CAPITAL ASSOCIATES, INC.
7175 WEST JEFFERSON AVENUE
SUITE 4000
LAKEWOOD, COLORADO 80235
INFORMATION STATEMENT
---------------------
This Information Statement is furnished to the holders of the common
stock, par value $.008 per share (the "Common Stock"), of Capital Associates,
Inc. (the "Company"), to inform them as to an action to be taken by the Company
with the written consents of MCC Financial Corporation, a Delaware Corporation
("MCC"), Mr. Gary M. Jacobs and Mr. Jack Durliat (the "Consenting
Stockholders"). The Consenting Stockholders are the record holders of, in the
aggregate, 6,315,179 shares of the Common Stock (representing 61.7% of the
10,232,447 shares outstanding as of October 2, 1995).
The Board of Directors of the Company has approved a one-for-two
reverse Common Stock split (the "Reverse Split"). Since certain stockholders may
hold numbers of shares not evenly divided by two, it is anticipated that
fractional shares of Common Stock will result. Following the Reverse Split,
rather than issue fractional shares, the Company will pay cash to such persons
otherwise entitled to receive fractional shares. Under Delaware law, the
affirmative vote of a majority of the outstanding stock entitled to vote thereon
is required to approve the amendment to the Company's Certificate of
Incorporation that will effect the Reverse Split. The Consenting Stockholders
gave their written consent to the Reverse Split on October 3, 1995. Since the
Consenting Stockholders own more than fifty percent of the outstanding Common
Stock entitled to vote thereon, the Reverse Split has been approved by the
necessary vote of stockholders. Accordingly, the Company is not seeking written
consents from any of its other stockholders.
WE ARE NOT ASKING YOU FOR A CONSENT OR PROXY AND
YOU ARE REQUESTED NOT TO SEND US A CONSENT OR PROXY
This Information Statement is being mailed on or about October 13,
1995, to stockholders of record on October 2, 1995. The Company intends to take
all necessary action to consummate the Reverse Split on or after November 2,
1995 (20 days from the date of the mailing of this Information Statement) (the
"Effective Date").
On October 2, 1995, the closing price of the Company's Common Stock on
the Nasdaq National Market was $0.84.
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VOTING SECURITIES
-----------------
The close of business on October 2, 1995, has been fixed by the Board
of Directors as the record date for determination of stockholders entitled to
execute written consents to authorize the Reverse Split. The securities entitled
to consent to the Reverse Split consist of shares of Common Stock. Each share of
Common Stock entitles its owner to one vote. Common Stock is the only
outstanding class of voting securities authorized by the Company's Articles of
Incorporation. The Company's Articles of Incorporation grant to the Board of
Directors the discretion to issue Preferred Stock in series, with various
rights, preferences and privileges, including, among others, voting rights. None
of the Preferred Stock is presently outstanding, and the Board of Directors has
no present plan to issue Preferred Stock.
The following table sets forth, as of October 2, 1995, the number of
shares and percentage of the outstanding Common Stock beneficially owned by each
person known by the Company to own more than 5% of the outstanding Common Stock:
Beneficial Ownership
--------------------------------------
Number of Shares Percent(3)
---------------- ----------
James D. Walker (1) 1,536,582.5 15.00%
8180 Greensboro Drive
Suite 1000
McLean, Virginia 22102
William H. Buckland (1) 1,529,982.5 14.95%
8180 Greensboro Drive
Suite 1000
McLean, Virginia 22102
Jack Durliat 1,350,015 13.20%
18 Borealis Way
Castle Rock, Colorado 80104
Gary M. Jacobs (2) 1,946,607 18.99%
2995 Baseline Road
Boulder, Colorado 80303
All directors and officers as a 6,583,358 64.05%
group (11 persons)
- ------------------------------------
(1) MCC is the record owner of 3,046,499 shares of Common Stock. Messrs.
Walker and Buckland, who are otherwise unrelated to each other, each
own 50% of the issued and outstanding stock of MCC. Mr. Walker owns
10,000 vested stock options. Mr. Buckland owns 3,400 vested stock
options.
(2) Includes (a) 21,942 shares of Common Stock that Mr. Jacobs is entitled
to acquire upon the exercise of vested stock options and (b) 6,000
shares held in the name of Mr. Jacobs' minor children for which he
disclaims beneficial ownership.
