SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant ____
Filed by a Party other than the Registrant __X__
Check the appropriate box:
____ Preliminary Proxy Statement
X Definitive Proxy Statement
____ Definitive Additional Materials
____ Soliciting Material Pursuant to 14a-11(c) or
Rule 14a-12
ARNOX CORPORATION
(Name of Registrant as Specified in its Charter)
Capston Network, Co.
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
_X_ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-
6(i)(l) or 14a-6(i)(3)
___ $500 for each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3)
___ Fee Computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
Date Filed: June 13, 1996
Dear Stockholder;
This Proxy Statement, its accompanying Letter to
Stockholders and the enclosed proxy card are being furnished to
holders of the common stock of Arnox in connection with the
solicitations of consents by Capston Network Co. ["Capston"].
Arnox filed a Chapter 11 petition with the U.S. Bankruptcy
Court in New Jersey on September 11, 1989, designated Case # 89-
07155, seeking protection from creditors. On December 18, 1989,
the Arnox petition was converted to Chapter 7. Under Chapter 7,
the company is liquidated to pay off creditors. On July 12, 1994
the Arnox bankruptcy was terminated. The Arnox corporate charter
from Delaware went void on March 1, 1990 for failure to pay
Delaware taxes. The last available price for the stock of Arnox,
according to the National Quotation Bureau, was 1/8th of a dollar
bid and asked. This price was established on September 10, 1990.
There has been no further activity.
Despite these reverses, Arnox is still a Registrant with the
U.S. Securities and Exchange Commission ["SEC"]. Arnox is not
current with its SEC reports and it is in arrears with its SEC
payments; but Arnox is still a Registrant. This means that Arnox
can still sell stock. But who would purchase Arnox stock in its
current plight? The answer is nobody. However, if Arnox puts
itself through a financial restructuring, this can change.
Capston has taken the initiative of reinstating Arnox's
original corporate charter by paying all of the company's past
due taxes with Delaware. If this Restructuring is approved,
Capston will bring Arnox current with its SEC reporting
requirement and pay all fees owed to the SEC. With its standing
fully restored in the State of Delaware and before the SEC, Arnox
can make a private placement offering to a sophisticated buyer.
Capston is asking the stockholders of Arnox to accept a ten
for one reverse split, simultaneous with the issuance of a 90%
block of stock to a new party, hereafter termed a Purchaser. If
Arnox can offer a 90% block of stock, there are many attractive
purchasers. These are private companies that want to become
public. It is true that a ten- for-one reverse split means that
every ten shares that you own will shrink to one share. But one
share that sells for $5.00 or more [pricing that is entirely
feasible] is worth more than ten shares that sell for 1/8th of a
dollar each and shows no sign of moving.
This is the opportunity presented to you by Capston. You can
convert your Arnox securities back into an investment possessing
value by voting for the Capston Plan.
Sincerely,
Sally Fonner / President
Capston Network, Co.
ARNOX CORPORATION
____________
PROXY STATEMENT
SOLICITATIONS OF CONSENTS
This document (the "Proxy Statement") describes a proposed
financial restructuring (the "Restructuring") of ARNOX
CORPORATION [hereafter "Arnox"], a reinstated Delaware
corporation and a Registrant with the Securities and Exchange
Commission. This Proxy Statement is being furnished to
stockholders of Arnox in connection with the solicitation of
consents relating to the Restructuring of Arnox and other
matters, more fully set forth in this Proxy Statement.
This Proxy Statement has been assembled and distributed by
Capston Network, Co. ["Capston"], in Capston's capacity as a
stockholder of Arnox. Capston has reinstated Arnox under its
original charter. Through this Proxy Statement, Capston is
presenting a proposal [the "Capston Plan"] for Restructuring
Arnox and other matters, including a solicitation of your consent
to allow Capston to file reports on the Registrant's behalf with
the SEC and to make representations to outsiders for the
Registrant, consistent with the terms set forth in this Proxy
Statement.
This is not a Prospectus. No shares are to be issued or
exchanged at this time if the Capston Plan is approved. However,
by voting for the Capston Plan, a shareholder is committing
themselves to a Restructuring, and pursuant to this
Restructuring, shareholders will be asked to reduce your holdings
of Arnox to one share for every ten shares that you now hold. The
nine shares released will be transferred to a new Purchaser under
a private placement transaction. This Purchaser will imbue Arnox
with a new identity, new management and renewed value for Arnox
stock. The identity of this new company and the specific terms
governing the issuance and exchange of this stock will be set
forth in a second proxy statement / prospectus, to be issued if
this Proxy Statement is approved and when Capston has located a
company deemed suitable to Arnox.
This transaction has not been approved or disapproved by
the Securities and Exchange Commission ["SEC"] or any State
Securities Commission nor has the Securities and Exchange
Commission or any State Securities Commission passed upon the
fairness or merits of this transaction or upon the accuracy or
adequacy of the information contained in this proxy statement.
Any representation to the contrary is a criminal offense.
This Proxy Statement is being mailed to shareholders on
June 13, 1996. Proxy Statements must be returned in twenty
calendar days. This solicitation of consents will expire at 5:00
p.m., New York City Time on July 3, 1996, unless it is extended.
TABLE OF CONTENTS
Cover
Letter to Stockholders
Proxy Statement Summary p. 2
I. Solicitations of Consent p. 3
II. Information about the Company p. 4
Arnox Update
Arnox as SEC Registrant
Shareholder Exposure
Value of Arnox Stock
Restructuring Capitalization
III. The Capston Plan p. 7
IV. Information Concerning Participants p. 8
Capston Network, Co.
Biographical Sketches on Participants
V. Additional Pertinent Information p. 11
Compliance with 230.419 An Offering
from a Blank Check Company
Comment on Shell Companies
Private Offering Exemption
VI. Compliance With SEC Proxy p. 17
Solicitation Rules
VII. Conclusion p. 21
SUMMARY
The following is a summary of certain information contained
in this Proxy Statement and is qualified in its entirety by the
more detailed information appearing elsewhere in the Proxy
Statement.
The Company
Arnox ceased operations in 1989, when it entered bankruptcy.
This condition endured until July, 1994. At that time, the Arnox
bankruptcy was closed. Presently, Arnox has no assets and no
business purpose and would qualify for the term Blank Check
Company.
Arnox stock is selling for 1/8th of a point and there has
been no trading since 1990. Without a major and transforming act
of its own, Arnox is doomed to continue to languish and your
investment in this security will remain de minimis.
