SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Concero Inc.
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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):
|_| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $0.01 par value
(2) Aggregate number of securities to which transaction applies:
10,237,890
(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): $0.50
(maximum anticipated distribution per share) x 10,237,890 (aggregate
number of shares outstanding)
(4) Proposed maximum aggregate value of transaction: $5,118,945.00
(5) Total fee paid: $1,023.79
|X| Fee paid previously with preliminary materials
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CONCERO INC.
6300 BRIDGEPOINT PARKWAY
BUILDING 1, SUITE 100
AUSTIN, TEXAS 78730
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 30, 2002
TO THE STOCKHOLDERS OF CONCERO INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Concero
Inc., a Delaware corporation (the "Company"), will be held on Monday, December
30, 2002 at 9:00 a.m., local time, at the offices of Brobeck, Phleger & Harrison
LLP at 4801 Plaza on the Lake, Austin, Texas 78746 for the following purposes:
1. to ratify and approve the Plan of Complete Liquidation, Dissolution and
Distribution, substantially in the form of Exhibit A to the accompanying
proxy statement, and such further actions as may be necessary or desirable
to consummate such transaction; and
2. to transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
The foregoing matters are described in more detail in the enclosed proxy
statement. The Board of Directors has fixed the close of business on November
20, 2002 as the record date for the determination of the stockholders entitled
to notice of, and to vote at, the Special Meeting and any postponement or
adjournment thereof. Only stockholders of record at the close of business on
November 20, 2002 will be entitled to notice of, and to vote at, the Special
Meeting.
By Order of the Board of Directors,
/s/ KEITH D. THATCHER
----------------------------------------
Keith D. Thatcher,
Secretary
Austin, Texas
December 9, 2002
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE READ THE ATTACHED PROXY
STATEMENT CAREFULLY, AND VOTE YOUR SHARES BY TELEPHONE, BY THE INTERNET OR BY
COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
AND RETURNING IT IN THE ENCLOSED ENVELOPE. EVEN IF YOU HAVE GIVEN YOUR PROXY,
YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER,
THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND
YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY
ISSUED IN YOUR NAME.
TABLE OF CONTENTS
SUMMARY OF GENERAL INFORMATION.................................................1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................7
FACTORS TO BE CONSIDERED BY STOCKHOLDERS IN DECIDING WHETHER TO
APPROVE THE PLAN OF DISSOLUTION..............................................9
SELECTED FINANCIAL DATA.......................................................11
INTERESTS OF DIRECTORS AND OFFICERS IN THE PLAN OF DISSOLUTION................14
PROPOSAL TO APPROVE THE PLAN OF DISSOLUTION...................................15
GENERAL OVERVIEW...........................................................15
COMPANY BACKGROUND.........................................................15
REASONS FOR ADOPTING THE PLAN..............................................16
THE PLAN OF DISSOLUTION....................................................18
Dissolution Under the Delaware Law.......................................18
Description of the Dissolution Process...................................18
Conduct Following the Dissolution........................................19
Right to Modify, Amend or Terminate the Plan of Dissolution..............20
Liquidating Distributions; Nature; Amount; Timing........................20
Sales of Our Assets......................................................21
Continuing Insurance.....................................................22
Reporting Requirements...................................................22
Contingent Liabilities; Contingency Reserve; Liquidating Trust...........22
Final Record Date........................................................24
Trading of Common Stock and Interests in any Liquidating Trust
or Trusts..............................................................24
Absence of Appraisal Rights..............................................25
Regulatory Approvals.....................................................25
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES..........................25
Federal Income Taxation of the Company...................................26
Federal Income Taxation of the Stockholders..............................26
Liquidating Trusts.......................................................27
State and Local Tax......................................................27
Backup Withholding.......................................................27
VOTE REQUIRED AND BOARD RECOMMENDATION........................................28
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING..............................29
CONCERO INC.
6300 BRIDGEPOINT PARKWAY
BUILDING 1, SUITE 100
AUSTIN, TEXAS 78730
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PROXY STATEMENT
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FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD
DECEMBER 30, 2002
Proxies in the form enclosed with this Proxy Statement are solicited on
behalf of the Board of Directors of Concero Inc., a Delaware corporation (the
"Company"), for use at the Special Meeting of Stockholders of the Company to be
held on Monday, December 30, 2002 at 9:00 a.m., local time (the "Special
Meeting") or at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Special Meeting.
The Special Meeting will be held at the offices of Brobeck, Phleger &
Harrison LLP at 4801 Plaza on the Lake, Austin, Texas 78746. This proxy
statement and the accompanying proxy card are first being mailed to all
stockholders entitled to vote at the Special Meeting on or about December 9,
2002.
SUMMARY OF GENERAL INFORMATION
What is the purpose of the Special Meeting?
o At the Special Meeting, stockholders will consider and vote on a
proposal to approve the Plan of Complete Liquidation, Dissolution
and Distribution (the "Plan of Dissolution") attached as Exhibit A.
Why has the Board adopted the Plan of Dissolution?
o Our Board of Directors has determined that it would not be advisable
to continue to operate the Company on an independent basis given our
limited cash resources and the unsatisfactory results of our efforts
to obtain customers for our products, and that, considering these
factors, a decision to continue the development and marketing of our
products might ultimately jeopardize the assets that might otherwise
remain available to stockholders in a liquidation. Additionally, our
Board of Directors recognized that it was reasonably unlikely that
we would receive, within a reasonable period of time under the
circumstances, any viable offer to engage in an attractive,
alternative transaction. See "Proposal to Approve the Plan of
Dissolution - Reasons for Adopting the Plan"
o After considering a variety of factors, including (i) the
precipitous decline in our revenue; (ii) the highly unlikely
improvement of sales for the foreseeable future; (iii) the deemed
unlikely availability of reasonable financing to raise the capital
necessary to complete product trials; (iv) indications that, despite
significant cutbacks in our workforce, significant operating losses
would continue; (v) the likely inability to gain rapid market
acceptance for products; (vi) prevailing negative economic
conditions both generally and within the software industry; (vii)
our inability to identify an acceptable buyer, strategic alliance
partner or merger candidate; and (viii) the significant risks
associated with restructuring our business, including the risk that
positive operating income could not be reached prior to insolvency,
our Board of Directors concluded that the liquidation of the Company
was in the best interests of
stockholders, and accordingly, on August 8, 2002 approved a
resolution directing the cessation of the Company's operations and
the liquidation of the Company. See "Proposal to Approve the Plan of
Dissolution - Reasons for Adopting the Plan."
What will happen if the Plan of Dissolution is approved?
o If the Plan of Dissolution is approved, we will take the following
actions:
o file a Certificate of Dissolution with the Secretary of State
of the State of Delaware;
o only conduct business operations to the extent necessary to
wind-up our business affairs;
o attempt to convert all of our remaining assets into cash or
cash equivalents in an orderly fashion;
o pay or attempt to adequately provide for the payment of all or
our known obligations and liabilities;
o establish a contingency reserve designed to satisfy any
additional liabilities; and
o distribute pro rata in one or more liquidating distributions
to or for the benefit of our stockholders, as of the
applicable record date(s), all of our remaining assets.
See "Proposal to Approve the Plan of Dissolution - Description of the
Dissolution Process."
What will happen if the Plan of Dissolution is not approved?
o If the Plan of Dissolution is not authorized and approved by the
stockholders, our Board of Directors will continue to manage the
company as a publicly owned entity and will explore what, if any,
alternatives are then available for the future of our business.
When will stockholders receive payment of any available liquidation proceeds?
o We are currently unable to predict the precise timing of any
distributions pursuant to the Plan of Dissolution. The timing of any
distributions will be determined by our Board of Directors and will
depend in part upon our ability to convert our remaining assets into
cash and pay and settle our significant remaining liabilities and
obligations, including contingent claims. We anticipate that the
initial distribution proceeds will be made to stockholders in early
2003. Thereafter, as we liquidate our remaining assets and
properties, we will distribute available liquidation proceeds, if
any, to stockholders as the Board of Directors deems appropriate. We
anticipate that the majority of the remaining liquidation proceeds
will be distributed over a period of three years. See "Proposal to
Approve the Plan of Dissolution - Liquidating Distributions; Amount;
Timing."
o In addition, the existence of contingent claims could delay the
making of any distributions in connection with the Plan of
Dissolution.
What will stockholders receive in the liquidation?
o Because of the uncertainties as to the precise net realizable value
of our assets that we have not yet sold and the ultimate settlement
amount of our liabilities, it is impossible to predict with
certainty the aggregate net value which will ultimately be
distributed to our stockholders. However, based upon information
presently available to us, we believe that the proceeds stockholders
could receive over time is between $0.30 and $0.50 per share. See
"Proposal to Approve the Plan of Dissolution - Liquidating
Distributions; Nature; Amount; Timing." We are unable at this time
to predict the precise nature, amount and timing of any
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distributions, due in part to our inability to predict the net value
of our non-cash assets and the ultimate amount of our liabilities,
many of which have not been settled.
o In addition, we may incur additional liabilities arising out of
contingent claims that are not yet reflected as liabilities on our
balance sheet. We are unable at this time to predict what amount, if
any, may be paid on these contingent claims. We are unable at this
time to predict the precise nature, amount and timing of any
distributions, due in part to our inability to predict the net value
of our non-cash assets and the ultimate amount of our liabilities,
many of which have not been settled. See "Proposal to Approve the
Plan of Dissolution - Contingent Liabilities; Contingency Reserve;
Liquidating Trust." The sale of our non-cash assets could yield less
than we expect, we may incur additional liabilities, or the
settlement of our existing liabilities (including contingent claims)
could cost more than we anticipate, any of which could result in a
substantially lower distribution to our stockholders.
Do directors and officers have interests in the plan of dissolution that differ
from mine?
o In considering the Board of Directors' recommendation to approve the
Plan of Dissolution, you should be aware that some of the directors
and officers may have interests that are different from or in
addition to your interests as a stockholder. For a detailed
description of the interests of directors and officers that differ
from yours, see "Interests of Directors and Officers in the Plan of
Dissolution."
Can I still sell my shares?
o Yes, you may sell your shares at this time. However, if the Plan of
Dissolution is approved by the stockholders, it is likely that we
will close our stock transfer books and restrict transfers of our
common stock after filing the certificate of dissolution with the
State of Delaware, which will occur promptly following the Special
Meeting. See "Proposal to Approve the Plan of Dissolution - Final
Record Date."
What are the tax consequences of the liquidation?
o Generally, as a result of our liquidation, for federal income tax
purposes stockholders will recognize gain or loss equal to the
difference between (i) the sum of the amount of cash distributed to
them and the aggregate fair market value (at the time of
distribution) of any property distributed to them, and (ii) their
tax basis for their shares of our capital stock. A stockholder's tax
basis in his or her shares will depend upon various factors,
including the stockholder's cost and the amount and nature of any
distributions received with respect thereto. Any loss will generally
be recognized only when the final distribution from us has been
received, which may be as long as three years after the date that
the Plan of Dissolution is adopted. See "Proposal to Approve the
Plan of Dissolution - Certain Federal and State Income Tax
Consequences."
o Tax consequences to stockholders may differ depending on their
circumstances. You should consult your tax advisor as to the tax
effect of your particular circumstances.
Who is entitled to vote?
o The record date for the Special Meeting is November 20, 2002. Only
stockholders of record at the close of business on that date are
entitled to notice of and to vote at the Special Meeting. At the
close of business on the record date there were 10,237,890 shares of
common stock outstanding.
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o Except as otherwise required by law, the holders of shares of our
common stock vote together as a single class on all matters
presented to the stockholders. Each registered holder of common
stock of record at the close of business on November 20, 2002 is
entitled to one vote per share on each matter to be voted on at the
Special Meeting.
How many votes are required to authorize and approve the Plan of Dissolution?
o The authorization and approval of the Plan of Dissolution requires
the affirmative vote of the holders of a majority of the outstanding
shares of common stock. Members of our Board of Directors and our
executive officers who hold (or are deemed to hold) as of November
20, 2002 an aggregate of 4.9 million shares of common stock
(approximately 48% of the outstanding shares of common stock as of
the record date) have indicated that they will vote for the
authorization and approval of the Plan of Dissolution.
