SCHEDULE 14A
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 Under Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
HIGH SPEED ACCESS CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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: not applicable
(2) Form, Schedule or Registration Statement No.: not applicable
(3) Filing Party: not applicable
(4) Date Filed: not applicable
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[HIGH SPEED ACCESS LOGO]
LIQUIDATION AND DISSOLUTION PROPOSED-YOUR VOTE IS VERY IMPORTANT.
October 25, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of High
Speed Access Corp. ("HSA"), a Delaware corporation, to be held at the offices of
Frost Brown Todd LLC, 400 West Market Street, 32nd Floor, Louisville, Kentucky
40202 at 10:00 a.m. on Wednesday, November 27, 2002.
At the annual meeting, you will be asked to consider and vote on the following
proposals:
(1) To approve a Plan of Liquidation of HSA;
(2) To elect two directors to Class III of HSA's Board of
Directors;
(3) To ratify the appointment of PricewaterhouseCoopers LLP as
HSA's independent auditor for its fiscal year ending December
31, 2002; and
(4) To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors unanimously recommends that you vote "FOR" each of the
proposals.
It is important that your shares be represented at the annual meeting whether or
not you are able to attend personally. Please make sure your views are
considered by completing, signing and returning the enclosed proxy card
promptly.
Sincerely,
/s/ DAVID A. JONES, JR.
David A. Jones, Jr.
Chairman
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[HIGH SPEED ACCESS LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 27, 2002
To the Stockholders of High Speed Access Corp.:
The annual meeting of stockholders of High Speed Access Corp., a Delaware
corporation (the "Company" or "HSA") will be held at the offices of Frost Brown
Todd LLC, 400 West Market Street, 32nd Floor, Louisville, Kentucky 40202 at
10:00 a.m. on Wednesday, November 27, 2002 to consider and act upon the
following matters:
1. To approve and adopt the Plan of Liquidation of HSA, substantially
in the form of Appendix A attached to the accompanying proxy
statement;
2. To elect two directors to Class III of HSA's Board of Directors;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditor for its fiscal year ending December
31, 2002; and
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on Monday, October 21, 2002 will
be entitled to notice of and to vote at the meeting or any adjournment or
adjournments thereof. A list of our stockholders entitled to vote at the meeting
will be available for examination by any stockholder of the Company for any
purpose germane to the meeting during ordinary business hours at our offices
located at 9900 Corporate Campus Drive, Suite 3000, Louisville, Kentucky 40223,
for the 10-day period prior to the meeting.
Your vote is very important. Whether or not you expect to attend the meeting,
please complete, date and sign the enclosed proxy and mail it promptly in the
enclosed envelope in order to ensure representation of your shares. You do not
need to use postage if the proxy is mailed from within the United States.
The Board of Directors unanimously recommends that you vote "FOR" approval of
the Plan of Liquidation of HSA and other proposals as described herein.
By Order of the Board of Directors,
/s/ JOHN G. HUNDLEY
John G. Hundley
Secretary
Louisville, Kentucky
October 25, 2002
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TABLE OF CONTENTS
Page
----
Summary 1
Questions and Answers about the Proposals 2
Risk Factors 6
General Information 9
Proposal No. 1 - Approval of Plan of Liquidation and Dissolution 11
Proposal No. 2 - Election of Class III Directors 29
Proposal No. 3 - Ratification of Appointment of Independent Auditor 38
Other Information 40
Appendix A - Plan of Liquidation and Dissolution of High Speed Access Corp. 45
Appendix B - Form of Proxy 49
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SUMMARY
This summary highlights selected information from this proxy statement and may
not contain all of the information that is important to you. To better
understand the proposed Plan of Liquidation and Dissolution (the "Plan") and for
a more complete description of the legal terms of the Plan, you should read
carefully the entire document and the documents we have referred you to.
PROPOSALS FOR STOCKHOLDERS VOTE
At the Annual Meeting, stockholders will be asked to vote:
1. To approve our plan to liquidate and dissolve pursuant to the Plan
which is attached as Appendix A to this proxy statement (the "Plan");
2. To elect the two Class III directors standing for re-election to our
Board of Directors; and
3. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent auditor for the year ending December 31, 2002.
APPROVAL FOR THE PLAN OF LIQUIDATION (SEE PAGE 11)
If the Plan is approved, we intend to:
o pay or provide for our remaining obligations;
o liquidate our remaining assets and continue winding up the
Company's affairs;
o make an Initial Distribution to our stockholders (as defined
below); and
o make periodic cash distributions over the next three years to our
stockholders as we complete the wind up of our affairs.
THE INITIAL DISTRIBUTION AND SUBSEQUENT DISTRIBUTIONS (SEE PAGE 16)
If the Plan is approved, and subject to the uncertainties and Risk Factors
described in this proxy statement, we expect to make an initial cash
distribution of between $1.35 per share and $1.40 per share to our stockholders
in March 2003 (the "Initial Distribution"). Because of the uncertainties and
reserves for liabilities that we must create as described in greater detail in
this proxy statement, the actual amount of the Initial Distribution as
determined by our Board may be lower than $1.35 per share or higher than $1.40
per share.
Subsequent to the Initial Distribution, we expect to distribute any remaining
available cash proceeds, minus the amount of appropriate reserves for
liabilities, to our stockholders within 12 months of the date of adoption of the
plan. We expect to make a final liquidating distribution of any reserves not
paid out to creditors during the dissolution process to our stockholders three
(3) years after the date of adoption of the plan and we complete the wind up of
our affairs. We estimate that the total aggregate amount of the cash
distributions made subsequent to the Initial Distribution will be from $.00 per
share to $.15 per share (in the case of a $1.40 per share Initial Distribution)
OR from $.05 per share to $.20 per share (in the case of a $1.35 per share
Initial Distribution).
ELECTION OF DIRECTORS (SEE PAGE 29)
We are asking our stockholders to re-elect two (2) of our Class III directors to
the Board of Directors.
RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLC AS INDEPENDENT
AUDITOR (SEE PAGE 31)
We are asking our stockholders to ratify the Board of Director's appointment of
PricewaterhouseCoopers LLP as our independent auditor for the year ending
December 31, 2002.
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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
The following questions and answers are for your convenience only, and briefly
address some commonly asked questions about the proposals. You should still
carefully read this proxy statement in its entirety, including the attached
appendices.
WHAT AM I BEING ASKED TO VOTE UPON AT THE ANNUAL MEETING?
The proposals to be voted on at the Annual Meeting are:
1. To approve our plan to liquidate and dissolve pursuant to a Plan of
Liquidation and Dissolution attached as Appendix A to this proxy
statement (the "Plan");
2. To elect the two Class III directors standing for re-election to our
Board of Directors; and
3. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent auditor for the year ending December 31, 2002.
WHY DOES THE BOARD RECOMMEND THAT THE STOCKHOLDERS APPROVE THE PLAN OF
LIQUIDATION?
On February 28, 2002, we sold substantially all of our operating assets to an
affiliate of Charter Communications, LLC (the "Asset Sale") pursuant to an Asset
Purchase Agreement dated September 28, 2001 (the "Asset Purchase Agreement"). We
do not presently own or operate any revenue-generating businesses. The Board of
Directors, after reviewing various strategic alternatives for the Company,
concluded on August 13, 2002 that our liquidation and dissolution would best
maximize stockholder value (see "Background and Reasons for the Plan" on page
11). Accordingly, the Board has adopted the Plan subject to stockholder
approval. In reaching its decision, the Board considered a number of factors,
including:
o the significant risks associated with acquiring an existing or
starting a new business;
o the fact that our net assets exceeded, and for some time prior to
the adoption of the Plan had exceeded, the market value of our
outstanding common stock; and
o the Board's belief that the distribution of our assets in
accordance with the Plan will produce more value for our
stockholders.
WHAT WILL HAPPEN IF THE PLAN IS APPROVED?
If the Plan is approved, we intend to:
o pay or provide for our remaining obligations;
o liquidate our remaining assets and continue winding up the
Company's affairs;
o make an Initial Distribution (as defined below) to our
stockholders; and
o make periodic cash distributions over the next three years to our
stockholders as we complete to wind up of our affairs.
WHAT WILL I RECEIVE IN THE LIQUIDATION, AND WHEN WILL I RECEIVE IT?
If the Plan is approved, and subject to the uncertainties and Risk Factors
described in this proxy statement (see "Risk Factors" on page 6), we estimate
that we will make an initial cash distribution in March 2003 of
2
between $1.35 per share and $1.40 per share to our stockholders (the "Initial
Distribution"). The actual amount of the Initial Distribution as determined by
our Board may be lower than $1.35 per share or higher than $1.40 per share due
to various uncertainties (see "You will not know the exact amount and timing of
the liquidation distributions at the time of the annual meeting" on page 6).
Those uncertainties include but are not limited to:
o the exact amount, if any, we will receive upon liquidation of our
remaining tangible assets net of any claims or liabilities;
o the amount of expected $2 million Charter indemnity holdback that we
ultimately collect and our ability to dispose or settle any claims
Charter may subsequently assert against us under the Asset Purchase
Agreement;
o the amount of the Contingency Reserve we determine is appropriate to
assure the settlement of our liabilities (see "We might miscalculate
or fail to adequately reserve an amount sufficient to cover out
contingent liabilities" on page 7);
o the amount of time and money required to assess and resolve
outstanding and potential litigation against us;
o the total amount of our liquidation transaction and administration
costs; and
o any claims or potential claims that may arise before we are finally
liquidated and dissolved or that management believes are likely to
arise within 10 years of our dissolution.
Subsequent to the Initial Distribution, we expect to distribute any remaining
available cash proceeds, minus the amount of appropriate reserves for
liabilities, to our stockholders within 12 months of the date of adoption of the
Plan. We expect to make a final liquidating distribution of any reserves not
paid out to auditors during the dissolution process to our stockholders three
(3) years after the date of adoption of the Plan and we complete the wind up of
our affairs. We estimate that the total aggregate amount of the distributions
made subsequent to the Initial Distribution will be from $.00 per share to $.15
per share (in the case of a $1.40 per share Initial Distribution) OR from $.05
per share to $.20 per share (in the case of a $1.35 per share Initial
Distribution).
WHAT WILL HAPPEN IF THE PLAN IS NOT APPROVED?
If the Plan is not approved, we will continue to operate as a publicly owned
company and our Board will continue to evaluate our other alternatives.
IS IT NECESSARY TO VOTE TO ELECT NEW DIRECTORS TO THE BOARD OF DIRECTORS AND
APPROVE THE APPOINTMENT OF AUDITORS EVEN IF I APPROVE THE PLAN?
Yes. Even if you vote to approve the Plan, you should also vote on the proposals
to elect our Class III directors and ratify the appointment of auditors. If the
Plan is adopted, our Board of Directors will continue to oversee the wind up of
our affairs and the distribution of our assets. Additionally, we will continue
to need the services of independent accountants to conduct annual audits and
other matters.
CAN I SELL MY SHARES OF COMMON STOCK ONCE THE PLAN IS APPROVED?
Yes, until we close our stock transfer books. On July 10, 2002, our securities
were delisted from the Nasdaq's National Market System, and trading in our
common stock is now conducted on the "Over the Counter" electronic bulletin
board of the National Association of Securities Dealers, Inc. (the "OTC-BB") and
the so-called "Pink Sheets." If our stockholders adopt the Plan, we expect to
continue to comply with the reporting requirements of the Securities Exchange
Act of 1934 (the "Exchange Act") and remain listed on the OTC-BB and Pink Sheets
until we make our Initial Distribution. At this time, we cannot be certain as to
3
when we will close our stock transfer books and restrict transfer of our common
stock after the Initial Distribution. See "You may not be able to buy or sell
shares of HSA's common stock if we close our stock transfer books" on page 8 and
"We may close our stock transfer books" on page 15.
WHAT DO I NEED TO DO NOW?
After carefully reading and considering the information contained in this proxy
statement, you should :
o complete and sign your proxy; and
o return it in the enclosed return envelope as soon as possible so
that your shares may be represented at the special meeting.
A majority of shares entitled to vote:
o must be represented at the meeting to enable us to conduct
business at the meeting; and
o must vote "for" the Plan in order for the Plan to be approved.
CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
You can change your vote at any time before proxies are voted at the special
meeting. You can change your vote in one of three ways:
1. You can send a written notice to our Secretary, John G. Hundley,
at our executive offices, stating that you would like to revoke
your proxy.
2. You can complete and submit a new proxy to our Secretary, John G.
Hundley, at our executive offices.
3. You can attend the meeting and vote in person.
IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
Not unless you instruct them to do so. If you abstain or do not vote on the
Plan, your action will have the same effect as a vote against the Plan.
Therefore, if you wish to vote for the Plan, you must instruct your broker to
vote your HSA shares held in "street name." You may do so by following the
directions provided by your broker regarding how to instruct him or her to vote
your shares. If your broker or nominee returns your proxy to us and indicates on
the proxy that the broker or nominee does not have discretionary authority to
vote shares regarding the Plan, that indication will have the same effect as a
vote against the Plan.
Your abstention will not affect the proposals to elect directors or ratify the
appointment of auditors.
DO I HAVE APPRAISAL RIGHTS?
Under Delaware law, you will not have appraisal or other similar rights in
connection with the Plan.
WHAT ARE THE TAX CONSEQUENCES OF THE LIQUIDATION?
The liquidation will be a taxable transaction to you for United States federal
income tax purposes. In most cases, you will recognize gain or loss equal to the
difference between (i) the amount of cash distributed to you and your
proportionate share of the fair market value of any property transferred to a
liquidating trust
4
(less the amount of any known liabilities assumed by the liquidating trust), and
(ii) your tax basis in your shares. A brief summary of the material federal
income tax consequences to you appears on page 26 of this proxy statement. Tax
consequences to you may differ depending on your circumstances, so you should
consult your tax advisor.
WHO CAN HELP ANSWER MY QUESTIONS?