The Capston Plan
Capston owns stock in Arnox and wants to see the value of
this stock restored. This can be accomplished through a financial
restructing of the existing capitalization. Existing shareholders
are hereby being asked to approve a ten for one reverse split,
whereby every ten shares presently held in Arnox will be
exchanged for one share in the Company after it has been through
a restructuring. The ninety percent block of stock released will
be tranferred to a Purchaser, who in turn, will install new
management and a new identity.
The Opportunity
Arnox can be salvaged. Only shareholder support is needed. By
voting for the Capston Plan, you can ratify a plan for
restructuring the Arnox capitalization and passing control to a
new party. No transfer of control will occur without your
specific approval. Capston will mail a second Proxy - Prospectus
to all security holders of record. This will identify the
Purchaser and seek specific approval to surrender ten shares of
stock for one share in a restructured company. Once this is
approved, the Purchaser can install new management and imbue the
Arnox stock with new value.
Through this Proxy Statement, Capston is asking for authority
to speak on behalf of Arnox, to file reports with the SEC on
Arnox behalf, and to seek out a qualified Purchaser that can
install new management and revive Arnox stock.
I. SOLICITATIONS OF CONSENTS
TO THE CAPSTON PLAN
General
According to the Arnox Quarterly Report filed on July 1,
1989, there were 3,417,025 shares of Arnox Common Stock
outstanding and entitled to vote. Common Stock constitutes the
only class of outstanding voting securities. Each share of common
stock entitles its owner to one vote.
This is a Consent Solicitation, which constitutes a Proxy
within the meaning of section 14(a) of the Securities Exchange
Act of 1934, as amended. By this mailing and through this
information statement, you are being asked to execute a proxy and
vote the number of shares that you own. If your shares are held
in the name of a brokerage firm, bank or nominee, only this
holder of record can vote such shares and only upon receipt of
your specific instructions. Accordingly, please contact the
person responsible for your account and give instructions for
such shares to be voted. If your shares are registered in more
than one name, the enclosed proxy must be signed by all
registered owners to ensure that the shares are voted. Any
shareholder giving a proxy may revoke their proxy if this
revocation is received before the date that an action is
scheduled to become effective. Just a duly executed proxy signed
at a later date and received in a timely fashion, will suffice to
revoke your original proxy. Proxies that are signed but lack any
specifications will be voted in favor of the proposals set forth
in this proxy. If you do not return a proxy, this failure to
object or to dissent will be interpreted as a consent and as an
authorization to pursue the plan recommended in this proxy.
The SEC has promulgated Regulation 14(A) and (C) and
Schedule 14(A) and (C), which dictate the information that must
be contained in an information statement such as this; how this
information must be presented; how this information must be
distributed; and whether or not this information must be filed.
[See Compliance with S.E.C. Proxy Solicitation Rules.]
This proxy does not ask you to do anything with your
existing shares at this time, other than cast a vote commensurate
with your holdings of securities. However, if the plan offered
through this proxy should be approved, then you will be asked to
make an investment decision at a later time. Though we cannot
detail the specific investment decision that will follow, we can
describe this investment decision in general terms. [See Proposed
Capston Plan.]
The cost of soliciting this Proxy, including its
preparation, assembly and mailing, as well as the cost of
forwarding such material to beneficial owners of the Company's
Common Stock, will be borne by Capston, and no reimbursement will
be sought by Capston from the Company for this expense. Capston
will pay the standard charges of brokerage firms and other
nominees or fiduciaries for sending proxy materials to their
principles who are beneficial owners of Arnox Common Stock.
Capston has no plans for solicitation of proxies over the phone
or through personal interview, but Capston reserves the right to
solicit the vote of a proxy holder, if said Proxy Holder takes
the initiative and calls Capston, with questions concerning this
proxy.
II. INFORMATION ABOUT THE COMPANY
Arnox Update
The shares of Arnox were registered with the SEC under an S-
1 Registration Statement filed on October 21, 1985. This
Registration Statement continues to remain valid. Prior to this
Proxy Statement, the last Arnox filing with the SEC consisted of
an 8 - K Current Report on September 11, 1989, reporting the
filing of a bankruptcy petition. Arnox was in bankruptcy from
September 11, 1989 to July 12, 1994, 4 years and eight months.
On April 25, 1989, Arnox withdrew from NASDAQ because Arnox
was no longer able to meet the minimum capital requirement
imposed by NASDAQ's rules. Arnox's withdrawal from NASDAQ did not
affect the company's public status or the company's stock. The
charter for Arnox became inoperative on March 1, 1990 for failure
to pay Delaware taxes. By this date, Arnox was in Chapter 7 of
its bankruptcy proceeding, which is liquidation.
At this time, Arnox qualifies as a Blank Check Company,
which is an SEC term used to describe a company that no longer
has a specific business purpose. [See Compliance with 230.419 An
Offering from a Blank Check Company]. The term shell company is
also employed. [See Comment on Shell Companies.] Arnox has no
assets and no specific business purpose.
Arnox as SEC Registrant
Despite the fact that Arnox did not have a listing on NASDAQ
and its corporate charter in Delaware had gone void, Arnox was
still a Registrant. As an SEC Registrant, Arnox has been
delinquent. In the first place, the corporation which sponsored
the Arnox registration is deemed the owner of this registration.
Since the original Arnox corporate charter went void, the very
legal existence of Arnox as a Registrant was open to challenge.
In addition, Membership as a Registrant with the S.E.C. carries a
cost. An annual fee of $250 has probably not been paid since
1990. Arnox has a reporting requirement with the SEC. Reports
must be filed quarterly and annually on forms 10-Q and 10-K. The
latter must include an audited financial statement. Arnox filed
its last 10-K [Annual Report] on December 31, 1988.
Before doing anything, Capston set out to discover whether
the Arnox status as an SEC Registrant was salvageable. If the
original corporate charter could not be reinstated, the answer
was negative.
Capston has caused Arnox to be revived under its original
charter number, pursuant to Section 312 of the General
Corporation Law of the State of Delaware. Section 312 of the
General Corporation Law of the State of Delaware is titled
"Renewal, revival, extension and restoration of certificate of
incorporation." This states, in pertinent part, 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 ..." Only
one debt was "secured or imposed by its original certificate" and
this was the obligation of Arnox to pay its Delaware taxes. This
debt has been satisfied.
Fortunately, the other lapses, payment of past due SEC fees
and bringing Arnox current with its reports, can also be
corrected. If the security holders of Arnox approve Capston's
Plan and give Ms. Fonner a mandate to represent them in
negotiations with outsiders, Capston will pay these past due fees
owed to the SEC and bring Arnox current with its reporting
requirement. These matters should be pursued immediately, to
bring Arnox in good standing with the SEC and secure its status
as a Registrant.