(3) Calculated in accordance with Rule 13d-3(d) of the Securities and
Exchange Commission.
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REVERSE SPLIT OF COMMON STOCK
-----------------------------
General
- -------
The Board of Directors of the Company has approved an amendment to the
Company's Certificate of Incorporation (the "Certificate of Incorporation") to
effect a one-for-two reverse split of the issued and outstanding shares of
Common Stock. A copy of the amendment to the Certificate of Incorporation
effecting the Reverse Stock Split, in substantially the form in which it is
proposed to be filed, is attached as Exhibit A. The Consenting Stockholders have
approved the Reverse Split which is expected to become effective on the
Effective Date. Each share of Common Stock issued and outstanding immediately
prior to that Effective Date will be reclassified as, and changed into, one-half
of one share of Common Stock.
The Reverse Split will not materially affect any stockholder's
proportionate equity interest in the Company or the relative rights,
preferences, privileges or priorities of any stockholder. In addition, pursuant
to the terms of the Company's stock option and rights plans, the number of
shares issuable upon exercise of outstanding options and rights, and the
exercise price per share, will be proportionately adjusted.
Purpose and Effect of the Reverse Stock Split
- ---------------------------------------------
The Common Stock is trading at or below $1.00 which is the minimum bid
price for continued listing on the Nasdaq National Market, unless, as an
alternative test, the market value of the public float in the Company's Common
Stock is $3 million or more and the Company's net tangible assets equal $4
million or more. Currently, the "public float" for the purpose of this test is
approximately 3,000,000 shares, and on that basis the Company has not met the
alternative test. The National Association of Securities Dealers, Inc. (the
"NASD"), which operates the Nasdaq National Market, has informed the Company
that it may remove the Company from listing on the Nasdaq National Market if the
minimum bid price requirement is not met. In order to avoid such action by the
NASD, the Company's Board of Directors has determined to propose the Reverse
Split. The principal effect of the Reverse Split will be to decrease the number
of outstanding shares of Common Stock from 10,232,447 (as of October 2, 1995) to
approximately 5,116,224 shares, providing that no additional shares have been
issued subsequent to October 2, 1995. The Common Stock issued pursuant to the
Reverse Split will be fully paid and nonassessable. The respective voting rights
and other rights that accompany the Common Stock will not be altered by the
Reverse Split (other than as a result of payment of cash in lieu of fractional
shares (as discussed below)), and the par value of the Common Stock will remain
at $.008 per share. Consummation of the Reverse Split will not alter the number
of authorized shares of the Company's capital stock, which will remain at
17,500,000. Such authorized shares of capital stock consist of 15,000,000 shares
of Common Stock and 2,500,000 shares of preferred stock (none of which shares of
preferred stock has been issued). After giving effect to the Reverse Split, the
number of outstanding shares of Common Stock (as of October 2, 1995) would be as
set forth above, with the result that approximately 9,883,776 shares of Common
Stock would constitute authorized but unissued shares, with approximately
1,486,118 of such shares of Common Stock being reserved for issuance pursuant to
the Company's stock option. At this time, the Company has no plans to issue
additional shares of its Common Stock other than pursuant to outstanding
options.
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The Board of Directors believes that a decrease in the number of shares
of Common Stock outstanding without any material alteration of the proportionate
economic interest in the Company represented by individual shareholdings may
increase the trading price of the Common Stock, although no assurance can be
given that the market price of the Common Stock will rise in proportion to the
reduction in the number of shares outstanding resulting from the Reverse Split.
There can be no assurance that the Reverse Split will not adversely
impact the market price of the Common Stock, that the marketability of the
Common Stock will improve as a result of the Reverse Split or that the Reverse
Split will otherwise have any of the effects described herein. If the Company's
stock is removed from listing on the Nasdaq National Market, price information
will be available on the NASD OTC Bulletin Board. However, such information is
not as widely available as Nasdaq National Market information in newspapers and
other publications.