How does the Board of Directors recommend I vote on the Plan of Dissolution?
o Our Board of Directors recommends that you vote "FOR" the
authorization and approval of the Plan of Dissolution.
What if my shares are held in "street name" by a broker?
o If you are the beneficial owner of shares held in "street name" by a
broker, your broker, as the record holder of the shares, is required
to vote those shares in accordance with your instructions.
Stockholders should follow the directions provided by their brokers
regarding how to instruct brokers to vote the shares.
How many shares must be present to hold the Special Meeting?
o A quorum must be present at the Special Meeting for any business to
be conducted. The presence at the Special Meeting, in person or by
proxy, of the holders of a majority of the shares of common stock
outstanding on the record date will constitute a quorum. Proxies
received but marked as abstentions or broker non-votes will be
included in the calculation of the number of shares considered to be
present at the Special Meeting.
What if a quorum is not present at the Special Meeting?
o If a quorum is not present at the scheduled time of the Special
Meeting, the stockholders who are represented may adjourn the
meeting until a quorum is present. The time and place of the
adjourned meeting will be announced at the time the adjournment is
taken, and no other notice will be given. An adjournment will have
no effect on the business that may be conducted at the meeting.
How do I vote?
o You may vote by mail. If you properly complete and sign the
accompanying proxy card and return it in the enclosed envelope, it
will be voted in accordance with your instructions. The enclosed
envelope requires no additional postage if mailed in the United
States.
o You may vote by telephone or via the internet. Specific instructions
to be followed by any registered stockholder interested in voting
via Internet or by telephone are set forth on the enclosed proxy
card. The Internet and telephone voting procedures are designed to
authenticate the stockholder's identity and to allow stockholders to
vote their shares and confirm that their instructions have been
properly recorded. If your shares are held in "street
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name" by a broker or other nominee, you should check the voting form
used by that firm to determine whether you will be able to vote by
telephone or on the Internet.
o You may vote in person at the Special Meeting. If you plan to attend
the Special Meeting and wish to vote in person, we will give you a
ballot at the Special Meeting. However, if your shares are held in
the name of your broker, bank or other nominee, you will need to
obtain a proxy form from the institution that holds your shares
indicating that you were the beneficial owner of our common stock on
November 20, 2002, the record date for voting at the Special
Meeting.
Can I change my vote after I submit my proxy?
o Yes, you may revoke your proxy and change your vote at any time
before the polls close at the meeting by:
o signing another proxy with a later date;
o giving written notice of the revocation of your proxy to our
Secretary prior to the Special Meeting; or
o voting in person at the Special Meeting.
What if I do not specify how my shares are to be voted?
o If you submit an executed proxy but do not indicate any voting
instructions, your shares will be voted FOR the proposal to
authorize and approve the Plan of Dissolution, and you will give the
proxies the discretion to vote on other matters that may come before
the Special Meeting.
Will any other business be conducted at the Special Meeting?
o At this time, our Board of Directors knows of no other business that
will be presented at the Special Meeting. If any other proposal
properly comes before the stockholders for a vote at the Special
Meeting, however, the proxy holders will vote all shares for which
they have been delegated discretionary voting power in the enclosed
proxy in accordance with their best judgment.
Do I have dissenters' appraisal rights?
o No. Under Delaware law, stockholders will not have dissenters'
appraisal rights in connection with the Plan of Dissolution.
What do stockholders need to do now?
o After carefully reading and considering the information contained in
this proxy statement, each stockholder should complete and sign his
or her proxy and return it in the enclosed return envelope as soon
as possible so that his or her shares may be represented at the
meeting. A majority of shares entitled to vote must be represented
at the meeting to enable us to conduct business at the meeting.
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Who can help answer questions?
o If you have any additional questions about the proposed Plan of
Dissolution or if you need additional copies of this proxy statement
or any public filings referred to in this proxy statement, you
should contact Concero at (512) 343-6581. Our public filings can
also be accessed at the SEC's web site at www.sec.gov.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of October 31, 2002 by:
o each person who is known by us to be a beneficial owner of more than
5% of our common stock;
o each of our directors;
o our chief executive officer during our last fiscal year, each of our
other four most highly compensated executive officers who were
serving as executive officers at the end of our last fiscal year,
and our current chief executive officer and chief financial officer;
and
o all current directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power with
respect to the securities. Except as indicated in the notes following the table,
and subject to applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. The number of shares of common stock
used to calculate the percentage ownership of each listed person includes shares
of common stock underlying options or warrants held by such persons that are
exercisable within sixty (60) days of October 31, 2002. The percentage of
beneficial ownership is based on 10,237,890 shares of common stock outstanding
as of October 31, 2002.
Our common stock is the only class of voting securities outstanding.
Percentage of
Shares Shares
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------
Wade E. Saadi........................................................... 1,693,393 16.54%
Edward C. Ateyeh, Jr.................................................... 1,693,392 16.54%
Edgar G. Saadi.......................................................... 1,630,093 15.92%
W. Frank King, Ph.D..................................................... 641,046 6.26%
Dimensional Fund Advisors, Inc.......................................... 512,600 5.01%
Keith D. Thatcher....................................................... 163,109 1.59%
Timothy D. Webb**....................................................... 482,178 4.71%
Cathy S. Hetzel**....................................................... 0 *
Wayne E. Mock**......................................................... 32,645 *
John M. Velasquez**..................................................... 226,648 2.21%
Michael J. Maples....................................................... 106,109 1.04%
Kevin B. Kurtzman....................................................... 84,841 *
All directors and officers as a group (10 persons) 5,123,361 50.04%
* Less than one percent of the outstanding common stock.
** No longer employed by the Company
Unless otherwise indicated, the address for all officers and directors is
c/o Concero Inc., 6300 Bridgepoint Parkway, Building 1, Suite 100, Austin, Texas
78730.
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Wade E. Saadi. These shares include exercisable warrants to purchase
14,705 shares of common stock and exercisable options to purchase 63,303 shares
of common stock, of which 19,000 shares are unvested. All of Mr. Saadi's
unvested shares will vest immediately prior to the dissolution of the Company.
Mr. Saadi's address is c/o Pencom Systems Incorporated, 40 Fulton Street, New
York, New York 10038.
Edward C. Ateyeh, Jr. These shares include exercisable warrants to
purchase 14,704 shares of common stock and exercisable options to purchase
63,303 shares of common stock, of which 19,000 shares are unvested. All of Mr.
Ateyeh's unvested shares will vest immediately prior to the dissolution of the
Company. Mr. Ateyeh's address is c/o Pencom Systems Incorporated, 40 Fulton
Street, New York, New York 10038.
Edgar G. Saadi. These shares include exercisable warrants to purchase
14,708 shares of common stock. Mr. Saadi's address is c/o Pencom Systems
Incorporated, 40 Fulton Street, New York, New York 10038.
W. Frank King, Ph.D. These shares include exercisable options to purchase
148,000 shares of common stock, of which 51,000 shares are unvested. All of Mr.
King's unvested shares will vest immediately prior to the dissolution of the
Company.
Keith D. Thatcher. These shares include exercisable options to purchase
163,109 shares of common stock.
Timothy D. Webb. These shares include exercisable options to purchase
398,178 shares of common stock. Mr. Webb's employment with the Company ended on
September 5, 2002.
Cathy H. Hetzel's employment with the Company ended on August 13, 2002.
Wayne E. Mock. These shares include exercisable options to purchase 30,202
shares of common stock. Mr. Mock's employment with the Company ended on August
13, 2002.
John M. Velasquez. These shares include exercisable options to purchase
177,178 shares of common stock. Mr. Velasquez's employment with the Company
ended on August 13, 2002.
Michael J. Maples. These shares include exercisable options to purchase
64,099 shares of common stock, of which 19,000 shares are unvested. All of Mr.
Maples' unvested shares will vest immediately prior to the dissolution of the
Company.
Kevin B. Kurtzman. These shares include exercisable options to purchase
84,841 shares of common stock, of which 19,000 shares are unvested. All of Mr.
Kurtzman's unvested shares will vest immediately prior to the dissolution of the
Company
8
FACTORS TO BE CONSIDERED BY STOCKHOLDERS IN DECIDING WHETHER
TO APPROVE THE PLAN OF DISSOLUTION
There are many factors that the Company's stockholders should consider
when deciding whether to vote to ratify and approve our proposed Plan of
Dissolution. Such factors include those set forth in the Company's publicly
filed reports, including its Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2002, as well as those factors set forth below.
There are risks associated with forward looking statements.
This proxy statement contains certain forward looking statements,
including statements concerning the value of the Company's net assets, the
anticipated liquidation value per share of common stock, and the likelihood of
stockholder value resulting from sale of certain of its significant assets. Some
of our other assets may be difficult for us to convert into cash, and we can
make no assurance that we will receive any material amounts in respect of such
assets. No assurance can be given that the amount to be received in liquidation
will equal or exceed the price or prices at which the common stock has recently
traded or may trade in the future, or that the liquidation value will exceed
zero. Stockholders who disagree with the Board of Directors' determination that
the ratification and adoption of the Plan of Dissolution is in the best
interests of the Company and its stockholders should vote "against" ratification
and approval of the Plan of Dissolution.
Stockholders could be liable to the extent of liquidating distributions received
if contingent reserves are insufficient to satisfy the Company's liabilities.
If we fail to create an adequate contingency reserve for payment of our
expenses and liabilities, or if we transfer our assets to a liquidating trust
and the contingency reserve and the assets held by the liquidating trust are
less than the amount ultimately found payable in respect of expenses and
liabilities, each stockholder could be held liable for the payment to creditors
of such stockholder's pro-rata portion of the excess, limited to the amounts
previously received by the stockholder in distributions from us or the
liquidating trust.
If a court holds at any time that we have failed to make adequate
provision for our expenses and liabilities or if the amount ultimately required
to be paid in respect of such liabilities exceeds the amount available from the
contingency reserve and the assets of the liquidating trust, our creditors could
seek an injunction against the making of distributions under the Plan of
Dissolution on the grounds that the amounts to be distributed are needed to
provide for the payment of our expenses and liabilities. Any such action could
delay or substantially diminish the cash distributions to be made to
stockholders and/or holders of beneficial interests of any liquidating trust
under the Plan of Dissolution. See "The Plan of Dissolution-Contingent
Liabilities; Contingency Reserve; Liquidating Trust."
Anticipated timing of liquidation may not be achieved.
Immediately after the Special Meeting, if the Plan of Dissolution is
approved by stockholders, we intend to file a certificate of dissolution with
the Secretary of State of the State of Delaware. Although we anticipate that we
will substantially complete the sale of our assets within a 12-month period, our
Board of Directors may determine that it is in the best interest of our
stockholders that some assets be placed into a liquidating trust, which could
delay the receipt by stockholders of the final proceeds of the liquidation.
9
The liquidation may not result in greater returns to stockholders than our
continuing as a going concern.
We cannot assure you that the Plan of Dissolution will result in greater
returns to stockholders than our continuing as a going concern or through a
business combination with a third party. If the Plan of Dissolution is not
authorized and approved by the stockholders, our Board of Directors will
continue to manage the Company as a publicly owned entity and will explore what,
if any, alternatives are then available for the future of our business.
Our stock transfer books will close on the final record date, after which it
will not be possible for stockholders to publicly trade in our stock.
We intend to close our stock transfer books and discontinue recording
transfers of common stock at the close of business on the Final Record Date,
which we anticipate will be the date to be fixed by our Board of Directors for
filing the certificate of dissolution. Thereafter, certificates representing the
common stock shall not be assignable or transferable on our books except by
will, intestate succession or operation of law. The proportionate interests of
all of our stockholders shall be fixed on the basis of their respective stock
holdings at the close of business on the Final Record Date, and, after the Final
Record Date, any distributions made by us shall be made solely to the
stockholders of record at the close of business on the Final Record Date, except
as may be necessary to reflect subsequent transfers recorded on our books as a
result of any assignments by will, intestate succession or operation of law.
Our directors and officers may have interests in our liquidation and dissolution
that are different from the interests of other stockholders.
Members of our Board of Directors and our executive officers may be deemed
to have a potential conflict of interest in recommending authorization and
approval of the Plan of Dissolution. See "Interests of Directors and Officers in
the Plan of Dissolution."