Shareholder Exposure to Past Claims
Under Section 282(c) of the General Corporation Law of the
State of Delaware, the aggregate liability of any stockholder of
a dissolved corporation for claims against the dissolved
corporation cannot exceed the amount distributed to this
stockholder in a dissolution. Capston has retrieved the Arnox
bankruptcy files from archives and studied them. No distribution
was made to stockholders. Since stockholders of Arnox received no
distributions, Capston can assure you that as an Arnox
stockholder, you are fully shielded from any liability under this
provision of Delaware law for any past claims.
Value of Arnox Stock
The latest figures available from the National Quotation
Bureau, Inc., a firm devoted to doing research and generating
information for the securities field, quotes the stock of Arnox
at one-eighth of a point bid and one-eighth of a point asked.
This price was established on September 10, 1990. National
Quotation Bureau further reports that the stock has not been
traded since this date, which means that it might be difficult to
receive even one-eighth of a point for a share given the
Company's derelict status. If you have forgotten about your
security holdings in Arnox or written them off as a total loss,
the National Quotation Bureau supports you in this decision.
Arnox has been virtually forgotten and dismissed by the
securities market.
Restructing the Company's Capitalization
To turn this phenomena around, Arnox must restructure itself
as a Company. This process is already in motion. Capston took the
first essential step by reinstating the original corporate
charter. Presently, security holders of Arnox control 100% of the
Registrant; but 100% of zero is still zero. As a security holder
of Arnox, the members of this registrant need to create new value
in its stock. There is only one way to accomplish this task. A
controlling block of stock must be sold to an outsider [termed a
Purchaser], and this Purchaser must bring in new management. This
new management must imbue Arnox with a new identity and a new
business purpose. After control has shifted to the Purchaser, the
equity interests of the present security holders will be diluted
from 100% to a figure approximating 10%. However, if this
Purchaser can inject the stock of Arnox with enough value to keep
this stock trading at a price of $5.00 or higher per share, just
ten percent of this revitalized capitalization is worth a lot
more than 100% of what presently exists.
The full impact of this dilution will not be felt by
existing shareholders immediately. Under the Capston Plan, this
Purchaser will acquire a ninety percent block of stock through a
private sale pursuant to a private offering exemption. [See
Private Offering Exemption.] This means that this controlling
block of stock will not be registered. Once this sale is
completed, the stock of the Purchaser will be restricted for at
least two and possibly three years. Legends will be affixed to
these stock certificates which clearly state, the stock is
restricted and cannot be sold over an established securities
exchange where sales are all reported. During this initial two or
three year term, even though existing security holders will
control 10% of the total stock outstanding, this 10% block will
represent 100% of the shares that are freely trading. Only
existing security holders will be able to take their stock to a
broker-dealer and sell this stock through a securities exchange
where sales are all reported.
The party purchasing this controlling block of stock may
launch an initial public offering. As a security holder, this
would be strongly in your interest. This public offering can
create long term value for your stock. If this happens, an
initial public offering will still take at least six to nine
months to reach the market. During this six to nine month term,
existing security holders will control 100% of the shares that
are freely trading.
In summary, the Capston Plan contemplates a ten for one
reverse split, which will have the effect of reducing existing
stockholder equity from 100% down to 10%. However, the impact of
this dilution will be cushioned for existing security holders by
the terms of the private offering exemption. The effect of a
dilution from 100% to 10% will not be felt overnight by existing
security holders. The effect of this restructing will be realized
in stages. At a minimum, existing shareholders of Arnox will
still control 100% of the freely trading stock on the market for
six to nine months, and this condition might endure for as long
as two or three years.
This restructuring plan, specifically the sale of a ninety
percent control block of stock and the resulting dilution of
equity interests for existing security holders from 100% to 10%,
is indispensable to the task of instilling new value to the stock
of Arnox.
[The rest of this page is deliberately left blank.]
III. THE CAPSTON PLAN
By filling out the enclosed Proxy Card and voting in favor
of the Capston Plan, you are ratifying, consenting and
authorizing the following changes.
* I approve and ratify the action of Capston, in reinstating
the original charter of Arnox Corporation and acting on behalf of
the Corporation till either a suitable Purchaser is located or
the passage of two years lapses, whichever event occurs first.
* I authorize Capston and its authorized representatives, Ms.
Sally Fonner and her counsel, Mr. Norman Sirak, to file 10 K
Reports and 10 Q Reports with the SEC to bring Arnox current with
its reporting requirement, plus any other reports that should
properly be filed.
* I authorize the payment by Capston of the annual fee owed to
the SEC, upon the understanding that Capston will not seek
reimbursement for this fee from Arnox.
* I authorize Capston and its authorized representatives, Ms.
Fonner and Mr. Sirak, to seek out a suitable purchaser for a
ninety percent block of Arnox stock, although my final approval
for the transfer of this block of stock shall be deferred until
Capston can identify this Purchaser and describe this Purchaser
fully in a subsequent Proxy / Prospectus.
* I authorize in principle the Restructuring of Arnox and
specifically the surrender of ten shares of existing Arnox stock
for one share of common stock in a restructured company.
* I approve of moving the company's principal place of
business to 6550 First Avenue North, St. Petersburg, Florida
33710. [This is also the principal place of business for
Capston.]
* I approve of retaining the former stock transfer agent,
Continental Stock Transfer & Trust Co. as the Company's stock
transfer agent and ratify the action of restoring its Arnox file.
* I authorize Capston to give instructions to Continental
Stock Transfer & Trust Co. and to inform Continental of my
willingness to implement the restructuring of the company's
capitalization.
* I approve of convening the special meeting of stockholders,
mandated by Section 312, paragraph (h) of the General Corporation
Law of the State of Delaware, to be deferred until the Purchaser
is identified and approved in a second proxy solicitation. I
understand that the purpose for this special meeting of
stockholders is to elect a full board of Directors. In the
interim, I authorize Ms. Sally Fonner to serve as Acting
President and Acting Secretary of the corporation.
* I further authorize Capston, Ms. Fonner and Mr. Sirak to
file any and all reports deemed necessary or convenient for the
Restructuring of Arnox, as herein described, with the State of
Delaware and before any other governmental bodies, and to do
anything necessary or convenient to insure compliance with all
applicable laws engaged by the Capston Plan.
IV. INFORMATION CONCERNING PARTICIPANTS
IN THIS PROXY SOLICITATION
Capston Network, Co.