If you have any additional questions about any of the proposals, or if you need
additional copies of this proxy statement or any public filings referred to in
this proxy statement, you should contact: George Willett, President and CFO, at
(502) 657-6340. Our public filings can also be accessed at the web site of the
Securities and Exchange Commission, located at http://www.sec.gov.
5
RISK FACTORS
You should consider the following risks in deciding whether to vote in favor of
Proposal No. 1 relating to approval of the Plan of Liquidation and Dissolution
(the "Plan"). In addition, we strongly urge you to consider the items disclosed
elsewhere in this proxy statement and in the documents incorporated by reference
in this proxy statement.
WE MAKE FORWARD-LOOKING STATEMENTS IN THIS PROXY STATEMENT THAT ARE SUBJECT TO
RISKS THAT MAY CHANGE THE LIKELIHOOD OF THOSE STATEMENTS BEING REALIZED.
This proxy statement, as well as the other documents included with this proxy
statement, incorporated by reference herein and to which we refer in this proxy
statement, describes many of the positive factors and assumed benefits of the
Plan. You should also be aware of factors that could have a negative impact on
the Plan and our ability to make distributions of net assets, including the
expected Initial Distribution, to you. When we use such words as "believes",
"expects", "anticipates", or similar expressions, we are making forward-looking
statements. In addition, we have made in this proxy statement certain forward
looking statements, including statements concerning the timing and amount of
distributions of cash to stockholders, statements contained under the heading
"Liquidation Analysis and Estimates" on page 22 and "What will I receive in the
liquidation, and when will I receive it?" on page 2 and other statements
concerning the value of our net assets and the resultant liquidation value per
share of common stock as compared to its market price absent the proposed
liquidation. All such forward-looking statements are necessarily only estimates
of future results, and there can be no assurance that actual results will not
materially differ from expectations. These statements are subject to many risks,
including those set forth in each of the following paragraphs.
THERE ARE MANY FACTORS TO BE CONSIDERED BY STOCKHOLDERS IN DECIDING WHETHER TO
APPROVE THE PLAN.
There are many factors that you should consider when deciding whether to vote to
approve the Plan. Such factors include those risks set forth in our publicly
filed reports, including our quarterly reports on Form 10-Q for the fiscal
quarter ended June 30, 2002 and our Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, as well as those factors set forth below. Copies
of our Form 10-Q for the quarter ended June 30, 2002 and Annual Report on Form
10-K for the fiscal year ending December 31, 2001 are incorporated by reference
in this proxy statement and have been delivered to you together with this proxy
statement.
If you disagree with the Board's determination that the adoption of the Plan is
in the best interest of HSA and its stockholders, you should vote "against"
approval of the Plan.
YOU WILL NOT KNOW THE EXACT AMOUNT OR TIMING OF THE LIQUIDATION DISTRIBUTIONS AT
THE TIME OF THE ANNUAL MEETING.
The methods the Board and management used to estimate the value of our net
assets do not result in an exact determination of value nor are they intended to
indicate definitively the amount of cash you will receive in liquidation. We
cannot assure you that the amount you will receive in liquidation will equal or
exceed the price or prices at which the common stock has recently traded or may
trade in the future. Any distributions to
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you may be reduced by additional liabilities we may incur and the ultimate
settlement amounts of our liabilities.
The expected distribution of our cash to stockholders, including the anticipated
Initial Distribution in March 2003, may be delayed from the timing we discuss in
this proxy statement for any number of reasons. These reasons include the
following:
1. It may take us longer than we anticipate to settle or finally resolve
our outstanding litigation. We do not intend to make the Initial
Distribution until the Delaware Class Action Suits (see "Legal
Proceedings" on page 41) are finally settled. While we expect final
settlement of those cases to occur later this year, we cannot
guarantee you that they will. Moreover, we need additional time to
evaluate and assess the progress of the IPO Litigation (see "Legal
Proceedings"on page 41) in order to more accurately gauge and reserve
for our non-insured exposure, if any, in those cases.
2. Uncertainty remains regarding our expected collection of a $2 million
indemnity holdback due to us from Charter on February 28, 2003, minus
the amount of any claims Charter asserts against us under the Asset
Purchase Agreement. We are presently not aware of any claims that
Charter intends to assert against us under the Asset Purchase
Agreement, nor are we aware of any reason or basis upon which Charter
would refuse or be unable to pay us the $2 million indemnity holdback
when due. Nevertheless, many of our covenants, representations and
warranties survived the closing of the Asset Sale and will continue in
effect until February 28, 2003, and many others will not expire until
several months, and in some cases, another year, after the expected
collection of the $2 million holdback on February 28, 2003.
3. Additionally, even though we are not aware of any such pending or
threatened claims, a creditor of HSA might obtain an injunction
against our making the proposed distributions to you under the Plan on
the grounds that the amounts to be distributed are needed to provide
for the payment of our expenses and liabilities, including those that
may later be in dispute.
WE MIGHT MISCALCULATE OR FAIL TO ADEQUATELY RESERVE AN AMOUNT SUFFICIENT TO
COVER OUR CONTINGENT LIABILITIES.
Under Delaware law, the Board must establish a reserve for known and unknown
liabilities expected to be incurred through completion of our liquidation (the
"Contingency Reserve"), and the adequacy of that reserve will be reviewed prior
to making cash distributions to you. If we fail to create an adequate
Contingency Reserve for payment of our expenses and liabilities, you could be
held liable for payment to HSA's creditors of your proportional share of amounts
owed to creditors in excess of the Contingency Reserve. In that regard, your
liability would be limited to the amounts previously received by you from HSA or
a liquidating trust established by HSA. Accordingly, you could be required to
return some or all distributions previously made to you. In such an event, you
could receive nothing from HSA under the Plan. Moreover, you could incur a net
tax cost if you paid taxes on the amounts received from HSA and then have to
repay such amounts back to HSA's creditors. Unless you are able to get a
corresponding reduction in taxes in connection with your repayment, you may end
up having paid taxes on monies that you have had to return.
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A Contingency Reserve has not been recorded in our June 30,2002 financial
statements which are incorporated herein by reference and a copy of which has
been provided to you with this proxy. If the stockholders approve the Plan, we
will adopt a liquidation basis of accounting. At such time, we will record the
Contingency Reserve in our financial statements as required under Delaware law.
Under the liquidation basis of accounting, we will also make adjustments to our
individual assets and liabilities to their estimated net realizable values that
may result in either a net write-up or write-down of our equity. We currently
estimate that the Contingency Reserve will range between $500,000 to $6,000,000
(see "Liquidation Analysis and Estimates" on page 22). However, we cannot assure
you that the Contingency Reserve we will establish will be adequate to cover all
of our expenses and liabilities expected to be incurred through completion of
our liquidation.
If the Plan is approved by the stockholders, a Certificate of Dissolution will
be promptly filed with the State of Delaware dissolving HSA. According to
Delaware General Corporation Law, HSA will continue to exist for three years
after the dissolution becomes effective or for a longer period if the Delaware
Court of Chancery requires us to, for the purpose of prosecuting and defending
suits against HSA and enabling us to dispose of our property, discharge our
liabilities and distribute to our stockholders any remaining assets.
YOU MAY NOT BE ABLE TO BUY OR SELL SHARES OF HSA'S COMMON STOCK IF WE CLOSE OUR
STOCK TRANSFER BOOKS.
We have not had an operating business since February 28, 2002. If we complete
our plans to liquidate and dissolve, we may close our stock transfer books at
some time following the effectiveness of the filing of the Certificate of
Dissolution in Delaware, after which you will no longer be able to transfer
shares. At the present time, we expect to keep our stock transfer books open for
some period of time after we make the Initial Distribution. Additionally, we
will likely close our stock transfer books at such time as we transfer our
remaining assets and liabilities to a liquidating trust, although no
determination has been made yet as to when that might occur. However, if the
Board determines that our continued compliance with the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") is
unduly burdensome on us or otherwise inconsistent with the Plan, we may close
our stock transfer books sometime prior to the Initial Distribution. See "We may
close our stock transfer books" on page 15 for more information.
MEMBERS OF THE BOARD OF DIRECTORS MAY HAVE INTERESTS THAT ARE ADVERSE TO YOURS.
Members of the Board may be deemed to have a potential conflict of interest in
recommending approval of the Plan. See "Possible Effects of the Approval of the
Plan Upon Directors and Officers" on page 23 and "Vote Required and Board
Recommendation" on page 27 for a description of potential conflicts of interest.
8
GENERAL INFORMATION
SOLICITATION OF PROXIES; DATE, TIME, AND PLACE OF THE ANNUAL MEETING
This proxy statement is furnished to you in connection with the solicitation of
proxies by the Board of Directors (the "Board") of High Speed Access Corp., a
Delaware corporation ("HSA", "we," "us," "our," or the "Company"). We intend to
use the proxies at our annual meeting of stockholders, which will held on
Wednesday, November 27, 2002, at the offices of Frost Brown Todd LLC at 400 West
Market Street, 32nd Floor, Louisville, Kentucky 40202, 10:00 a.m., local time
and at any adjournment or adjournments of that meeting.
The enclosed form of proxy is solicited by our Board. The Company will bear the
cost of the solicitation. When you sign the proxy and return it to us, your
shares of common stock will be voted as directed at the annual meeting or any
postponement or adjournment thereof or, if no direction is indicated, your
shares will be voted in favor of the proposals set forth in the notice of our
annual meeting of stockholders attached hereto.
REVOCATION OF PROXIES
You may revoke it at any time before it is voted at the annual meeting by
notifying our secretary, by delivering a later-dated proxy, or by voting in
person at the annual meeting. Your attendance at the meeting will not in and of
itself constitute the revocation of a proxy previously provided to us.
MAILING DATE OF THIS PROXY
This proxy statement, the attached notice of annual meeting of stockholders and
the accompanying proxy card are first being mailed to stockholders on or about
October 25, 2002.
RECORD DATE AND SHARES ENTITLED TO VOTE
The Board has fixed October 21, 2002 as the record date for the determination of
stockholders entitled to notice of and to vote at the meeting. As of the record
date, there were 40,294,783 shares of HSA common stock issued, outstanding and
entitled to vote. Each share is entitled to one vote.
QUORUM AND VOTES REQUIRED
The presence in person or by proxy of the holders of the majority of the shares
of our common stock issued and outstanding as of the record date and entitled to
vote at the annual meeting is necessary to constitute a quorum at the annual
meeting. Abstentions with respect to any proposal under consideration at the
annual meeting will be counted for purposes of establishing a quorum.
9
Note regarding Broker Non-Votes. Shares held by nominees for beneficial owners
will be counted for purposes of determining whether a quorum is present if the
nominee has the discretion to vote on at least one of the matters before the
annual meeting even if the nominee may not exercise discretionary voting power
with respect to other matters and voting instructions have not been received
from the beneficial owner. Such shares are referred to as "broker non-votes." At
the annual meeting, broker non-votes will (i) have the same effect as a vote
against the Plan and (ii) will not be counted as votes for or against the other
matters presented for stockholder consideration.
With respect to the proposals described in this proxy statement, and provided a
quorum is present:
1. The approval of the Plan requires the affirmative vote of the holders
of a majority of all shares of our common stock outstanding and
entitled to vote. Consequently, if you abstain from voting or do not
vote on the Plan, your action will have the same effect as a vote
against the Plan. If a broker or nominee indicates on its proxy that
the broker or nominee does not have discretionary authority to vote
shares regarding the Plan, that vote will also have the same effect as
a vote against the Plan.
2. Directors are elected by a plurality of the votes cast by the holders
of our common stock represented in person or by proxy at our annual
meeting at which a quorum is present. Abstentions will have no effect
on the election of directors.
3. The ratification of the appointment of PricewaterhouseCoopers LLP as
our independent auditors will require the affirmative vote of a
majority of the votes cast on such proposal by the holders of our
outstanding common stock represented in person or by proxy at our
annual meeting at which a quorum is present. Abstentions will have no
effect on the proposal to ratify the appointment of auditors.
4. With respect to any other matter that may properly come before the
annual meeting, the approval of any such matter would require a
greater number of votes cast in favor of the matter than the number of
votes cast against such matter.
The Board knows of no other business that will be presented for consideration at
the meeting other than the proposals 1 through 3 listed above. If any other
business should come before the meeting, however, it is the intention of the
persons named in the enclosed proxy to vote the proxies in respect of any such
business in accordance with their best judgment. Proxies solicited by the Board
confer discretionary authority to vote on any matter to come before the meeting
with respect to which we did not receive notice prior to October 20, 2002.
HSA'S ADDRESS AND TELEPHONE NUMBER
The address of our principal executive offices is 9900 Corporate Campus Drive,
Suite 3000, Louisville, KY 40223. Our telephone number at that address is (502)
657-6340.
EACH OF THE MEMBERS OF OUR BOARD IS RECOMMENDING THAT STOCKHOLDERS VOTE
'FOR' EACH OF THE PROPOSALS SET FORTH HEREIN.
10
PROPOSAL NO. 1
APPROVAL OF PLAN OF LIQUIDATION AND DISSOLUTION
GENERAL
The Board of Directors is proposing a Plan of Liquidation and Dissolution (the
"Plan") for ratification and approval by our stockholders at the annual meeting.
The Plan was adopted by the Board of Directors, subject to stockholder approval,
on August 13, 2002. A copy of the Plan is attached as Appendix A to this proxy
statement on page 45. Certain material features of the Plan are summarized
below; these summaries are not complete and are subject in all respects to the
provisions of, and are qualified in their entirety by reference to, the Plan.
YOU ARE URGED TO READ THE PLAN IN ITS ENTIRETY.
