SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Information Statement
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[ ] Confidential, for use of the Commission only
(as permitted by Rule 14c-5(d)(2))
FBR Capital Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
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(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):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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FBR CAPITAL CORPORATION
20 East University, Suite 304
Tempe, Arizona 85281
NOTICE AND INFORMATION STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 6, 1999
To Our Stockholders:
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of FBR
Capital Corporation (the "Company") will be held at 10:00 a.m., local time, on
October 7, 1999, at the offices of Squire, Sanders & Dempsey L.L.P., 40 N.
Central Avenue, Suite 2700, Phoenix, AZ 85004, for the following purposes:
1. To elect six (6) directors to the Board of Directors to serve for one
year terms;
2. To consider and act upon proposal to adopt the Company's 1999 Equity
Compensation Plan;
3. To consider and act upon a proposal to amend the Company's Articles of
Incorporation to increase the number of authorized shares of Common
Stock from 16,666,667 to 50,000,000 shares;
4. To consider and act upon a proposal to amend the Articles of
Incorporation to change the Company's name from "FBR Capital
Corporation" to "Vitrix, Inc."; and
5. To transact such other business as may properly come before the Annual
Meeting. Management is presently aware of no other business to come
before the meeting.
The Board of Directors has fixed the close of business on September 15,
1999, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the Annual Meeting or any postponement or
adjournment thereof (the "Record Date"). Shares of Common Stock and Series B
Convertible Preferred Stock can be voted at the meeting only if the holder is
present at the meeting in person or by valid proxy. Management is not soliciting
proxies in connection with the Annual Meeting and stockholders are requested not
to send proxies to the Company. A copy of the Company's 1999 Annual Report to
Stockholders, which includes certified financial statements, was mailed with
this Notice and Information Statement to all stockholders of record on the
Record Date. Management cordially invites you to attend the Annual Meeting.
Your attention is directed to the attached Information Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Michael A. Wolf
Chairman of the Board
Tempe, Arizona
September 16, 1999
<PAGE>
FBR CAPITAL CORPORATION
20 East University, Suite 304
Tempe, Arizona 85281
---------------------
INFORMATION STATEMENT
---------------------
This Information Statement is being furnished to the stockholders of FBR
Capital Corporation, a Nevada corporation (the "Company"), in connection with
the Annual Meeting of the Stockholders of the Company to be held on October 7,
1999, at 10:00 a.m., local time, and any adjournment or postponement thereof
(the "Annual Meeting"). A copy of the Notice of the Annual Meeting accompanies
this Information Statement. It is anticipated that the mailing of this
Information Statement to stockholders will commence on September 16, 1999.
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
VOTING
Only stockholders of record at the close of business on September 15, 1999
(the "Record Date"), are entitled to notice of and to vote at the Annual Meeting
or any adjournment or postponement thereof. On the Record Date, 13,241,031 and
10,000,000 shares of Common Stock, $.005 par value per share (the "Common
Stock"), and Series B Convertible Preferred Stock, $.01 par value per share (the
"Preferred Stock"), respectively, were issued and outstanding. Each holder of
Common Stock and Preferred Stock is entitled to one vote, exercisable in person
or by proxy, for each share of the Company's Common Stock or Preferred Stock
held of record on the Record Date. The holders of Common Stock and the holders
of Preferred Stock vote together as a single class, except as otherwise required
by law. Cumulative voting is not permitted.
The Company's Bylaws provide that a majority of all shares of stock
entitled to vote, whether present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the meeting. Abstentions
and broker non-votes will be included in the determination of the number of
shares represented for a quorum. In order to vote their shares in person at the
meeting, stockholders who own their shares in "street name" must obtain a
special proxy card from their broker.
The Board of Directors does not know of any matters other than the election
of directors, the adoption of the 1999 Equity Compensation Plan, the amendment
to the Company's Articles of Incorporation to increase the number of authorized
shares and to change of the name of the Company that are expected to be
presented for consideration at the Annual Meeting.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors currently consists of six (6) members. Each director
serves until their successor has been elected and qualified, or until their
earlier resignation or removal. Following is certain biographical information,
as of August 31, 1999, with respect to the members of and nominees to the Board
of Directors.
DIRECTOR NOMINEES
At the meeting, six (6) directors will be elected to serve for one-year
terms and until the election and qualification of their respective successors.