No further stockholder approval will be required.
The approval of the Plan of Dissolution requires the affirmative vote of
the holders of a majority of all shares of our common stock outstanding and
entitled to vote. If our stockholders approve the Plan of Dissolution, we will
be authorized to dispose of our assets without further approval of our
stockholders.
The authorization and approval of the Plan of Dissolution requires the
affirmative vote of the holders of a majority of the outstanding shares of our
common stock. Members of our Board of Directors and our executive officers who
hold (or are deemed to hold) as of November 20, 2002 an aggregate of 4.9 million
shares of common stock (approximately 48% of the outstanding shares of common
stock as of November 20, 2002) have indicated that they will vote in favor of
the Plan of Dissolution.
Stockholders may not be able to recognize a loss for federal income tax purposes
until they receive a final distribution from us, which may be as long as three
years.
Generally, as a result of our liquidation, for federal income tax
purposes, stockholders will recognize gain or loss equal to the difference
between (i) the sum of the amount of cash distributed to them and the aggregate
fair market value (at the time of distribution) of any property distributed to
them, and (ii) their tax basis for their shares of our capital stock. A
stockholder's tax basis in his or her shares will depend upon various factors,
including the stockholder's cost and the amount and nature of any distributions
received with respect thereto. Any loss will generally be recognized only when
the final distribution from us has been received, which may be as long as three
years after the date that the Plan of Dissolution is adopted.
10
SELECTED FINANCIAL DATA
Going Concern Basis
The selected statements of operations data and balance sheet data for the five
years ended December 31, 2001 presented below have been derived from our audited
financial statements that do not appear herein. The statements of operations and
balance sheet data for the six months ended June 30, 2002 presented below have
been derived from our unaudited financial statements that do not appear herein.
These financial statements were prepared on the going concern basis of
accounting. The going concern basis of accounting contemplates the realization
of assets and satisfaction of liabilities in the normal course of business. On
August 8, 2002 the Company's Board of Directors approved the cessation of the
Company's operations and the liquidation of the Company, subject to required
stockholder approval. As a result, the following historical financial
information prepared on a going concern basis provides no indication of our
future financial condition and results of operations. However, this historical
financial information is one of many factors that the Company's stockholders
should consider when deciding whether to vote to ratify and approve our proposed
Plan of Dissolution. The following should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes thereto appearing in Form
10-K filed for the year ended December 31, 2001 and in Form 10-Q filed for the
quarter ended June 30, 2002.
========================================================
Year Ended December 31,
--------------------------------------------------------
1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
In thousands, except per share data
Statements of Operations Data:
Revenue..................................... $ 44,118 $ 39,101 $ 45,823 $ 57,290 $ 20,223
Operating expenses:.........................
Technical staff......................... 22,479 23,440 25,377 33,833 14,670
Selling and administrative staff........ 8,405 10,121 9,034 10,872 5,424
Other expenses ......................... 7,979 8,933 9,520 18,178 20,094
Special compensation expense............ 268 75 -- -- --
-------- -------- -------- -------- --------
Total operating expenses........... 39,131 42,569 43,931 62,883 40,188
-------- -------- -------- -------- --------
Income (loss) from operations............... 4,987 (3,468) 1,892 (5,593) (19,965)
Interest income (expenses), net............. 431 946 1,018 943 596
-------- -------- -------- -------- --------
Income (loss) before provision (benefit) for
income taxes.............................. 5,418 (2,522) 2,910 (4,650) (19,369)
-------- -------- -------- -------- --------
Provision (benefit) for income taxes:
Nonrecurring charge for termination of
Subchapter S election................. 1,200 -- -- -- --
C corporation taxes................... 1,000 (1,060) 1,130 (725) 2,281
-------- -------- -------- -------- --------
Net income (loss)........................... $ 3,218 $ (1,462) $ 1,780 $ (3,925) $(21,650)
======== ======== ======== ======== ========
Diluted earnings (loss) per share........... $ (0.16) $ 0.17 $ (0.39) $ (2.13)
======== ======== ======== ========
Unaudited pro forma information:
Historical income before provision for
Income taxes............................ $ 5,418
Pro forma provision for income taxes.... 1,900
--------
Pro forma net income........................ $ 3,518
========
Pro forma diluted earnings per share.... $ 0.41
========
Shares used in diluted earnings (loss) per
share calculation....................... 8,517 9,113 10,501 9,971 10,188
======== ======== ======== ======== ========
11
====================================================================
December 31, June 30,
-------------------------------------------------------- ----------
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- ----------
In thousands (unaudited)
Working capital............................. $ 28,074 $ 27,379 $ 29,260 $ 24,161 $ 9,579 $ 7,672
Total assets................................ 35,420 33,351 37,816 35,806 16,644 11,542
Total stockholders' equity.................. 31,859 31,068 33,422 32,760 11,133 8,756
Condensed Consolidated Statement of Operations (Going Concern Basis)
Six Months Ended June 30, 2002
(in thousands, except per share data)
(Unaudited)
Revenue....................................................... $ 996
Operating expenses:
Technical staff............................................ 731
Research and development................................... 1,925
Selling and administrative staff........................... 1,088
Other expenses............................................. 356
--------
Total operating expenses...................................... 4,100
--------
Loss from operations.......................................... (3,104)
Interest income............................................... 118
--------
Loss before income taxes...................................... (2,986)
Benefit from income taxes..................................... (605)
--------
Net loss...................................................... $ (2,381)
========
Basic and diluted loss per share.............................. $ (0.23)
========
Shares used in loss per share calculation..................... 10,227
========
Liquidation Basis
On August 8, 2002 the Company's Board of Directors approved the cessation
of the Company's operations and the liquidation of the Company, subject to
required stockholder approval. The Company has ceased its operating activities
and has commenced the orderly wind down of its affairs. As a result, the Company
has adopted the liquidation basis of accounting for the presentation of its
consolidated financial statements for periods subsequent to June 30, 2002. This
basis of accounting is appropriate when, among other things, liquidation of a
company appears imminent and the net realizable values of its assets are
reasonably determinable. Under the liquidation basis of accounting, the Company
has stated its assets at their net realizable values, contractual liabilities at
contractual amounts, and estimated costs through the liquidation date are
recorded to the extent they are reasonably determinable. The liquidation basis
of accounting requires many estimates and assumptions, and there are substantial
uncertainties in carrying out the orderly wind down of operations. The actual
values and costs are expected to differ from the amounts shown herein and could
be higher or lower than the amounts recorded.
12
The net assets in liquidation and statement of changes in net assets in
liquidation presented below have been derived from our unaudited financial
statements that do not appear herein and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes thereto appearing in our Form
10-Q filed for the quarter ended September 30, 2002.
Condensed Consolidated Statement of Net Assets in Liquidation
(Liquidation Basis)
At September 30, 2002
(In thousands, except per share data)
(Unaudited)
Assets
Cash.............................................................. $ 1,059
Short-term investments............................................ 6,229
Accounts receivable, net......................................... 7
Assets held for sale.............................................. 500
Other assets......................................................... 254
-------
Total assets......................................................... $ 8,049
-------
Liabilities
Accounts payable.................................................. 145
Accrued expenses and other liabilities............................ 4,054
-------
Net assets in liquidation............................................ $ 3,850
=======
Shares used.......................................................... 10,381
=======
Net assets in liquidation per share of common stock.................. $ 0.37
=======
Condensed Consolidated Statement of Changes in Net Assets in Liquidation
(Liquidation Basis)
Three Months Ended September 30, 2002
(in thousands)
(Unaudited)
Net assets on a going concern basis as of June 30, 2002.............. $ 8,756
-------
Adjustments to reflect liquidation basis accounting:
Write-down assets held for sale to net realizable value........... 584
Accrual of remaining lease obligations............................ 1,819
Estimated expenses to be incurred through liquidation............. 2,503
-------
Net adjustments to reflect liquidation basis accounting.............. $ 4,906
-------
Net assets in liquidation as of June 30, 2002........................ $ 3,850
=======
Changes in estimated liquidation values
Other assets...................................................... $ --
Accrued and other liabilities..................................... --
-------
Net changes in estimated liquidation values.......................... $ --
=======
Net assets in liquidation as of September 30, 2002................... $ 3,850
=======
13
INTERESTS OF DIRECTORS AND OFFICERS IN THE PLAN OF DISSOLUTION
In considering the Board of Directors' recommendation to approve the Plan
of Dissolution, you should be aware that some of our directors and officers may
have interests that are different from or in addition to your interests as a
stockholder, including those set forth below. Other than as set forth below, it
is not currently anticipated that our liquidation will result in any material
benefit to any of our officers or to directors who participated in the vote to
adopt the Plan of Dissolution.
Kevin B. Kurtzman, our current Chief Executive officer, who also is a
member of our Board of Directors, will receive a salary of $9,875 per month
until December 31, 2002. We anticipate that Mr. Kurtzman will remain employed
following December 31, 20002 at a salary level to be determined by our Board of
Directors to assist the Company in the winding up of its affairs.
Keith D. Thatcher, our Chief Financial Officer is a party to an agreement
with us providing for a salary of $13,854.17 per month and the payment of a
severance amount of $42,000 in the event of a change of control or the
liquidation, dissolution or winding up of our business.
Timothy D. Webb, our immediate past Chief Executive Officer, and Wayne E.
Mock, our former Vice President and Chief Technology Officer, have been engaged
to negotiate the sale of the Company's Marquee software suite and related
assets. Upon the consummation of any sale of these assets, Mr. Webb and Mr. Mock
will receive 70% and 30%, respectively, of an aggregate commission equal to 25%
of any transaction value between $300,000 and $1.0 million; 35% of any
transaction value greater than $1.0 million and up to $1.5 million; and 50% of
any transaction value greater than $1.5 million.
Our Board of Directors may confer other benefits or bonuses to our
employees and our officers, including officers who are also directors, in
recognition of their services to us based on the performance of such employees
and officers, including performance during our liquidation process.
All of our current executive officers and directors hold shares of common
stock or options to acquire shares of common stock. The table below sets forth
information relating to stock options and warrants to acquire common stock held
by each of our officers and directors as of November 20, 2002 for which the
exercise price is less than the maximum anticipated liquidation distribution of
$0.50 per share. See "Proposal to Approve the Plan of Dissolution - Liquidating
Distributions; Nature; Amount; Timing." The estimated value of the stock options
is based on the difference between the exercise price of $0.36 and the maximum
anticipated liquidation distribution of $0.50 per share. The estimated value of
the warrants is based on the difference between the exercise price of $0.04 and
the maximum anticipated liquidation distribution of $0.50 per share.
Number of Underlying
Shares of Common Stock
---------------------- Estimated
Officers and Directors Options Warrants Value
---------------------- ------- -------- -----
Wade E. Saadi.................. 4,000 14,705 $7,324.30
Edward C. Ateyeh, Jr........... 4,000 14,704 $7,323.84
W. Frank King, Ph.D............ 4,000 $560.00
Michael J. Maples.............. 4,000 $560.00
Kevin B. Kurtzman.............. 4,000 $560.00
14
PROPOSAL TO APPROVE THE PLAN OF DISSOLUTION
GENERAL OVERVIEW
Our Board of Directors adopted resolutions on November 15, 2002, which
authorized, subject to stockholder approval, the orderly liquidation of our
assets pursuant to the Plan of Dissolution. The Plan of Dissolution provides
that, if the requisite approval of our stockholders is received, our officers
and directors will undertake our complete liquidation and dissolution. After the
date the Plan of Dissolution is adopted by our stockholders, we will not engage
in any business activities, except for the purpose of preserving the value of
our assets, prosecuting and defending lawsuits by or against us, adjusting and
winding up our business and affairs, selling and liquidating our properties and
assets, including our intellectual property and other intangible assets, paying
our creditors, terminating commercial agreements and relationships and preparing
to make distributions to stockholders, in each case in accordance with the Plan
of Dissolution. If the Plan of Dissolution is approved by our stockholders, we
will file a certificate of dissolution with the Secretary of State of the State
of Delaware promptly after the Special Meeting.