BACKGROUND AND REASONS FOR THE PLAN
On February 28, 2002, we consummated the sale of substantially all of our assets
(the "Asset Sale") to CC Systems, LLC immediately after obtaining the required
approval of our stockholders. The Asset Sale was effected pursuant to an asset
purchase agreement (the "Asset Purchase Agreement"), dated September 28, 2001,
between the Company and Charter Communications Holding Company, LLC. Subsequent
to September 28, 2001, Charter Communications Holding Company, LLC assigned to
CC Systems, LLC the rights to purchase assets and certain other rights under the
Asset Purchase Agreement and certain other related agreements. Except as
otherwise specifically noted or unless the context otherwise requires, any
reference herein to "Charter" should be deemed a reference individually and/or
collectively to any of the following Charter entities: Charter Communications
Holding Company, LLC, Charter Communications, Inc., CC Systems, LLC, and Charter
Communications Ventures, LLC.
Pursuant to the terms of the Asset Purchase Agreement, Charter acquired certain
assets from us in consideration for (i) the payment to us of a cash amount equal
to $81.1 million, subject to certain adjustments, (ii) the assumption of certain
of our operating liabilities, and (iii) the tender to us of all our outstanding
shares of Series D Preferred Stock and warrants held by Charter to purchase
shares of common stock. At the closing, Charter agreed to certain reductions in
our indemnification obligations under the Asset Purchase Agreement. On February
28, 2002, Charter held back an aggregate of $3.4 million of the purchase price
to secure certain purchase price adjustments and indemnity claims against the
Company under the Asset Purchase Agreement. Of this amount, $1.4 million was
paid to us on April 30, 2002. The remaining $2.0 million, less any amounts used
to secure or satisfy actual indemnification claims, is payable on or about
February 28, 2003. After taking account of the various purchase price
adjustments, obligations paid by Charter on our behalf and the $3.4 million
purchase price and indemnification holdbacks, the Company received from Charter
on February 28, 2002, a net cash amount equal to $69.5 million.
The assets acquired by Charter pursuant to the Asset Purchase Agreement were
used by us primarily in the provision of high speed Internet access to
residential and commercial customers of Charter via cable modems. As a result of
the Asset Sale and other actions, we do not presently own or manage any
revenue-generating businesses.
11
Also on February 28, 2002, we purchased 20,222,139 shares of our common stock
from Vulcan Ventures Incorporated ("Vulcan") for an aggregate purchase price of
$4.4 million, or $0.22 per share. The consummation of the Asset Sale was a
condition precedent to the purchase of our common stock from Vulcan. The board
of directors approved the cancellation of these shares in March, 2002 and they
were officially retired in June, 2002. Following the consummation of the Asset
Sale and the purchase of our common stock from Vulcan, none of Vulcan, Charter
or any of their respective affiliates hold any equity interest in the Company.
Accordingly, we are no longer affiliated with Vulcan, Charter or any of their
respective affiliates.
On November 2, 2001, we announced that we had not determined what our strategic
direction would be following the consummation of the Asset Sale to Charter. We
disclosed that we were considering at least three (3) alternatives, namely:
o Option 1 - Make no distribution, retain all proceeds and reinvent
the business (i.e., pursue select domestic business opportunities
as they arise, including the possible acquisition of an existing
business or the development of one or more new businesses);
o Option 2 - Make a partial distribution, retain part of the
proceeds and reinvent the business; or
o Option 3 - Distribute all of the proceeds, wind down the business
and dissolve.
Following the Asset Sale to Charter on February 28, 2002, we embarked on an
effort to terminate our remaining contractual obligations, settle outstanding
claims and litigation against us, terminate the employment of employees whose
services were no longer needed, and otherwise take steps to aggressively reduce
costs and conserve cash, while reviewing alternative business strategies and
acquisition opportunities.
During the months of January 2002 through August 2002, our Board considered
proposals on a non-exclusive negotiation basis for a strategic combination of
the Company with another business or a strategic acquisition of assets. In
connection with its review of new business combination or acquisition
opportunities, the Board decided on March 19, 2002 that we would not engage in
any (i) multiple-acquisition or "investment company" strategies, (ii) invest or
merge with any pre-revenue companies, or (iii) invest in, acquire or merge with
any companies absent a demonstrably "fully-funded" business plan (after giving
effect to the Company's contribution of any cash in the combination).
Based on these parameters, we engaged in discussions with numerous public and
private companies. Following our conduct of initial due diligence on these
opportunities, the Board on April 30, 2002 directed that we not pursue eleven
(11) such opportunities, and authorized management and one of our directors to
continue discussions with only one (1) of the aforementioned companies, while
continuing to seek out and pursue other opportunities. After extensive due
diligence and extended meetings between the management of both companies, on
August 5, 2002, our Board, citing concerns over the public market environment
and the size and business momentum of our potential acquirer, decided to
terminate these discussions. Negotiations were subsequently suspended.
On August 13, 2002, our Board concluded that the liquidation of the Company was
the best alternative available for maximizing stockholder value and adopted the
Plan subject to stockholder approval. In reaching its decision, the Board
considered a number of factors. Among the factors the Board considered were:
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(1) the Company's lack of an operating business;
(2) prevailing economic and business valuation conditions;
(3) the significant risks associated with acquiring an existing or
starting a new business and the significant amount of cash that
would be spent to fund our operations prior to achieving, if at
all, acceptable financial results;
(4) our inability to identify a strategic partner or combination
acceptable to us;
(5) the fact that our net assets exceeded, and for some time prior to
the adoption of the Plan had exceeded, the market value of our
outstanding common stock; and
(6) the Board's belief that the distribution of our assets in
accordance with the Plan will produce more value for our
stockholders.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. The Board did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination.
Prior to August 13, 2002, the Board compared estimates of our net asset value
per share 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, restructuring and strategic partnering opportunities. The Board had
been kept informed continuously of our business, affairs and financial
condition. The Board determined not to continue to operate the Company and to
return its cash to the stockholders to allow each stockholder to make his, her
or its own investment decisions. Based on this information, the Board believed
that distribution to the stockholders of our available net assets would return
the greatest value to HSA's stockholders as compared to other alternatives.
We cannot assure you that the liquidation value per share of common stock in the
hands of our stockholders will equal or exceed the price or prices at which the
common stock has recently traded or may trade in the future. The Board believes,
however, that it is in the best interests of HSA and its stockholders to
distribute to the stockholders HSA's available net assets pursuant to the Plan.
If the Plan is not approved by the stockholders, we will continue to operate as
a public company and the Board will continue to evaluate our other alternatives
then available for the future of HSA.
CONDUCT OF HSA FOLLOWING APPROVAL OF THE PLAN
Since the Asset Sale to Charter pursuant to the Asset Purchase Agreement, we
have been winding up HSA's affairs and evaluating various strategic
opportunities for the Company. Since the adoption of the Plan by the Board on
August 13, 2002, we have been engaged solely in winding up the Company's
affairs.
Following approval of the Plan by the stockholders, HSA's activities will be
limited to:
o filing a Certificate of Dissolution with the Secretary of State of the
State of Delaware and thereafter remaining in existence as a
non-operating entity for three years;
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o winding up our affairs, including the settlement of any
then-outstanding issues with Charter relating to the Asset Sale,
selling any remaining non-cash assets of the Company, and taking such
action as may be necessary to preserve the value of our assets and
distributing our assets in accordance with the Plan;
o paying our creditors;
o terminating any of our remaining commercial agreements, relationships
or outstanding obligations;
o resolving our outstanding litigation;
o establishing a Contingency Reserve for payment of the Company's
expenses and liabilities; and
o preparing to make distributions to our stockholders.
We will seek to distribute or liquidate all of our assets in a manner consistent
with the Plan and such manner and upon such terms as the Board determines to be
in the best interests of the stockholders.
We presently have only three (3) employees, and expect to employ no more than
two (2) employees as of December 31, 2002. Following the approval of the Plan by
the stockholders, we will continue to pay our employees their regular salary,
and if approved by the board based on an evaluation of all relevant factors, any
bonus for which our employees are eligible, for services rendered in connection
with the implementation of the Plan. See "Compensation, termination and
change-in-control arrangements for our President and Chief Financial Officer" on
page 31 for a description of the compensation arrangements for our President and
Chief Financial Officer, Mr. George Willett.
We will also continue to indemnify current and former officers, directors,
employees and agents in accordance with HSA's by-laws for actions taken in
connection with the Plan and the winding up of HSA's affairs. Our obligation to
indemnify our officers, directors, employees and agents may be satisfied out of
the assets of any liquidating trust. The Board may obtain and maintain the
amount of insurance as may be necessary to cover our indemnification obligations
under the Plan.
Your ratification and approval of the Plan will constitute your approval of the
payment of any such compensation, indemnification and insurance.
PRINCIPAL PROVISIONS OF THE PLAN
We will distribute to our stockholders proportionally, in cash or in-kind, or
sell or otherwise dispose of, all of HSA's property and assets. The liquidation
is expected to commence as soon as practicable after approval of the Plan by the
stockholders and is expected to be concluded prior to the third anniversary
thereof by a final liquidating distribution either directly to the stockholders,
or to a liquidating trust. We do not anticipate that we will solicit from our
stockholders any further votes to approve the specific terms of any particular
sale of assets.
We intend to establish a reasonable Contingency Reserve in an amount determined
by the Board to be sufficient to satisfy our liabilities, expenses and
obligations not otherwise paid, provided for or discharged. The amount of the
Contingency Reserve, including the estimates set forth in this proxy (see
"Liquidation Analysis and Estimates" on Page 22) may change before or after the
Initial Distribution. We expect to distribute the net balance, if any, of HSA's
cash on hand, together with the cash proceeds of any sales of HSA's other
assets, remaining after we establish the Contingency Reserve, to the
stockholders pro rata within
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twelve (12) months of the filing of the Certificate of Dissolution. These
liquidating distributions shall be in complete redemption of the common stock
from our stockholders.
WE MAY TRANSFER ASSETS TO A LIQUIDATING TRUST
Following your approval of the Plan, we may, if the Board deems it to be
appropriate for any reason, transfer any of our assets, liabilities and
Contingency Reserves to a liquidating trust established for the benefit of the
stockholders. The trust would thereafter settle our remaining liabilities and
sell or distribute the property transferred to it on terms approved by the
trustees of the trust. If all of HSA's assets (other than the Contingency
Reserve) are not sold or distributed prior to the third anniversary of the
filing of the Certificate of Dissolution and we have not previously assigned our
assets and liabilities to a liquidating trust, HSA will transfer in final
distribution the remaining assets and liabilities of the Company to the trust.
This trust is referred to in this proxy statement as the "liquidating trust".
For further information relating to the liquidating trust, the appointment of
trustees and the liquidating trust agreement, see "Contingent liabilities;
contingent reserve; liquidating trust" on page 17.
WE MAY CLOSE OUR STOCK TRANSFER BOOKS
We may close our stock transfer books at any time after the dissolution.
However, we expect to close our stock transfer books and discontinue recording
transfers of shares of common stock on the earliest to occur of:
o the close of business on the date on which the remaining assets
of HSA are transferred to a liquidating trust, which we expect to
occur sometime if and after we make the Initial Distribution;
o the close of business on the record date fixed by the Board of
Directors for the final liquidating distribution; or
o the date on which HSA ceases to exist under Delaware law, which
date may be three years (or longer if unresolved claims or
litigation is still outstanding) from the date of dissolution.
After the stock transfer books have been closed, certificates representing
shares of common stock will not be assignable or transferable on HSA's books
except by will, intestate succession or operation of law. After the final record
date for the recording of stock transfers, we will not issue any new stock
certificates, other than replacement certificates. See "Listing and trading of
the common stock and interests in the liquidating trust" on page 21 and "Final
record date" on page 20.
Following approval of the Plan by the stockholders, we will file a Certificate
of Dissolution with the State of Delaware dissolving HSA. The dissolution of HSA
will become effective, in accordance with Delaware law, upon proper filing of
the Certificate of Dissolution with the Secretary of State of Delaware or upon
such later date as may be specified in the Certificate of Dissolution. Pursuant
to Delaware law, HSA will continue to exist for three years after the
dissolution becomes effective or for such longer period as the Delaware Court of
Chancery shall direct, for the purpose of prosecuting and defending suits,
whether civil, criminal or administrative, by or against it, and enabling HSA
gradually to settle and close its business, to dispose of and convey its
property, to discharge its liabilities and to distribute to its stockholders any
remaining assets, but not for the purpose of continuing the business for which
HSA was organized.
15
ABANDONMENT; AMENDMENT
Under the Plan, the Board of Directors may modify, amend or abandon the Plan,
notwithstanding stockholder approval, to the extent permitted by Delaware law.
We will not amend or modify the Plan under circumstances that would require
additional stockholder solicitations under Delaware law or the Federal
securities laws without obtaining the required stockholder consent.
LIQUIDATING DISTRIBUTIONS; NATURE; AMOUNT; TIMING
Initial Distribution. Although the Board has not established a firm timetable
for distributions to stockholders, if the Plan is approved by the stockholders,
and subject to the uncertainties and Risk Factors described in this proxy
statement (see "Risk Factors" on page 6), we estimate that we will make an
initial cash distribution in March 2003 of between $1.35 per share to $1.40 per
share to our stockholders (the "Initial Distribution"). The actual amount of the
Initial Distribution as determined by our Board may be lower than $1.35 per
share or higher than $1.40 per share due to various uncertainties. Those
uncertainties include but are not limited to:
o the exact amount, if any, we will receive upon liquidation of our
remaining tangible assets net of any claims or liabilities;
o the amount of expected $2 million Charter indemnity holdback that we
ultimately collect and our ability to dispose of or settle any claims
Charter may assert against us under the Asset Purchase Agreement;
o the amount of the Contingency Reserve we determine is appropriate to
assure the settlement of our liabilities;
o the amount of time and money required to assess and resolve
outstanding and potential litigation against us;
o the total amount of our liquidation transaction and administration
costs; and
o any claims or potential claims that may arise before we are finally
liquidated and dissolved or that management believes are likely to
arise within 10 years of our dissolution.
The "per share" amount is based on 40,294,783 shares of common stock outstanding
as of October 21, 2002.