The nominees receiving the greatest number of votes cast at the Annual Meeting
will be elected to the Board of Directors. The Board of Directors recommends
Michael A. Wolf, Philip R. Shumway, Todd P. Belfer, Lise M. Lambert, Hamid
Shojaee and Bahan Sadegh be elected directors, to serve until the annual meeting
of stockholders in 2000. Michael A. Wolf, Philip R. Shumway, Todd P. Belfer,
Lise Lambert, Hamid Shojaee and Bahan Sadegh are currently directors of the
Company whose term of office will expire at the Annual Meeting.
MICHAEL A. WOLF. Mr. Wolf, age 47, has served as Chairman of the Board of
Directors of the Company since March 1999, and as a director of Vitrix
Incorporated, a wholly owned subsidiary of the Company ("Vitrix"), since June
1997. Mr. Wolf co-founded VIASOFT in November 1984, served as its Executive
Vice-President and Chief Technology Officer and as a director from which he
retired in August 1997. Mr. Wolf is a member of the Board of Directors of the
Arizona Software Association, and serves on the Boards or Advisory Boards of
several other technology-related companies including Andigilog, Essential Wisdom
and E-Try.com. Mr. Wolf earned a Bachelor of Science in Quantitative Systems
from Arizona State University.
PHILIP R. SHUMWAY. Mr. Shumway, age 52, has served as President, Chief
Executive Officer and director of the Company since March 1999. Prior to
assuming his current position, Mr. Shumway served as Director of Strategic
Accounts in the Channel Sales Division for Unisys Corporation from 1997 until
1998. In 1996, Mr. Shumway founded Performance Marketing Group, Inc. and served
as its President until 1997. Mr. Shumway also served as Director of Sales
Operations for the U.S. Sales Division of Apple Computer, Inc. from 1994 until
1996. From 1984 to 1994, Mr. Shumway held various sales and marketing management
positions with Apple Computer, Inc. Mr. Shumway earned a Masters in Business
Administration from the University of Northern Colorado and a Bachelor of
Science in Business Administration from Bowling Green State University.
TODD P. BELFER. Mr. Belfer, age 31, has served as a director of the Company
since March 1999, and as Chairman of the Board of Directors of Vitrix from April
1996 until March 1999. Mr. Belfer also is currently serving as President and
Chairman of the Board of M.D. Labs, Incorporated, a private Arizona-based
company, where he has been employed since February 1994. Mr. Belfer also
co-founded Employee Solutions, Inc. in May 1990, and served as its Executive
Vice-President and as a director from 1991 to 1996. Mr. Belfer earned a Bachelor
of Science in Finance and Economics from the University of Arizona in 1989.
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<PAGE>
LISE M. LAMBERT. Ms. Lambert, age 42, has served as a director of the
Company since April 1999 and as director of Vitrix since January 1998. Ms.
Lambert is President of Relevant, Inc., a consulting company that serves the
computer software industry. Ms. Lambert has been employed by Relevant, Inc.
since 1996. In 1986, Ms. Lambert co-founded Mastersoft, Inc., where she served
as Vice-President of Marketing from 1986 to 1990 and Senior Vice-President of
Sales from 1990 to 1995. Ms. Lambert has held various sales and management
positions, including Product Line Manager at MicroAge, Inc. in Tempe Arizona,
and currently serves as director for OutBack Resource Group. Ms. Lambert earned
Bachelor of Arts degrees in education and music, and a Masters degree in
deafness and audiology from Smith College.
BAHAN SADEGH. Mr. Sadegh, age 25, has served as a director of Vitrix since
1996. Mr. Sadegh co-founded Vitrix in 1996, and has served as Chief Technology
Officer of Vitrix since its founding. Mr. Sadegh served as an engineer
consultant for Brouwer, Palmer and Associates from 1992 until 1995. Mr. Sadegh
is completing a degree in mechanical engineering and business administration at
Arizona State University.
HAMID SHOJAEE. Mr. Shojaee, age 25, has served as a director of the Company
since April 1996. Mr. Shojaee co-founded Vitrix in 1996, served as its President
and Chief Executive Officer from June 1998 until March 1999. Mr. Shojaee
currently serves as Information Technology Director for Vitrix. Mr. Shojaee
formerly owned and operated Power Computing Solutions, a computer consultant
business, from August 1993 until December 1995. Mr. Shojaee served as a network
administrator for International Business Machines Corporation from January 1992
until December 1993. Mr. Shojaee is a Microsoft Certified Systems Engineer, and
attended Arizona State University.