Our Board of Directors may, at any time, in addition to or in substitution
for Messrs. Webb and Mock, retain a third party to complete the liquidation of
our remaining assets and distribute proceeds from the sale of assets to our
stockholders pursuant to the Plan of Dissolution. This third-party management
may involve a liquidating trust, which, if created, would succeed to all of our
assets, liabilities and obligations. Our Board of Directors may appoint one or
more of our directors or officers or a third party to act as trustee or trustees
of such liquidating trust. If, however, all of our assets are not distributed
within three years after the date our certificate of dissolution is filed with
the State of Delaware, we will transfer our remaining assets to a liquidating
trust if we have not already done so. Your authorization and approval of the
Plan of Dissolution will also constitute your approval of any appointment and
compensation of such trustees.
Certain material features of the Plan of Dissolution are summarized below.
This summary is qualified by reference to the complete text of the Plan of
Dissolution and the relevant portions of the Delaware General Corporation Law. A
complete copy of the Plan of Dissolution is attached to this proxy statement as
Exhibit A.
STOCKHOLDERS SHOULD CAREFULLY READ THE PLAN OF DISSOLUTION IN ITS ENTIRETY.
COMPANY BACKGROUND
For more than a decade, we provided software development services to
customers that were innovators, early technology adopters and market leaders.
Prior to the incorporation of the Company in 1996, we conducted our business and
operations as the software division of Pencom Systems Incorporated. Pencom
determined that its software division would be better able to meet the
mission-critical needs of its clients by defining its own priorities as an
independent entity and, in October 1996, Pencom contributed the assets and
associated liabilities of its software division to the Company. We completed the
initial public offering of our common stock on June 5, 1997.
In 1999, we undertook a change in our business focus from software
development services to strategic consulting for the definition, design,
development and deployment of e-business services. Our management team executed
a strategy of providing high value-added e-business services emphasizing
relationships with leading technology providers aligned with our e-business
focus, including Vignette Corporation, Scientific-Atlanta and Mercury
Interactive.
As a result of this change in strategy and a robust U.S. economy, we
experienced significant revenue growth during the period from the beginning of
1999 through the second quarter of 2000. Our
15
revenue increased 25% to $57.3 million in 2000 from $45.8 million in 1999;
however, beginning in the third quarter of 2000, the market for e-business
services began to deteriorate and our revenue declined precipitously. In the
second half of 2000, we experienced a 17% decrease in revenue as compared to the
first half of 2000. Although we reported net income of $1.7 million for the
first half of 2000, we experienced a net loss of $5.6 million for the second
half of 2000, resulting in a net loss of $3.9 million for the year. We believe
that our revenue decrease was primarily attributable to reduced and deferred
spending by Internet-related technology businesses resulting from a
deteriorating business climate for technology companies, particularly those
focused on e-business.
Beginning in late 2000, our Board of Directors began an extensive analysis
of our business affairs and rapidly declining revenue, as well as our overall
financial condition. As a result of this analysis, we initiated cost reduction
measures in late 2000, including the closure of our Seattle office and a
workforce reduction and hiring freeze, which reduced our total headcount from
508 at the end of the third quarter of 2000 to 457 at the end of 2000.
Additionally, we narrowed our service offerings around strategy, enterprise
portals, content chains and interactive television.
In 2001, our performance continued to be considerably and negatively
affected by a weakening U.S. economy and substantial decreases in capital
spending by our customers and potential customers. For the year 2001, our
revenue declined by 65% to $20.2 million from $57.3 million in 2000, resulting
in a net loss of $21.7 million. We continued to provide strategic consulting
skills with deep technology and integration expertise to our remaining
customers; however, we further narrowed our focus around interactive television.
During 2001, we also began development of our Marquee software suite to enable
on-demand interactive television applications and services, which we believed
would leverage our technical expertise and marketing alliances around
interactive television. As a result of continued analysis and extensive
discussion of our business affairs and financial condition by our Board of
Directors, we implemented additional cost reduction measures in 2001 to further
reduce our cost structure. These additional cost reduction measures included the
closure of our Boston, Chicago, Los Angeles, New York and San Francisco offices,
efforts to mitigate the expense of lease commitments associated with our unused
Austin office space, and dramatic reductions our headcount to 76 by the end of
2001.
During the first half of 2002, we devoted our efforts to the launch of the
Marquee software suite, including product development, marketing and sales.
These marketing and selling activities included extensive participation in trade
shows and the solicitation of potential customers. Marquee was first
demonstrated at the National Cable & Telecommunications Association's "Cable
2002" trade show in May 2002. This was followed by an expanded demonstration at
the Cable Television Administration and Marketing convention in July 2002. Our
sales team conducted following up meetings and technology review sessions with
many of the major North American cable operators. The focus of these discussions
was to initiate customer trials of Marquee during the second half of 2002.
Despite our efforts to develop and promote the Marquee software suite, we
continued to experience significant losses. For the six months ended June 30,
2002, we reported total revenue of $996,000 and a net loss of $2.4 million.
Our common stock was involuntarily delisted from the Nasdaq National
Market effective as of August 1, 2002 as a result of our failure to meet the
minimum required bid price and market value of public float, and our common
stock has traded on the OTC Bulletin Board since August 7, 2002.
REASONS FOR ADOPTING THE PLAN
Our Board of Directors has been kept informed continuously of our
business, affairs and financial condition and, beginning in late 2000, has
convened numerous special meetings in addition to regularly scheduled meetings
to consider means to address our deteriorating business and financial
performance and condition. Our Board of Directors was encouraged by the initial
positive market reaction to Marquee at the "Cable 2002" trade show and Cable
Television Administration and Marketing convention.
16
However, our potential customers remained pressured to reduce and defer expenses
in light of the deterioration of general economic conditions in the United
States. Our Board of Directors concluded that in order to continue to pursue
customer product trials, we would need to raise additional capital before the
end of 2002. Moreover, there was no assurance that Marquee would be successful
in product trials or generate significant revenue. Our Board of Directors and
senior management team engaged in extensive discussions and market research
regarding our ability to raise additional capital, and concluded that our
progress to date in marketing Marquee and the poor state of the capital markets
would not be sufficient to raise additional capital.
Beginning in mid-2001, our Board of Directors and senior management team
investigated various potential strategic alternatives and engaged in inquiries
regarding possible merger and asset sale transactions with potential business
partners in an effort to protect the interests of stockholders and enhance
stockholder value. These discussions included the marketing and sale of the
Marquee product and related assets. Throughout the period, our management
engaged in discussions with numerous companies regarding various strategic
transactions, including mergers, asset sales or strategic licensing
arrangements. Our Board of Directors received comparisons of the Company's net
asset value to the prices at which our common stock was trading at different
points in time and analyzed the results of management's investigation of various
acquisition, investment and strategic partnering opportunities. Few of those
discussions resulted in serious proposals for consideration by our Board of
Directors. Our management reviewed all credible potential transactions with the
Board of Directors at its periodic meetings and concluded that none of these
potential transactions was in the best interest of our stockholders.
In the summer of 2002, our Board of Directors determined that it would not
be advisable to continue to operate the Company on an independent basis
indefinitely given our limited cash resources and the unsatisfactory results of
our efforts to obtain customers for our Marquee software suite, and that,
considering these factors, a decision to continue the development and marketing
of Marquee might ultimately jeopardize the assets that otherwise may have been
available to stockholders in a liquidation. Additionally, our Board of Directors
recognized that it was reasonably unlikely that we would receive, within a
reasonable period of time under the circumstances, any viable offer to engage in
an attractive, alternative transaction.
After considering a variety of factors, including (i) the precipitous
decline in our revenue; (ii) the highly unlikely improvement of sales for the
foreseeable future; (iii) the deemed unlikely availability of reasonable
financing to raise the capital necessary to complete Marquee product trials;
(iv) indications that, despite significant cutbacks in our workforce,
significant operating losses would continue; (v) the likely inability to gain
rapid market acceptance for Marquee; (vi) prevailing negative economic
conditions both generally and within the software industry; (vii) our inability
to identify an acceptable buyer, strategic alliance partner or merger candidate;
and (viii) the significant risks associated with restructuring our business,
including the risk that positive operating income could not be reached prior to
insolvency, our Board of Directors concluded that the liquidation of the Company
was in the best interests of stockholders, and accordingly, on August 8, 2002
approved a resolution directing the cessation of the Company's operations and
the liquidation of the Company.
Following the August 8, 2002 meeting of the Board of Directors, we have
been engaged in the process of (i) soliciting potential buyers for Marquee and
other assets (such as furniture and equipment) and (ii) performing significant
diligence to determine our known and contingent liabilities. On November 15,
2002, our Board of Directors adopted the Plan of Dissolution. Pursuant to the
Plan of Dissolution, we intend to convert all of our remaining assets to cash
and to implement the Plan of Dissolution, whereby we would satisfy or settle all
of our remaining liabilities, establish appropriate reserves for any remaining
contingencies, pay the premiums on additional insurance to cover certain
contingencies and distribute our remaining cash, if any, to our stockholders.
17
THE PLAN OF DISSOLUTION
Dissolution Under the Delaware Law
Section 275 of the Delaware General Corporation Law provides that a
corporation may dissolve upon either (a) a majority vote of the Board of
Directors of the corporation followed by a majority vote of its stockholders; or
(b) a unanimous stockholder consent. Following such approval, the dissolution is
effected by filing a certificate of dissolution with the Secretary of State of
the State of Delaware. Once a corporation is dissolved, its existence is
automatically continued for a term of three years, but solely for the purpose of
winding up its business. The process of winding up includes:
o the prosecution and defense of lawsuits, if any;
o the settling and closing of any business;
o the disposition and conveyance of any property;
o the discharge of any liabilities; and
o the distribution of any remaining assets to the stockholders of the
corporation.
If any action, suit or proceeding is commenced by or against the corporation
before or within the winding up period, the corporation will, solely for the
purpose of such action, suit or proceeding, automatically continue to exist
beyond the three-year period until any judgments, orders or decrees are fully
executed.
Description of the Dissolution Process
The following is a brief summary of the Plan of Dissolution. It is
qualified in its entirety by reference to the full text of the Plan of
Dissolution attached hereto as Exhibit A and incorporated herein by reference.
You should read the Plan of Dissolution carefully.
We will distribute pro-rata to our stockholders, in cash or in-kind, or
sell or otherwise dispose of, all of our property and assets. As of November 20,
2002, we have sold, or contracted for the sale of, the majority of our non-cash
assets other than our Concero Marquee Software Suite, and we are currently in
negotiations for the sale of our Concero Marquee Software Suite and the
remainder of our non-cash assets. We have sold a non-material amount of our
assets to certain of our affiliates; however, the aggregate value of these
assets is less than $2,000. The terms of each of these sales have been
substantially similar to the terms of our sales of similar assets to independent
third parties. We do not intend to sell any material amount of our assets to
any of our affiliates or related parties of our affiliates in connection with
our liquidation. Agreements for the sale of assets may be entered into prior to
the Special Meeting and, if entered into, may be contingent on the approval of
the Plan of Dissolution at the Special Meeting. The sale of our assets will be
concluded prior to the third anniversary of the filing of the certificate of
dissolution with the Delaware Secretary of State by a final liquidating
distribution either directly to the stockholders or to one or more liquidating
trusts. Any sales of our assets have been and will be made in private or public
transactions and on such terms as are approved by our Board of Directors. It is
not anticipated that any further votes of our stockholders will be solicited
with respect to the approval of the specific terms of any particular sales of
assets approved by our Board of Directors. See "Sales of Our Assets" below.
Subject to the payment or the provision for payment of our indebtedness
and other obligations, our cash on hand, together with the cash proceeds of any
sales of our other assets, will be distributed from time to time pro-rata to the
holders of common stock. We intend to establish a reasonable contingency reserve
in an amount determined by our Board of Directors to be sufficient to satisfy
our liabilities,
18
expenses and obligations not otherwise paid, provided for or discharged. The net
balance, if any, of any such contingency reserve remaining after payment,
provision or discharge of all such liabilities, expenses and obligations will
also be distributed to our stockholders pro-rata. No assurances can be given
that available cash and amounts received from the sale of assets will be
adequate to provide for our obligations, liabilities, expenses and claims and to
make cash distributions to stockholders. See "Liquidating Distributions; Nature;
Amount; Timing" and "Contingent Liabilities; Contingency Reserve; Liquidating
Trust" below.