Capston is a newly formed Delaware company which represents
the culmination of a long term collaboration between two people,
Ms. Sally Fonner and Mr. Norman Sirak. Its offices are located at
6550 First Ave. North, St. Petersburg, Florida 33710. Capston's
telephone number is 813 443 5240.
Mr. Sirak is an attorney licensed to practice in Ohio
[Registration # 0038058] and in the District of Columbia [D.C.
Bar # 162669 / D.C. Professional License # 49716]. His office is
located at 1535 Baycrest Drive N.W., Canton, Ohio 44708. Mr.
Sirak's phone number is (330) 588 9818 and his fax number is
(330) 588 8802.
Capston seeks out companies such as Arnox, then goes about
the painstaking and laborious process of locating the Arnox files
and reviewing the company's activities to be sure the company can
qualify for resurrection [companies tainted by fraud are
immediately dismissed from consideration]; investigating and
initiating the company's reinstatement under its original
charter; acquiring a stockholders list and purchasing stock; then
assembling and distributing this proxy statement. If recipients
of this proposal reject the Capston Plan, this effort becomes a
waste of time. Without a mandate from you, the stockholders,
Capston is powerless to do anything. If the Capston Plan is
approved, Capston locates a Purchaser, issues a Private Placement
Memorandum, assembles a second proxy/ prospectus and distributes
this to stockholders, and upon receiving stockholder approval,
the Restructuring and Change of Control is pursued to completion.
All fees charged by Capston and Mr. Sirak will be paid by
the Purchaser and no reimbursement shall be sought from Arnox,
the Registrant. Capston will receive a fee for its research
efforts, its reinstatement of a corporate charter, its filing
reports with the SEC to bring the charter of a Registrant into
good standing, and for the enormous task of assembling and
coordinating two proxy solicitations. This fee is expected to be
at least $75,000 for this transaction and it could be higher. Mr.
Sirak will receive a fee for his legal services. This consists of
structuring the mechanism for resurrecting a company such as
Arnox, drafting two proxy statements, drafting a Private
Placement Memorandum for the Purchaser, doing due diligence on
all parties that are associated with the Purchaser, drafting
Amended and Restated Articles of Incorporation and Bylaws for the
reinstated company, securing permits for doing business in all
states requested by the Purchaser, doing a primary Registration
Statement for at least one state and an application with Standard
& Poor's for a secondary trading exemption in most of the
remaining states, drafting the Amendment required for the
Registrant's S-1 Registration Statement, drafting all documents
necessitated for the stock transfer and merger, drafting all
documents necessary to commence trading activity [most notably
the 15c 2-11 Form] and preparing a corporate book with all
appropriate records for the Purchaser. These fees are expected to
equal at least $75,000 for this transaction and they could be
higher.
Biographical Sketches
Ms. Fonner 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. Ms.
Fonner is forty-seven years old. In many of her assignments as a
business consultant, she is frequently engaged in dealings which
involve financiers and large monetary transactions. Currently,
Ms. Fonner has been engaged for the last two years in the complex
area of financing rehabilitation providers.
Mr. Sirak has been an independently employed sole
practitioner for the last twelve years. Mr. Sirak graduated from
Miami University in 1969, where he received his bachelor of
Science Degree in Business Administration. Mr. Sirak attended the
Washington College of Law at American University and received his
Juris Doctor Degree in 1972. Mr. Sirak is forty-nine years old.
He was admitted into the Ohio Supreme Court in 1972 and to the
District of Columbia Court of Appeals in 1973. Presently, Mr.
Sirak is also licensed to practice law before the U.S. Supreme
Court, the Sixth Circuit Court of Appeals, the District Court for
the District of Columbia and others. Mr. Sirak's practice has
leaned increasingly toward the securities field. In addition to
practicing securities law, Mr. Sirak frequently travels abroad
and his practice also brings him into contact with businesses
located abroad.
Business Addresses Shares Beneficially Owned% of Class
Capston Network, Inc. 884 0.025%
6550 First Ave. North
St. Petersburg, Florida 33710
Ms. Sally Fonner1 - 0 -
6550 First Ave. North
St. Petersburg, Florida 33710
Mr. Norman Sirak - 0 -
1535 Baycrest Drive N.W.
Canton, Ohio 44708
V. ADDITIONAL PERTINENT INFORMATION
A private or limited offering, such as the Capston Plan
described herein, is not subject to the registration requirements
of the Securities Act of 1933. However, this offering is fully
subject to the antifraud provisions of the Securities Exchange
Act of 1934, including specifically Section 15(b) and
17A(c)(4)(C) of said Act. Compliance with the anitfraud
provisions requires the issuer of any such report to provide all
pertinent information relating to the decision requested in the
private offering.
To understand and evaluate the Capston Plan, the following
additional information is deemed pertinent: Compliance with
230.419, An Offering from a Blank Check Company; a Comment on
Shell Companies; and an explanation of the Private Offering
Exemption.
Compliance with 230.419
An Offering from a Blank Check Company
The SEC has a definition which applies to Arnox Corporation.
Arnox is a blank check company. [See 230.419(a)(2)(i).] A blank
check company is a development stage company that has no specific
business plan or purpose and has indicated that its only business
plan is to engage in a merger with an unidentified company. This
is precisely the predicament of Arnox.
230.419(b) stipulates that all securities and funds issued
in connection with an offering by a blank check company and the
gross proceeds from the offering shall be deposited promptly into
an escrow account maintained by an "insured depository
institution" as this term is defined in Section 3(c)(2) of the
Federal Deposit Insurance Act [12 U.S.C. 1813(c)(2)].
In the transaction contemplated by the Capston Plan, Arnox
will issue ninety percent of its registered outstanding stock to
the Purchaser, a term defined in 230.419(a)(3) as "any person
acquiring securities directly or indirectly in the offering, for
cash or otherwise ..." No cash will be exchanged between the
Parties, meaning the Registrant [Arnox] and the Purchaser. In
return for this ninety percent block of stock, the Purchaser will
merge their existing company and operations into Arnox, and the
Purchaser will conduct business from that day forward under the
corporate charter of Arnox, though no doubt using another name.
This qualifies as a situation where securities are being acquired
otherwise.
230.419(b)(3) states that "All securities issued in
connection with the offering ... shall be deposited directly into
the escrow or trust account promptly upon issuance." Because the
Purchaser is almost certain to change the name of the corporation
from Arnox to something which identifies them in the marketplace,
it will be impossible to issue these certificates until the
second proxy / prospectus is approved and the closing has
occurred on the exchange of stock and merger. To comply with this
section, Capston shall ask the company's registered agent to
establish an escrow account on the Purchaser's behalf, and to
desposit the securities acquired by this Purchaser into this
escrow account promptly upon issuance.