Approval of the election of the director nominees will require the
affirmative vote of a plurality of the votes cast by the stockholders entitled
to vote. The Directors and executive officers of the Company, who collectively
have voting power over a majority in interest of the outstanding shares of
Common Stock and Preferred Stock, have indicated they will vote FOR election of
the director nominees as set forth above. Accordingly, it is expected that the
director nominees will be elected to the Board of Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 1999, the Board of Directors of the
Company met or acted by written consent on three occasions. Each of the
Company's Directors attended more than 75% of the meetings of the Board of
Directors.
The Audit Committee, which is currently comprised of Messrs. Wolf, Belfer
and Lambert, is responsible for reviewing and making recommendations to the
Board concerning the selection of outside auditors, the annual audit of the
Company's financial statements and the Company's internal accounting controls,
practices and policies. The Audit Committee did not meet during the fiscal year
ended June 30, 1999.
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The Compensation Committee, which is currently comprised of Messrs. Wolf,
Belfer and Lambert, makes recommendations to the Board of Directors regarding
option grants and addresses matters relating to executive compensation. The
Compensation Committee did not meet during the fiscal year ended June 30, 1999.
The Company's Board of Directors does not maintain a standing nominating
committee or other committees performing similar functions.
DIRECTOR COMPENSATION
During fiscal 1999, the Company's non-employee directors received no
compensation for their services to the Company, but were reimbursed for
reasonable expenses incurred in connection with attendance at each meeting of
the Board of Directors.
The Company granted options to purchase 159,690 shares of Common Stock to
each of Michael A. Wolf and Lise M. Lambert in connection with their election to
the Board of Directors in February 1999.
EXECUTIVE COMPENSATION
The following table summarizes all compensation to the Company's Chief
Executive Officer and to the Company's other most highly compensated executive
officers other than the Chief Executive Officer whose total annual salary and
bonus exceeded $100,000 (collectively, the "Named Officers"), for services
rendered to the Company for each of the years ended June 30, 1999, 1998 and
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------- ---------------------
Awards
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Name and Other Annual Securities Underlying
Principal Position(1) Year Salary ($) Bonus ($) Compensation ($) Options/SARS (#)
- ------------------------- ---- ---------- --------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Philip R. Shumway(2) 1999 $31,439 -- -- 758,528(3)
President and
Chief Executive Officer
Charles D. Snead, Jr.(4) 1999 $32,693 -- -- --
President and 1998 $49,413 -- -- --
Chief Executive Officer 1997 $60,681 -- -- 30,000
</TABLE>
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(1) No other executive officer of the Company received compensation in excess
of $100,000 for the periods presented.
(2) Mr. Shumway became President and Chief Executive Officer of the Company
effective April 15, 1999, in connection with the transactions consummated
under that certain Exchange Agreement, dated April 15, 1999, by and among
the Company, Vitrix Incorporated ("Vitrix") and the Shareholders party
thereto (the "Exchange Agreement"). Mr. Shumway's annual salary is
$100,000. The salary amount for Mr. Shumway reflects salary received for
the period April 15, 1999 through June 30, 1999.
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(3) Pursuant to the terms of his Employment Agreement with Vitrix, Mr. Shumway
received options to purchase 380,000 shares of Common Stock of Vitrix which
were converted to options to purchase 758,528 shares of Company Common
Stock in connection with the consummation of the transactions contemplated
by the Exchange Agreement.
(4) Mr. Snead resigned as the Company's President and Chief Executive Officer
effective April 15, 1999, in connection with the Merger. The salary amounts
for Mr. Snead reflect amounts paid pursuant to a consulting arrangement
between the Company and Mr. Snead.
