND MS. FONNER HAVE 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.
PROPOSAL SIX
AUTHORIZATION OF FINDERS' FEES
As is customary in the industry, the Revised Plan
contemplates the payment of finders' 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 Company's
Board of Directors and will be in conformity with the standards
discussed below.
Finder's 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 and Ms. Fonner intend to offer a graduated
finders' fee schedule to unrelated third party finders who
introduce the Company to a suitable acquisition prospect. Under
the formula proposed by Capston and Ms. Fonner, 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 finder's fee in cash, it is
anticipated that any finder's fees will be paid with shares of
the Company's Common Stock which may be registered under the
Securities Act prior to issuance. Notwithstanding the foregoing,
no finder's fees will be paid to Capston, Ms. Fonner or any of
their 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
finder's fee formula. Only shares voted "FOR" or "AGAINST" 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
FINDERS' FEE FORMULA. THE PROXY ENCLOSED HEREWITH WILL BE VOTED
FOR THE PROPOSED FINDERS' FEE FORMULA UNLESS THE STOCKHOLDER
VOTES AGAINST THE PROPOSAL OR ABSTAINS FROM VOTING. SINCE CAPSTON
AND MS. FONNER HAVE 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.
PROPOSAL SEVEN
AUTHORIZATION OF STOCK ISSUANCE
In general, a business acquisition 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 will
frequently be several brokers who are interested in the newly
reorganized company because they have stock remaining in their
customer's accounts.
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 and Ms. Fonner believe 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.
The following table reflects the potential ownership of the
Existing Stockholders, Capston, the Target Company and the
Finders under several possible business acquisition scenarios:
POTENTIAL DILUTION TABLE
80% to 90% to 95% to
Target Co. Target Co. Target Co.
Stockholders Stockholders Stockholders
Shares Percent Shares Percent Shares Percent
Existing Stockholders (est.)300,0009.62%300,000 4.82%300,000
2.39%
Capston (est.) 300,000 9.62%300,000 4.82%300,000 2.39%
Target Company Stockholders2,400,00076.92%5,400,00086.75%11,
400,000 90.69%
Finders 120,000 3.85% 225,000 3.61% 570,000
4.53%
Total 3,120,000 100.00%6,225,000100.00%12,570,000
100.00%
The potential business acquisition scenarios set forth above
are only intended to serve as examples of the range of business
acquisition transactions will be permissible under the Revised
Plan and it is possible that the final terms of a business
acquisition may fall outside of the range presented. Since
Capston and Ms. Fonner have 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 acquisition or to quantify the final interest of
the Existing Stockholders in the combined entity. Notwithstanding
the foregoing, Capston's 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.
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 authorize the issuance of
an indeterminate number of shares of Common Stock to unrelated
third parties in connection with a business acquisition
transaction of the type contemplated by the Revised Plan. Only
shares voted "FOR" or "AGAINST" 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
BUSINESS COMBINATION FORMAT. THE PROXY ENCLOSED HEREWITH WILL BE
VOTED IN FAVOR OF THE BUSINESS COMBINATION FORMAT UNLESS THE
STOCKHOLDER VOTES AGAINST THE PROPOSAL OR ABSTAINS FROM VOTING.
SINCE CAPSTON AND MS. FONNER HAVE 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.
PROPOSAL EIGHT
PROPOSED INCENTIVE STOCK PLAN
As part of the Revised Plan, Capston and Ms. Fonner propose
to adopt an Incentive Stock Plan (the "Incentive Stock Plan") for
the benefit of the employees that will be employed by the Company
after the completion of a business acquisition of the type
contemplated by the Plan. Capston, Ms. Fonner and their
employees, agents and affiliates 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, "Incentive Awards'). 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
"Committee"), which will consist of two or more directors, each
of whom shall be a "disinterested person" within the meaning of
Rule 16b-3(c)(2)promulgated under Section 16 of the Exchange Act.
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 acquisition transaction and equal 10%
of the total number of shares of Common Stock outstanding on that
date.
