Exhibit (a)(1)
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OFFER TO PURCHASE
NETPLIANCE, INC.
Offer to Purchase Outstanding Options
With an Exercise Price of $1.00 or More
In Exchange for Shares of Netpliance Common Stock
____________________________________________________________
The Offer and Withdrawal Rights Expire
At 5:00 P.M., Austin, Texas Time, on Wednesday, May 2, 2001,
Unless the Offer is Extended.
____________________________________________________________
Netpliance, Inc., a Delaware corporation, hereby offers to purchase all
outstanding options to purchase shares of our common stock, $0.01 par value per
share, that were issued to our continuing employees and non-employee directors
under the Netpliance, Inc. Amended and Restated 1999 Stock Option and Restricted
Stock Plan (the "plan"), that have an exercise price of $1.00 per share or more
(the "options"). Employees who have been notified that their service with us
will be terminated prior to the end of 2001 are not eligible to participate in
this offer. The purchase price of each option tendered will be paid in common
stock, which will be issued as "restricted stock" under the terms of the plan.
As restricted stock, these shares will be subject to forfeiture and other
restrictions until they vest under the terms of a new restricted stock agreement
between each tendering optionholder and us. The number of shares of restricted
stock that each optionholder will receive has been calculated as described
below, and the shares of restricted stock will be issued pursuant to the terms
and subject to the conditions set forth herein and in the related letter of
transmittal. We refer to this amount payable to optionholders as the "purchase
price." See Section 5. We refer to this offer to purchase and the related letter
of transmittal, together with any amendments or supplements, as this "offer."
WE WILL NOT BE OBLIGATED TO PURCHASE ANY OPTIONS IF OPTIONHOLDERS AS A
GROUP TENDER OPTIONS TO PURCHASE LESS THAN 1,500,000 SHARES OF OUR COMMON STOCK.
HOWEVER, WE MAY CHOOSE TO PURCHASE OPTIONS TO PURCHASE LESS THAN 1,500,000
SHARES IF LESS ARE TENDERED. THIS OFFER IS ALSO SUBJECT TO OTHER CONDITIONS.
All options properly tendered and not thereafter validly withdrawn will be
purchased at the applicable purchase price, subject to the terms and conditions
of this offer. You may tender all or any portion of your options. However, you
are not required to tender any of your options.
The restricted stock issued in exchange for tendered options will be issued
under the plan. Regardless of the current vesting schedule of your options, the
restricted stock you receive will vest in three equal annual installments
beginning one year after May 1, 2001, assuming you meet the requirements for
vesting specified in the restricted stock agreement. As a result, you may
receive restricted stock with a new vesting schedule in exchange for options
that have already vested. See Section 8.
NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO
WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS. YOU MUST MAKE
YOUR OWN DECISION WHETHER TO TENDER YOUR OPTIONS. WE
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HAVE BEEN ADVISED THAT MOST OF OUR NON-EMPLOYEE DIRECTORS AND EXECUTIVE
OFFICERS, INCLUDING A MAJORITY OF THOSE THAT ARE DIRECTORS, INTEND TO TENDER
THEIR OPTIONS PURSUANT TO THIS OFFER.
Our common stock has been quoted on the Nasdaq National Market under the
symbol "NPLI" since our initial public offering on March 17, 2000. On March 30,
2001, the closing sale price per share of our common stock was $0.4375. We urge
you to obtain current market quotations for our common stock.
You should direct questions or requests for assistance, or for additional
copies of this offer to purchase or the letter of transmittal, to Xxxxx X.
Xxxxxx, Vice President and General Counsel, Netpliance, Inc., 0000X X. Xxxxxxx
xx Xxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000, (000) 000-0000.
April 4, 2001
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IMPORTANT INFORMATION
Any optionholder desiring to tender his or her options for purchase should
complete and sign the letter of transmittal, or a facsimile thereof, in
accordance with the instructions therein, and mail or otherwise deliver it and
any other required documents, including the option agreement(s) evidencing your
options, to us at our address set forth on the back cover of this offer to
purchase.