The following table sets forth information concerning individual grants of
stock options made to the Named Officers during the fiscal year ended June 30,
1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
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Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Exercise Appreciation for
Options Employees in Price Expiration Option Term(3)
Name Granted (#)(1) Fiscal Year ($/sh)(2) Date 5%($) 10%($)
---- -------------- ------------ --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Philip R. Shumway 758,528 58% $.1100 02/2009 $53,100 $144,100
Charles D. Snead, Jr. 30,000 -- $.4375 06/2006 $ 5,400 $ 13,200
30,000 -- $.3100 01/2002 $ 1,200 $ 2,700
</TABLE>
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(1) In connection with Mr. Shumway's employment with Vitrix, Mr. Shumway was
granted options to purchase 380,000 shares of Vitrix Common Stock, which
were converted to options to purchase 758,528 shares of Company Common
Stock pursuant to the terms of the Exchange Agreement.
(2) The exercise price of $.11 is on an as adjusted basis pursuant to the terms
of the Exchange Agreement.
(3) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Common Stock, overall stock market
conditions, as well as the optionholder's continued employment through the
vesting period. The amounts reflected in this table may not necessarily be
achieved.
EMPLOYMENT AGREEMENT
On February 16, 1999, Vitrix entered into an Employment Agreement with
Phillip R. Shumway (referred to herein as the "Employee") for services as
President and Chief Executive Officer. This Agreement provides for a base annual
salary, effective as of the commencement date of March 8, 1999, of $100,000,
payable in accordance with payroll policies as they may be revised from time to
time. In addition, the Employee is entitled to receive quarterly cash bonuses,
and an annual cash bonus for the annual period ending March 31, 2000, determined
according to bonus schedules. The Employee also was granted an option to
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<PAGE>
purchase 380,000 shares of Vitrix common stock which, under the Exchange
Agreement, converted to an option to purchase 758,528 shares of the Company's
Common Stock, exercisable at the fair market value of the shares at the time of
the grant. The option grant has a ten-year term, and will be exercisable in
equal thirds, over a period of three years. The first third will vest on the
first anniversary of employment, with full vesting occurring on the third year
anniversary date. For two years following the effective date of the Agreement,
the Employee agrees that he will not engage in any activity for the purpose of
or which results in competition with Vitrix.
The agreement has a one-year term, but may be terminated earlier. The board
of directors of Vitrix may terminate the Employee for "cause," which includes
(i) material neglect of duties; (ii) willful failure to abide by ethical and
good faith instructions or policies from or set by the board; (iii) Employee's
material breach of the Employment Agreement; (iv) the appropriation (or
attempted appropriation) of a material business opportunity of Vitrix, including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of Vitrix; (v) the misappropriation (or
attempted misappropriation) of any of Vitrix's funds or property; or (vi) the
conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony, or
any other crime with respect to which imprisonment is a possible punishment. If
the Employee is terminated for cause, Vitrix is obligated to pay the Employee
only salary due him through the date of termination. If the Employee fails to
perform his duties under the Agreement because of illness or other incapacity,
Vitrix has the right to terminate the Agreement without further obligation
except for (i) payment to the Employee of salary due him through the date of
termination; (ii) any bonus amounts earned prior to the date of termination; and
(iii) any amounts payable pursuant to the disability plans generally applicable
to executive employees.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, as well as persons beneficially
owning more than 10% of the Company's outstanding Common Stock, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC") within specified time periods. Such officers, directors
and shareholders are also required to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of such forms received by it, or written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and 10%
shareholders were complied with during the fiscal year ended June 30, 1999.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of September 1, 1999, the beneficial
ownership of shares of Common Stock of the Company by (i) each person known by
the Company to beneficially own more than 5% of the Company's Common Stock; (ii)
each Director; (iii) each of the Named Officers; and (iv) all Directors and
executive officers of the Company as a group.
Name and Address of Amount and Nature of Percent of
Beneficial Owner(1) Beneficially Ownership (2) Common Stock(3)
- ------------------- -------------------------- ---------------
Philip R. Shumway 238,304 1.0%
Michael A. Wolf 664,433(4) 2.9%
Todd P. Belfer 4,322,948 18.6%
Lise M. Lambert 432,024(5) 1.9%
Bahan Sadegh 1,596,902 6.9%
Hamid Shojaee 6,986,446 30.1%
Craig J. Smith -- --
Charles D. Snead, Jr. -- --
All directors and Named
Officers as a group 14,241,057(4) 61.3%
- ----------
(1) The address of each of the beneficial owners is c/o FBR Capital
Corporation, 20 East University, Suite 304, Tempe, Arizona 85281.