230.419(e)(1) states that "Upon execution of an agreement
for the acquisition of a business or assets that will constitute
the business (or a line of businesses) of the registrant and for
which the fair value of the business or net assets to be required
represents at least 80% of the maximum offering proceeds, the
registrant shall file a post-effective amendment" to its S-1
Registration Statement. In this transaction, the business and
assets of the purchaser will represent 100% of the offering
proceeds. Accordingly, a post effective amendment will be
required. 230.419(e)(2)(iii) states the filing of this post-
effective amendment suffices for the purpose of confirming the
Purchaser's intent to invest in this blank check company and,
consequently, all funds and securities which are deposited in
connection with this offering would be entitled to be released.
Capston will comply with the terms relating to an offer from
a blank check company pursuant to 230.419 in the following
manner. The stock transfer agent will be instructed to set up an
escrow account for the Purchaser's securities and to deposit
these securities into this escrow promptly upon issuance. As a
practical matter, it will probably require a few weeks to print
these certificates and the Purchaser may waive this protection
and instruct the stock transfer agent to send these certificates
directly to the Purchaser's agent. Nevertheless, the protections
mandated by this provision will be implemented. Capston will
prepare an Amendment to the S-1 Registration, including a new
financial statement for the company acquired and the pro forma
financial information required by SEC rules and regulations. This
Amendment will be ratified by the Purchaser after the stock
transfer agreement and merger have been consummated. In effect,
the Purchaser will thereby confirm their investment and qualify
all funds and securities which are exchanged to be released.
Although no proceeds will be exchanged between the Purchaser
and the Registrant (i.e. Arnox), Capston and Mr. Sirak will
receive fees for services performed. These fees will be paid by
the Purchaser, and they will be paid before the stock is
transferred and the merger is implemented. Furthermore, it will
be clear in the documents executed and from the nature of the
services performed, that the Registrant will not be entitled to
receive any of these fees. [See Capston.] Since these fees for
Capston and Mr. Sirak are not being paid by the Registrant nor
are they for the Registrant, this SEC provision does not
stipulate that these fees must be deposited in escrow.
Comment on Shell Companies
In street vernacular, blank check companies are frequently
referred to as shell companies. The entire discussion of shell
companies is frequently peppered with emotionally charged words
such as shell game, or phony stock, or phony prices, or false
business values and the like. It is true, the shell business
seems to have more than its share of fast buck artists. It is
also true that the shell business includes legitimate organizers.
If you look at this field with some perspective, you discover
that the problem is not the shells per se. The problem arises
because of what people do with these shells.
The most common abuse concerns the manipulation of a shell's
price to a figure bearing no relationship to the underlying
financial condition. This is effected by broker-dealers. In fact,
the manipulation of a shell corporation stock would be impossible
without the active connivance of a trader-dealer. All trading in
Arnox stock virtually stopped when the stock was removed from
NASDAQ. Capston will not take any steps to renew this trading
activity until a Purchaser has been identified and approved by
the stockholders and the stock transfer and merger agreement has
been consummated. Without a current Form 15c 2-11 on file with
NASD, trading in Arnox stock should remain suspended. This will
effectively guard against any price manipulation. When the change
of control is completed, Capston will assist in the drafting of
the 15c 2-11 Form required by the SEC and NASD, to be sure this
public information is written truthfully.
Another abuse concerns blind pools, which are offerings in
which the use of the proceeds is not specified. Blind pool shells
are frequently vehicles for fraud. This transaction will not be a
blind pool. Arnox stockholders will receive a prospectus which
fully identifies the Purchaser and the Purchaser's business.
Sometimes, a promoter takes over a shell and, as issuer,
circulates unfounded and irresponsible reports about its
operations.2 This is done to elevate the price of the stock and
give the appearance of a financial colossus. In truth, there is
nothing substantive supporting this price. To insure that this
does not occur, Capston will not entertain any start-ups. Only
established businesses will be given serious consideration.
To further guard against stock manipulation, the stock sold
to the Purchaser will be restricted. This will keep this block of
stock out of the market for at least two years.
None of the abuses commonly associated with shells will be
tolerated while Capston acts as a mandate for Arnox. However,
Capston is not in the business of buying and selling stocks and
Capston has no plans for taking any significant stock position
with Arnox, once the change of control is consummated. Capston
intends to fade into the background as just another stockholder
when this is over. After control has changed to another party,
Capston will no longer be in a position to dictate events.
Hopefully, the Purchaser found by Capston and approved by you,
the Arnox stockholders, will possess the same integrity evidenced
by the initial directors of this company. With luck, this
Purchaser will lead this corporation into a new and brighter
future, thereby confounding the skeptics that expect only evil to
emanate from shells. In any event, Arnox has hit such a low
point, it owes it to itself to try. Arnox has nowhere else to go
but up.
Private Offering Exemption
The general rule is that all security offerings are subject
to the registration requirement imposed by Section 5 of the
Securities Act of 1933 [15 USC 77a - 77aa] unless the offer
qualifies for a specific exemption. Only two registration
exemptions were written into the Securities Act adopted in 1933.
One is called the Private Offering Exemption. Congress provided a
private offering exemption because they realized that the
financial and administrative burdens imposed by registration
would be particularly onerous upon a company that sought to make
an offer to a relatively small number of investors. Accordingly,
the private offering exemption applies to "transactions by an
issuer not involving any public offering." [ 4(2), 1933 Act, 15
USC 77(d)(2)]
The private offering exemption has played an important role
in the securities field. This is the vehicle which affords the
basis for a private placement. Although private placements are
typically associated with investment banking firms and
institutional investors such as insurance companies and pension
funds, the private placement can also be used as the means for a
start-up company to raise its initial capital. Private placements
are relied upon in the issuance of securities by a company in
connection with business combinations and asset acquisitions. The
Arnox Registration Statement can be viewed as an asset. Arnox
needs to exchange its status as a public company in return for a
Purchaser who installs new management. This is both a business
combination and an asset acquisition.
A short, precise and clear definition of the private
offering exemption is impossible, due to the fact that its
availability depends in large part upon the administrative and
judicial gloss that has been bestowed upon it through more than
forty years of interpretation. However, the private placement
exemptions' critical elements and the fundamental judicial and
administrative interpretations that have molded the private
placement exemption into its its current form and defined its
present utility, can be reviewed with sufficient particularity,
so as to explain why and how the private placement offering is
available to Arnox.