Periodic Additional Distributions. Subsequent to the Initial Distribution, we
expect to distribute any remaining available cash proceeds, minus the amount of
the Contingency Reserve, to the stockholders within 12 months of the date of the
adoption of the Plan. We expect to make a final liquidating distribution of any
Contingency Reserve not paid out to auditors during the distribution process to
our stockholders three (3) years after the date of adoption of the Plan and we
complete the wind up of our affairs. We estimate that the total aggregate amount
of the distributions made subsequent to the Initial Distribution will be from
$.00 to $.15 per share (in the case of an $1.40 per share Initial Distribution)
or from $.05 per share to $.20 per share (in the case of an $1.35 per share
Initial Distribution).
We expect to conclude the liquidation on the third anniversary of the filing of
the Certificate of Dissolution in Delaware by a final liquidating distribution.
HSA does not plan to satisfy all of its liabilities and obligations prior to
making distributions to its stockholders, but instead will reserve assets deemed
by management and the Board to be adequate to provide for such liabilities and
obligations. See "Contingent liabilities; Contingency Reserve; liquidating
trust" on page 17.
16
Uncertainties as to the precise net value of HSA's assets (other than cash) and
the ultimate amount of its liabilities make it impracticable to predict with
certainty the aggregate net value ultimately distributable to stockholders.
Claims, liabilities and expenses from operations (including operating costs,
salaries, payroll and local taxes, legal and accounting fees, rent and
miscellaneous office expenses), although currently declining in the aggregate,
will continue to be incurred following approval of the Plan. These expenses will
reduce the amount of assets available for ultimate distribution to stockholders.
Even though we cannot currently make a precise estimate of those expenses or
guarantee you that our estimates are correct, we believe that our available net
cash will be adequate to provide for HSA's obligations, liabilities, expenses
and claims (including contingent liabilities) and to make cash distributions to
stockholders. (See "Liquidation Analysis and Estimates" on Page 22).
DISPOSITION OF HSA'S REMAINING PHYSICAL ASSETS
With the exception of miscellaneous office furniture and equipment in
Louisville, and unsold office furniture equipping our former principal executive
offices in Littleton, Colorado, we have already disposed of our tangible and
intangible assets. We have not yet determined when to sell any of these
remaining non-cash assets, and do not expect to realize a material amount from
their sale. The determination will be based on the judgment of the Board and
management as to whether the sale of such assets at any particular time will
result in our realizing the highest likely value to HSA's stockholders.
We do not anticipate amending or supplementing this proxy statement to reflect
any agreement or sale, unless required by applicable law.
REPORTING REQUIREMENTS
After the Plan is approved, we have an obligation to continue to comply with the
applicable reporting requirements of the Exchange Act even though compliance
with such reporting requirements is economically burdensome. However, if and
after we file our Certificate of Dissolution and make the expected Initial
Distribution, in order to curtail expenses, we expect sometime thereafter to
attempt to cease complying with the reporting requirements under the Exchange
Act. As the liquidation proceeds, either we or the liquidating trustee will
continue to provide at least unaudited annual financial reports to you and
inform you of any material events affecting the Company or liquidating trust.
However, such reports may or may not be in the formats otherwise required by the
Exchange Act.
CONTINGENT LIABILITIES; CONTINGENCY RESERVE; LIQUIDATING TRUST
Under Delaware law, we are required, in connection with its dissolution, to pay
or make reasonable provision for the payment of all of our liabilities and
obligations, including all contingent, conditional and unmatured claims,
including those that management believes are likely to arise or become known to
us within 10 years of our dissolution.
The actual amount of the Contingency Reserve will be based upon estimates and
opinions of management and the Board and review of HSA's estimated operating
expenses, including, without limitation, anticipated compensation payments,
legal and accounting fees, rent, payroll and other taxes payable, miscellaneous
office expenses, insurance and obligations accrued in HSA's financial
statements.
17
We cannot assure you that the ranges for the Contingency Reserve that we are
presently considering are in fact accurate or will be sufficient. The Board may
have to increase the amount of the Contingency Reserve before or after
dissolution or the making of the Initial Distribution. If the Board decides to
increase the amount of the Contingency Reserve, it will probably result in a
decrease in the amount of the Initial Distribution and any possible subsequent
distributions. After the liabilities, expenses and obligations for which the
Contingency Reserve has been established have been satisfied in full, we will
distribute to the stockholders any remaining portion of the Contingency Reserve.
If the Board deems it necessary, appropriate or desirable for any reason, we
may, from time to time, transfer any of HSA's remaining assets to a liquidating
trust established for the benefit of the stockholders. The liquidating trust
would thereafter sell or distribute the transferred assets on terms approved by
the trust's trustees. The Board 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, any unsold office furniture and
equipment) or where the Board determines that it would not be in the best
interests of HSA and the stockholders for the assets to be distributed directly
to the stockholders at the time. If all of HSA's assets (other than the
Contingency Reserve) are not sold or distributed prior to the third anniversary
of the effectiveness of HSA's dissolution and we have not already made such a
transfer to the liquidating trust, HSA must transfer in a final distribution any
remaining net assets to a liquidating trust. The Board may also elect in its
discretion to transfer the Contingency Reserve, if any, to a liquidating trust.
The purpose of a liquidating trust would be to distribute or sell property on
terms satisfactory to the liquidating trustees and then distribute the proceeds
of any sale to the stockholders after paying any of HSA's liabilities which the
trust assumed. Any liquidating trust acquiring all of the unsold assets of HSA
will assume all of the liabilities and obligations of HSA and will be obligated
to pay any expenses and liabilities of HSA which remain unsatisfied. If the
Contingency Reserve transferred to the liquidating trust is exhausted, the
expenses and liabilities will be satisfied to the extent of the liquidating
trust's other unsold assets.
The Plan authorizes the Board to appoint one or more individuals or entities to
act as trustee of the liquidating trust and to cause HSA to enter into any
liquidating trust agreement with the trustee or trustees on such terms and
conditions as may be approved by the Board. We anticipate that the Board will
select trustees on the basis of the experience of the individual or entity in
administering and disposing of assets and discharging liabilities of the kind to
be held by the liquidating trust and the ability of the individual or entity to
serve the best interests of the stockholders. If and to the extent we decide
sometime in the future to transfer our remaining assets and liabilities to a
liquidating trust. Stockholder approval of the Plan will also constitute
stockholder approval of any of the Board's appointments and any liquidating
trust agreement.
We anticipate that the trust agreement would provide that the trust property
would be transferred to the trust immediately prior to the distribution of
interests in the trust to HSA's stockholders and that the trust property would
be held in trust for the benefit of the stockholder beneficiaries subject to the
terms of the trust agreement. We anticipate that the interests would be
evidenced only by the trust's records and there would be no certificates or
other tangible evidence of trust interests and that no stockholder 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.
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We further anticipate that, pursuant to the trust agreement, the trust would be
irrevocable and would terminate after the earliest of (1) the date the trust
property is fully distributed, (2) a majority in interest of the beneficiaries
of the trust, or a majority of the trustees, have approved the termination, or
(3) a specified number of years having elapsed after the creation of the trust.
Under Delaware law, if we fail to create an adequate Contingency Reserve and the
assets held by the liquidating trust are less than the amount of expenses and
liabilities ultimately found to be due, you could be held liable for the payment
to creditors of your pro rata share of such excess, limited to the amounts you
have previously received from HSA or from the liquidating trust.
If we are held by a court to have failed to make adequate provision for its
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, a creditor of HSA could seek an
injunction against the making of the proposed distributions under the Plan on
the ground that the amounts to be distributed were needed to provide for the
payment of HSA's expenses and liabilities. Any such action could delay and/or
substantially diminish the cash distributions to be made to stockholders under
the Plan.
DISSOLUTION PROCEDURES; DIRECTORS' AND STOCKHOLDERS' LIABILITY TO CREDITORS OF
HSA
Under Delaware law, dissolution is effective upon the filing of a Certificate of
Dissolution with the Delaware Secretary of State or upon such future effective
date as may be set forth in the Certificate of Dissolution. Section 278 of the
Delaware General Corporation Law provides that a dissolved corporation continues
to exist for three years after the date of dissolution for purposes of
prosecuting and defending suits by or against the corporation and enabling it to
settle and close its business, dispose of and convey its property, discharge its
liabilities and distribute to stockholders any remaining assets, but not for the
purpose of continuing the business of the corporation as a going concern. The
corporation can continue to exist beyond the three year period, if ordered by a
court, for the sole purpose of prosecuting or defending any action, suit or
proceeding that was brought before or during the three year period after the
date of dissolution, until any judgments, orders or decrees are fully executed.
The powers of the directors continue during this time period in order to allow
them to take the necessary steps to wind up the affairs of the corporation.
In liquidating the Company, the Board intends to follow the procedure described
in Section 281(b) of the Delaware General Corporation Law. Under this procedure,
the directors must adopt a plan of distribution pursuant to which the Company
shall:
o pay or make reasonable provision to pay all claims and obligations,
including contingent, conditional or unmatured contractual claims,
known to the Company;
o make such provision 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
o 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
19
known to the Company, are likely to arise or become known to the
Company within 10 years after the date of dissolution.
Under an alternative procedure described in Sections 280 and 281(a) of the
Delaware General Corporation Law, the directors could seek judicial supervision
and approval from the Delaware Chancery Court with respect to the amount and
form of security which would be reasonably likely to be sufficient to provide
compensation for certain known and unknown claims against the Company. If we
elected to seek a 'judicially-supervised' dissolution however, distributions
would not be made prior to 210 days after filing of the Certificate of
Dissolution with the Secretary of State of Delaware.
If we comply with either of these procedures, our directors will not be
personally liable to HSA's claimants in the event that our assets do not cover
all of our liabilities, and our stockholders will not be personally liable to
claimants in excess of the lesser of the amount of each stockholder's pro rata
share of a claim or the amount distributed to each stockholder.
FINAL RECORD DATE
Following the filing of our Certificate of Dissolution, we expect to close our
stock transfer books and discontinue recording transfers of shares of common
stock (the "final record date") on the earliest to occur of:
o the close of business on the date on which the remaining assets
of HSA are transferred (if at all) to a liquidating trust, which
may occur sometime if and after we make the Initial Distribution;
o the close of business on the record date fixed by the Board of
Directors for the final liquidating distribution; or
o the date on which HSA ceases to exist under Delaware law.
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, HSA will not issue any new stock
certificates, other than replacement certificates. It is anticipated that no
further trading of HSA's shares will occur on or after the final record date.
See "Principal provisions of the Plan" on page 14 and "Listing and trading of
the common stock and interests in the liquidating trust" on page 21. All
liquidating distributions from HSA or a liquidating trust on or after the final
record date will be made to stockholders according to their holdings of common
stock as of the final record date or transferees of such stockholders by will or
descent. After the final record date, we may at our election require
stockholders to surrender their stock certificates in order to receive
subsequent distributions.
You should not forward your stock certificates before receiving instructions to
do so. If we should require you to surrender your stock certificates, all
distributions otherwise payable by HSA or any liquidating trust, if any, to
stockholders who have not surrendered their stock certificates may be held in
trust for them, without interest, until the surrender of their certificates
(subject to escheat pursuant to the laws relating to unclaimed property). If
your stock certificate has been lost, stolen or destroyed, you 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.
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LISTING AND TRADING OF THE COMMON STOCK AND INTERESTS IN THE LIQUIDATING TRUST
On July 10, 2002, our securities were delisted from the Nasdaq National Market,
and trading in our common stock is presently conducted in the over-the-counter
market in the so-called "pink sheets" or possible on the NASD's "Electronic
Bulletin Board." As a consequence of delisting, you may find it more difficult
to sell or find a current price quote for HSA common stock. In addition, the
delisting of the common stock may result in lower prices for it than would
otherwise prevail.
Subsequent to the filing of our Certificate of Dissolution and making of the
Initial Distribution, we expect 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 the shares will cease on and after the final record date.
If and to the extent our assets and liabilities to a liquidating trust, we
anticipate that the beneficial interests in such liquidating trust will not be
transferable, although the Board has not yet made that decision. The Board and
management will make that decision prior to the transfer of cash (i.e., the
Contingency Reserve) and unsold non-cash assets to the liquidating trust and
will base the decision on, among other things, the Board's and management's
estimate of the value of the assets being transferred to the liquidating trust,
tax matters and the impact of complying with applicable securities laws. If the
interests are transferable, we plan to distribute an information statement with
respect to the liquidating trust at the time of the transfer of assets and the
liquidating trust may be required to comply with the periodic reporting and
proxy requirements of the Exchange Act. The cost of complying with those
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 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.
For Federal income tax purposes, you could be deemed to have received a
liquidating distribution equal to your pro rata share of the value of the net
assets distributed to a liquidating trust because the distribution of
non-transferable interests can result in tax liability to the interest holder
(see "Certain Federal income tax consequences--Liquidating Trusts" on page 27).
You would not be readily able to realize the value of your interest to pay any
tax.
ABSENCE OF APPRAISAL RIGHTS
Under Delaware law, you are not entitled to appraisal rights for your shares of
common stock in connection with the transactions contemplated by the Plan.
REGULATORY APPROVALS
There are currently no Federal or state regulatory requirements HSA must comply
with or approvals required in connection with the liquidation.
21
LIQUIDATION ANALYSIS AND ESTIMATES
In the table below, we have set forth the balances of our cash and liabilities
as of June 30, 2002, and our present estimates of the range of following
potentially realizable values for:
o the Company's projected quarterly net losses excluding
liquidation transaction costs through March 31, 2003;
o the Company's liquidation transaction costs;
o the expected receipt of the Charter holdback; and
o the Contingency Reserve.
WE EMPHASIZE THAT THESE ARE MERELY ESTIMATES. We cannot assure you that we will
be able to settle all of our liabilities and resolve our outstanding litigation
at the indicated values or within the indicated range or collect all of the
Charter holdback.