(2) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated or under applicable laws.
In accordance with the rules of the Securities and Exchange Commission,
each stockholder is deemed to beneficially own any shares subject to stock
options which are currently exercisable or which will become exercisable or
convertible within 60 days after September 1, 1999. The inclusion herein of
shares listed as beneficially owned does not constitute an admission of
beneficial ownership.
(3) Percentages reflect conversion of Preferred Stock into Common Stock.
(4) Includes 159,690 shares of Common Stock which are subject to unexercised
options that were exercisable on September 1, 1999 or within 60 days
thereafter.
(5) Includes 159,690 shares of Common Stock which are subject to unexercised
options that were exercisable on September 1, 1999 or within 60 days
thereafter.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
During 1996, the Company entered into a debt financing agreement for
$310,000 with T.P.B. Investment Limited Partnership (TPB), which is owned by
Todd P. Belfer, a member of the Company's Board of Directors. On June 20, 1998,
TPB converted debt of $110,000, together with accrued interest thereon of
approximately $27,000, to contributed capital.
On March 3, 1999, TPB agreed to convert the remaining principal ($200,000)
and accrued interest ($64,570) outstanding on its notes into 2,720,723 shares of
the Company's Common Stock and Preferred Stock.
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ADOPTION OF A STOCK OPTION PLAN
On July 13, 1999, the Board of Directors adopted the 1999 Equity
Compensation Plan (the "Plan"), subject to shareholder approval. The Board
believes that in order to attract and retain officers and employees of the
highest caliber, provide increased incentive for such persons and to continue to
promote the well being of the Company, it is in the best interests of the
Company and its shareholders to provide officers and employees of the Company,
through the granting of stock options, the opportunity to participate in the
appreciation in value of the Company's Common Stock.
SUMMARY OF THE PLAN
The following summary of the Plan does not purport to be complete, and is
subject to and qualified in its entirety to the text of the Plan, which is
attached hereto as Appendix A.
ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Company's Board of Directors, or such other committee
designated by the Board. The Committee has full authority, subject to the
provisions of the Plan, to award incentive stock options and non-statutory stock
options (collectively, the "Options") or restricted stock awards ("Stock
Awards") (hereinafter, collectively referred to as "Awards").
Subject to the provisions of the Plan, the Committee determines in its
discretion, among other things, the persons to whom from time to time Awards may
be granted ("Participants"), the number of shares subject to each Option,
exercise prices under the Options, any restrictions or limitations on Awards
including any vesting, exchange, deferral, surrender, cancellation,
acceleration, termination, or forfeiture provisions related to such Awards. The
interpretation and construction by the Committee of any provisions of, or the
determination of any questions arising under, the Plan or any rule or regulation
established by the Committee pursuant to the Plan, shall be final, conclusive
and binding on all persons interested in the Plan.
SHARES SUBJECT TO THE PLAN. The Plan authorizes the granting of Awards
which would allow up to a maximum of 3,000,000 shares of the Common Stock
(approximately 12.9% of the outstanding Common Stock) to be acquired by the
Participants of said Awards. In order to prevent the dilution or enlargement of
the rights of the Participants under the Plan, the number of shares of Common
Stock authorized by the Plan is subject to adjustment in the event of any
increase or decrease in the number of shares of outstanding Common Stock
resulting from a stock dividend, stock split, combination of shares, merger,
reorganization, consolidation, recapitalization or other change in the corporate
structure affecting the Company's capital stock. If any Award granted under the
Plan is forfeited or terminated, the shares of Common Stock that were underlying
such Award shall again be available for distribution in connection with Awards
subsequently granted under the Plan.
ELIGIBILITY. Subject to the provisions of the Plan, Awards may be granted
to key employees of the Company or its subsidiaries who hold a position of
responsibility in a managerial, administrative or professional capacity.
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EFFECTIVE DATE AND TERM OF PLAN. If approved by the Company's shareholders,
the Plan will be deemed effective on July 13, 1999, the date on which it was
adopted by the Board of Directors. The Plan will terminate ten (10) years after
the effective date of the Plan, subject to earlier termination by the Board. No
Option may be granted under the Plan after the termination date, but Options
previously granted may extend beyond such date.