If deemed necessary by our Board of Directors for any reason, we may, from
time to time, transfer any of our unsold assets to one or more trusts
established for the benefit of our stockholders, which assets would thereafter
be sold or distributed on terms approved by each trust's trustees. If all of our
assets (other than the contingency reserve) are not sold or distributed prior to
the third anniversary of the effectiveness of our dissolution, we will transfer
in final distribution such remaining assets to a trust. The Board of Directors
may also elect in its discretion to transfer the contingency reserve, if any, to
such a trust. Any of such trusts are referred to in this proxy statement as
"liquidating trusts." Notwithstanding the foregoing, to the extent that a
distribution or transfer of any asset cannot be effected without the consent of
a governmental authority, no such distribution or transfer shall be effected
without such consent. In the event of a transfer of assets to a liquidating
trust, we would distribute, pro-rata to the holders of our capital stock,
beneficial interests in any such liquidating trust or trusts. It is anticipated
that the interests in any such trusts will not be transferable; therefore,
although the recipients of the interests would be treated for tax purposes as
having received their pro-rata share of property transferred to the liquidating
trust or trusts and will thereafter take into account for tax purposes their
allocable portion of any income, gain or loss realized by such liquidating trust
or trusts, the recipients of the interests will not receive the value thereof
unless and until such liquidating trust or trusts distributes cash or other
assets to them. The Plan of Dissolution authorizes our Board of Directors to
appoint one or more individuals or entities to act as trustee or trustees of the
liquidating trust or trusts and to cause us to enter into a liquidating trust
agreement or agreements with such trustee or trustees on such terms and
conditions as may be approved by our Board of Directors. Approval and
authorization of the Plan of Dissolution also will constitute the approval by
our stockholders of any such appointment and any liquidating trust agreement or
agreements. For further information relating to liquidating trusts, the
appointment of trustees and the liquidating trust agreements, reference is made
to "Contingent Liabilities; Contingent Reserve; Liquidating Trust."
We intend to close our stock transfer books and discontinue recording
transfers of shares of common stock on the earliest to occur of (i) the close of
business on the record date fixed by the Board of Directors for the final
liquidating distribution, (ii) the close of business on the date on which our
remaining assets are transferred to a liquidating trust, or (iii) the Final
Record Date, the date fixed by the Board of Directors for filing the certificate
of dissolution, and, thereafter, certificates representing shares of common
stock will not be assignable or transferable on our books except by will,
intestate succession or operation of law. After the Final Record Date, we will
not issue any new stock certificates, other than replacement certificates. Any
person holding options, warrants or other rights to purchase common stock must
exercise such instruments or rights prior to the Final Record Date. See "Listing
and Trading of the Common Stock and Interests in the Liquidating Trust or
Trusts" and "Final Record Date" below.
Conduct Following the Dissolution
Once the Certificate of Dissolution is filed and effective, we will
continue to exist, but only for the purpose of winding up our affairs, and we
will undertake to (a) convert to cash, by sales, as much of our remaining
non-cash assets as possible, (b) withdraw from any jurisdiction in which we are
qualified to do business, (c) pay or make provision for the payment of all of
our expenses and liabilities, (d) continue to indemnify our directors and
officers as required by our Certificate of Incorporation and Bylaws, and in
connection therewith continue to pay the premiums on director and officer
liability insurance, (e) create reserves for contingencies, (f) prosecute,
defend and settle lawsuits, if any, (g) distribute our remaining
19
assets, if any, to stockholders, and (h) do any other act necessary to wind up
and liquidate our business and affairs. Our Board of Directors and officers will
oversee our dissolution and liquidation.
Right to Modify, Amend or Terminate the Plan of Dissolution
By approving the Plan of Dissolution, stockholders will be granting our
Board of Directors the authority to modify, amend or terminate the Plan of
Dissolution. The Board may modify or amend the Plan at any time without
stockholder approval, if it determines that such action would be in the best
interests of the Company and its stockholders. If any amendment or modification
appears necessary, and in the judgment of the Board of Directors would
materially and adversely affect the interest of stockholders, the Board of
Directors is required to submit such amendment or modification to stockholders
for approval. The Board of Directors may terminate the Plan of Dissolution
without stockholder approval at any time, if it determines that termination
would be in the best interest of the company and its stockholders.
Liquidating Distributions; Nature; Amount; Timing
Although our Board of Directors has not established a firm timetable for
distributions to our stockholders if the Plan of Dissolution is authorized and
approved by the stockholders, our Board of Directors intends, subject to
contingencies inherent in winding up our business, to make such distributions as
promptly as practicable. The liquidation is expected to be concluded prior to
the third anniversary of the filing of the certificate of dissolution in
Delaware by a final liquidating distribution either directly to the stockholders
or to a liquidating trust. The proportionate interests of all of our
stockholders shall be fixed on the basis of their respective stock holdings at
the close of business on the Final Record Date, and after that date, any
distributions made by us shall be made solely to stockholders of record on the
close of business on the Final Record Date, except for permitted transfers. The
actual nature, amount and timing of all distributions will be determined by our
Board of Directors, in its sole discretion, and will depend in part upon our
ability to convert our remaining assets into cash and pay and settle our
remaining liabilities and obligations.
We are currently unable to predict the precise nature, amount or timing of
any distributions pursuant to the Plan of Dissolution, due in part to our
inability to predict the net value of our non-cash assets and the ultimate
amount of our liabilities, many of which have not been settled. Additionally,
there are substantial uncertainties in carrying out the orderly wind down of
operations and the estimated costs associated with the wind down may materially
differ from our estimates, and the Company may be liable for claims that have
not been asserted and of which we are not aware.
In the section of this proxy statement entitled "Selected Financial
Data-Liquidation Basis," we have estimated that our net assets in liquidation as
of September 30, 2002 were $3,850,000, or $0.37 per share. Under the liquidation
basis of accounting, we have stated assets at their net realizable values,
contractual liabilities at contractual amounts, and estimated costs through the
liquidation date are recorded to the extent they are reasonably determinable.
The liquidation basis of accounting requires many estimates and assumptions, and
there are substantial uncertainties in carrying out the orderly wind down of
operations. The actual values and costs are expected to differ from the amounts
indicated in our estimate and could be higher or lower than the amounts
recorded. For example, our estimate of net assets in liquidation assumes that
the liability associated with our current lease obligations will be the full
contractual amounts, and the estimate also contains assumptions regarding
potential dissolution costs related to items such as continuing insurance
coverage. In the event that we are able to successfully market our leased office
space and certain of our assumptions regarding dissolution costs prove to be too
high, the proceeds to our stockholders could be greater than $0.37 per share.
Conversely, our estimate of net assets in liquidation does not include accrued
expenses for claims, asserted or unasserted, which we have determined are
unlikely to occur or are without merit, or for which we have determined that it
is unlikely we will incur a material liability. These potential claims include
items such as claims that may
20
be asserted by our former vendors and the insurance retention amounts payable in
connection with any securities related claim. In the event that a number of such
claims are asserted, and are ultimately successful, the proceeds to our
stockholders could be less than $0.37 per share. Based upon information
presently available to us, we anticipate that the proceeds stockholders could
receive over time are between approximately $0.30 and $0.50 per share.
We do not plan to satisfy all of our liabilities and obligations prior to
making distributions to stockholders, but instead will reserve assets deemed by
management and our Board of Directors to be adequate to provide for these
liabilities and obligations. See "Contingent Liabilities; Contingency Reserve;
Liquidating Trust," below.
Uncertainties as to the precise net value of our non-cash assets and the
ultimate amount of our liabilities make it impracticable to predict the
aggregate net value ultimately distributable to stockholders. Claims,
liabilities and expenses from operations (including operating costs, salaries,
income taxes, payroll and local taxes, legal and accounting fees and
miscellaneous office expenses), although currently declining, will continue to
be incurred following stockholder authorization and approval of the Plan of
Dissolution. These expenses will reduce the amount of assets available for
ultimate distribution to stockholders, and, while we do not believe that a
precise estimate of those expenses can currently be made, management and our
Board of Directors believe that available cash and amounts received on the sale
of assets will be adequate to provide for our obligations, liabilities, expenses
and claims (including contingent liabilities) and to make cash distributions to
stockholders. However, no assurances can be given that available cash and
amounts received on the sale of assets will be adequate to provide for our
obligations, liabilities, expenses and claims and to make cash distributions to
stockholders. If available cash and amounts received on the sale of assets are
not adequate to provide for our obligations, liabilities, expenses and claims,
distributions of cash and other assets to our stockholders will be
proportionately reduced.
Sales of Our Assets
The Plan of Dissolution gives our Board of Directors the authority to sell
all of our assets. As of November 20, 2002, we have sold, or contracted for the
sale of, the majority of our non-cash assets other than our Concero Marquee
Software Suite, and we are currently in negotiations for the sale of our Concero
Marquee Software Suite and the remainder of our non-cash assets. We have sold a
non-material amount of our assets to certain of our affiliates; however, the
aggregate value of these assets is less than $2,000. The terms of each of these
sales have been substantially similar to the terms of our sales of similar
assets to independent third parties. We do not intend to sell any of our assets
to any of our affiliates or related parties of our affiliates in connection with
our liquidation. Agreements for the sale of assets may be entered into prior to
the Special Meeting and, if entered into, may be contingent on approval of the
Plan of Dissolution at the Special Meeting. Authorization and approval of the
Plan of Dissolution will constitute approval of any such agreements and sales.
Sales of our assets will be made on such terms as are approved by our Board of
Directors and may be conducted by either competitive bidding, public sales or
privately negotiated sales. We do not anticipate that any further stockholder
votes will be solicited with respect to the approval of the specific terms of
any particular sales of assets approved by our Board of Directors. We do not
anticipate amending or supplementing this proxy statement to reflect any such
agreement or sale, unless required by applicable law. The prices at which we
will be able to sell our various assets depends largely on factors beyond our
control, including, without limitation, the condition of financial markets, the
availability of financing to prospective purchasers of the assets, United States
and foreign regulatory approvals, public market perceptions, and limitations on
transferability of individual assets. In addition, we may not obtain as high a
price for a particular asset as we might secure if we were not in liquidation.
21
Continuing Insurance
Following stockholder approval of the Plan of Dissolution, we will
continue to indemnify our officers, directors, employees and agents for their
lawful actions in accordance with our certificate of incorporation and bylaws,
including for lawful actions taken in connection with the Plan of Dissolution
and the wind-down of our business and affairs. We have maintained, and intend to
continue to maintain, director and officer liability insurance for the benefit
of such persons. As part of our wind-down, we intend to prepay the premium to
continue to maintain such insurance for claims made following the filing of our
certificate of dissolution. Since our insurance policy may, depending upon the
circumstances, require us to pay the initial amount of any liability incurred
and then to pay the further costs of defending a claim, subject to reimbursement
from the insurance carrier, we intend to establish a contingency reserve to
cover such possible contingency.
Reporting Requirements
Whether or not the Plan of Dissolution is authorized and approved, we have
an obligation to continue to comply with the applicable reporting requirements
of the Securities Exchange Act of 1934, even though compliance with such
reporting requirements is economically burdensome. In order to curtail expenses,
we will seek relief from the SEC from these reporting requirements. However,
other companies in our situation have sought relief from the SEC with respect to
the reporting requirements and such relief has been denied. We anticipate that,
if such relief is granted, we would continue to file current reports on Form 8-K
to disclose material events relating to our liquidation and dissolution along
with any other reports that the SEC might require.
Contingent Liabilities; Contingency Reserve; Liquidating Trust
Under Delaware law, we are required, in connection with our dissolution,
to pay or provide for payment of all of our liabilities and obligations.
Following the authorization and approval of the Plan of Dissolution by our
stockholders, we will pay all expenses and fixed and other known liabilities, or
set aside as a contingency reserve cash and other assets which we believe to be
sufficient, based on factors known to us, to satisfy such liabilities and other
claims that might arise. We are currently unable to estimate with precision the
amount of any contingency reserve which may be required, but that amount (in
addition to any cash contributed to a liquidating trust, if one is utilized)
will be deducted before the determination of amounts available for distribution
to stockholders.