RANGE
LOW HIGH
------------ ------------
(IN THOUSANDS)
EXCEPT PER SHARE DATA
----------------------------
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS AS OF
JUNE 30, 2002:
Cash and cash equivalents(1) $ 62,596 $ 62,596
Short-term investments(1) 4,208 4,208
------------ ------------
Total cash, cash equivalents and short-term investments
as of June 30, 2002 66,804 66,804
------------ ------------
LIABILITIES AS OF JUNE 30, 2002:
Accounts payable(1) 201 201
Accrued compensation and related expenses(1) 2,053 2,053
Other current liabilities(1) 2,505 2,505
------------ ------------
Total liabilities as of June 30, 2002 4,759 4,759
------------ ------------
Cash, cash equivalents and short-term investments in excess of total
liabilities as of June 30, 2002 62,045 62,045
------------ ------------
Projected net losses excluding liquidation transaction costs for
the quarters ending(2):
September 30, 2002 (350) (200)
December 31, 2002 (150) --
March 31, 2003 (150) --
Estimated obligations pursuant to severance terms of a Management
Contract(3) (200) (200)
Liquidation transaction costs(4) (900) (700)
Charter holdback(5) 2,000 2,000
Contingency Reserves(6) (6,000) (500)
Estimated proceeds from the exercise of stock options(7) 77
------------ ------------
Projected cash available for distribution to stockholders $ 56,372 $ 62,445
============ ============
Shares of common stock outstanding as of October 21, 2002(7) 40,294,783 40,294,783
Estimated additional shares issued upon exercise of stock
options 98,947
------------ ------------
Total estimated fully-diluted shares of outstanding common
stock 40,393,730 40,294,783
============ ============
Projected liquidation value per share $ 1.40 $ 1.55
============ ============
22
(1) Amounts per the unaudited June 30, 2002 financial statements as filed
in the Company's Form 10-Q for the quarterly period ended June 30,
2002, incorporated by reference in this proxy statement.
(2) For the quarter ended September 30, 2002, we currently expect to incur
a net loss of between $200,000 and $350,000. This estimate is based in
part on the following assumptions:
o We believe we will earn interest on cash and short term
investments for the quarter totaling approximately $300,000.
o We expect to employ a total of three (3) employees to
provide general and administrative support for the wind up
of our remaining affairs.
o We expect to record a charge of approximately $200,000
related to severance obligations for our Secretary and
former General Counsel during the third quarter of 2002.
We expect that before any cash distribution to stockholders and any
liquidation administrative cost, our projected net loss after
September 30, 2002, exclusive of any unforeseen or unusual items, will
not exceed $50,000 per month. These losses will be incurred in
connection with the continued employment of, and overhead costs
associated with, our remaining employees, legal and accounting fees,
rent, miscellaneous office expenses and insurance. We expect to
partially fund these losses from the proceeds of, and interest income
earned on the proceeds of, the Asset Sale, but such interest income
alone generated by the proceeds of the Asset Sale will not be adequate
to fully offset these continuing general and administrative costs,
especially after we make the expected Initial Distribution.
(3) Consists of estimated aggregate severance benefits to which our
President and Chief Financial Officer is entitled under his existing
employment agreement if his employment is terminated.
(4) Consists of estimated legal, printing, insurance, trustee fees, other
professional fees and miscellaneous costs associated with the proposed
liquidation discussed in this proxy.
(5) Amount represents the potential indemnity claims that Charter held
back under the Asset Purchase Agreement, most of which we currently
believe will ultimately be released to us in accordance with the Asset
Purchase Agreement.
23
(6) A Contingency Reserve has not been recorded in our June 30,2002
financial statements which are incorporated herein by reference and a
copy of which is being delivered to you with this proxy. If the
stockholders approve the Plan, we will adopt a liquidation basis of
accounting. At such time, we will record the Contingency Reserve in
our financial statements as required under Delaware law. Under the
liquidation basis of accounting, we will also make adjustments to our
individual assets and liabilities to their estimated net realizable
values that may result in either a net write-up or write-down of our
equity. We currently estimate that the Contingency Reserve will range
between $500,000 to $6,000,000. However, we cannot assure you that the
Contingency Reserve we will establish will be adequate to cover all of
our expenses and liabilities expected to be incurred through
completion of our liquidation.
(7) HSA currently has 98,947 outstanding and exercisable stock options
with a strike price of less than $1.24 per share, the closing price of
a share of our common stock on October 21, 2002. For purposes of
calculating the "Low" range of the "Projected liquidation value per
share," we have assumed that all of these options will be exercised
and the estimated cash proceeds of $77,000 are paid to the Company,
even though their financial impact is not material to the "Projected
liquidation value per share."
In addition, there are 334,081 outstanding and exercisable stock
options with a strike price of $1.30 or $1.38 per share (the average
is $1.31 per share) which are excluded from the "Projected liquidation
per share value." We do not know and cannot predict whether any or all
of these options will be exercised, and in any event do not expect
their exercise to impact materially the "Projected liquidation value
per share."
All other outstanding stock options have a strike price in excess of
the "High" range of the "Projected liquidation value per share."
The actual amount of cash available for distribution to stockholders, and the
liquidation value per share, may vary depending on various factors, including
but not limited to, final payout amounts on known, unknown and contingent
liabilities and the level of cash used in our operations. We cannot assure you
that our projected liquidation value per share of approximately $1.40 to $1.55
will be reflected in the trading price of our common stock or will be received
as a cash distribution.
The method used by the Board and management in estimating the values and value
ranges of HSA's assets and liabilities are inexact and may not approximate
values actually realized. The Board's assessment assumes that the estimate of
HSA's liabilities and operating costs are accurate, but those estimates are
subject to numerous uncertainties beyond our control and also do not reflect any
contingent liabilities that may materialize. For all these reasons, we can not
assure you that the actual net proceeds distributed to stockholders in
liquidation will not be significantly less than the estimated amount shown.
IMPORTANT NOTE. PricewaterhouseCoopers LLP has neither examined nor compiled the
accompanying prospective financial information and, accordingly,
PricewaterhouseCoopers LLP does not express an opinion or any other form of
assurance with respect thereto. This prospective financial information was not
prepared with a view toward compliance with the published guidelines of the
Securities and Exchange Commission or the guidelines established by the American
Institute of Certified Public Accountants for preparation and presentation of
prospective financial information.
24
CERTAIN INFORMATION REGARDING THE PRICE OF HSA'S COMMON STOCK
The sale price of a share of our common stock on August 12, 2002 (the date
preceding the date the Plan was adopted by the Board) was $1.18.
POSSIBLE EFFECTS OF THE APPROVAL OF THE PLAN UPON DIRECTORS AND OFFICERS
The approval of the Plan by the stockholders may have certain effects upon HSA's
officers and directors, including those set forth below.
All of HSA's current, and certain of its former, officers and directors hold
shares of common stock or options to acquire shares of common stock. The
directors of the Company, all of who voted in favor of the Plan, held or had
rights to purchase in the aggregate 6,158,020 shares of common stock. See "Five
Percent Beneficial Owners and Management" on page 32.
On August 9, 2002, John G. Hundley, our Secretary, General Counsel and Senior
Vice President - Development, was terminated by the Company and was paid his
severance pursuant to a Separation Agreement. He is now employed as Counsel to
Frost Brown Todd LLC, which we have previously engaged to provide legal
services to us in connection with various contract matters and strategic
activities, and which we have retained to advise us with respect to this
liquidation and other matters affecting the wind up of our affairs. We believe
this engagement to be on customary and ordinary terms. At the request of the
Board, Mr. Hundley continues to serve as our Secretary on a non-employee basis.
No officer or director who served as an officer or director on the day the Board
adopted the Plan is party to an agreement with HSA providing for compensation
for a fixed term or for severance upon termination other than our President and
Chief Financial Officer, George E. Willett. For a description of Mr. Willett's
employment agreement with HSA, see "Compensation, termination and
change-in-control arrangements for President and Chief Financial Officer" on
page 31.
The Board may confer other benefits or bonuses to HSA's employees and officers
in recognition of their services to HSA based on the performance of the
employees and officers, including performance during HSA's liquidation process.
25
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material Federal income tax
consequences of the Plan to HSA's stockholders, but does not purport to be a
complete analysis of all the potential tax effects. The discussion addresses
neither the tax consequences that may be relevant to particular categories of
investors subject to special treatment under certain Federal income tax laws
(such as dealers in securities, banks, insurance companies, tax-exempt
organizations and foreign individuals and entities) nor any tax consequences
arising under the laws of any state, local or foreign jurisdiction. The
discussion is based upon the Internal Revenue Code, Treasury Regulations,
Internal Revenue Service (the "IRS") rulings, and judicial decisions now in
effect, all of which are subject to change at any time; any such change may be
applied retroactively. The following discussion has no binding effect on the IRS
or the courts and assumes that we will liquidate substantially in accordance
with the Plan.
Distributions pursuant to the Plan may occur at various times and in more than
one tax year. We cannot assure you that the tax treatment described herein will
remain unchanged at the time of the distributions. The following discussion
presents the opinion of HSA. No ruling has been requested from the IRS with
respect to the anticipated tax treatment of the Plan, and we will not seek an
opinion of counsel with respect to the anticipated tax treatment. If any of the
conclusions stated herein proves to be incorrect, the result could be increased
taxation to the stockholders thus reducing the benefit to the stockholders and
HSA from the liquidation.
Consequences to HSA. To the extent that HSA generates federal taxable income
between the approval of the Plan and completion of the liquidation, we believe
that sufficient federal tax net operating losses will be available to offset
such federal taxable income.
Consequences to Stockholders. Upon liquidation of HSA, 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 for
their shares of the common stock. A stockholder's tax basis in his or her shares
will depend upon various factors, including the amount paid by the stockholder
for his or her shares and the amount and nature of any distributions received
with respect to those shares.
A stockholder's gain or loss will be computed on a "per share" basis. Because
HSA expects to make more than one liquidating distribution, the amount of each
such liquidating distribution will be allocated proportionately to each share of
stock owned by a stockholder. Any gain will be recognized by reason of a
liquidating distribution only to the extent that the aggregate value of such
distributions received by a stockholder with respect to a share exceeds his, her
or its tax basis for that share. STOCKHOLDERS SHOULD NOTE CAREFULLY THAT ANY
LOSS WILL GENERALLY BE RECOGNIZED ONLY UPON EITHER (i) A SALE OF THE
STOCKHOLDER'S SHARES, OR (ii) WHEN THE FINAL DISTRIBUTION FROM HSA (OR THE
LIQUIDATING TRUST SUCCEEDING TO HSA'S REMAINING ASSETS AND LIABILITIES) HAS BEEN
RECEIVED AND THEN ONLY IF THE AGGREGATE VALUE OF THE LIQUIDATING DISTRIBUTIONS
WITH RESPECT TO A SHARE IS LESS THAN THE STOCKHOLDER'S TAX BASIS FOR THAT SHARE.
IF A STOCKHOLDER RETAINS HIS, HER OR ITS SHARES DURING THE LIQUIDATION PERIOD,
SUCH STOCKHOLDER MAY NOT BE ABLE TO RECOGNIZE ANY LOSS FOR UP TO THREE (3) YEARS
(OR POSSIBLY LATER IF THE LIQUIDATION IS NOT COMPLETE AFTER THREE YEARS.) Any
gain or loss recognized by a stockholder will be capital gain or loss provided
the shares are held as capital assets. Gain resulting from distributions of cash
or assets from a corporation
26
pursuant to a plan of liquidation is, therefore, generally capital gain rather
than ordinary income. If it were to be determined that distributions made
pursuant to the Plan were not liquidating distributions, the result could be
treatment of distributions as dividends, taxable at ordinary income rates.
Upon any distribution of property, the stockholder's tax basis in such property
immediately after the distribution will 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 the sale and
the proceeds of the sale.
After the close of each year, HSA will provide stockholders and the IRS with a
statement of the amount of cash distributed to the stockholders and, if
applicable, 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
such property valuation. As a result of such a challenge, the amount of gain or
loss recognized by stockholders might be changed. Distributions 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.
LIQUIDATING TRUSTS. If HSA transfers assets to a liquidating trust, HSA intends
to structure such trust so that stockholders will be treated for tax purposes as
having received their proportionate share of the property at the time it is
transferred to the liquidating trust. In such event, the amount of the
distribution will be reduced by the amount of known liabilities assumed by the
liquidating trust or to which the property transferred is subject. The
liquidating trust itself should not be subject to tax. After formation of the
liquidating trust, the stockholders will take into account for Federal income
tax purposes their allocable portion of any income, gain or loss recognized by
the liquidating trust. AS A RESULT OF THE TRANSFER OF PROPERTY TO THE
LIQUIDATING TRUST AND THE ONGOING OPERATIONS OF THE LIQUIDATING TRUST,
STOCKHOLDERS SHOULD BE AWARE THAT THEY MAY BE SUBJECT TO TAX, WHETHER OR NOT
THEY HAVE RECEIVED ANY ACTUAL DISTRIBUTIONS FROM THE LIQUIDATING TRUST WITH
WHICH TO PAY THE TAX.
TAXATION OF NON-UNITED STATES STOCKHOLDERS. Foreign corporations or persons who
are not citizens or residents of the United States should consult their tax
advisor with respect to the U.S. and non-U.S. tax consequences of the Plan.
STATE AND LOCAL TAX. Stockholders may also be subject to state or local taxes
and should consult their tax advisor with respect to the state and local tax
consequences of the Plan.
The foregoing summary of certain Federal income tax consequences is included for
general information only and does not constitute legal advice to any
stockholder. The tax consequences of the Plan may vary depending upon your
particular circumstances. We recommend that you consult your own tax advisor
regarding the specific tax consequences of the Plan to you.
VOTE REQUIRED AND BOARD RECOMMENDATION
The approval of the Plan requires the affirmative vote of the holders of a
majority of the outstanding shares of common stock.
27
THE BOARD BELIEVES THAT THE PLAN IS IN THE BEST INTERESTS OF HSA'S STOCKHOLDERS
AND RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. WE INTEND TO VOTE SHARES
REPRESENTED BY THE ENCLOSED FORM OF PROXY IN FAVOR OF THIS PROPOSAL UNLESS YOU
SPECIFY OTHERWISE IN THE PROXY.