This offer is not being made to, nor will any tender of options be accepted
from, optionholders in any jurisdiction in which the making of this offer or the
acceptance of any tender of options would not be in compliance with the laws of
such jurisdiction. However, we may, at our discretion, take such action as we
deem necessary for us to make this offer in compliance with the laws of such
jurisdiction.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS PURSUANT
TO THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE
YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER
OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF TRANSMITTAL. IF
ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR REPRESENTATION, YOU
MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR AUTHORIZATION AS HAVING
BEEN AUTHORIZED BY US.
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SUMMARY TERM SHEET
This summary highlights material information contained in this offer to
purchase. To understand this offer fully and for a more complete description of
the terms and conditions of this offer, you should read the entire offer to
purchase and related letter of transmittal carefully. In this summary, we have
included page references parenthetically to direct you to a more complete
description of the topics in the body of this offer to purchase.
What securities are we offering to purchase?
We are offering to purchase all outstanding stock options under the
Netpliance, Inc. Amended and Restated 1999 Stock Option and Restricted Stock
Plan (the "plan") that were issued to our continuing employee and non-employee
directors with an exercise price of $1.00 or more. (See Page 11)
What are the conditions to this offer?
We are not obligated to purchase any options if optionholders as a group
tender options to purchase less than 1,500,000 shares of our common stock
("option shares"). However, we may choose to purchase options to purchase less
than 1,500,000 option shares if less are tendered. (See Page 11) This offer is
subject to a number of other conditions. (See Page 14)
How much will we pay you for your options?
We will pay for the options with shares of our common stock. The shares of
our common stock issued to you will be "restricted stock," awarded pursuant to
the terms and conditions of the plan. The shares of restricted stock you receive
will be subject to forfeiture and restrictions on transfer until the
restrictions lapse (at which time the shares "vest") under the terms of a new
restricted stock agreement executed between you and us. You will receive one
share of restricted stock for each five option shares issuable upon exercise of
the options you tender. We will not issue fractional shares of restricted stock.
If the total number of option shares issuable upon exercise of the options you
tender are not divisible by five, you will receive the next highest whole number
of shares of restricted stock. (See Page 14)
Do you have to tender all of your options?
No, you may tender any portion of your options or none at all. If you
tender less than all of your options (a "partial tender"), you must indicate in
the letter of transmittal the number of option shares that are included in your
tender. If we accept for purchase a partial tender of an option, we will first
accept the option shares as to which the option has not vested, if any. If the
options that you tender include option shares as to which the option has vested,
we will first accept the option shares that have not vested, if any, and then
will accept vested option shares available under that option sequentially,
starting with those option shares scheduled to vest latest. (See Page 14)
When will you receive payment for your tendered options?
Assuming the conditions to this offer are satisfied, we will exchange your
tendered options for shares of restricted stock promptly following the
expiration date of this offer. After the expiration date of this offer, we will
forward a restricted stock agreement to you. You must then properly execute this
agreement and return it to us. Upon our receipt of the executed restricted stock
agreement, we will issue the restricted stock. (See Page 14)
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What is the vesting schedule for the restricted stock?
The restricted stock you receive will vest in three equal annual
installments beginning one year after May 1, 2001 (we refer to May 1, 2001 as
the "vesting record date"). Even if the option shares you tender are fully
vested, the restricted stock you receive will be subject to vesting over the
three years after the vesting record date. If there is a "change in control" (as
defined in the restricted stock agreement), to the extent your restricted stock
is not then fully vested, one-third of the shares of the restricted stock will
immediately vest. Any remaining unvested shares after the change in control will
continue to vest in one-third installments, as scheduled, on each anniversary of
the vesting record date, until fully vested. (See Page 17)
Under what circumstances will you forfeit the restricted stock you receive in
this tender offer?