We may incur additional liabilities arising out of contingent claims, such
as the claims described below, that are not yet reflected on our balance sheet.
We are unable at this time to predict what amount, if any, may be paid on these
contingent claims.
The actual amount of the contingency reserve will be based upon estimates
and opinions of management and our Board of Directors and derived from
consultations with outside experts and review of our estimated operating
expenses and future estimated liabilities, including, without limitation,
anticipated compensation payments, estimated legal and accounting fees,
operating lease expenses, payroll and other taxes payable, miscellaneous office
expenses, expenses accrued in our financial statements, and reserves for
litigation expenses. There can be no assurance that the contingency reserve in
fact will be sufficient. We have not made any specific provision for an increase
in the amount of the contingency reserve. Subsequent to the establishment of the
contingency reserve, we will distribute to our stockholders any portions of the
contingency reserve which are deemed no longer to be required. After the
liabilities, expenses and obligations for which the contingency reserve had been
established have been satisfied in full, we will distribute to our stockholders
any remaining portion of the contingency reserve.
22
If deemed necessary, appropriate or desirable by our Board of Directors
for any reason, we may, from time to time, transfer any of our unsold assets to
one or more liquidating trusts, or other structure it deems appropriate,
established for the benefit of our stockholders, which property would thereafter
be sold or distributed on terms approved by each trust's trustees. Our Board of
Directors and management may determine to transfer assets to a liquidating trust
in circumstances where the nature of an asset is not susceptible to distribution
(for example, interests in intangibles) or where our Board of Directors
determines that it would not be in the best interests of our business and our
stockholders for such assets to be distributed directly to the stockholders at
that time. If all of our assets (other then the contingency reserve) are not
sold or distributed prior to the third anniversary of the effectiveness of our
dissolution, we must transfer in final distribution those remaining assets to a
liquidating trust. Our Board of Directors may also elect in its discretion to
transfer the contingency reserve, if any, to such a liquidating trust. The
purpose of a liquidating trust would be to distribute such property or to sell
such property on terms satisfactory to the liquidating trustees, and distribute
the proceeds of such sale after paying our liabilities, if any, assumed by the
trust, to our stockholders. Any liquidating trust acquiring all of our unsold
assets will assume all of our liabilities and obligations and will be obligated
to pay any of our expenses and liabilities that remain unsatisfied. If the
contingency reserve transferred to the liquidating trust is exhausted, such
expenses and liabilities will be satisfied out of the liquidating trust's other
unsold assets.
The Plan of Dissolution authorizes our Board of Directors to appoint one
or more individuals or entities to act as trustee or trustees of the liquidating
trust or trusts and to cause us to enter into a liquidating trust agreement or
agreements with such trustee or trustees on such terms and conditions as may be
approved by our Board of Directors. It is anticipated that our Board of
Directors will select such trustee or trustees on the basis of the experience of
such individual or entity in administering and disposing of assets and
discharging liabilities of the kind to be held by the liquidating trust or
trusts and the ability of such individual or entity to serve the best interests
of our stockholders. Approval of the Plan of Dissolution by our stockholders
will also constitute the approval by our stockholders of any such appointment
and any liquidating trust agreement or agreements.
We may decide to use a liquidating trust or trusts, and our Board of
Directors believes the flexibility provided by the Plan of Dissolution with
respect to the liquidating trusts to be advisable. The trust would be evidenced
by a trust agreement between the trustees and us. The purpose of the trust would
be to serve as a temporary repository for the trust property prior to its
disposition or distribution to our stockholders. The transfer to the trust and
distribution of interests therein to our stockholders would enable us to divest
the trust property and permit our stockholders to enjoy the economic benefits of
ownership thereof. Pursuant to the trust agreement, the trust property would be
transferred to the trustees immediately prior to the distribution of interests
in the trust to our stockholders, to be held in trust for the benefit of the
stockholder beneficiaries subject to the terms of the trust agreement. It is
anticipated that the interests would be evidenced only by the records of the
trust and there would be no certificates or other tangible evidence of such
interests and that no holder of common stock would be required to pay any cash
or other consideration for the interests to be received in the distribution or
to surrender or exchange shares of common stock in order to receive the
interests. It is further anticipated that pursuant to the trust agreements (i) a
majority of the trustees would be required to be independent of our management;
(ii) approval of a majority of the trustees would be required to take any
action; and (iii) the trust would be irrevocable and would terminate after the
earliest to occur of (x) the trust property having been fully distributed, or
(y) a majority in interest of the beneficiaries of the trust, or a majority of
the trustees, having approved of such termination, or (z) a specified number of
years having elapsed after the creation of the trust.
Under Delaware law, in the event we fail to create an adequate contingency
reserve for payment of our expenses and liabilities, or should such contingency
reserve and the assets held by the liquidating trust or trusts be exceeded by
the amount ultimately found payable in respect of expenses and liabilities, each
stockholder could be held liable for the payment to creditors of such
stockholder's pro-rata share of
23
such excess, limited to the amounts theretofore received by such stockholder
from us and from the liquidating trust or trusts.
If we were held by a court to have failed to make adequate provision for
our expenses and liabilities or if the amount ultimately required to be paid in
respect of such liabilities exceeded the amount available from the contingency
reserve and the assets of the liquidating trust or trusts, a creditor of ours
could seek an injunction against the making of distributions under the Plan of
Dissolution on the ground that the amounts to be distributed were needed to
provide for the payment of our expenses and liabilities. Any such action could
delay or substantially diminish the cash distributions to be made to
stockholders and/or interest holders under the Plan of Dissolution.
Final Record Date
We intend to close our stock transfer books and discontinue recording
transfers of shares of common stock on the earliest to occur of (i) the close of
business on the record date fixed by the Board of Directors for the final
liquidating distribution, (ii) the close of business on the date on which our
remaining assets are transferred to a liquidating trust, or (iii) the Final
Record Date, the date fixed by the Board of Directors for filing the certificate
of dissolution, and thereafter certificates representing shares of common stock
will not be assignable or transferable on our books except by will, intestate
succession or operation of law. After the Final Record Date, we will not issue
any new stock certificates, other than new stock certificates for option holders
who exercise their options after the Final Record Date and replacement
certificates. We anticipate that no further trading of our shares will occur on
or after the Final Record Date. See "Listing and Trading of Common Stock and
Interests in the Liquidating Trust or Trusts" below. All liquidating
distributions from us or a liquidating trust on or after the Final Record Date
will be made to stockholders according to their holdings of capital stock as of
the Final Record Date. Subsequent to the Final Record Date, we may at our
election require stockholders to surrender certificates representing their
shares of the capital stock in order to receive subsequent distributions.
Stockholders should not forward their stock certificates before receiving
instructions to do so. If surrender of stock certificates should be required,
all distributions otherwise payable by us or the liquidating trust, if any, to
stockholders who have not surrendered their stock certificates may be held in
trust for those stockholders, without interest, until the surrender of their
certificates (subject to escheat pursuant to the laws relating to unclaimed
property). If a stockholder's certificate evidencing capital stock has been
lost, stolen or destroyed, the stockholder may be required to furnish us with
satisfactory evidence of the loss, theft or destruction thereof, together with a
surety bond or other indemnity, as a condition to the receipt of any
distribution.
Trading of Common Stock and Interests in any Liquidating Trust or Trusts
We currently intend to close our stock transfer books on the Final Record
Date and to cease recording stock transfers and issuing stock certificates
(other than replacement certificates) at that time. Accordingly, we expect that
trading in our shares will cease on and after that date.
In any event, we will close our stock transfer books upon the filing of
the certificate of dissolution. Thereafter, the stockholders will not be able to
transfer their shares. We anticipate that the interests in a liquidating trust
or trusts will not be transferable, although no determination has yet been made.
This determination will be made by our Board of Directors and management prior
to the transfer of unsold assets to the liquidating trust and will be based on,
among other things, our Board of Directors', and management's estimate of the
value of the assets being transferred to the liquidating trust or trusts, tax
consequences and the impact of compliance with applicable securities laws.
Interests in the liquidating trust or trusts may be required to comply with the
periodic reporting and proxy requirements of the Securities Exchange Act of
1934. The costs of compliance with such requirements would reduce the amount
which otherwise could be distributed to interest holders. Even if transferable,
the interests are not expected to be listed on a national securities exchange or
quoted through Nasdaq, and the extent of
24
any trading market therein cannot be predicted. Moreover, the interests may not
be accepted by commercial lenders as security for loans as readily as more
conventional securities with established trading markets.
As stockholders will be deemed to have received a liquidating distribution
equal to their pro-rata share of the value of the net assets distributed to an
entity which is treated as a liquidating trust for tax purposes (see "Certain
Federal Income Tax Consequences"), the distribution of non-transferable
interests could result in tax liability to the interest holders without their
being readily able to realize the value of such interests to pay such taxes or
otherwise.
Absence of Appraisal Rights
Under Delaware law, our stockholders are not entitled to appraisal rights
for their shares of common stock in connection with the transactions
contemplated by the Plan of Dissolution.
Regulatory Approvals
Except for filing the Certificate of Dissolution with the Secretary of
State of Delaware and compliance with Delaware General Corporation law, the
rules and regulations of the Securities and Exchange Commission and the United
States Internal Revenue Code, no United States federal or state regulatory
requirements must be complied with or approvals obtained in connection with the
liquidation.
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material United
States federal income tax consequences affecting the Company's stockholders that
are anticipated to result from the dissolution and liquidation of the Company.
This discussion is limited to those stockholders who hold their Company stock as
a capital asset and does not purport to be a complete analysis of all the
potential tax effects. Moreover, the discussion does not address the tax
consequences that may be relevant to particular categories of stockholders
subject to special treatment under certain federal income tax laws (such as
dealers in securities, banks, insurance companies, tax-exempt organizations,
retirement plans, mutual funds, foreign individuals and entities, persons
subject to alternative minimum tax, persons who hold their Company stock through
partnerships or other pass-through entities, persons who hold their Company
stock as part of a straddle, a hedge against currency risk, or as part of a
constructive sale or conversion transaction, and persons who acquired their
Company stock upon exercise of stock options or in other compensatory
transactions). It also does not specifically address any tax consequences
arising under the laws of any state, local or foreign jurisdiction. The
discussion is based upon the Internal Revenue Code of 1986, as amended, Treasury
Regulations, Internal Revenue Service ("IRS") rulings, and judicial decisions
now in effect, all of which are subject to change at any time; any such changes
may be applied retroactively. Distributions pursuant to the Plan of Dissolution
may occur at various times and in more than one tax year. No assurance can be
given that the tax treatment described herein will remain unchanged at the time
of such distributions.
The following discussion has no binding effect on the IRS or the courts
and assumes that the Company will liquidate in accordance with the Plan of
Dissolution in all material respects. No ruling has been requested from the IRS
with respect to the anticipated tax treatment of the Plan of Dissolution, and
the Company will not seek an opinion of counsel with respect to the anticipated
tax treatment. If any of the anticipated tax consequences described herein
proves to be incorrect, the result could be increased taxation at the corporate
and/or stockholder level, thus reducing the benefit to the stockholders and the
Company from the liquidation. Tax considerations applicable to particular
stockholders may vary with and be contingent on the stockholder's individual
circumstances. This discussion does not constitute legal advice to any
stockholder.
25
Federal Income Taxation of the Company
After the approval of the Plan of Dissolution and until the liquidation is
completed, the Company will continue to be subject to federal income tax on its
taxable income, if any. The Company will recognize gain or loss on sales of its
assets pursuant to the Plan of Dissolution. Upon the distribution of any
property, other than cash, to stockholders pursuant to the Plan of Dissolution,
the Company will recognize gain or loss as if such property were sold to the
stockholders at its fair market value, unless certain exceptions to the
recognition of loss apply. Any losses and net operating loss carry-forwards that
the Company has may be available to offset any gains recognized on sales or
distributions of Company assets.
Federal Income Taxation of the Stockholders
As a result of the liquidation of the Company, for federal income tax
purposes stockholders will recognize gain or loss equal to the difference
between (i) the sum of the amount of cash distributed to them and the fair
market value (at the time of distribution) of any property distributed to them,
and (ii) their tax basis in their shares of the Company's capital stock. A
stockholder's tax basis in his or her shares will depend upon various factors,
including the stockholder's cost and the amount and nature of any distributions
received with respect thereto.