NATURE OF AWARDS. The Plan provides for incentive stock options as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
non-statutory stock options or restricted stock awards, any of which may be
granted with any other option or stock based award not subject to the Plan. The
Committee determines when Awards are to be granted and when they may be
exercised.
OPTION PRICE. The exercise price of each Option will be determined by the
Committee but under the Code the exercise price of incentive stock options may
not be less than 100% of the fair market value of the Common Stock on the date
the option is granted (or in the case of an incentive stock option granted to a
person possessing more than 10% of the total combined voting power of all
classes of stock of the Company, not less than 110% of such fair market value).
PERIOD OF OPTION. The term of an Option will not exceed ten (10) years
(five (5) years in the case of an Option granted to a 10% shareholder) from the
date the Option was granted.
EXERCISE OF OPTIONS. Subject to any limitations or conditions the Committee
may impose, Options may be exercised, in whole or in part, at any time during
the term of the Option by giving written notice of exercise to the Company
specifying the number of shares of Common Stock to be purchased. Such notice
must be accompanied by payment in full of the purchase price. Full payment for
shares purchased pursuant to an exercise of an Option will be made in cash or
such other form of consideration as the Committee may approve, including without
limitation, the delivery of shares of Common Stock. Options granted under the
Plan may not be transferred other than by will or by the laws of descent and
distribution. The Committee shall adopt policies determining the entitlement of
Participants who cease to be employed by the Company or its Subsidiaries.
STOCK AWARD RESTRICTIONS. The Committee shall place such conditions,
restrictions or limitations as it deems appropriate on the Stock Awards. The
Committee may modify, or accelerate the termination of, the restrictions
applicable to a Stock Award as it deems appropriate.
PARTICIPANT RIGHTS AS SHAREHOLDERS. The Committee may, in its discretion,
grant to the Participant to whom such Stock Awards have been awarded all or any
of the rights of a shareholder with respect to such shares.
EVIDENCE OF AWARDS. Options granted under the Plan will be evidenced by
agreements consistent with the Plan in such form as the Committee may prescribe.
Stock Awards in any such manner as the Committee deems appropriate. Neither the
Plan nor agreements thereunder confer any right to continued employment upon any
Participant.
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AMENDMENTS TO THE PLAN. The Board may at any time, and from time to time,
amend, modify or terminate any of the provisions of the Plan, but no amendment,
modification or termination shall be made which would impair the rights of a
Participant under any agreement theretofore entered into pursuant to an Award
grant, without the Participant's consent.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
participation in the Plan is only a summary of the general rules applicable to
the grant and exercise of incentive stock options and does not purport to give
specific details of every variable and does not cover, among other things,
state, local and foreign tax treatment of participation in the Plan. The
information is based upon present law and regulations, which are subject to
being changed prospectively or retroactively.
The Participant of an Award will recognize no taxable income and the
Company will not qualify for any deduction upon the grant or exercise of an
Award. Upon a disposition of the shares underlying the Award after the later of
two years from the date of grant or one year after the issuance of the shares to
the Participant, the Participant will recognize the difference, if any, between
the amount realized and the exercise price as long-term capital gain or
long-term capital loss (as the case may be) if the shares are capital assets.
The excess, if any, of the fair market value of the shares on the date of
exercise of an Award over the exercise price will be treated as an item of
adjustment in computing the alternative minimum tax for a Participant's taxable
year in which the exercise occurs and may result in an alternative minimum tax
liability for the Participant.
If Common Stock acquired upon the exercise of an Award is disposed of prior
to two years from the date of grant of the Award or in the same taxable year as
the exercise of the Award, (i) the Participant will recognize ordinary
compensation income in the taxable year of disposition in an amount equal to the
excess, if any, of the lesser of the fair market value of the shares on the date
of exercise, or the amount realized on the disposition of the shares, over the
exercise price paid for such shares; and (ii) the Company will qualify for a
deduction equal to the amount recognized by the Participant as compensation
income, subject to the limitation that the compensation be reasonable. The
Participant will recognize the excess, if any, of the amount realized over the
fair market value of the shares on the date of exercise, if the shares are
capital assets, as short-term or long-term capital gains, depending on the
length of time that the Participant held the shares, and the Company will not
qualify for a deduction with respect to such excess. In the case of a
disposition of shares in the same taxable year as the exercise of an Award,
where the amount realized on the disposition is less than the fair market value
of the shares on the date of exercise, there will be no adjustment since the
amount treated as an item of adjustment, for alternative minimum tax purposes,
is limited to the excess of the amount realized on such disposition over the
exercise price, which is the same amount included in regular taxable income.