You will generally forfeit any portion of the restricted stock you receive
in this tender offer that is not vested when your service with us terminates for
any reason. If your service with us is terminated because of your dishonesty or
other acts detrimental to us, or if you compete with us or solicit our employees
to leave our employ during the period of your service with us or within the 18
month period after your service is terminated, you will forfeit all of your
restricted stock, including the restricted stock that is vested when your
service is terminated. (See Page 17)
What are the other restrictions on the restricted stock?
The terms and conditions of the restricted stock, including the applicable
restrictions, are contained in the plan and the restricted stock agreement.
Generally, the restricted stock may not be sold, transferred, assigned, pledged
or otherwise encumbered or disposed until the stock vests. (See Page 16)
You will not receive a stock certificate for the restricted stock until
after the restricted stock has vested. Until then, the restricted stock will be
held in our custody. Once the restricted stock vests, upon your request, you
will receive a stock certificate for the corresponding number of shares of
common stock. (See Page 17)
Are you entitled to exercise any rights of ownership of the restricted stock
while the stock is subject to a restriction or similar condition?
Yes, you will have dividend, voting and other stockholder rights with
respect to any restricted stock you receive in this offer as of the date we
issue the restricted stock to your account. In addition, we will deliver to you,
by mail or otherwise, all notices of meetings, proxy statements, proxies and all
other materials distributed to our stockholders. (See Page 17)
What is the source of the common stock that will be used to pay you for your
options?
The restricted stock issued pursuant to this offer will be drawn from a
pool of common stock authorized for issuance under the plan, or made available
by our purchase of tendered options. All of the tendered options will be
cancelled, thereby providing additional shares of common stock for issuances of
restricted stock pursuant to this offer and for future awards under the plan.
(See Page 16)
When does this offer expire? Can we extend this offer, and if so, how will you
be notified?
This offer expires Wednesday, May 2, at 5:00 p.m., Austin, Texas time,
unless it is extended by us.
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We may extend this offer at any time but we cannot assure you that this
offer will be extended or, if extended, for how long. (See Pages 11, 23)
If this offer is extended, we will make a public announcement of the
extension no later than 9:00 a.m., Austin, Texas time, on the next business day
following the previously scheduled expiration date of this offer. (See Page 24)
How do you tender your options?
If you decide to tender your options, you must deliver to us a properly
completed and duly executed letter of transmittal, the option agreement(s)
evidencing your options and any other documents required by the letter of
transmittal, at the address set forth on the back cover of this offer to
purchase before 5:00 p.m., Austin, Texas time, on Wednesday, May 2, 2001. (See
Page 13)
During what period of time can you withdraw previously tendered options?
You may withdraw your tendered options at any time before 5:00 p.m.,
Austin, Texas time, on May 2, 2001. If we extend this offer beyond that time,
you may withdraw your tendered options at any time until the expiration of this
offer (as extended). In addition, unless we accept your tendered options for
purchase before 12:00 midnight, Austin, Texas time, on June 1, 2001, you may
withdraw your tendered options at any time after that day. To withdraw tendered
options you must deliver to us a written notice of withdrawal, or facsimile
thereof, prior to the expiration of the period during which you have the right
to withdraw the tendered options. Once withdrawn, you may only re-tender your
options by again following the tendering procedures described herein. (See Page
13)
What do we and our board of directors think of this offer?
Neither we nor our board of directors makes any recommendation as to
whether you should tender or refrain from tendering your options. You must make
your own decision whether to tender your options. (See Page 25)
We have been advised that most of our non-employee directors and executive
officers, including those who are directors, intend to tender their options
pursuant to this offer. (See Page 21)
Will you have to pay federal income taxes if we purchase your options in this
offer?
There are no immediate tax consequences in receiving restricted stock in
exchange for your options unless you make an election under Section 83(b) of the
Internal Revenue Code. If you do not make a Section 83(b) election, then upon
the vesting of your restricted stock you will be required to recognize income in
an amount equal to the fair market value of the restricted stock that vests,
determined on the date the shares vest. If you make a Section 83(b) election,
you will be required to recognize taxable income at the time you receive your
restricted stock in an amount equal to the fair market value of the restricted
stock you receive on that date.