Certificates and Fractional Shares
- ----------------------------------
The Reverse Split will occur on the Effective Date without any action
on the part of stockholders of the Company and without regard to the date or
dates certificates presently representing shares of the Common Stock are
physically surrendered for certificates representing the number of shares of the
Common Stock such stockholders are entitled to receive as a consequence of the
Reverse Split. The certificates presently representing shares of Common Stock
will be deemed to represent one-half the number of shares of Common Stock after
the Effective Date of the Reverse Split. New certificates of Common Stock will
be issued in due course as old certificates are tendered to the Exchange Agent
for exchange or transfer. No fractional shares of Common Stock will be issued
and, in lieu thereof, stockholders holding a number of shares of Common Stock
not evenly divisible by two, and stockholders holding less than two shares of
Common Stock prior to the Effective Date, upon surrender of their old
certificates, will receive cash in lieu of fractional shares of Common Stock.
Such cash payment will not be made until a stockholder presents his old
certificates to the Exchange Agent. The price payable by the Company for the
fractional shares of Common Stock will be equal to the product of (a) the number
of old shares that appears in the numerator of the fraction of a new share,
times (b) the average of either (i) the high bid and low asked prices of one old
share, as reported on the NASD OTC Bulletin Board, or (ii) the closing price of
one old share, as reported on the Nasdaq National Market, whichever alternative
is applicable, for the ten business days immediately preceding the Effective
Date of the Reverse Split for which transactions in the Common Stock are
reported.
Only the fractional shares will be purchased by the Company, as a
result, whole shares will remain outstanding. For example, if stockholder Z owns
125 old shares. Dividing 125 shares by 2, the Reverse Split ratio, would cause
stockholder Z to hold after the reverse split 62.5 new shares. Stockholder Z
would be issued a stock certificate for 62 new shares and would receive a cash
payment (calculated as described above) for his .5 new share fractional
interest.
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Source of Funds; Number of Holders
- ----------------------------------
The funds required to purchase the fractional shares are available and
will be paid from the current cash reserves of the Company. The Company's
stockholder list indicates that a portion of the outstanding Common Stock is
registered in the names of clearing agencies and broker nominees. It is,
therefore, not possible to predict with certainty the number of fractional
shares and the total amount that the Company will be required to pay for
fractional share interests. However, it is not anticipated that the funds
necessary to effect the cancellation of fractional shares will be material.
As of October 2, 1995, approximately 225 persons were holders of record
of Common Stock. The Company does not anticipate that the Reverse Split and the
payment of cash in lieu of fractional shares will result in a significant
reduction in the number of holders of record of Common Stock. The Company does
not presently intend to seek, either before or after the Reverse Split, any
change in the Company's status as a reporting company for federal securities law
purposes.
Exchange of Stock Certificates
- ------------------------------
As soon as practicable after the Effective Date, the Company will send
a letter of transmittal to each shareholder of record on the Effective Date for
use in transmitting certificates representing shares of Common Stock ("Old
Certificates") to the Exchange Agent. The letter of transmittal will contain
instructions for the surrender of Old Certificates to the Exchange Agent in
exchange for certificates representing the appropriate number of whole shares in
new Common Stock. No new certificates will be issued to a shareholder until such
shareholder has surrendered all Old Certificates together with a properly
completed and executed letter of transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with all Old Certificates,
shareholders will receive a new certificate or certificates representing the
number of whole shares of new Common Stock into which their shares of Common
Stock represented by the Old Certificates have been converted as a result of the
Reverse Split. Until surrendered, outstanding Old Certificates held by
shareholders will be deemed for all purposes to represent the number of whole
shares of new Common Stock to which such shareholders are entitled as a result
of the Reverse Split. Shareholders should not send their Old Certificates to the
Exchange Agent until they have received the letter of transmittal. Shares not
presented for surrender as soon as practicable after the letter of transmittal
is sent shall be exchanged at the first time they are presented for transfer.
No service charges will be payable by holders of shares of Common Stock
in connection with the exchange of certificates, all expenses of which will be
borne by the Company. However, if a transfer of ownership is requested, a fee
may be charged.