Capston and Ms. Fonner believe 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 and Ms. Fonner believe
that an emphasis on equity-based compensation will yield the
greatest benefit for the shareholders, as the employee's
compensation will be directly dependent on the return on
shareholders' 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 Company's
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 ("ISO") 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("NQO") granted under the Incentive Stock Plan will be
determined by the Committee. NQOs and ISOs are referred to herein
as `Options." 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 "Change in
Control"), all Options become immediately exercisable. The
Incentive Stock Plan defines Change in Control to mean (i) a
"change in control" 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 "Issue Date")
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 "Vesting Date")
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 `Election'). 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 "tax' 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 "FOR" or "AGAINST" 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 AND MS. FONNER HAVE 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 Company's Common Stock there
were 3,476,370 shares of the Company's Common Stock issued and
outstanding on December 31, 1997. The following table presents
certain information regarding the beneficial ownership of the
Company's 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 Company's directors, and (iii) all
directors and officers as a group.
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Victor Reichenstein 985,507 27.00%
866 United Nations Plaza
Suite 307
New York, New Your 10017
Sally A. Fonner (1) 5,000 0.00%
1612 N. Osceola Avenue
Clearwater, Fl 33755
All Directors And Officers
As A Group 5,000 0.00%
(1)The shares attributed to Ms. Fonner are beneficially owned by
Capston Incorporated, a Delaware corporation solely owned
and controlled by Ms. Fonner.
The above information, with the exception of information
relating to the stock ownership of Ms. Fonner, is taken the
records of American Stock Transfer & Trust Company, the transfer
agent for the Company's Common Stock. The transfer agent, Capston
and Ms. Fonner have no information which would indicate this
information is not accurate. Capston and Ms. Fonner believe 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 Company's Annual Report on Form 10-K for the year ended March
31, 1997 as filed with the Securities and Exchange Commission,
(ii) a copy of the proposed Project Management Agreement between
Capston and the Company, and (iii) a copy of the proposed
Incentive Stock Plan. The Form 10-K, the proposed Project
Management Agreement and the proposed Incentive Stock Plan are
incorporated herein by this reference and all disclosures herein
are qualified in their entirety by reference to such documents.
The Company's 1998 Annual Meeting has been tentatively
scheduled for December 15, 1998. Any shareholder who wishes to
submit a proposal to be included in the proxy statement and form
of proxy relating to the 1998 annual meeting will be required to
submit such proposals to the Company on or before August 15,
1998.
This solicitation is being conducted by Capston on behalf the
Company. The cost of soliciting proxies will be advanced by
Capston at its sole cost, risk and expense and the Company will
have no duty to reimburse Capston for any expenses incurred on
behalf of the Company. The cost of this solicitation including
legal, accounting, printing, mailing and other miscellaneous
expenses are estimated at $20,000. To date, Capston's out-of-
pocket expenses have been approximately $30,000. 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.
Capston and Ms. Fonner do 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 June 19, 1998 at
1;00 p.m.
The undersigned hereby appoints Michael Weber and Yanie
Dubouchage, 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 on June 19, 1998 at 1:00 p.m.,
in a posted room at the Tampa Airport Mariott of Tampa, Florida,
and at any and all adjournments thereof:
1. PROPOSED RATIFICATION OF REINSTATEMENT AND SEC FILINGS. To
ratify and affirm all actions of Capston Network Co.
("Capston") in (i) effecting a renewal, revival and
restoration of the Company's Certificate of Incorporation;
and (ii) filing the reports and other documents necessary to
bring the Company current with respect to its reporting
obligations under the Securities Exchange Act of 1934;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
2. PROPOSED AMENDMENT OF BY-LAWS. To approve the proposed
amendment to ARTICLE II, Section 2. of the Company's By-laws
to permit a single-member Board of Directors until such time
as the total Stockholders' equity of the Company the
business combination;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
3. PROPOSED ELECTION OF SOLE DIRECTOR. To elect Sally A. Fonner
to serve as the sole member of the Board of Directors until
the 1999 annual Meeting of Stockholders, or until her
successor is elected and qualified;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