In order to help you defray any related tax liability, if you make a
Section 83(b) election, we will pay you a cash bonus equal to 30% of the fair
market value of the restricted stock you receive. We will pay you this bonus
within ten business days after we receive your signed restricted stock agreement
and a copy of your executed Section 83(b) election. You will be required to
recognize additional taxable income in the amount of the bonus we pay to you.
Depending on your particular circumstances, your cash bonus may be less than
(and possibly substantially less than) the federal income taxes that you will
owe as a result of receiving the restricted stock and the cash bonus. WE ARE NOT
MAKING A
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RECOMMENDATION AS TO WHETHER YOU SHOULD MAKE A SECTION 83(B) ELECTION IF YOU
ELECT TO TENDER YOUR SHARES.
We will generally be allowed a business expense deduction for the amount of
any taxable income recognized by you, at the time such income is recognized by
you. (See Page 22)
You are urged to consult with your own tax adviser to determine the tax
consequences of participating in this offer, whether to make a Section 83(b)
election if you elect to tender your options and the procedure for making a
Section 83(b) election. (See Page 23)
Who should you contact if you have questions about this offer?
For additional information or assistance, you may contact:
Xxxxx X. Xxxxxx
Vice President and General Counsel
Netpliance, Inc.
0000X X. Xxxxxxx xx Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
(000) 000-0000
Why are we making this offer?
We believe that many of our outstanding options are not achieving the
purpose for which they were intended. The options that we are offering to
purchase have exercise prices ranging from $1.19 to $18.50 per share, while the
closing price of our common stock on March 30, 2001, as reported on the Nasdaq
National Market, was $0.4375 per share. By making this offer to purchase and
instituting other forms of incentive and option plans for which our continuing
employees and non-employee directors will be able to realize the intended
benefits, we expect to be able to provide better performance incentives to our
continuing employees and directors, and thereby maximize stockholder value. (See
Page 11)
We have virtually depleted the pool of common stock available for issuance
under the plan. In fact, we have issued options to purchase 5,145,012 shares of
our common stock that are contingent on the availability of shares of common
stock under the plan. Therefore, we do not currently have adequate common stock
available for future awards to our eligible employees, directors and
consultants. By making this offer, the cancelled option shares will be returned
to the pool of common stock available for issuance under the plan. Those shares
will be available for the outstanding options that are contingent on the
availability of shares of common stock under the plan, restricted stock to be
issued in connection with this offer and future awards, without any potential
dilution of our stockholders' ownership or any further stockholder action
(except as required by applicable law or the rules of the Nasdaq National Market
or any other securities exchange on which our common stock is then listed). (See
Page 12)
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TABLE OF CONTENTS
Section Page
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Summary Term Sheet........................................................ 4
Table of Contents......................................................... 8
Forward-Looking Statements................................................ 9
Introduction.............................................................. 9
The Offer................................................................. 11
1. Number of Options; Expiration Date................................... 11
2. Purpose of the Offer................................................. 11
3. Procedures for Tendering Options..................................... 13
4. Withdrawal Rights.................................................... 13
5. Acceptance of Tendered Options and Payment of Purchase Price......... 14
6. Certain Conditions of the Offer...................................... 14
7. Price Range of Our Common Stock...................................... 16
8. Source and Amount of Consideration; Terms of Restricted Stock Award.. 16
9. Certain Information about Us......................................... 17
10. Certain Financial Information........................................ 18
11. Interests of Directors and Officers; Transactions and Arrangements
Concerning the Options............................................... 20
12. Status of Options Acquired by Us in the Offer........................ 22
13. Certain Legal Matters; Regulatory Approval........................... 22
14. Certain Federal Income Tax Consequences.............................. 22
15. Extension of this Offer; Termination; Amendment...................... 23
16. Fees and Expenses.................................................... 24
17. Additional Information............................................... 24
18. Miscellaneous........................................................ 25
Schedule A................................................................ 26
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FORWARD-LOOKING STATEMENTS
This offer to purchase contains, or refers to documents that contain,
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as
amended. All statements other than statements of historical fact are "forward-
looking statements" for purposes of federal and state securities laws,
including: any projections of earnings, revenues or other financial items; any
statements of the plans, strategies and objectives of management for future
operations; any statements concerning proposed new products, services or
developments; any statements regarding future economic conditions or
performance; any statements of belief; and any statements of assumptions
underlying any of the foregoing. Forward-looking statements may include the
words "may," "will," "estimate," "intend," "continue," "believe," "expect" or
"anticipate" and other similar words. Such forward-looking statements may be
contained in the sections "Factors Affecting Operating Results," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," among other places, of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.