A stockholder's gain or loss will be computed on a "per share" basis. The
Company expects to make more than one liquidating distribution, each of which
will be allocated proportionately to each share of stock owned by a stockholder.
The value of each liquidating distribution will be applied against and reduce a
stockholder's tax basis in his or her shares of stock. Gain will be recognized
as a result of a liquidating distribution to the extent that the aggregate value
of the distribution and prior liquidating distributions received by a
stockholder with respect to a share exceeds his or her tax basis in that share.
Any loss will generally be recognized only when the final distribution from the
Company has been received and then only if the aggregate value of all
liquidating distributions with respect to a share is less than the stockholder's
tax basis for that share. Gain or loss recognized by a stockholder will be
capital gain or loss provided the shares are held as capital assets, and will be
long-term capital gain or loss if the stock has been held for more than one
year. If it were to be determined that distributions made pursuant to the Plan
of Dissolution were not liquidating distributions, the result could be treatment
of distributions as dividends taxable at ordinary income rates if the Company
were to have any earnings and profits for federal income tax purposes,
determined either on an historic or a current year basis, for the year of
distribution.
Upon any distribution of property, the stockholder's tax basis in such
property immediately after the distribution would be the fair market value of
such property at the time of distribution. The gain or loss realized upon the
stockholder's future sale of that property will be measured by the difference
between the stockholder's tax basis in the property at the time of such sale and
the proceeds of such sale.
After the close of each taxable year, the Company will provide
stockholders and the IRS with a statement of the amount of cash distributed to
the stockholders and its best estimate as to the value of any property
distributed to them during that year. There is no assurance that the IRS will
not challenge any such valuation. As a result of such a challenge, the amount of
gain or loss recognized by stockholders might be changed. Distributions of
property other than cash to stockholders could result in tax liability to any
given stockholder exceeding the amount of cash received, requiring the
stockholder to meet the tax obligations from other sources or by selling all or
a portion of the assets received.
It is possible that the Company will have liabilities not fully covered by
its contingency reserve for which the stockholders will be liable up to the
extent of any liquidating distributions they have received. See "Contingent
Liabilities; Contingency Reserve; Liquidating Trust." Such a liability could
require a stockholder to satisfy a portion of such liability out of prior
liquidating distributions received
26
from the Company and any liquidating trust or trusts. Payments by stockholders
in satisfaction of such liabilities would commonly produce a capital loss, the
deductibility of which is limited and which, in the hands of individual
stockholders, could not be carried back to prior years to offset capital gains
realized from liquidating distributions in those years.
Liquidating Trusts
If the Company transfers assets to a liquidating trust or trusts, the
Company intends to structure such trust or trusts so that stockholders will be
treated for tax purposes as having received their pro-rata share of the property
transferred to the liquidating trust or trusts, reduced by the amount of known
liabilities assumed by the liquidating trust or trusts or to which the property
transferred is subject.
Assuming such treatment is achieved, assets transferred to a liquidating trust
will cause the stockholder to be treated in the same manner for federal income
tax purposes as if the stockholder had received a distribution directly from the
Company. The liquidating trust or trusts themselves should not be subject to
federal income tax, assuming that they are treated as liquidating trusts for
federal income tax purposes. After formation of any liquidating trust or trusts,
stockholders must take into account for federal income tax purposes their
allocable portion of any income, gain or loss recognized by the liquidating
trust or trusts. As a result of the transfer of property to any liquidating
trust or trusts and the ongoing operations of the liquidating trust or trusts,
stockholders should be aware that they may be subject to tax, whether or not
they have received any actual distributions from the liquidating trust or trusts
with which to pay such tax. There can be no assurance that the liquidating trust
or trusts described in the Plan of Dissolution will be treated as a liquidating
trust or trusts for federal income tax purposes.
State and Local Tax
The Company may be subject to liability for state or local taxes with
respect to the sale of its assets. Stockholders may also be subject to state or
local taxes, including with respect to liquidating distributions received by
them or paid to a liquidating trust on their behalf, and with respect to any
income derived by a liquidating trust. Stockholders should consult their tax
advisors with respect to the state and local tax consequences of the Plan of
Dissolution.
Backup Withholding
Unless a stockholder complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the United
States Internal Revenue Code and Treasury Regulations promulgated thereunder,
such stockholder may be subject to backup withholding tax at a rate of up to 30%
with respect to any distributions received pursuant to the liquidation. Backup
withholding generally will not apply to distributions made to certain exempt
recipients such as a corporation or financial institution or to a stockholder
who furnishes a correct taxpayer identification number or provides a certificate
of foreign status and provides certain other required information. If backup
withholding applies, the amount withheld is not an additional tax, but is
credited against that stockholder's U.S. federal income tax liability.
THE FOREGOING SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
IS INCLUDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO
ANY STOCKHOLDER. THE TAX CONSEQUENCES OF THE PLAN OF DISSOLUTION MAY VARY
DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF THE STOCKHOLDER. THE COMPANY
RECOMMENDS THAT EACH STOCKHOLDER CONSULT ITS OWN TAX ADVISOR REGARDING THE
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN OF DISSOLUTION AS WELL AS THE STATE,
LOCAL, AND FOREIGN TAX CONSEQUENCES.
27
ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange
Act of 1934, and we file reports, proxy statements and other information with
the SEC. You may read and copy any materials we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room. Our public filings are also available to the public from commercial
document retrieval services and at the Internet web site maintained by the SEC
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this document. This
means that we can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this document, except for any information
superseded by information in this document. This document incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about us and our finances.
1. Concero's Annual Report on Form 10-K for the fiscal year ended December
31, 2001;
2. Concero's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, June 30 and September 30, 2002; and
3. Concero's Current Reports on Form 8-K filed August 6 and August 14,
2002.
We are also incorporating by reference additional documents that we may
file with the SEC between the date of this proxy statement and the date of the
Special Meeting.
In conjunction with this proxy statement, we are also sending you copies
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2001
and our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2002, each referenced above. You can obtain additional copies of our annual
report as well as any of the other incorporated documents by contacting us. We
will send you the documents incorporated by reference without charge.
Stockholders may obtain documents incorporated by reference in this proxy
statement by requesting them in writing or by telephone from the following:
Keith D. Thatcher, Corporate Secretary, Concero, Inc., 6300 Bridge Point
Parkway, Building 1, Suite 100, Austin, Texas 78730, (512) 343-6581.
VOTE REQUIRED AND BOARD RECOMMENDATION
The authorization and approval of the Plan of Dissolution requires the
affirmative vote of the holders of a majority of the outstanding shares of
common stock. Members of our Board of Directors and our executive officers who
hold (or are deemed to hold) as of November 20, 2002 an aggregate of 4.9 million
shares of common stock (approximately 48% of the outstanding shares of common
stock as of November 20, 2002) have indicated that they will vote in favor of
the Plan of Dissolution.
OUR BOARD OF DIRECTORS BELIEVES THAT THE PLAN OF LIQUIDATION IS IN THE
BEST INTERESTS OF OUR STOCKHOLDERS AND RECOMMENDS A VOTE FOR THIS PROPOSAL. IT
IS INTENDED THAT SHARES REPRESENTED BY THE ENCLOSED FORM OF PROXY WILL BE VOTED
IN FAVOR OF THIS PROPOSAL UNLESS OTHERWISE SPECIFIED IN SUCH PROXY.
28
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
Our Board of Directors knows of no other business that currently is
intended to come before the Special Meeting. However, if any other matters are
properly presented to the Special Meeting or any adjournment or postponement
thereof, the persons named in the proxies will vote upon them in accordance with
their best judgment. Discretionary authority with respect to such other matters
is granted by the execution of the enclosed proxy card.
By Order of the Board of Directors,
Date: December 9, 2002 /s/ KEITH D. THATCHER
----------------------------------------
Keith D. Thatcher, Secretary
29
DETACH HERE
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PROXY
CONCERO INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR SPECIAL MEETING ON DECEMBER 30, 2002
The undersigned hereby constitutes and appoints Edward C. Ateyeh, Jr. and
Keith D. Thatcher and each of them singly, with full power of substitution, as
proxies to vote and act at the Concero Inc. Special Meeting of Stockholders to
be held on December 30, 2002 at 9:00 a.m., local time, and at any and all
postponements and adjournments thereof (the "Special Meeting"), upon and with
respect to the number of shares of the common stock of Concero Inc., $0.01 par
value per share ("Common Stock"), as to which the undersigned may be entitled to
vote or act. The undersigned instructs such proxies, or their substitutes, to
vote as designated on the reverse side and in favor of the recommendations
management on any other matters which may come before the Special Meeting and
any adjournment or postponement thereof and, in their discretion, upon such
other business as may properly come before the Special Meeting, or any
adjournment or postponement thereof, all as further described in the
accompanying Notice of Special Meeting of Stockholders and proxy statement. If
no such directions are indicated, the proxies or their substitutes will have
authority to vote FOR Item 1 and FOR Item 2.
----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------
Concero Inc.
Dear Stockholder;
Please take note of the important information enclosed with this proxy card.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach and return it in the enclosed postage paid
envelope.
Your vote must be received prior to the Special Meeting of Stockholders on
December 30, 2002. Whether or not you plan to be personally present at the
Special Meeting, please complete, date and sign the enclosed proxy and return it
promptly in the enclosed envelope. If you later desire to revoke your proxy, you
may do so at any time before it is exercised by following the instructions on
page two of the accompanying proxy statement. Thank you in advance for your
prompt consideration.
Sincerely,
Concero Inc.
30
DETACH HERE
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|X| PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
FOR AGAINST ABSTAIN
1. To ratify and approve the proposed Plan of |_| |_| |_|
Liquidation, Dissolution and Distribution and
such further actions as may be necessary or
desirable to consummate such transaction.
2. In their discretion, to act upon any matters |_| |_| |_|
incidental to the foregoing and such other
business as may properly come before the Special
Meeting or any adjournment thereof.
Receipt of the Notice of Special Meeting of Stockholders and Proxy Statement
dated December 9, 2002 relating to the Special Meeting is hereby acknowledged.
MARK HERE FOR ADDRESS CHANGE AND NOTE IMMEDIATELY BELOW |_|
Please sign exactly as your name(s) appear(s) hereon. Joint owners should each
sign. If a corporation, sign in full corporate name by president or authorized
officer. If a partnership, sign in partnership name by an authorized person.
When signing as attorney, executor, administrator, trustee or guardian, please
give your full title as such.
Signature Date
-------------------------------- ----------------------------
Signature Date
-------------------------------- ----------------------------
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 4PM Eastern Time
the business day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy card.
--------------------------------------- --------------------------------------- --------------------------------------
Internet Telephone Mail
http://www.eproxy.com/cero 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to vote Mark, sign and date
Have your proxy card in hand when you OR your proxy. Have your proxy card in hand OR your proxy card
access the web site. You will be when you call. You will be prompted to and
prompted to enter your control number, enter your control number, located in return it in the
located in the box below, to create and the box below, and then follow the enclosed postage-paid
submit an electronic ballot. directions given. envelope.
--------------------------------------- --------------------------------------- --------------------------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
31
EXHIBIT A
PLAN OF COMPLETE LIQUIDATION, DISSOLUTION AND DISTRIBUTION
OF
CONCERO INC.
THIS PLAN OF COMPLETE LIQUIDATION, DISSOLUTION AND DISTRIBUTION , dated as
of ___________, 2002 (the "Plan"), is adopted to accomplish the complete
liquidation and dissolution of Concero Inc., a Delaware corporation (the
"Company"), in accordance with the Delaware General Corporation Law (the "DGCL")
and Section 331 of the Internal Revenue Code of 1986, as amended (the "Code"),
as follows:
1. Adoption of the Plan. The board of directors of the Company (the "Board
of Directors") has adopted resolutions deeming it advisable and in the best
interest of the Company to dissolve the Company, adopt the Plan, and call a
meeting (the "Meeting") of the holders of the Company's common stock, par value
$0.01 per share (the "Common Stock"), to adopt the Plan and ratify the Company's
actions taken to date on the Plan. If stockholders holding a majority of the
outstanding shares of Common Stock vote in favor of the proposed dissolution of
the Company and the adoption of the Plan at a special meeting of the holders of
shares of Common Stock (the "Meeting"), the Plan shall constitute the adopted
Plan of the Company as of the date of the Meeting, or such later date on which
the stockholders may approve the Plan if the Meeting is adjourned to a later
date (the "Adoption Date").