The private placement exemptions' critical elements can be
described in the following terms. First, there can be no general
advertising or public solicitation of purchasers. Second, the
purchasers must have access and be given full disclosure of all
material information about the registrant, in this case Arnox.
This second element requires a Private Placement Memorandum.
Third, the purchaser must have sufficient knowledge and
experience to understand the risks that are inherent in the
offering. This is the quality referred to as sophistication.
Finally, this exemption is lost if the purchasers become conduits
in the transfer of securities to unqualified purchasers. The
distribution of Arnox stock must come to rest in the hands of
only qualified purchasers. When these elements are in place, the
private placement exemption is available.
The leading U.S. Supreme Court decision relating to the
private placement exemption involved the 1954 decision, SEC v.
Ralston Purina Co., 346 U.S. 119 (1954). This decision
established the basic principle that the private placement
exemption was available only for an offer made exclusively to
persons "able to fend for themselves." [Id. at 125.] The ability
to fend for oneself depends upon access to the same kind of
information as that which would be included in a registration
statement and the sophistication of the purchaser. Under the
Ralston Purina decision, the number of purchasers is irrelevant.
In the case of Arnox, there is no problem with either of these
requirements. The Capston Plan includes a Private Placement
Memorandum. This private placement memorandum will fully disclose
the Registration Statements previously filed by Arnox and its
bankruptcy. The affairs of Arnox are literally a open book.
Registration Statements and Bankruptcy files are public records,
open and available to any member of the public that has the
inclination, the curiosity and the time to retrieve Arnox's files
from the archives. The matter of sophistication is an element
fully under Capston's control. Capston expects to encounter
parties that want to become public, but do not qualify. Since
Arnox and its delegated agent, Capston, has the burden of proof
to establish the availability of the private offering exemption
if this is ever challenged, the two year mandate has been
requested with the view of sifting through the chaff till the
wheat is found. Of course, Capston must fully disclose the
credentials of this purchaser for final approval from all
security holders, which serves as a further safeguard to insure
that only a truly sophisticated party can act on this offer.
On November 6, 1962, the SEC issued Release No. 4552, titled
Nonpublic Offering Exemption. This Release stated, "an increasing
tendency to rely upon the exemption for offerings of speculative
issues to unrelated and uninformed persons prompts this statement
to point out the limitations on its availability." The SEC
Release went on to state that whether a transaction was or was
not a public offering essentially turned on a question of fact
and necessitated a consideration of all surrounding
circumstances.
This SEC Release focused upon the parties that are making
the offer, in essence, the registrant. This Release states,
"negotiations or conversations with or general solicitations of
an unrestricted and related group of prospective purchasers for
the purpose of ascertaining who would be willing to accept an
offer of securities is inconsistent with a claim that the
transaction does not involve a public offering even through
ultimately there may be a few knowledgeable purchasers."
Cognizant of this guideline, Capston will pursue its purchasers
through previously established and reliable channels, such as
attorneys with a securities practice that help private companies
become public, and through financiers that have clients who
desire to become public. In this regard, Capston has excellent
connections with attorneys and financiers in the U.S. and abroad,
both in Asia and in Europe. Some of these parties have already
contacted Capston, which explains why this effort was initiated.
These confidential contacts are in contact with established
companies that wish to become public in the U.S. Absolutely no
advertising has been done or will be done by Capston. Through
these confidential contacts, Capston expects to have no problem
finding suitable purchasers while conducting itself in strict
compliance with this SEC maxim.
In its Release, the SEC states that the "sale of stock to
promoters who take the initiative in founding and organizing the
business would come within the exemption." This is precisely the
situation which faces Arnox. Arnox has no business. The
purchasers of this stock will have to organize this business from
the ground up. In one of the clearest, most unequivocal passages
in this entire Release, the SEC confirms the availability of the
private offering exemption under this circumstance.
If the services of a broker-dealer are used, this private
offering exemption can be lost. Using "the facilities of a
securities exchange to place the securities necessarily involves
an offering to the public." For this reason, Arnox needs to place
these securities itself. No broker-dealer will be employed.
Instead, Arnox's stock transfer agent will be kept fully
appraised of the progress. When a purchaser is approved and a
second proxy has been mailed to all security holders, the
authority derived from the next proxy will be used to issue
instructions to Arnox's stock transfer agent. In this manner,
Arnox will go through a ten for one reverse split, then issue the
stock that has just been surrendered as a result of this reverse
split to the purchaser. Since only a few certificates will be
involved for the purchaser and all of these certificates will be
burdened with restrictive legends, this can be fully accommodated
by the stock transfer agent. Of course, each existing security
holder must take the initiative and surrender their own
certificate after the restructuring is completed.
Another limitation discussed in the SEC Release is the
danger that the purchasers are just conduits for a wider
distribution. To guard against this phenomena, all securities
issued to the purchaser will be restricted. This is a job which
can also be performed for the Registrant by its stock transfer
agent.
Based upon Capston's review of the private offering
exemption, Capston is of the belief that the transaction proposed
in the Capston Plan can qualify for the private offering
exemption and Arnox, in its capacity as a Registrant in good
standing, can issue these shares directly to a properly qualified
purchaser.
[The rest of this page deliberately left blank.]
VI. COMPLIANCE WITH SEC PROXY SOLICITATION RULES
SEC Schedule 14A dictates the necessary content of a proxy
statement, issued pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended. 240.14a-101 (C) requires a
full disclosure of the credentials of all parties that seek
positions or relationships with the registrant. Ms. Sally Fonner
seeks a position as the mandated agent of the Registrant. Her
attorney, Norman L. Sirak, seeks a relationship with registrant,
namely the right to file materials on behalf of the registrant
with the SEC and to structure a transaction which will shift
ninety percent of the Registrant's stock to a new party and
shrink the interest of existing security holders from 100% to
approximately 10%. Ms. Fonner and Mr. Sirak qualify as both a
participant and as a participant in a solicitation as these terms
are used in the instructions for 240.14a-101 Item 4.
Accordingly, background materials on both Ms. Fonner and Mr.
Sirak are required and can be found on page nine. [See
Biographical Sketches.]
Because this is an action to be taken by written consent,
there is no date, time or place for a meeting of the security
holders and this information is not applicable. In compliance
with 240.14a-101 Item 1 (a), the date by which consents must be
submitted is set forth prominently on the cover and in the
preamble of this proxy. In addition, the approximate date on
which the proxy material was first sent to security holders is
set forth on the first page.
240.14a-101 Item 2 requires the person issuing the proxy to
state whether or not this person has the power to revoke it. Ms.