4. PROPOSED AMENDMENTS TO ARTICLES OF INCORPORATION.
(a)PROPOSED REVERSE SPLIT. 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) PROPOSED INCREASE IN COMMON STOCK. To increase the
authorized Common Stock of the Company to 25,000,000
shares;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
(c)PROPOSED INCREASE IN PREFERRED STOCK To increase the
authorized Preferred Stock of the Company to 5,000,000
shares;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
(d)PROPOSED NAME CHANGE AUTHORIZATION. To authorize the
Board of Directors to change the Company's 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
5. PROPOSED COMPENSATION SHARE ISSUANCE. To approve the issuance
of approximately 300,000 shares of Common Stock to Ms. Fonner
and other persons designated by Capston as compensation for
services rendered in connection with the development of the
Plan, the Revised Plan and the management of the Company
pending completion of the business combination;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
6. PROPOSED AUTHORIZATION OF FINDERS' FEES. To authorize the
Board of Directors to pay an in-kind Finder's Fee to
unrelated third party finders who introduce the Company to a
suitable acquisition prospect;
nFOR nAGAINST nABSTAIN nBROKER NON-VOTE
7. 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;
nFORnAGAINST nABSTAIN nBROKER NON-VOTE
8. 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
9. 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: _____________________, 1998
_______________________________________
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.
PROJECT MANAGEMENT AGREEMENT
THIS PROJECT MANAGEMENT AGREEMENT is made and entered into
and effective this ____ day of _________, 1998, by and between
Capston Network Company, a Delaware corporation with an office
1612 N. Osceola Avenue Clearwater, Fl 33755, hereinafter called
"Manager," and Webcor Electronics, Inc., an inactive Delaware
corporation with an office 1612 N. Osceola Avenue Clearwater, Fl
33755, hereinafter called the "Company."
W I T N E S S E T H
WHEREAS, the Company is an inactive Delaware corporation that
has no assets, liabilities, management or ongoing operations and
has not engaged in any business activities since February 1990;
and
WHEREAS, Capston has previously undertaken on its own
initiative and at its own cost, risk and expense, to restore the
Company's Certificate of Incorporation, file the Company's
delinquent reports with the Securities and Exchange Commission
(the "SEC"), and develop a restructuring plan (the "Plan")
whereby the Company will be restructured as a "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 (a "Target Company"); and
WHEREAS, the Plan is more fully described in a detailed
written Proxy Statement dated ___________, 1998 (the "Proxy
Statement") which was previously distributed to and approved by
the Stockholders of the Company, and forms the legal basis for
the relationship established hereby; and
WHEREAS, the parties hereto desire to enter into a formal
agreement for the operation and management of the Company's
affairs and the implementation of the Plan;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, it is agreed that the Company shall
be managed by Capston in accordance with the terms and provisions
of this agreement, which are as follows, to-wit:
Article I
Powers of Manager
Subject at all times to the supervision, direction and
control of the Company's board of directors, Manager shall have
all necessary power and authority to, manage, supervise and
administer the day-to-day business affairs of the Company and
shall use reasonable commercial efforts to seek, investigate and,
if the results of such investigation warrant, negotiate a
business combination with a suitable company or business
opportunity that seeks the perceived advantages of a business
combination with a publicly held corporation.
Article II
Operations
2.1All operations conducted on behalf of the Company by the
Manager shall be conducted by competent personnel who have been
selected by the Manager and approved by Company's board of
directors. All such operations shall be performed in a good and
professional manner and in connection with all such operations
the Manager shall adhere to the standard of care that is
customary and usual in the activities of similarly situated
publicly-held companies who are seeking to effect a business
combination with a Target Company.
2.2The number of employees, the selection of such employee,
the hours of labor and the compensation for services to be paid
any and all such employees shall be determined by Manager, and
all such employees shall be the employees of Manager.
2.3The Manager shall retain such consultants,
subcontractors, employees and agents as may be necessary to
discharge the duties set forth in this Article II in a prompt,
professional and timely manner. Except as specifically set forth
herein, all fees, wages, charges and expenses incurred by the
Manager in connection with the performance of its duties
hereunder shall be the responsibility and obligation of, and paid
by, the Manager, and the Manager hereby expressly agrees to
indemnify and hold the Company harmless from and against all
costs and expenses, including attorney's fees, judgments and
amounts paid in settlement, which may be paid or incurred by any
such person in connection with or as a result of any claim,
demand, action or right of action which in any way arises from or
relates to the performance of any duty of the Manager under the
terms of this Agreement.