Although we believe that the expectations reflected in our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in any of our forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and to inherent risks and uncertainties, such
as those disclosed in this report. We do not intend, and undertake no
obligation, to update any forward-looking statement.
INTRODUCTION
Netpliance, Inc., a Delaware corporation, hereby offers to purchase all
outstanding options to purchase shares of our common stock, $0.01 par value per
share, that were issued to our continuing employees and non-employee directors
under the Netpliance, Inc. Amended and Restated 1999 Stock Option and Restricted
Stock Plan (the "plan"), that have an exercise price of $1.00 per share or more
(the "options"). Employees who have been notified that their service with us
will be terminated prior to the end of 2001 are not eligible to participate in
this offer. The purchase price of each option tendered will be paid in common
stock, which will be issued as "restricted stock" under the terms of the plan.
As restricted stock, these shares will be subject to forfeiture and other
restrictions until they vest under the terms of a new restricted stock agreement
between each tendering optionholder and us. This offer is made upon the terms
and subject to the conditions set forth herein and in the related letter of
transmittal. We refer to this offer to purchase and the related letter of
transmittal, together with any amendments or supplements, as this "offer."
WE WILL NOT BE OBLIGATED TO PURCHASE ANY OPTIONS IF OPTIONHOLDERS AS A
GROUP TENDER OPTIONS TO PURCHASE LESS THAN 1,500,000 SHARES OF OUR COMMON STOCK.
HOWEVER, WE MAY CHOOSE TO PURCHASE OPTIONS TO PURCHASE LESS THAN 1,500,000
SHARES IF LESS ARE TENDERED. THIS OFFER IS ALSO SUBJECT TO OTHER CONDITIONS.
We are offering to purchase all of the outstanding options that were issued
to our continuing employees and non-employee directors with an exercise price of
$1.00 per share or more. All options properly tendered and not validly withdrawn
will be purchased at the purchase price, subject to the terms and conditions of
this offer. You may tender all of your options, any portion thereof, or none at
all. You will receive one share of restricted stock for each five shares of
common stock issuable upon exercise of the options ("option shares") that you
tender. To tender less than all of your options, you must indicate in the letter
of transmittal the number of option shares that you wish to tender. If you
tender less than all of your options, you will receive a proportionate number of
shares of restricted stock. See Section 5.
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The restricted stock issued in exchange for the tendered options will
be issued under the plan. Regardless of the current vesting schedule of your
options, the restricted stock you receive pursuant to this offer will vest in
three equal annual installments beginning one year after May 1, 2001 (we refer
to May 1, 2001 as the "vesting record date"), assuming you meet the requirements
for vesting specified in your restricted stock agreement. As a result, you may
receive restricted stock with a new vesting schedule in exchange for options
that have already vested. See Section 8.
NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO
WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS. YOU MUST MAKE
YOUR OWN DECISION WHETHER TO TENDER YOUR OPTIONS. WE HAVE BEEN ADVISED THAT MOST
OF OUR NON-EMPLOYEE DIRECTORS AND EXECUTIVE OFFICERS, INCLUDING A MAJORITY OF
THOSE THAT ARE DIRECTORS, INTEND TO TENDER THEIR OPTIONS PURSUANT TO THIS OFFER.