While the matters set forth above may be deemed to give rise to a potential
conflict of interest with respect to the Board's adoption of the Plan, the Plan
was adopted by the unanimous vote of directors believed by HSA to be
disinterested. We determined that no independent committee was required to
review the Plan because we do not currently anticipate that the liquidation of
HSA will result in any material increase in value of the options held by any
director who participated in the vote on the Plan as compared to the value that
he or she would have received by exercising his or her options prior to the
Initial Distribution.
* * * * * * *
28
PROPOSAL NO. 2
ELECTION OF CLASS III DIRECTORS
CLASS III DIRECTORS TO BE ELECTED
Our Certificate of Incorporation divides the Board of Directors into three
classes. Each class serves a three-year term and only one class is elected at
each annual meeting of stockholders. Class III directors are to be elected this
year.
At the Annual Meeting, two directors are to be elected in Class III, with a term
to expire at the annual meeting of stockholders to be held in 2005. The Board of
Directors has nominated David A. Jones, Jr. and Robert S. Saunders for election
as directors in Class III. Both of these individuals is currently serving as a
director in Class III. Following the election of Class III directors at the
Annual Meeting, the Board of Directors will consist of five members, with one
director serving in Class I and two directors serving in each of Class II and
Class III.
The Board has no reason to believe that any nominee for Class III director will
not be available for election. However, if any of the nominees becomes
unavailable for election, and unless authority is withheld, the holders of the
proxies solicited hereby will vote for such other individual(s) as the Board may
recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR CLASS III
DIRECTORS NAMED ABOVE.
INFORMATION ABOUT OUR DIRECTORS AND NOMINEES
The following biographies show the age and principal occupation during the past
five years of each of our directors, the date the director was first elected to
the Board of Directors and any directorships held by the director with any other
public company or registered investment company. Ages are shown as of October
21, 2002.
Class III directors (terms expiring at the annual meeting held in 2005):
David A. Jones, Jr., 44, has served as Chairman of the Board and a
director of the Company since April 1998. Since 1994, Mr. Jones has been
Chairman of Chrysalis Ventures, a private equity management firm. Mr. Jones also
serves as Vice Chairman and a director of Humana, Inc.
Robert S. Saunders, 50, has served as Vice Chairman of the Board and a
director of the Company since April 1998. Mr. Saunders has been Senior Managing
Director of Chrysalis Ventures, a private equity management firm, since 1997.
Class II directors (terms expiring at the annual meeting held in 2004):
Michael E. Gellert, 71, has been a director of the Company since April
1998. Since 1967, Mr. Gellert has served as a General Partner of Windcrest
Partners, a private investment company. Mr. Gellert is a
29
director of Devon Energy Corp., Six Flags, Inc., Humana Inc., Seacor Smit Inc.,
Smith Barney World Funds, Travelers Series Funds, Inc., and he is on the
Advisory Board to the Bank of New York.
Daniel J. O'Brien, 43, the Company's former President and Chief
Executive Officer, has been a director since September 2000. Mr. O'Brien joined
the Company as Chief Operating Officer in October 1999 and was named President
in November 1999 and Chief Executive Officer in February 2000. Mr. O'Brien's
employment with the Company was terminated on April 30, 2002. From 1995 to
October 1999, Mr. O'Brien was President and Chief Operating Officer of
Primestar, Inc. and previously served as President of Time Warner Satellite
Services.
Class I director (term expiring at the annual meeting held in 2003):
Irving W. Bailey, II, 61, has been a director of the Company since
April 1998. Mr. Bailey is a Managing Director of Chrysalis Ventures, a private
equity management firm. Mr. Bailey is also a director of Computer Sciences
Corporation (CSC).
DIRECTOR COMPENSATION
Directors do not currently receive cash compensation for service on the Board or
any committee of the Board, but directors may be reimbursed for their reasonable
expenses incurred in connection with attendance at Board and committee meetings.
In January of each year, directors who are not employees of the Company or its
subsidiaries receive automatic grants of stock options under our 1999
Non-Employee Director Stock Option Plan. Under the plan, each non-employee
director received an option to purchase 27,125 shares of Common Stock in January
1999. Such options were granted at fair market value on the date of grant and
vested immediately. In January 2000, January 2001, and in January 2002, each
director received an option to purchase 11,625 shares of Common Stock that vest
over the remainder of the respective director's term effective at the time of
the grant. All options granted to non-employee directors have an exercise price
equal to the fair market value of the common stock on the grant date, and have a
term of ten years. If the Plan is approved, the Board intends to cancel the 1999
Non-Employee Director Stock Option Plan prior to the automatic grant of any
options in January 2003. We do not expect to compensate our Board for any
services in 2003 other than reimbursement for their reasonable expenses incurred
in connection with attendance at Board and committee meetings.
MANAGEMENT OF THE COMPANY
The following table sets forth certain information concerning our executive
officers. The executive officers serve at the pleasure of the Board of
Directors.
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
George E. Willett 40 President and Chief Financial Officer
John G. Hundley 42 Secretary
George E. Willett was appointed as Chief Financial Officer of the Company in
June 1998 and President of the Company effective May 1, 2002. From 1997 to 1998,
Mr. Willett served as Chief Financial Officer of
30
American Pathology Resources, Inc. and, from 1994 to 1997, as Chief Financial
Officer of Regent Communications, Inc., a radio station holding company.
John G. Hundley previously served as Secretary and General Counsel of the
Company from November 2001, and Senior Vice President -- Business Development
and Assistant Secretary of the Company from November 2000. On August 9, 2002,
Mr. Hundley was terminated by the Company and was paid his severance pursuant to
a Separation Agreement. He is now employed as Counsel to Frost Brown Todd, LLC,
which we have previously engaged to provide legal services to us in connection
with various contract matters and strategic activities, and which we have
retained to advise us with respect to this liquidation and other matters
affecting the wind up of our affairs. We believe this engagement to be on
customary and commercially reasonable terms. At the request of the Board of
Directors, Mr. Hundley continues to serve as our Secretary on a non-employee
basis.
COMPENSATION, TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS FOR OUR PRESIDENT
AND CHIEF FINANCIAL OFFICER
In July 2001, the Company entered into an employment agreement with George E.
Willett, our President and Chief Financial Officer. Under this agreement, Mr.
Willett is entitled to a base salary of $14,000 per month. He is also eligible
for a bonus of up to 50% of his base salary, and is entitled to participate in
the Company's retirement, medical, dental and welfare plans, life and disability
insurance and other benefit plans afforded to senior executives and employees by
the Company. Mr. Willett's agreement is for a term of one year and automatically
renews for successive one year terms unless the Company elects to terminate the
agreement upon sixty days notice to Mr. Willett prior to the end of the
respective term.
Under the agreement, if Mr. Willett's employment is terminated without cause or
constructively terminated, he is entitled to continued base salary for twelve
months, any bonus previously fixed and declared by the Board of Directors,
continuation of group health benefits for period of not less than eighteen
months and the right to exercise all options previously granted to him for a
period of up to twelve months. The payment of any severance benefits under the
agreement as set forth above is subject to Mr. Willett's compliance with certain
non-compete covenants during the period such benefits are being paid. We have
also granted Mr. Willett 75,000 shares of restricted stock pursuant to a
Restricted Stock Agreement. The restrictions on the stock will lapse if Mr.
Willett's employment is involuntarily or constructively terminated at any time.
We expect to retain Mr. Willett and one (1) other employee until we settle any
issues associated with the $2 million Charter indemnity holdback and make the
Initial Distribution, and possible longer if we remain a reporting company
subject to the Exchange Act. If and to the extent we terminate Mr. Willett after
the making of the Initial Distribution, we may retain his services (and the
services of our other employee) on a consulting or other out-sourced basis if
deemed necessary by the Board.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). These
officers and directors are required by SEC regulation to furnish us with copies
of all Section 16(a) forms filed. Based
31
solely upon review of copies of such forms, or written representations that
there were no unreported holdings or transactions, we believe that for the
fiscal year ending December 31, 2001 all Section 16(a) filing requirements
applicable to our executive officers, directors and ten percent beneficial
owners were complied with on a timely basis. We filed an amended Form 5 with the
SEC to correct the inadvertent omission of a 1,000 share gift of HSA stock by
one of our directors in February 2001.
FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the number of shares of the Company's Common Stock
beneficially owned as of October 21, 2002, by each person who is known by us to
own beneficially more than 5% of the common stock, each of the directors, each
of the officers named in the Summary Compensation Table, and all directors and
executive officers as a group.
SHARES OF CLASS
BENEFICIALLY OWNED
---------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT(1)
------------------------ --------- ----------
Korsant Partners Limited Partnership(8) 2,400,000 6.0%
Don C. Whitaker (12) 2,320,116 5.8%
Irving W. Bailey, II(2) 1,384,567 3.4%
Michael E. Gellert(3) 593,179 1.5%
David A. Jones, Jr.(4) 975,736 2.4%
Robert S. Saunders(5) 377,523 1.0%
Daniel J. O'Brien(6) 2,820,000 6.7%
Gregory G. Hodges (7) 455,000 1.1%
Richard George(8) 100,000 *
John G. Hundley(9) 101,875 *
George E. Willett(10) 259,008 *
Directors and executive officers
As a group (9 persons)(11) 7,066,888 16.5%
----------
*Less than 1%
(1) Based on 40,294,783 shares of common stock issued and outstanding as
of October 21, 2002. Shares which a person has the right to acquire
pursuant to options within sixty days after October 21, 2002, are
deemed to be outstanding for the purposes of computing the percentage
for such person but are not deemed to be outstanding for the purpose
of computing the percentage of any other person.
(2) Includes 4,800 shares held by Mr. Bailey's wife, 19,000 shares held by
the Beauregard Foundation, of which Mr. Bailey is President, and
54,767 shares that Mr. Bailey may acquire upon exercise of options
exercisable within 60 days of October 21, 2002.
(3) Includes 173,515 shares held by Mr. Gellert's wife and 40,301 shares
that Mr. Gellert may acquire upon exercise of options exercisable
within 60 days of October 21, 2002.
(4) Includes 164 shares held by CV Holdings, Inc., of which Mr. Jones is
the sole shareholder, 2,115 shares held by Chrysalis Ventures, LLC, a
company controlled by Mr. Jones, 1,540 shares held by
32
Mr. Jones' wife as custodian under the Uniform Gift to Minors' Act and
62,000 shares that Mr. Jones may acquire upon exercise of options
exercisable within 60 days of October 21, 2002.
(5) Includes 115,526 shares held by Saunders Capital, LLC, of which Mr.
Saunders is president, 91,834 shares held by Saunders Capital Profit
Sharing Plan and 62,000 shares that Mr. Saunders may acquire upon
exercise of options exercisable within 60 days of October 21, 2002.
(6) Includes 1,600,000 shares that Mr. O'Brien may acquire upon exercise
of options exercisable within 60 days of October 21, 2002. Mr.
O'Brien's employment was terminated on April 30, 2002.
(7) Includes 350,000 shares that Mr. Hodges may acquire upon exercise of
options exercisable within 60 days of October 21, 2002. Mr. Hodges'
employment was terminated on April 30, 2002.
(8) Based on information set forth in Schedule 13G filed on September 26,
2002 on behalf of Korsant Partners Limited Partnership, Lusman
Investment Partners, Philip B. Korsant and Joel Lusman.
(9) Includes 1,230 shares held by Mr. Hundley's wife, 765 shares held by
Mr. Hundley as custodian under the Uniform Gift to Minors Act, and
96,500 shares that Mr. Hundley may acquire upon exercise of options
exercisable within 60 days of October 21, 2002.
(10) Includes 75,000 shares of restricted stock subject to forfeiture,
179,158 shares that Mr. Willett may acquire upon exercise of options
exercisable within 60 days of October 21, 2002, and 3,200 shares held
in the Company's 401(k) plan.
(11) Includes shares of restricted stock and shares that the directors and
executive officers may acquire upon exercise of options exercisable
within 60 days of October 21, 2002.
(12) Based on information set forth in Schedule 13D (Amendment No. 1) filed
on July 3, 2002 by Don C. Whitaker. Amount does not include 435,000
shares held by Don Whitaker, Inc. or 130,000 shares held by Don
Whitaker. Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of four directors who are not employees
of the Company or any of its subsidiaries. The current members of the Committee
are Mr. Bailey, Mr. Gellert, Mr. Jones and Mr. Saunders. No interlocking
relationship exists between the Board of Directors or Compensation Committee and
the board of directors or compensation committee of any other company, nor has
such interlocking relationship existed in the past.
33
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held twenty (20) meetings, and constituted as a Special
Committee in connection with the Asset Sale to Charter, held an additional eight
(8) meetings, during 2001. Excluding certain directors who resigned on July 31,
2001, each of the our directors attended at least 75% of the total number of
meetings of the Board of Directors and the committees of the Board of Directors
on which such director served.
We have a standing Audit Committee and Compensation Committee whose functions
and members are described below:
COMPENSATION COMMITTEE. The Compensation Committee reviews and approves the
compensation of the Company's officers, reviews and administers the Company's
stock option plans for employees and makes recommendations to the Board of
Directors regarding such matters. The members of the Compensation Committee are
Mr. Saunders, Chairman, and Messrs. Bailey, Gellert, and Jones. The Compensation
Committee met seven (7) times in 2001.
AUDIT COMMITTEE. The Audit Committee makes recommendations to the Board of
Directors regarding the selection and retention of the independent auditors,
reviews the scope and results of the audit and reports the results to the Board
of Directors. In addition, the Audit Committee reviews the adequacy of internal
accounting, financial and operating controls, reviews the Company's financial
reporting compliance procedures, and oversees the Company's reporting of
financial information including the review of quarterly and annual financial
information prior to filing with the Securities and Exchange Commission (the
"SEC"). All of the present members of the Audit Committee are "independent" as
defined in the National Association of Securities Dealers' listing standards.