Article III
Specific Duties of Manager
The Manager shall have the primary responsibility for
conducting all of the Company's existing and proposed operations
in a good and professional manner with due regard for the rights
and interests of all of the Company's Stockholders In
furtherance, and not in limitation of the foregoing, the Manager
shall:
a. conduct all of the Company's existing and proposed
operations in accordance with applicable law and the
provisions of this Agreement;
b. conduct all of the Company's existing and proposed
operations in a good and workmanlike manner as would a
prudent manager under the same or similar circumstances;
c. keep the Company's Board of Directors informed with
respect to all operations of the Company, all
investigations of or negotiations with potential Target
Companies, all other matters which they are entitled to
know under applicable law and all additional matters it
deems to be important under the circumstances;
d. keep the Company's Stockholders informed of all matters
which they are entitled to know under applicable law and
all additional matters it deems to be important under the
circumstances;
e. keep the Company and its properties, if any, free from
all liens and encumbrances occasioned by the operations
contemplated hereby;
f. retain at its sole cost, risk and expense such employees,
experts and consultants as may be necessary or desirable
in the discharge of the duties of the Manager set forth
in this Agreement;
g. maintain complete, correct and accurate books, records
and accounts and furnish to the Company's Board of
Directors periodic reports in such detail as may be
reasonably required to permit the Company to fully
discharge its reporting obligations under the Exchange
Act and other applicable law;
i. make all information concerning the Company available for
inspection by the Board of Directors or the authorized
representatives of the Stockholders.
Article IV
Payment of Expenses
All costs, expenses and liabilities accruing or resulting
from the operation of the Company pursuant to this agreement and
the implementation of the Plan shall be advanced and paid by
Manager at its sole cost, risk and expense. All such costs,
expenses and related charges shall be accounted for by Manager in
accordance with generally accepted accounting principles ("GAAP")
and shall be treated as contributions to the Company's capital by
the Manager. The Company shall not be obligated to reimburse the
Manager for any costs and expenses previously incurred or to be
incurred in connection with the reinstatement of the Company's
certificate of incorporation, the preparation and filing of the
Company's reports under the Securities Exchange Act of 1934 (the
"Exchange Act") and the investigation of business opportunities
on behalf of the Company. Notwithstanding the foregoing, the
Manger shall be entitled to attempt to negotiate a " acquisition
fee" or "non-accountable expense allowance" of up to $250,000
that will be payable solely by or for the benefit of the Target
Company and neither the Company nor any of its Stockholders shall
have any claim to or interest in any fees or expense allowances
that are paid to Manager by or for the benefit of any Target
Company.
Article V
Compensation to Manager
As its sole compensation for services rendered and to be
rendered in connection with the development and implementation of
the Plan and the operation of the Company pursuant to this
agreement, the Manager or its designees shall be entitled to
receive the number of shares of the Company's $0.01 par value
common stock that is equal to 100% of the issued and outstanding
common stock of the Company immediately after the completion of
the 1 for 12 reverse split contemplated by the Plan, but prior to
the issuance of any shares to the Manager or any other third
party. Thereafter, subject to proportional dilution for future
stock issuances pursuant to the Plan, the Manager shall own 50%
of the outstanding Common Stock of the Company and the existing
stockholders of the Company, determined as of the date of this
agreement, shall own 50% of the outstanding Common Stock of the
Company. All shares issuable to the Manager or its designees
pursuant to this Article III may, prior to issuance, be
registered under the Securities Act of 1933, as amended (the
"Securities Act") on Form S-8 or such other registration form as
may then be available to the Company. The Company shall use its
best efforts to cause such registration to become effective at
the earliest practicable date and to maintain the effectiveness
of such registration for such period as may, in the opinion of
the Manager, be necessary or appropriate under the circumstances.
Except as specifically provided in this Article V, the Manager
shall not be entitled to receive any preferred stock or other
securities of the Company that are or may be convertible into
common stock, or any other options, warrants appreciation rights
or similar instruments that will or might entitle the Manager to
receive additional shares of common stock in the future.
Article VI
Employment of Professionals
In connection with the implementation of the Plan and
consummation of a business combination transaction with at Target
Company, the Manager shall be authorized, subject to the approval
of the Company's Board of Directors, to retain such attorneys,
accountants and other advisors to represent and assist the
Company as it deems reasonable and prudent under the
circumstances. In connection with the engagement of such
professionals, and subject at all times to the approval of the
Company's Board of Directors, the Manager may negotiate fee
agreements that provide for the full or partial payment of
professional fees associated with services rendered to the
Company with authorized but previously unissued shares of the
Company's common stock. All shares issuable such attorneys,
accountants and other advisors pursuant to this Article VI may,
prior to issuance, be registered under the Securities Act of
1933, as amended (the "Securities Act") on Form S-8 or such other
registration form as may then be available to the Company. The
Company shall use its best efforts to cause such registration to
become effective at the earliest practicable date and to maintain
the effectiveness of such registration for such period as may, in
the opinion of the Manager, be necessary or appropriate under the
circumstances.