Fonner, acting on behalf of Capston, has the right of revocation
and this power will be exercised if any matter contemplated in
her plan should be found to be violative of federal or state law.
Ms. Fonner has already devoted considerable time and expense in
researching this question. The Capston Plan has been carefully
formulated so as to comply with all applicable laws. However, in
the unlikely event that a compliance problem is encountered, Ms.
Fonner will exercise her right of revocation and withdraw this
proxy. All security holders will be promptly advised of this
decision and the reasons therefor. Subject to this sole
limitation, this proxy shall be deemed irrevocable.
240.14a-101 Item 2 stipulates that if the proxy, before it
is implemented, must comply with any formal procedure, this
formal procedure must be fully described. The formal procedures
entailed with implementing this proxy are extensive and, in some
cases, beyond Capston's control. Assuming a favorable vote is
given to the Capston Plan, these procedures include:
(a.) A Current Report must be filed with the SEC [Form 8-K].
This must disclose the mandate issued to Capston, how this
mandate was procured by Capston, and what plans the Registrant
intends to pursue.
(b.) Arnox must be brought current with its 10-K and 10-Q
reports and all bills owed to the SEC must be paid in full.
(c.) A search must be undertaken for a qualified company
that wants to become public by acquiring Arnox. Extensive due
diligence must be performed on this company. To qualify for the
Private Offering Exemption, this company must be a sophisticated
purchaser within an SEC context. In addition, background checks
must be performed on all parties associated with the purchaser's
company, including key executives making up the new management
team.
(d.) A Private Placement Memorandum must be issued to the
Purchaser of Arnox's stock, along with a confirmation that Arnox
is an SEC Registrant in good standing.
(e.) A second proxy solicitation must be sent to all
security holders. This proxy solicitation will ask all security
holders to make an investment decision. Specifically, security
holders will be asked to surrender their existing share
certificates in exchange for a new certificate which will reflect
a ten for one reverse split and a 100% to 10% dilution in their
existing equity. Additionally, this proxy solicitation will fully
disclose the identity of the purchaser of Arnox's ninety percent
block of stock and ask security holders to approve the issuance
of this ninety percent block of stock to this purchaser.
(f.) The transfer of stock will be effected through an
Acquisition Agreement. The purchaser will acquire a ninety
percent block of stock in Arnox. For this stock, Arnox will
receive a new management team and a new business purpose.
Following this transaction, the capitalization of Arnox will be
restructured, the company's name will be changed, and descriptive
information will be released to the market place relating to the
company under its new management and control group.
(g.) One final notice will be sent to security holders,
advising them of the consummation of this transaction and
providing security holders with directions for exchanging their
existing certificates for new certificates, or for replacing
their certificates if they are lost, and then getting them issued
in the new company's name.
Once this is accomplished, the mandate set forth in this
proxy will be fully performed.
240.14a-101 Item 3 requires a proxy to indicate the effect
of a security holder's failure to vote and in particular, if this
failure will constitute a waiver. The author of a proxy is
further required to state their position in regard to these
matters and what authority supports this position. SEC Regulation
14C, 240.14c-1 (g) defines the term proxy as "every proxy,
consent or authorization within the meaning of section 14(a) of
the Act. The consent or authorization may take the form of
failure to object or to dissent. [Emphasis added by Capston.]
Capston takes the position that every failure to object or to
dissent shall be interpreted as a consent and as an authorization
to pursue the Capston Plan.
240.14a-101 Item 4 (a) requires the party that makes this
solicitation to be identified with particularity, especially when
this party is not the Registrant. Capston and Ms. Fonner are not
the Registrant. Capston is a minor stockholder and Ms. Fonner is
Capston's chief executive officer. However, if this solicitation
is approved, Capston may represent itself to the SEC and to
outsiders as the Registrant for the next two years, unless the
purposes set forth in this proxy are accomplished within a
shorter span of time, which is deemed likely.
240.14a-101 Item 4 (b) requires a disclosure as to how the
solicitations are being made and the methods employed to solicit
security holders. Capston is handling the printing and mailing of
these disclosures to security holders. Capston acquired its
initial list of security holders from the Arnox bankruptcy
filing, Schedule A-3.1 [Debtor's List of Equity Security
Holders], filed as required by Bankruptcy Rule 1007(a)(3).
Recently, Capston has paid Continental Stock Transfer to restore
the Arnox file, and this list will be consulted before the second
proxy statement is distributed. All proxy - information
statements were sent via first class mail to the address listed
on the schedule in this bankruptcy filing. Since Capston is not
the Registrant, there are no issues concerning the use of
employees to perform this work, which is another concern in
240.14a-101 Item 4 (b).
240.14a-101 Item 4(b)(4) requires a disclosure as to the
total amount spent to date in connection with this solicitation.
Capston has spent approximately $5,000 to acquire the names of
security holders, for printing these proxies, and for first class
postage. In addition, an as yet undefined sum has been spent for
miscellaneous reasons, such as retrieving information on Arnox
from Disclosure, Inc., retrieving information required from the
state regulatory body and for phone and courier liaison with
these parties. Finally, Mr. Sirak has charged Capston $8,000 for
designing and writing this Proxy - Information Statement. These
expenses will all be borne ultimately by Capston. Reimbursement
will not be sought for any of these expenses from Arnox, the
Registrant, regardless of whether this proxy solicitation is
approved or fails. Capston does intend to collect a fee for its
services from the proposed purchaser of Arnox stock, and this fee
is expected to cover these expenses.
240.14a-101 Item 5 requires Capston, Ms. Fonner and Mr.
Sirak to briefly describe any substantial interest, direct or
indirect, which they will gain if this matter is favorably acted
upon. Capston, and through Capston Ms. Fonner, will realize a
substantial fee from the party that ultimately elects to assume
the ninety percent block of stock in Arnox. This fee can equal
$75,000 or more for Capston. Mr. Sirak will submit bills for
legal services and it is estimated, Mr. Sirak's legal fees can
also equal $75,000 or more. None of Mr. Sirak's legal fees will
be charged to Registrant.
240.14a-101 Item 5 further requires a comment which
addresses the matter of whether a participant in this proxy
solicitation will realize a benefit, in terms of stock, which is
not shared on a pro rata basis with all other security holders of
the same class. Capston presently owns 882 shares of Arnox stock.
Ms. Fonner and Mr. Sirak do not own any shares of Arnox stock.
Once the ten-for-one reverse split is implemented, the holdings
of Capston will be reduced just like every other security
holder's interest will be reduced. Neither Capston, Ms. Fonner or
Mr. Sirak will realize any windfall in stock through this
transaction, nor will Capston enjoy any benefit which is not
shared on a pro rata basis with all other security holders.