Adoption of the Plan requires the affirmative vote of the holders of a
majority of the combined voting power of all the issued and outstanding Common
Stock and Preferred Stock present at the Annual Meeting in person or through
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proxy. The Company's directors and executive officers, who collectively have
voting power over a majority in interests of the outstanding shares of Common
Stock and Preferred Stock, have indicated they will vote FOR the adoption of the
Plan. Accordingly, it is expected that the Plan will be adopted.
AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors unanimously recommends the approval of an amendment
to Article Four of the Company's Articles of Incorporation, which would increase
the number of shares of Common Stock which the Company is authorized to issue
from 16,666,667 to 50,000,000.
The Board of Directors determined that this amendment is advisable and
should be considered at the Annual Meeting. The full text of the proposed
amendment to the Articles of Incorporation is set forth below. The Company is
also currently authorized to issue 10,000,000 shares of preferred stock, par
value $.01 per share. The proposed amendment will not affect this authorization.
The proposed amendment would increase the number of shares of Common Stock
which the Company is authorized to issue from 16,666,667 to 50,000,000. The
additional 33,333,333 shares would be a part of the existing class of Common
Stock and, if and when issued, would have the same rights and privileges as the
shares of Common Stock presently issued and outstanding. At September 15, 1999,
there were 13,241,031 shares of Common Stock issued and outstanding and
10,000,000 shares of Preferred Stock issued and outstanding. The shares of
Preferred Stock are convertible into Common Stock on a share for share basis.
The Board of Directors believes it is desirable to increase the number of
authorized shares of Common Stock of the Company in order to effect the
conversion of the Preferred Stock issued under the terms of the Exchange
Agreement into shares of Common Stock and to provide the Company with adequate
flexibility in the future for general corporate purposes. The additional Common
Stock would be available for sale to raise capital, for issuance to consultants,
or for any other lawful corporate purpose in the discretion of the Board of
Directors. Such purposes may include paying the necessary obligations, expenses
and salaries of the Corporation.
Under the terms of the Exchange Agreement, each outstanding share of Vitrix
Common Stock held by a participating Vitrix shareholder was converted into the
right to receive a combination of .9224 shares of Common Stock and 1.0736 shares
of Preferred Stock. Each share of Preferred Stock is automatically convertible
into one share of Common Stock at such time as the Company has the authorized
capital to issue such shares. The aggregate number of shares of Preferred Stock
issued under the Exchange Agreement was 9,016,988 shares.
Other than the obligation to convert the Preferred Stock into the Company's
Common Stock pursuant to the terms of the Exchange Agreement, the Company has no
other present commitments, agreements, or intent to issue additional shares of
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Common Stock, except for transactions in the ordinary course of the Company's
business, or shares which may be issued under the Company's stock option or
other existing benefit plans.
The proposed amendment to Article Four would permit the issuance of
additional shares up to the 50,000,000 maximum authorization without further
action or authorization by Stockholders, subject to the requirements of any
national securities exchange on which the Common Stock may trade. The holders of
the Company's Common Stock are not entitled to preemptive rights or cumulative
voting. Accordingly, the issuance of additional shares of Common Stock might
dilute, under certain circumstances, the ownership and voting rights of the
Company's stockholders. The proposed increase in the number of shares of Common
Stock in a public or private sale, merger, or similar transaction would increase
the number of outstanding shares, thereby possibly diluting the interest of a
party attempting to obtain control of the Company. The Company is not aware of
any pending or threatened efforts to acquire control of the Company.
The approval of the amendment to the Company's Articles of Incorporation
requires the affirmative vote of the holders of a majority of the combined
voting power of all of the issued and outstanding shares of Common Stock and
Preferred Stock entitled to vote at the Annual Meeting, voting together as
single class. The directors and executive officers of the Company, who
collectively have voting power over a majority in interests of the outstanding
shares of Common Stock and Preferred Stock, have indicated they will vote FOR
the adoption of the amendment to the Articles of Incorporation of the Company.
Accordingly, it is expected that the amendment will be adopted.