Article VII
Employment of Finder's
In connection with the implementation of the Plan and
consummation of a business combination transaction with at Target
Company, the Manager shall be authorized, subject to the approval
of the Company's Board of Directors, to enter into such
agreements with third party finders as it deems reasonable and
prudent under the circumstances. In connection with the
engagement of such finders, and subject at all times to the
approval of the Company's Board of Directors, the Manager may
negotiate fee agreements that provide for a graduated finders'
fee schedule to unrelated third party finders who introduce the
Company to a suitable acquisition prospect. In general, the
Manager is expressly authorized to offer finders' fees of 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.
Manager is expressly authorized to agree to pay such finder's
fees with shares of the Company's Common Stock and shares
issuable finders pursuant to this Article VII may, prior to
issuance, be registered under the Securities Act of 1933, as
amended (the "Securities Act") on Form S-8 or such other
registration form as may then be available to the Company. The
Company shall use its best efforts to cause such registration to
become effective at the earliest practicable date and to maintain
the effectiveness of such registration for such period as may, in
the opinion of the Manager, be necessary or appropriate under the
circumstances.
Article VIII
Rights of the Company
The Company's Board of Directors shall have access to Manager
and its employees at all reasonable times to inspect and
supervise the operations of the Company and shall have access at
all reasonable times to all information pertaining to the
operation thereof. Manager, upon request, shall furnish the Board
of Directors with any information that may be reasonably
requested pertaining to operations of the Company, including
copies of accounting records, correspondence, due diligence
materials provided by potential Target Companies, and reports on
the status of discussions and negotiations with potential Target
Companies. The Company's Board of Directors shall have the right
to inspect at all reasonable times during business hours, the
books and records of Manager pertaining to the Company; provided,
however, that Manager may destroy or otherwise dispose of any
books and records relating to matters that are more than seven
years old, except records with respect to items in dispute.
Article IX
Liability of Manager
The judgment and discretion of Manager exercised in good
faith shall be the limit of the liability of Manager to Company.
Manager shall never be liable to Company for any act done or
omitted to be done in good faith in the performance of any of the
provisions of this agreement. Manager shall not be liable to
Company for any failure to perform or for any loss caused by
strikes, riots, fires, tornadoes, floods or any other cause
including requirements of governmental agencies, whether of like
character or not, beyond the control of Manager and which the
exercise of reasonable diligence could not avoid.
Article X
Notices
All notices, reports and correspondence permitted or required
to be given to any party hereunder, except as otherwise
specifically provided herein, shall be given in writing by U.S.
mail or by telegram, postage or charges prepaid, addressed to
such party at the address listed above. Any party may change his
or its address by appropriate written notice to the other party
hereto.
Article XI
State and Federal Laws, Rules and Regulations
All of the terms and provisions of this agreement are hereby
expressly made subject to all federal and state laws and to all
valid rules and regulations and orders of any duly constituted
authority, having jurisdiction in the premises. Manager shall
prepare and the Company shall file all such applications,
notices, reports and other information concerning the operations
of the Company as may be required under the Exchange Act or other
applicable law. All costs and expenses incurred by Manager in
preparing periodic and other reports for the benefit of the
Company shall be paid by the Manager at its sole cost, risk and
expense. Nothing herein contained, however, shall obligate the
Manager to prepare any applications, notices, reports and other
information concerning the operations of the Company from and
after the closing date of a business combination transaction of
the type contemplated by the Plan.
Article XII
Force Majeure
If any party is rendered unable, wholly or in part, by force
majeure, to carry out its obligations under this Agreement, other
than the obligation to make money payments, that party shall the
other party prompt written notice of the force majeure, with
reasonably full particulars concerning it; thereupon, the
obligation of the party giving the notice, so far as they are
affected by the force majeure, shall be suspended during, but no
longer than, the continuance of the force majeure. The affected
party shall use all reasonable diligence to remove the force
majeure as quickly as possible. The term "force majeure" as here
employed shall mean an Act of God, strike, lockout or other
industrial disturbance, act of the public enemy, war, blockade,
public riot, lightning, fire, storm, flood, explosion,
governmental restraint, unavailability of equipment, and any
other cause, whether of the kind specifically enumerated above or
otherwise, which is not reasonably within the control of the
party claiming suspension.