2. Cessation of Business Activities. After the Adoption Date and in
accordance with Section 278 of the DGCL, the Company shall not engage in any
business activities, except for the purpose of prosecuting and defending suits,
whether civil, criminal or administrative, by or against the Company, and to
gradually settle and close the business of the Company, to dispose of and convey
the property of the Company, to discharge the liabilities of the Company and to
distribute to the stockholders of the Company any remaining assets, but not for
the purpose of continuing the business for which the Company was organized. No
later than 30 days following the Adoption Date, the Company shall file a Form
966 with the Internal Revenue Service.
3. Continuing Employees and Consultants. For the purpose of effecting the
dissolution of the Company and in accordance with the provisions hereof, the
Company shall hire or retain, at the discretion of the Board of Directors, such
employees and consultants as the Board of Directors deems necessary or desirable
to supervise the dissolution.
4. Liquidation Process. From and after the Adoption Date and subject to
the provisions hereof, the Company shall complete the following corporate
actions:
(a) Liquidation of Assets. The Company shall determine whether and
when to (i) transfer the Company's property and assets (other than cash, cash
equivalents and accounts receivable) to a liquidating trust (established
pursuant to Section 7), or (ii) collect, sell, exchange or otherwise dispose of
its remaining property and assets in one or more transactions upon such terms
and conditions as the Board of Directors, in its absolute discretion, deems
expedient and in the best interests of the Company and the stockholders, without
any further vote or action by the Company's stockholders. The Company shall
comply with applicable laws and requirements in connection with the liquidation
of its assets, including, without limitation, the DGCL and laws relating to
privacy policies. The Company's assets and properties may be sold in bulk to one
buyer or a small number of buyers or on a piece-meal basis to numerous buyers.
The Company shall not be required to obtain appraisals or other third-party
opinions as to the value of its properties and assets in connection with the
liquidation. In connection with such collection, sale, exchange and other
disposition, the Company shall collect or make provision for the collection of
all accounts receivable, debts and claims owing to the Company.
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(b) Payment Obligations. The Company shall, as determined by the
Board of Directors, (i) pay or make reasonable provision to pay all claims and
obligations, including all contingent, conditional or unmatured contractual
claims known to the Company, (ii) make such provisions as will be reasonably
likely to be sufficient to provide compensation for any claim against the
Company which is the subject of a pending action, suit or proceeding to which
the Company is a party, and (iii) make such provision as will be reasonably
likely to be sufficient to provide compensation for claims that have not been
made known to the Company or that have not arisen but that, based on facts known
to the Company, are likely to arise or to become known to the Company within 10
years after the date of dissolution. Such claims shall be paid in full and any
such provision for payment shall be made in full if there are sufficient assets
of the Company. If there are insufficient assets of the Company, such claims and
obligations of the Company shall be paid or provided for in accordance with
their priority and, among claims of equal priority, ratably to the extent of
assets of the Company legally available therefor. If and to the extent deemed
necessary, appropriate or desirable by the Board of Directors or the Trustees
(as defined in Section 7), in their absolute discretion, the Company may
establish and set aside a reasonable amount of cash and/or property (the
"Contingency Reserve") to satisfy such claims and obligations against the
Company, including, without limitation, tax obligations, and all expenses
related to the sale of the Company's property and assets, all expenses related
to the collection and defense of the Company's property and assets, and the
liquidation and dissolution provided for in this Plan.
(c) Distributions to Stockholders. Any assets of the Company
remaining after the payment of claims or the provision for payment of claims and
obligations of the Company as provided in subsection (b) above, shall be
distributed by the Company pro-rata to its stockholders. Such distribution may
occur all at once or in a series of distributions and shall be in cash or
assets, in such amounts, and at such time or times, as the Board of Directors or
the Trustees, in their absolute discretion, may determine.
5. Cancellation of Stock. The distributions to stockholders pursuant to
Sections 4, 7 and 8 shall be in complete redemption and cancellation of all of
the outstanding shares of Common Stock. As a condition to receipt of any
distribution to the Company's stockholders, the Board of Directors or the
Trustees, in their absolute discretion, may require the stockholders to (i)
surrender their certificates evidencing the Common Stock to the Company or its
agents for recording of such distributions thereon or (ii) furnish the Company
with evidence satisfactory to the Board of Directors or the Trustees of the
loss, theft or destruction of their certificates evidencing the Common Stock,
together with such surety bond or other security or indemnity as may be required
by and satisfactory to the Board of Directors or the Trustees. The Company will
finally close its stock transfer books and discontinue recording transfers of
Common Stock on the earliest to occur of (i) the close of business on the record
date fixed by the Board of Directors for the final liquidating distribution,
(ii) the close of business on the date on which the remaining assets of the
Company are transferred to the Trust or (iii) the date on which the Company
files its Certificate of Dissolution under the DGCL, and thereafter certificates
representing Common Stock will not be assignable or transferable on the books of
the Company except by will, intestate succession, or operation of law.
6. Abandoned Property. If any distribution to a stockholder cannot be
made, whether because the stockholder cannot be located, has not surrendered its
certificates evidencing the Common Stock as required hereunder or for any other
reason, the distribution to which such stockholder is entitled (unless
transferred to the Trust established pursuant to Section 7) shall be
transferred, at such time as the final liquidating distribution is made by the
Company, to the official of such state or other jurisdiction authorized by
applicable law to receive the proceeds of such distribution. The proceeds of
such distribution shall thereafter be held solely for the benefit of and for
ultimate distribution to such stockholder as the sole equitable owner thereof
and shall be treated as abandoned property and escheat to the applicable state
or other jurisdiction in accordance with applicable law. In no event shall the
proceeds of any such distribution revert to or become the property of the
Company.
A-2
7. Liquidating Trust. If deemed necessary, appropriate or desirable by the
Board of Directors, in its absolute discretion, in furtherance of the
liquidation and distribution of the Company's assets to the stockholders in
accordance with the provisions hereof, as a final liquidating distribution or
from time to time, the Company may transfer to one or more liquidating trustees,
for the benefit of its stockholders (the "Trustees"), under a liquidating trust
(the "Trust"), any assets of the Company which are (i) not reasonably
susceptible to distribution to the stockholders, including without limitation
non-cash assets and assets held on behalf of stockholders (a) who cannot be
located or who do not tender their certificates evidencing the Common Stock to
the Company or its agent as required herein or (b) to whom distributions may not
be made based upon restrictions under contract or law, including, without
limitation, restrictions of the Federal securities laws and regulations
promulgated thereunder, or (ii) held as the Contingency Reserve. The Board of
Directors is hereby authorized to appoint one or more individuals, corporations,
partnerships or other persons, or any combination thereof, including, without
limitation, any one or more officers, directors, employees, agents or
representatives of the Company, to act as the initial Trustee or Trustees for
the benefit of the stockholders and to receive any assets of the Company. Any
Trustees appointed as provided in the preceding sentence shall succeed to all
right, title and interest of the Company of any kind and character with respect
to such transferred assets and, to the extent of the assets so transferred and
solely in their capacity as Trustees, shall assume all of the claims and
obligations of the Company as provided in Section 4(b) hereof including, without
limitation, any unsatisfied claims and unascertained or contingent liabilities.
Further, any conveyance of assets to the Trustees shall be deemed to be a
distribution of property and assets by the Company to the stockholders for the
purposes of Section 4(c) of this Plan. Any such conveyance to the Trustees shall
be treated for federal and state income tax purposes as if the Company made such
distribution to the stockholders and the assets conveyed shall be held in trust
for the stockholders of the Company. The Company, subject to this Section 7 and
as authorized by the Board of Directors, in its absolute discretion, may enter
into a liquidating trust agreement with the Trustees, on such terms and
conditions as the Board of Directors, in its absolute discretion, may deem
necessary, appropriate or desirable. Adoption of the Plan by a majority of the
outstanding shares of Common Stock shall constitute the approval of the
stockholders of any such appointment, any such liquidating trust agreement and
any transfer of assets by the Company to the Trust as their act and as a part
hereof as if herein written.
8. Timing of Distribution. Whether or not a Trust shall have been
previously established pursuant to Section 7, if it should not be feasible for
the Company to make the final distribution to its stockholders of all assets and
properties of the Company prior to the third anniversary of the filing of its
Certificate of Dissolution then, on or before such date, the Company shall be
required to establish a Trust and transfer any remaining assets and properties
(including, without limitation, any uncollected claims, contingent assets and
the Contingency Reserve) to the Trustees as set forth in Section 7.
9. Certificate of Dissolution. After the Adoption Date, the officers of
the Company shall, at such time as the Board of Directors, in its absolute
discretion, deems necessary, appropriate or desirable, obtain any certificates
required from the Delaware tax authorities and, upon obtaining such certificates
and paying such taxes as may be owing, the Company shall file with the Secretary
of State of the State of Delaware a certificate of dissolution (the "Certificate
of Dissolution") in accordance with the DGCL.
10. Stockholder Consent to Sale of Assets. Approval of the proposed
dissolution and adoption of the Plan by holders of a majority of the outstanding
shares of Common Stock shall constitute the approval of the stockholders of the
Company of the dissolution of the Company and the sale, exchange or other
disposition in liquidation of all of the property and assets of the Company
pursuant to the terms hereof, whether such sale, exchange or other disposition
occurs in one transaction or a series of transactions, and shall constitute
ratification of all contracts for sale, exchange or other disposition which are
conditioned on adoption of the Plan.
A-3
11. Expenses of Dissolution. In connection with and for the purposes of
implementing and assuring completion of the Plan, the Company may, in the
absolute discretion of the Board of Directors, pay any brokerage, agency,
professional, legal and other fees and expenses of persons rendering services to
the Company in connection with the collection, sale, exchange or other
disposition of the Company's property and assets and the implementation of the
Plan. Adoption of the Plan shall constitute approval of such payments by the
stockholders of the Company.
12. Compensation. In connection with and for the purpose of implementing
and assuring completion of the Plan, the Company may, in the absolute discretion
of the Board of Directors, but subject to applicable legal and regulatory
requirements, pay the Company's officers, directors, employees, agents and
representatives, or any of them, compensation or additional compensation above
their regular compensation, in money or other property, as severance, bonus,
acceleration of vesting of stock or stock options, or in any other form, in
recognition of the extraordinary efforts they, or any of them, will be required
to undertake, or actually undertake, or otherwise necessary retain the services
of any of them, in connection with the implementation of the Plan.
13. Indemnification. The Company shall continue to indemnify its officers,
directors, employees, agents and representatives in accordance with its
certificate of incorporation, as amended, and bylaws and any contractual
arrangements, for the actions taken in connection with the Plan and the winding
up of the affairs of the Company. The Company's obligation to indemnify such
persons may also be satisfied out of the assets of the Trust. The Board of
Directors and the Trustees, in their absolute discretion, are authorized to
obtain and maintain insurance as may be necessary or appropriate to cover the
Company's obligations hereunder, including seeking an extension in time and
coverage of the Company's insurance policies currently in effect.
14. Modification or Abandonment of the Plan. Notwithstanding authorization
or consent to the Plan and the transactions contemplated hereby by the Company's
stockholders, the Board of Directors may modify, amend or abandon the Plan and
the transactions contemplated hereby without further action by the stockholders
to the extent permitted by the DGCL.
15. Authorization. The Board of Directors of the Company is hereby
authorized, without further action by the Company's stockholders, to do and
perform or cause the officers of the Company, subject to approval of the Board
of Directors, to do and perform, any and all acts, and to make, execute, deliver
or adopt any and all agreements, resolutions, conveyances, certificates and
other documents of every kind which are deemed necessary, appropriate or
desirable, in the absolute discretion of the Board of Directors, to implement
the Plan and the transactions contemplated hereby, including, without
limitation, all filings or acts required by any state or Federal law or
regulation to wind up its affairs.
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