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Federal Income Tax Consequences
- -------------------------------
Except as described below with respect to cash received in lieu of
fractional share interests, the receipt of Common Stock in the Reverse Split
should not result in any taxable gain or loss to stockholders for federal income
tax purposes. The tax basis of Common Stock received as a result of the Reverse
Split (including any fractional share interests to which a stockholder is
entitled) will be equal, in the aggregate, to the basis of the shares exchanged
for the Common Stock. For tax purposes, the holding period of the shares
immediately prior to the effective date of the Reverse Stock Split will be
included in the holding period of the Common Stock received as a result of the
Reverse Split, including any fractional share interests to which a stockholder
is entitled. A stockholder who receives cash in lieu of fractional shares of
Common Stock will be treated as first receiving such fractional shares and then
receiving cash as payment in exchange for such fractional shares of Common
Stock, and will recognize capital gain or loss in an amount equal to the
difference between the amount of cash received and the adjusted basis of the
fractional shares treated as surrendered for cash.
THE FEDERAL INCOME TAX DISCUSSION WITH RESPECT TO THE REVERSE SPLIT SET
FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. ALL STOCKHOLDERS
ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES APPLICABLE TO THEM WHICH COULD RESULT FROM THE REVERSE
SPLIT.
Effectiveness
- -------------
In accordance with Delaware law and notwithstanding approval of the
amendment by Consenting Stockholders, at any times prior to the filing of the
Certificate of Amendment, the Board of Directors may, in its sole discretion,
abandon the proposed amendment without any further action by stockholders.
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EXHIBIT A
Article IV of the Certificate of Incorporation of Capital Associates, Inc. will
be amended by the addition of the following paragraph immediately following
paragraph 3 thereof:
"4. Simultaneously with the effective date of this amendment (the
"Effective Date"), each share of Common Stock issued and outstanding
immediately prior to the Effective Date (the "Old Common Stock") shall
automatically and without any action on the part of the holder thereof be
reclassified as, and changed into, one-half (1/2) of a share of Common
Stock (the "New Common Stock"), subject to the treatment of fractional
share interests, as described below. Such reclassification and change of
Old Common Stock into New Common Stock shall not change the par value per
share of the shares reclassified and changed, which par value shall remain
$.008 per share. Each holder of a certificate or certificates which
immediately prior to the Effective Date represented outstanding shares of
Old Common Stock (the "Old Certificates", whether one or more) shall be
entitled to receive upon surrender of such Old Certificates to the
Corporation's Exchange Agent for cancellation, a certificate or
certificates (the "New Certificates", whether one or more) representing
the number of whole shares of New Common Stock into which and for which
the shares of the Old Common Stock formerly represented by such Old
Certificates so surrendered, are reclassified under the terms hereof. From
and after the Effective Date, Old Certificates shall represent only the
right to receive New Certificates (and, where applicable, cash in lieu of
fractional shares, as provided below) pursuant to the provisions hereof.
No certificates or scrip representing fractional share interests in New
Common Stock will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a stockholder of
the Corporation. A holder of Old Certificates shall receive, in lieu of
any fraction of a share of New Common Stock to which the holder would
otherwise be entitled, a cash payment therefore in an amount equal to the
product of (a) the number of shares of Old Common Stock that appears in
the numerator of such fraction times (b) the average of either (i) the
high bid and low asked prices of one share of Old Common Stock, as
reported on the NASD OTC Bulletin Board, or (ii) the closing price of one
share of Old Common Stock, as reported on the Nasdaq National Market,
whichever alternative is applicable, for the ten business days immediately
preceding the Effective Date for which transactions in Old Common Stock
are reported. If more than one Old Certificate shall be surrendered at one
time for the account of the same stockholder, the number of full shares of
New Common Stock for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares represented by the
Old Certificates so surrendered. In the event that the Exchange Agent
becomes aware that a holder of Old Certificates has not tendered all the
holder's certificates for exchange, the Exchange Agent shall carry forward
any fractional share until all certificates of that holder have been
presented for exchange such that payment for fractional shares to any one
holder shall not exceed the value of one share of Old Common Stock. If any
New Certificate is to be issued in a name other than that in which the Old
Certificates surrendered for exchange are issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, and the person or persons requesting such exchange shall affix
any requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Exchange Agent that such taxes are not payable. From
and after the Effective Date, the amount of capital represented by the
shares of the New Common Stock into which and for which the shares of the
Old Common Stock are reclassified under the terms hereof shall be the same
as the amount of capital represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in accordance with
applicable law."
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