The members of the Audit Committee are Mr. Bailey, Chairman, and Messrs.
Gellert, Jones, and Saunders. The Audit Committee met five (5) times in 2001.
AUDIT COMMITTEE REPORT
In connection with its responsibilities under its charter, the Audit Committee:
o Reviewed and discussed with management the audited financial
statements for the year ended December 31, 2001;
o Discussed with the independent auditors the matters required to be
discussed by AICPA Statement on Auditing Standards No. 61,
Communication with Audit Committees (required communication by
external auditors to audit committees);
o Received from the independent auditors written disclosures regarding
the auditors' independence required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, and
discussed with the auditors the auditors' independence; and
o Recommended, based on the review and discussions noted above, to the
Board of Directors that the audited financial statements be included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, for filing with the Securities and Exchange
Commission.
Submitted by,
Irving W. Bailey, II, Chairman
Michael E. Gellert
David A. Jones, Jr.
Robert S. Saunders
34
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors
administers the Company's general and executive compensation programs, including
compensation, severance, retirement benefits, restricted stock and stock option
plans. The Committee also reviews, recommends and approves changes to those
policies and programs, and makes recommendations to the Board of Directors as to
the amount and form of executive officer compensation.
GENERAL COMPENSATION PHILOSOPHY. In fiscal year 2001, the compensation programs
of the Company were designed primarily to enable the Company to retain and
reward executives and employees needed to accomplish the Company's goals of
restructuring (i.e., minimizing operating and administrative expenses in order
to retain shareholder value and downsizing the Company workforce), and arranging
for the sale or other strategic disposition of the Company . Therefore, the
Company provided an executive compensation program which included base pay,
severance benefits for both voluntary and involuntary terminations, in some
cases, restricted stock grants, and in other cases, incentive opportunities
through the use of stock options.
BASE SALARY. Base salary was designed primarily to be competitive with base
salary levels in effect at high technology companies that are of comparable size
to the Company and with which the Company competes for executive personnel. Base
salary is set annually based on job-related experience, individual performance
and pay levels of similar positions at comparable companies. Salaries for
executive officers for 2001 were generally determined on an individual basis by
evaluating each executive's scope of responsibility, performance, prior
experience and salary history, as well as salaries for similar positions at
comparable companies.
CASH PERFORMANCE AWARDS. Cash performance awards, such as bonuses, are tied to
the achievement of performance goals, financial or otherwise, established by the
Committee. The Company had no formal management incentive plan in 2001, and we
paid no bonuses in 2001, except to the extent that we were legally obligated to
do so by contract. However, as disclosed on our Form 10-K for the period ending
December 31, 2001, we did pay discretionary cash bonuses to certain employees in
2002 based on their performance in downsizing the Company workforce, operating
the business prior to the Asset Sale, successfully arranging and closing the
Asset Sale to Charter and otherwise retaining value for the stockholders.
STOCK OPTIONS AND RESTRICTED STOCK. In order to link the interests of the
Company's stockholders and senior management, the Company maintains stock option
plans. In 2001, the Committee believed that the practice
35
of granting stock options, and in some cases, restricted stock, was critical to
retaining the key talent necessary at all employee levels to ensure the
achievement of the Company's restructuring goals. Stock options generally have
value for executive officers only if the price of the Company's common stock
increases above the fair market value of a share of common stock on the grant
date and the officer either remains in the Company's employ for the period
required for the options granted to such person to vest, or their employment is
terminated in connection with a change of control event following a sale or
merger of the Company.
The number of shares subject to stock options or restricted stock granted is
within the discretion of the Committee. In determining the size of stock option
or restricted stock grants, the Committee considered the officer's
responsibilities, the expected future contribution of the officer to the
Company's performance and goals, and the number of shares which continue to be
subject to vesting under outstanding options. For 2001, options were granted to
the executive officers based on their positions and a subjective assessment of
individual performances. In addition, options were granted to certain executive
officers as incentives for them to strive to increase and preserve the value of
the Company's common stock for the benefit of the stockholders and to aid in
their retention due to the anticipated sale or merger of the Company . The stock
options generally become exercisable over a four-year period and are granted at
a price that is equal to the fair market value of the Company's common stock on
the date of grant. The restricted stock generally vests at the end of a 3-year
period unless accelerated by an involuntary termination resulting from a change
of control.
COMPENSATION FOR THE FORMER CHIEF EXECUTIVE OFFICER. In 2001, Mr. Dan O'Brien's
base salary and long term incentive rewards were determined by the Committee in
reference to his original and new employment agreements entered into between the
Company and Mr. O'Brien. The Committee believed that the new employment
agreement terms were consistent with the factors described above for all
executive officers, especially Mr. O'Brien responsibilities in connection with
the restructuring and downsizing the Company, the negotiation and closing of the
Asset Sale to Charter, and the preservation of value for the stockholders.
INTERNAL REVENUE CODE SECTION 162(M) LIMITATION. Section 162(m) of the Internal
Revenue Code imposes a limit, with certain exceptions, on the amount that a
publicly held corporation may deduct in any year for the compensation paid or
accrued with respect to its five most highly compensated executive officers. In
general, it is the Committee's policy to qualify, to the maximum extent
possible, executives' compensation for deductibility under applicable tax laws.
Compensation Committee
Robert S. Saunders, Chairman
Irving W. Bailey, II
Michael E. Gellert
David A. Jones, Jr.
36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 9, 2002, John G. Hundley, our Secretary, General Counsel and Senior
Vice President - Development, was terminated by the Company and was paid his
severance pursuant to a Separation Agreement. He is now employed as Counsel to
Frost Brown Todd, LLC, which we have previously engaged to provide legal
services to us in connection with various contract matters and strategic
activities, and which we have retained to advise us with respect to this
liquidation and other matters affecting the wind up of our affairs. We believe
this engagement to be on customary and commercially reasonable terms. At the
request of the Board, Mr. Hundley continues to serve as our Secretary on a
non-employee basis.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
DAVID A. JONES, JR. AND ROBERT S. SAUNDERS AS CLASS III
DIRECTORS OF THE COMPANY.
* * * * * *
37
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
The Board of Directors has selected PricewaterhouseCoopers LLP, as independent
auditor, to audit our financial statements of the Company for the fiscal year
ending December 31, 2002. In the event of a negative vote on such ratification,
the Board will reconsider its selection for the fiscal year ending December 31,
2002.
PricewaterhouseCoopers LLP has audited the Company's financial statement for
each year since 1998. Representatives of PricewaterhouseCoopers LLP are expected
to be present at the meeting with the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
AUDIT FEES
PricewaterhouseCoopers LLP billed the Company in 2001 an amount of $169,913 for
professional services rendered for the audit of the Company's annual financial
statements for fiscal year 2001 and the reviews of the financial statements
included in the Company's Forms 10-Q for fiscal year 2001.
PricewaterhouseCoopers LLP also billed the Company an additional $136,150 for
audit-related special services including the review of the proxy statement and
related financial statements filed in connection with the Asset Sale to Charter
and an audit of the financial statements of one of the Company's subsidiaries.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP neither rendered nor billed the Company for
professional services including supervising the operation of the Company's
information systems and design or implementation of hardware or software to
aggregate source data underlying the Company's financial statements during
fiscal year 2001.
ALL OTHER FEES
PricewaterhouseCoopers LLP billed the Company an aggregate amount of $255,593
for professional services during fiscal year 2001, excluding amounts billed in
connection with audit services and financial information systems design
implementation. This amount includes fees billed in fiscal year 2001 for
assistance with due diligence in connection with the Asset Sale to Charter,
evaluation of Internal Revenue Code Section 382 limitations on net operating
loss carryforwards, research and consultation regarding tax issues related to
doing business in Germany, preparation of individual and branch operation tax
returns related to the Company's Germany operations and miscellaneous tax
consulting services. The Audit Committee, in conducting its review of auditor
independence, considered whether the performance of services by the independent
accountants in addition to their audit services was compatible with maintaining
the independence of PricewaterhouseCoopers LLP as auditor.
38
VOTE REQUIRED
The affirmative vote of the majority of the votes cast will be required to
ratify and approve the appointment of PricewaterhouseCoopers LLP as our
independent auditor for the fiscal year ending December 31, 2002.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLC AS OUR INDEPENDENT AUDITOR
* * * * * *
39
OTHER INFORMATION
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN - STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder return
on its Common Stock during a period beginning June 4, 1999, when shares of
Common Stock of the Company were first registered under Section 12(g) of the
Securities and Exchange Act of 1934, and end on December 31, 2001(as measured by
dividing (a) the difference between the Company's share price at the end and the
beginning of the measurement period; by (b) the share price at the beginning of
the measurement period), with the cumulative total return of the Nasdaq (US)
Index and the Morgan Stanley High Technology Index during such period, assuming
a $100 investment on June 4, 1999. It should be noted that the Company has not
paid any dividends on the Common Stock, and no dividends are included in the
representation of the Company's performance. The stock price performance shown
on the graph is not necessarily indicative of future price performance.
[PERFORMANCE GRAPH]
Total returns for: 06/04/99 12/31/99 12/31/00 12/31/01
------------------ -------- -------- -------- --------
High Speed Access Corp. $ 100 $ 87 $ 5 $ 3
Nasdaq (US) Index 100 164 100 79
Morgan Stanley High Technology Index 100 175 127 98
40
SOLICITATION OF PROXIES
In addition to solicitation by mail, some of the Company's directors and
officers who will receive no additional compensation for their services may
solicit proxies in person, and by telephone, telegraph, telecopier, facsimile.
All costs of solicitation of proxies will be borne by the Company. We have
requested brokers and nominees who hold stock in their name to furnish this
proxy material to their customers and the Company will reimburse such brokers
and nominees for their reasonable related out-of-pocket expenses.
DESCRIPTION OF BUSINESS
See "Background and Reasons for the Plan" on page 11.
LEGAL PROCEEDINGS
The Delaware Class Action Lawsuits. The Company, our directors, certain former
directors as well as Charter and Paul Allen have been named as defendants in
four putative class action lawsuits filed in the Court of Chancery of the State
of Delaware (Denault v. O'Brien, et. al., Civil Action No. 19045-NC, Tesche v.
O'Brien, et al., Civil Action No. 19046-NC, Johnson v. O'Brien, et. al., Civil
Action No. 19053-NC, and Krim v. Allen, et al., Civil Action 19478-NC). All four
lawsuits, which allege breach of fiduciary duty by the individual defendants and
Charter, have been consolidated.The complaints in the first three lawsuits (with
the Denault complaint the operative complaint in the Consolidated Action)
allege, among other things, that the cash purchase price initially proposed by
Charter, $73.0 million, was grossly inadequate and that "[t]he purpose of the
proposed acquisition is to enable Charter and Allen to acquire [the Company's]
valuable assets for their own benefit at the expense of [the Company's] public
stockholders." The fourth lawsuit, Krim v. Allen, alleges that the $81.1 million
purchase price under the Asset Purchase Agreement was "grossly inadequate," and
that Charter and Paul Allen acted in a manner calculated to benefit themselves
at the expense of HSA's public shareholders.
The plaintiffs ask to represent the interests of all common stockholders of the
Company and seek (except in the case of Krim v. Allen) injunctive relief
preventing the Company from consummating the Asset Sale. All four lawsuits seek
to rescind the transaction and seek unspecified monetary damages.
We believe these lawsuits are entirely without merit. Nevertheless, lawyers for
the defendants in these lawsuits have had discussions with attorneys
representing the plaintiffs in the first three lawsuits concerning, among other
topics, financial and other changes to the terms of the draft Asset Purchase
Agreement that addressed the matters raised by the plaintiffs. As a result of
these discussions, a tentative agreement was reached to settle the first three
lawsuits subject to the completion of confirmatory discovery. The tentative
settlement is embodied in a Memorandum of Understanding (the "MOU"), dated as of
January 10, 2002, executed by counsel to all parties to the first three
lawsuits,. The MOU provides, among other things, that the settlement is premised
upon defendants' acknowledgment that the prosecution of the first three
litigations was a "substantial causal factor" underlying defendants' decision to
condition the Asset Sale on the public stockholder majority vote and was "one of
the causal factors" underlying Charter's decision to increase the consideration
to be paid to the Company in connection with the Asset Sale. The MOU further
provides that
41
defendants shall, upon Court approval, pay up to $390,000, which amount will be
allocated among the defendants, to reimburse plaintiffs' counsel for the fees
and expenses incurred in pursuit of these litigations.
Confirmatory discovery now has been completed. The settlement is subject to
final documentation and approval of the Delaware Chancery Court following notice
to class members. The claims asserted in the fourth lawsuit, Krim v. Allen, will
be covered by the settlement if it is ultimately approved by the Court.
The IPO Litigation. Also, on November 5, 2001, the Company, our President and
Chief Financial Officer (Mr. Willett) and one of our former Presidents (Mr. Ron
Pitcock), together with Lehman Brothers, Inc., J.P. Morgan Securities, Inc.,
CIBC World Markets Corp., and Banc of America Securities, Inc., were named as
defendants in a purported class action lawsuit filed in the United States
District Court for the Southern District of New York (Ruthy Parnes v. High Speed
Access Corp., et. al., Index No. 01-CV-9743(SAS)). The lawsuit alleges that our
Registration Statement, dated June 3, 1999, and Prospectus, dated June 4, 1999,
for the issuance and initial public offering of 13,000,000 shares of our common
stock to investors contained material misrepresentations and/or omissions,
alleging that our four underwriters engaged in a pattern of conduct to
surreptitiously extract inflated commissions greater than those disclosed in the
offering materials, among other acts of misconduct. The plaintiff asks to
represent the interest of all holders of our common stock and seeks unspecified
monetary damages. With respect to allegations against the Company, our President
and Chief Financial Officer and another of our former Presidents, we believe
this lawsuit is without merit and intend to vigorously defend against the claims
made therein. The allegations against Messrs. Willett and Pitcock were dismissed
without prejudice on October 11, 2002 pursuant to a Reservation of Rights and
Tolling Agreement dated as of July 20, 2002. We express no opinion as to the
allegations lodged against Lehman Brothers, Inc., J.P. Morgan Securities, Inc.,
CIBC World Markets Corp., and Banc of America Securities Inc.