240.14a-101 Item 5(b) requires a participant in a proxy
solicitation to disclose what dealings have occurred in the past
year vis-a-vis Arnox's stock and this participant. Capston
purchased 882 shares of Arnox stock on June 6, 1996. This is the
full extent of the contact which has occurred between Capston,
Ms. Fonner and Mr. Sirak, pertaining to Arnox's stock. No
arrangements have been made concerning puts or calls with Arnox's
stock, or guarantees against loss or guarantees against profits,
or any of the other matters addressed in this regulation.
240.14a-101 Item 12 requires disclosure of certain
information if action is to be taken with respect to the
modification of any class of securities, or the issuance or
authorization for issuance of securities of the registrant in
exchange for outstanding securities of the registrant. In this
proxy solicitation, authorization is sought for issuance of
securities in the registrant in exchange for outstanding
securities of the registrant. Specifically, the security holders
are being requested to authorize an offer of ninety percent of
the issued and outstanding shares of the Registrant's Common
Stock to an outside party. To make this transfer of stock
possible, security holders are being further requested to accept
a 100% to 10% dilution in their present holdings. Stated
differently, security holders are being asked to approve a ten
for one reverse split. This reverse split will shrink the number
of issued and outstanding shares of Common Stock from 3,417,025
to 341,702.3 This action will then make it possible to transfer
the stock just released, namely 3,075,322 shares, for transfer to
the outside purchaser.
The depressed value of Arnox stock affords sufficient good
cause to suggest this exchange. Although the equity of existing
security holders will shrink from 100% of the registrant to 10%
of the Registrant, the market value of the Registrant's stock is
expected to increase by more than a ten for one factor, which
should compensate in absolute financial terms for the decrease in
shares that will be incurred by every stockholder. In fact, due
to the extremely depressed price of the Registant, an increase of
much more than ten for one in monetary value [i.e an increase
from 1 cent to ten cents constitutes a ten for one increase in
monetary value] is distinctly possible. Finally, under current
conditions, there is no market for Arnox's stock. The infusion of
a new management and new operations will create a new market for
Arnox stock.
240.14c-5(a) stipulates that the information statement
shall be filed with the Commission at least ten calendar days
prior to the date that definitive copies are first sent or given
to security holders. In computing this ten day period, the filing
date of the preliminary copies is to be counted as the first day
and the eleventh day is the date when definitive copies may be
mailed. In this instance, these preliminary copies will be mailed
from Ohio and three days will be allowed for the U.S. Postal
service to deliver this mail. Thus, in computing this ten day
period, the fourth day after these statements are mailed shall be
deemed the first day, and the fifteenth day after they are
mailed, assuming there is no objection from SEC staff, shall be
deemed the eleventh day for the purpose of this computation. On
this fifteenth day, these proxy statement may be mailed to
security holders.
240.14c-4(a) requires the information included in the
information statement to be clearly presented and the statements
divided into groups according to subject matter with appropriate
headings. The order of items and sub-items in the schedule need
not be followed. 240.14c-4(b) states that the information
statement shall be sent or given at least 20 calendar days prior
to the meeting date or, in the case of corporate action taken
pursuant to consents or authorizations of security holders, at
least 20 calendar days prior to the earliest date on which the
corporate action may be taken. 240.14c-4(c) stipulates that all
information statements must be in roman type and at least as
large and legible as 10-point modern type. This text for this
proxy information is printed in 12-point Roman type and footnotes
are printed in 10 point Roman type.
240.14c-6(a) states that no information statement shall
contain any statement which, at the time and in the light of the
circumstances under which it is made, is false or misleading with
respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein
not false or misleading. 230.419, an Offering from a Blank Check
Company, a comment on shell companies and a description of the
Private Offering Exemption are all deemed material within the
context of this solicitation for stockholder consents. It is
submitted that this material, coupled with the remaining matters
addressed in the Proxy, comply with 240.14c-6(a) and insure that
sufficient information has been provided relating to the
circumstances surrounding this proposal to effectively guard
against the prospect of any false or misleading statement, or any
omission of a material fact.
If the registrant's list of security holders indicates that
some of its securities are registered in the name of a clearing
agency registered pursuant to section 17A of the Act (e.g., "Cede
& Co.," nominee for the Depository Trust Company), the registrant
must make appropriate inquiry of the clearing agency and
thereafter of the participants in such a clearing agency who may
hold on behalf of a beneficial owner, securities of Arnox.
Accordingly, if any such beneficial owners exist and have not
received a copy of this proxy information, upon being advised of
these parties, proxy statements will be immediately issued and
the earliest date upon which action can be taken shall be
extended automatically for another twenty days, to give said
beneficial owners an opportunity to respond in accord with
240.14c-7.
CONCLUSION
Please print and sign your name on this proxy exactly as
your name appears on your stock certificate, and vote for the
Capston Plan.
Capston Network, Co.
By ___________________
Sally Fonner / President
June 13, 1996
_______________________________
1 Ms. Fonner does not own any shares of Common Stock
directly, but may be deemed to have voting control over the 884
shares owned by Capston Network, Co.
2 In the most famous of this class of cases, the SEC
incorporated the correction of an unfounded rumor in its Exchange
Act Release, No. 8282 (March 27, 1968), concerning Sante Fe
International, Inc. This retraction stated, "The following rumors
concerning Santa Fe have been circulating, none of which are
true. They are absolutely false. We do not have two former
governors of Colorado on our board of directors. We are not
operating a silver mine. We are not being taken over by an
insurance company. We do not have the food and beverage
concession on the ship Queen Elizabeth. We are not contemplating
building a ski lodge near Georgetown, Colorado. ... As of
February 1, 1968, the company ... had current assets consisting
of cash in the sum of $7.80."
3 The final number will probably vary slightly from this
figure. Under the Capston Plan, every shareholder will receive at
least one share in the Restructured company, even if this
stockholder has only one security in Arnox. As a result, there
may be a few instances in which one share in the Restructured
Company will be issued for less than ten shares. This will serve
to increase the percentage of stock held by present security
holders to a figure slightly over 10%. Contrarily, all fractions
of shares will be rounded downward if the fraction is .5 or less,
and shall be rounded upward if the fraction is .6 or higher. This
rounding downward, because it includes five of the nine available
digits, will tend to lower the percentage held by existing
shareholders. Beyond moving the final figure slightly off the 90%
to 10% figures, both factors are expected to have a de minimis
effect on the total dispersion.