AMEND THE ARTICLES OF INCORPORATION TO CHANGE
THE CORPORATION'S NAME FROM FBR CAPITAL CORPORATION
TO VITRIX, INC.
The Board of Directors unanimously recommends the approval of an amendment
to Article One of the Company's Articles of Incorporation, which would change
the name of the Company from FBR Capital Corporation to Vitrix, Inc. The Board
of Directors has determined that this amendment is advisable and should be
considered at the Annual Meeting.
The approval of the amendment to the Company's Articles of Incorporation
requires the affirmative vote of a majority of the combined voting power of all
the issued and outstanding shares of Common Stock and Preferred Stock entitled
to vote at the Annual Meeting, voting together as a single class. The directors
and executive officers of the Company, who collectively have voting power over a
majority in interests of the outstanding shares of Common Stock and Preferred
Stock, have indicated they will vote FOR the adoption of the amendment to the
Articles of Incorporation of the Company. Accordingly, it is expected that the
amendment will be adopted.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On May 13, 1999, the Company, with the approval of the Company's Board of
Directors, dismissed Arthur Andersen LLP ("Arthur Andersen") and engaged BDO
Seidman, LLP ("BDO Seidman") as its independent public accountants for the year
ending June 30, 1999. The dismissal of Arthur Andersen was the result of a
change in control of the Company.
Arthur Andersen's reports on the Company's financial statements for the
past two years contained no adverse opinion and no disclaimer of opinion, nor
were such reports qualified or modified as to uncertainty, audit scope or
accounting principles. In the Company's two most recent fiscal years and the
subsequent interim periods preceding the dismissal of Arthur Andersen, there
were no disagreements with Arthur Andersen on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Arthur
Andersen, would have caused it to make a reference to the subject matter of the
disagreements in connection with its reports.
The Company has provided Arthur Andersen with a copy of the foregoing
disclosure, and has requested that Arthur Andersen furnish it with a letter
addressed to the Securities and Exchange Commission ("SEC") stating whether or
not it agrees with such disclosure. The Company has filed as an Exhibit to the
Form 8-K, dated May 13, 1999, a copy of the letter from Arthur Andersen required
by Item 304 of Regulation S-K.
During the Company's two most recent fiscal years and the subsequent
interim periods preceding the engagement of BDO Seidman, neither the Company nor
any party acting on its behalf has consulted with BDO Seidman regarding (i)
either the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements, or (ii) any matter that was
either the subject of a "disagreement" (as defined in Item 304(a)(1)(iv) of
Regulation S-K and related instructions) or a "reportable event" (as defined in
Item 304(a)(i)(v) of Regulation S-K).
STOCKHOLDER PROPOSALS
Any stockholder who wishes to present any proposal for stockholder action
at the next Annual Meeting of Stockholders to be held in 2000, must be received
by the Company's Secretary, at the Company's offices, not later than May 19,
2000, in order to be included in the Company's proxy statement and form of proxy
for that meeting. Such proposals should be addressed to the Corporate Secretary,
FBR Capital Corporation, 20 East University, Suite 304, Tempe, Arizona 85281. If
a shareholder proposal is introduced at the 2000 Annual Meeting of Stockholders
without any discussion of the proposal in the Company's proxy statement, and the
stockholder does not notify the Company on or before August 2, 2000, as required
by SEC Rule 14(a)-4(c)(l), of the intent to raise such proposal at the Annual
Meeting of Stockholders, then proxies received by the Company for the 2000
Annual Meeting will be voted by the persons named as such proxies in their
discretion with respect to such proposals. Notice of such proposal is to be sent
to the above address.
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OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting any
matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
1999 ANNUAL REPORT ON FORM 10-KSB
The Company files annual reports on Form 10-KSB with the SEC. A copy of the
annual report for the fiscal year ended June 30, 1999 (except for certain
exhibits thereto) may be obtained, free of charge, upon written request by any
stockholder to FBR Capital Corporation, 20 East University, Suite 304, Tempe,
Arizona 85281, Attention: Shareholder Relations. Copies of all exhibits to the
annual report are available upon a similar request, subject to payment of a
charge to reimburse the Company for its expenses in supplying any exhibit.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael A. Wolf
Michael A. Wolf
Chairman of the Board
September 16, 1999