We do not believe that the results of the above-noted legal proceedings will
have a material adverse effect on our financial condition or cash flows.
However, the Company's defense of and/or attempts to settle favorably these
proceedings and claims may affect the timing and amount of any distributions
made under the Plan.
STOCKHOLDER PROPOSALS
Any stockholder proposals intended to be presented at the Company's 2003 Annual
Meeting of Stockholders must be received in writing by the Company at its
principal office no later than March 13, 2002. Any proposal submitted after that
date will be considered untimely, and it will not be included in our proxy
statement and form of proxy relating to the 2003 Annual Meeting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly, special reports, proxy statements, and other
information with the SEC. You may read and copy any reports, statements or other
information HSA files at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. HSA's SEC filings are
also available to the public from commercial document retrieval services and at
the web site maintained by the SEC at http://www.sec.gov.
42
The SEC allows us to "incorporate by reference" information into the proxy
statement, which 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 proxy statement, except
for any information superseded by information in this proxy statement. This
proxy statement incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about our Company and its finances.
1) Annual Report on Form 10-K for the fiscal year ended
December 31, 2001
2) Definitive Proxy on Form 14A dated February 1, 2002
3) Quarterly Report on Form 10-Q for the quarter ended March
31, 2002
4) Quarterly Report on Form 10-Q for the quarter ended June
30, 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
meeting. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this proxy statement to the extent that a statement contained
herein or in any other document subsequently filed with the SEC which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this proxy
statement.
Annual Report on Form 10-K and Quarterly Report on Form 10-Q for period ended
June 30, 2002. Of the filings we have made with the SEC, the following reports
are being delivered to you with this proxy statement:
1) HSA's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001; and
2) HSA's Quarterly Report on Form 10-Q for the quarter ended June 30,
2002. Except as described in "Legal Proceedings," there have been
no material changes in HSA's affairs since June 30, 2002, the
period covered by HSA's latest Quarterly Report on Form 10-Q.
We will provide without charge to each person to whom a copy of this proxy
statement is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to the documents, unless such exhibits are specifically
incorporated by reference in the documents). Requests for such copies should be
directed to High Speed Access Corp., 9900 Corporate Campus Drive, Suite 300,
Louisville, Kentucky 40223, Attention: George E. Willett, President, or you may
call us at (502) 657-6340.
If you would like to request documents from us, please do so by November 20,
2002 to receive them before the meeting.
You should rely only on the information contained or incorporated by reference
in this proxy statement to vote on the Plan. We have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement. This proxy statement is dated October 25, 2002. You should not
43
assume that the information contained in this proxy statement is accurate as of
any date other than October 25, 2002.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come before
the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
By Order of the Board of Directors,
JOHN G. HUNDLEY
Secretary
October 25, 2002
The Board of Directors encourages stockholders to attend the meeting. Whether or
not you plan to attend, you are urged to complete, date, sign and return the
enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the meeting and your cooperation will be
appreciated. Stockholders who attend this meeting may vote their stock
personally even though they have sent in their proxies.
44
APPENDIX A
PLAN OF LIQUIDATION AND DISSOLUTION
OF
HIGH SPEED ACCESS CORP.
THIS PLAN OF LIQUIDATION AND DISSOLUTION (THE "PLAN") PROVIDES FOR THE COMPLETE
LIQUIDATION AND DISSOLUTION OF HIGH SPEED ACCESS CORP., A DELAWARE CORPORATION
(THE "CORPORATION"), IN ACCORDANCE WITH SECTIONS 275 AND 281(b) OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE (THE "DGCL") AND SECTION 331 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), PURSUANT TO THE
FOLLOWING STEPS:
1. This Plan shall become effective upon the approval and
adoption hereof by holders of a majority of the Corporation's outstanding common
stock entitled to vote on a dissolution pursuant to Section 275 of the DGCL.
2. The Corporation shall be formally dissolved at the
appropriate time in accordance with the DGCL and in anticipation thereof shall
cease doing business.
3. Pursuant to the Plan, the Corporation shall cease to be a
going concern at the earliest practical date, and shall continue its activities
thereafter merely for the purpose of winding up its affairs, paying its debts
and distributing the balance of its assets to its stockholders. The status of
liquidation will exist at the time of the first liquidating distribution and
will continue until the final liquidating distribution is made to the
stockholders.
4. Prior to the date the Certificate of Dissolution (referred
to in paragraph 5 below) is accepted by the Secretary of the State of Delaware,
the Corporation shall sell, exchange, transfer, lease, license or otherwise
dispose of all of its property and assets to the extent, for such consideration
(which may consist in whole or in part of forgiveness of obligations of the
Corporation, money or other property) and upon such terms and conditions as the
Board deems expedient and in the best interests of the Corporation and its
stockholders, without any further vote or action by the Corporation's
stockholders. The Corporation's remaining assets and properties may be sold in
bulk to one buyer or to a small number of buyers or on a piecemeal basis to
numerous buyers. The Corporation will not be required to obtain appraisals or
other third party opinions as to the value of its properties and assets in
connection with this liquidation process. The liquidation of the Corporation
will not be preceded or followed by the reincorporation in, or transfer or sale
to, a recipient corporation (the "Recipient") of any of the business or assets
of the Corporation, if persons holding more than 20 percent in value of the
stock in the Corporation also hold more than 20 percent in value of the stock of
the Recipient. For these purposes, ownership has been determined by application
of the constructive ownership rules of section 318, as modified by section
304(c)(3), of the Code. As part of the liquidation of its property and assets,
the Corporation shall collect, or make provision for the collection of, all
accounts receivable, debts and claims owing to the Corporation to the extent
feasible and cost efficient.
45
5. If the dissolution is approved pursuant to Paragraph 1
above, a Certificate of Dissolution will be filed with the Secretary of State of
the State of Delaware in accordance with Section 103 of the DGCL at an
appropriate time.
6. Pursuant to Section 281(b) of the DGCL, the Corporation
shall take the following actions through its officers and directors:
(a) (i) pay, or make reasonable provision to pay, all claims
and obligations, including all contingent, conditional, or unmatured
contractual claims, and all expenses relating to the sale of the
Corporation's assets and the liquidation and dissolution of the
Corporation (collectively, "Claims") known to the Corporation;
(ii) make such provision as will be reasonably likely
to be sufficient to provide compensation for any claim against the
Corporation which is the subject of a pending action, suit or
proceeding to which the Corporation 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 Corporation or that have not arisen but
that, based on facts known to the Corporation, are likely to arise or
to become known to the Corporation within 10 years after the date of
dissolution of the Corporation.
Notwithstanding the foregoing, the Corporation will neither pay nor
make adequate provisions for any claims that are assumed by a buyer or
buyers pursuant to the sale of the business or assets of the
Corporation as contemplated by paragraph 4 above.
(b) Claims shall be paid in full and any provisions required
by subparagraphs 6(a)(ii) and 6(a)(iii) hereof shall be provided for in
full if there are sufficient assets. It is expected that the fair
market value of the Corporation's assets will exceed its liabilities
both on the date of adoption of the Plan and at the time the first
liquidating distribution to the stockholders (discussed below) is made.
However, if there are insufficient assets for the payment of Claims and
provisions (discussed above), Claims and provisions shall be paid or
provided for according to their priority and, among claims of equal
priority, ratably to the extent of assets legally available therefor.
(c) All assets of the Corporation remaining after payment of
Claims and provisions required by subparagraph 6(a)(ii) and 6(a)(iii)
will be distributed in complete liquidation of the Corporation within
the 12-month period beginning on the date of the adoption of the Plan.
The balance of the assets retained to satisfy claims of creditors (if
any) will be distributed as soon as all claims are satisfied.
7. If deemed advisable, appropriate or desirable by the Board,
in its absolute discretion, the Board may at any time transfer to a liquidating
trust (the "Trust") the remaining assets of the Corporation. The Trust thereupon
shall succeed to all of the then remaining assets of the Corporation, including
all amounts in any Contingency Reserve, and any remaining liabilities and
obligations of the Corporation. The Board is hereby authorized to appoint one or
more corporations, partnerships, limited liability company or other persons, or
any combination thereof, including, without limitation, any one or more
officers, directors, employees, agents or representatives of the Corporation, to
act as the initial trustee
46
or trustees. Any trustee appointed shall succeed to all right, title and
interest of the Corporation of any kind and character with respect to such
transferred assets and, to extent of the assets so transferred and solely in
their capacity as trustee, shall assume all of the liabilities and obligations
of the Corporation. The Corporation, subject to this paragraph and as authorized
by the Board, in its absolute discretion, may enter into a liquidating trust
agreement with the trustee(s) on such terms and conditions as the Board may deem
necessary, appropriate or desirable. Adoption of this Plan by the stockholders
shall constitute the approval by the stockholders of such appointment, any such
liquidating trust agreement and the transfer of assets by the Corporation to the
Trust pursuant thereto.
8. Any distributions to the Corporation's stockholders
pursuant paragraph 6(c) of this Plan shall be in complete redemption and
cancellation of all of the outstanding common stock of the Corporation. No
distribution of assets representing earned but unreported income will be made by
the Corporation to its stockholders in the liquidation. No part of the
consideration to be received by any stockholder of the Corporation pursuant to
paragraph 6(c) will be received by the stockholder as a creditor, employee, or
in some capacity other than that of a stockholder of the Corporation. Moreover,
no assets will be retained or used to satisfy claims of any stockholders with
respect to their stock. As a condition to such distributions to the
Corporation's stockholders, the Board or the trustee(s), in their absolute
discretion, may require stockholders to surrender their certificates evidencing
common stock to the Corporation, the Trust, or an agent for cancellation. Under
such circumstances, if a stockholder's certificate for shares of common stock
has been lost, stolen or destroyed, such stockholder may be required, as a
condition to the disbursement of any distribution under this Plan, to furnish to
the Corporation, the Trust or an agent satisfactory evidence of the loss, theft
or destruction thereof, together with a surety bond or other security or
indemnity reasonably satisfactory to the Corporation, the Trust or an agent.
9. The Corporation shall continue to indemnify its officers,
directors, employees and agents in accordance with its amended and restated
certificate of incorporation, amended and restated bylaws and any contractual
arrangements as therein or elsewhere provided, and such indemnification shall
apply to acts or omissions of such persons in connection with the implementation
of this Plan and the winding up of the affairs of the Corporation. The
Corporation's obligation to indemnify such persons may be satisfied out of any
Contingency Reserve or out of assets transferred to the Trust, if any. The Board
and the trustee(s) of any Trust are authorized to obtain and maintain insurance
as may be necessary to cover the Corporation's indemnification obligations.
10. In connection with and for the purposes of implementing
and assuring completion of this Plan, the Corporation may, in the absolute
discretion of the Board, pay any brokerage, agency, professional and other fees
and expenses of persons rendering services to the Corporation in connection with
the collection, sale, exchange or other disposition of the Corporation's
property and assets and otherwise in connection with the implementation of this
Plan.
11. In connection with and for the purpose of implementing and
assuring completion of this Plan, the Corporation may, in the absolute
discretion of the Board, pay the Corporation's officers, directors, employees,
agents and representatives, 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 recognition of any
extraordinary efforts they, or any of them, will be required to undertake, or
actually undertake, in connection with the implementation of this Plan. Adoption
of this Plan
47
by the stockholders shall constitute the approval by the Corporation's
stockholders of the payment of any such compensation.
12. Notwithstanding any approval and adoption of this Plan and
the transactions contemplated hereby by the stockholders of the Corporation, the
Board may modify, amend, or abandon this Plan and the transactions contemplated
hereby without further action by the stockholders to the extent permitted under
the DGCL; provided, however, that the Corporation will not amend or modify the
Plan under circumstances that would require additional stockholder approval
under the DGCL and the federal securities laws without complying with the DGCL
and the federal securities laws.
13. The Board and the officers of the Corporation are
authorized to approve changes to the terms of any of the transactions referred
to herein, to interpret any of the provisions of this Plan, and to make, execute
and deliver such other agreements, conveyances, assignments, transfers,
certificates and other documents and take such other action as the Board and/or
the officers of the Corporation deem necessary or desirable in order to carry
out the provisions of this Plan and effect the complete liquidation and
dissolution of the Corporation in accordance with the Code and the DGCL and any
rules and regulations of the Securities and Exchange Commission or any state
securities commission, including, without limitation, any instruments of
dissolution or other documents, and any withdrawal of any qualification to
conduct business in any state in which the Corporation is so qualified, as well
as the preparation and filing of any tax returns.
Dated: As of August 13, 2002.
48
Appendix B
HIGH SPEED ACCESS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John G. Hundley, George E. Willett and each of
them, as proxies, each with the power of substitution and resubstitution and
hereby authorizes any of them to represent and to vote as designated below, all
the shares of common stock, par value $.01 per share, of High Speed Access Corp.
(the "Company"), held of record by the undersigned on October 21, 2002 at the
Annual Meeting of Stockholders to be held on November 27, 2002 at Frost Brown
Todd LLC, 400 West Market Street, 32nd Floor, Louisville, Kentucky at 10:00 a.m.
local time, or any postponement or adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein
by the stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT.
PLEASE, VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Has Your Address Changed? Mark box at right if an address change has been
noted on the reverse side of this card. [ ]
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
(Continued on reverse side)
49
HIGH SPEED ACCESS CORP.
1. To approve a plan of complete liquidation and dissolution of High Speed
Access Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To elect David Jones and Robert Saunders as Class III directors of High
Speed Access Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditor of High Speed Access Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
CONTROL NUMBER:
RECORD DATE SHARES:
In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
Please be sure to sign and date
this Proxy. Date:
---------------------------------
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Stockholder sign here
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Co-owner sign here