Article XIII
Term
Subject to other provisions hereof, this agreement shall
remain in full force and effect until the closing date of a
business combination transaction of the type contemplated by the
Plan, at which time all powers and responsibilities of the
Manager shall terminate. Notwithstanding any other provision of
this agreement, if the compensation payable to the Manger and
others as specified in Articles V and VI has not been paid on or
before such closing date, the Company shall, as promptly as
practicable, file such registration statements and other
documents as may be reasonably be required under the
circumstances to permit the Company to pay such compensation as
promptly as practicable.
Article XIV
Other Provisions
14.1 Notwithstanding anything to the contrary contained in
this Agreement, the following items pertaining to the management
of the Company shall not be considered as administrative
overhead, and Manager shall be entitled to make a direct charge
to the Company or the Target Company for same:
a.Fees for legal services, costs and expenses incurred in
connection with preparation and filing of a Current Report
on From 8-K to reflect the consummation of a business
combination transaction of the type contemplated by the
Plan.
b.Fees for third party professional and contract services of
personnel directly connected with or engaged in the
consummation of a business combination transaction of the
type contemplated by the Plan, provided, however, that all
agreements with such professional service providers or
contract service personnel shall be subject, in all events,
to the prior approval of the Company's Board of Directors.
14.2 This agreement and of the terms and provisions hereof
shall extend to and be binding upon the parties hereto, their
respective heirs, representatives, successors and assigns, and
shall be enforceable by the parties in any court of competent
jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties on the date first set forth above
Webcor Electronics, Inc. Capston Network Company
(the Company) (the Manager)
By: By:
Sally A. Fonner, Sole Director Sally A. Fonner, President
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 "Company"), 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)"Board of Directors" shall mean the Board of Directors of
Webcor Electronics, Inc., a Delaware corporation.
(b)"Cause," when used in connection with the termination of
a Participant's employment with the Company, shall mean the
termination of the Participant's 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 Company's 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 Company's Policies and
Procedures Manual, if any, then in effect.
(c)"Cash Bonus" shall mean an award of a bonus payable in
cash pursuant to Section 10 hereof.
(d)"Change in Control" shall mean:
(1)a "change in control" 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 "beneficial owner" (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 Company's
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 Company's then outstanding
securities, shall not constitute a "Change in Control" 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)"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(f)"Committee" 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)"Common Stock" shall mean the Company's Common Stock, par
value $.01 per share.
(h)"Company" shall mean Webcor Electronics, Inc., a Delaware
corporation, and each of its Subsidiaries, and its successors.
(i)"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(j)the "Fair Market Value" 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 ("Nasdaq") 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
Bureau's "Pink Sheets" or the National Association of Securities
Dealers' 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)"Incentive Award" 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)"Incentive Stock Option" shall mean an Option which is an
"incentive stock option" 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)"Issue Date" 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)"Non-Qualified Stock Option" 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)"Option" 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)"Participant" 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)"Person" shall mean a "person," 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 "Phantom Stock" 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)"Plan" shall mean the Webcor Electronics, Inc. Incentive
Stock Plan, as it may be amended from time to time.
(t)"Qualified Domestic Relations Order" 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 "Restricted Stock" 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)"Securities Act" shall mean the Securities Act of 1933,
as amended from time to time.
(w)"Stock Bonus" shall mean a grant of a bonus payable in
shares of Common Stock pursuant to Section 9 hereof.
(x)"Subsidiary" or "Subsidiaries" 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)"Vesting Date" 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 number 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 "disinterested person" 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 attorneys' 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 Company's 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 cashier's 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 cashier's 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 "incentive stock options" (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, "permanent
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 "permanent 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 Company's 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 Participant's
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 Participant's 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 Participant's
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 Participant's
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 Company's 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 Committee's 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 Participant's 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 Company's
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 Clearwater, Florida this ___ day of _____, 199_.
Webcor Electronics, Inc.
Sally A. Fonner, Sole Director