As of March 30, 2001, we have issued and outstanding options to
purchase 12,878,922 shares of our common stock issued under the plan, of which
options to purchase 3,673,084 shares of our common stock were issued to our
continuing employees and non-employee directors with an exercise price of $1.00
per share or more. The options we are offering to purchase represent
approximately 28.5% of the stock options issued and outstanding under the plan
as of March 30, 2001.
Our common stock is currently listed and principally traded on the
Nasdaq National Market under the symbol "NPLI". On March 30, 2001, the closing
sale price of our common stock was $0.4375 per share. YOU ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK. See Section 7.
All options accepted by us pursuant to this offer will be cancelled
and the option shares purchasable thereunder will be returned to the pool of
common stock available for future issuance under the plan.
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THE OFFER
1. Number of Options; Expiration Date.
Upon the terms and subject to the conditions of this offer, we will
purchase from our continuing employees and non-employee directors all options to
purchase shares of our common stock that were issued with an exercise price of
$1.00 or more and that are properly tendered (and not validly withdrawn in
accordance with Section 4) prior to the expiration date (as defined below) of
this offer. Employees who have been notified that their service with us will be
terminated prior to the end of 2001 are not eligible to participate in this
offer. We will not be obligated to purchase any options if optionholders as a
group tender options to purchase less than 1,500,000 shares of common stock
issuable upon exercise of the options ("option shares"). However, we may choose
to purchase less than 1,500,000 option shares if less than 1,500,000 option
shares are tendered. This offer is subject to other terms and conditions. See
Section 6. We will accept partial tenders of any amount of options. See Section
5.
If your options are properly tendered and accepted for purchase, you will
be entitled to receive an amount payable in shares of common stock. All shares
of our common stock paid to optionholders pursuant to this offer will be
restricted stock, subject to the vesting schedule set forth in a new restricted
stock agreement between you and us. See Section 8. You will receive one share of
restricted stock for each five option shares issuable upon exercise of the
options you tender. We will not issue fractional shares of restricted stock. If
the total number of option shares issuable upon exercise of the options you
tender are not divisible by five, you will receive the next highest whole number
of shares of restricted stock. If you tender less than all of your options, you
will receive a proportionate number of shares of restricted stock. See Section
5. This offer will expire at 5:00 p.m., Austin, Texas time, on Wednesday, May 2,
2001, unless we extend this offer beyond that time ("expiration date"). This
offer will be extended until the expiration of ten business days after the date
of publication of notice if:
(a) we increase or decrease the amount of consideration to be paid for the
options or we increase or decrease the number of subject options being
sought in the offer and, in the event of an increase in the number of
subject options being sought, such increase exceeds 2% of the
outstanding subject options, and
(b) the offer is scheduled to expire at any time earlier than the expiration
of a period ending on the tenth business day after, and including, the
date that notice of such increase or decrease is first published, sent
or given in the manner specified in Section 15.
For purposes of this offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, Austin, Texas time.
2. Purpose of the Offer.
We believe that many of our outstanding options are not achieving the
purpose for which they were intended. The options that we are offering to
purchase have exercise prices ranging from $1.19 to $18.50 per share, while the
closing price of our common stock on March 30, 2001, as reported on the Nasdaq
National Market, was $0.4375 per share. By making this offer to purchase and
instituting other forms of incentive and option plans for which our continuing
employees and non-employee directors will be able to realize the intended
benefits, we expect to be able to provide better performance incentives to our
continuing employees and non-employee directors, and thereby maximize
stockholder value.
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We have virtually depleted the pool of common stock available for issuance
under the plan. In fact, we have issued options to purchase 5,145,012 shares of
our common stock that are contingent on the availability of shares of common
stock under the plan. Therefore, we do not currently have adequate common stock
available for future awards to our eligible employees, directors and
consultants. By making this offer, the cancelled option shares will be returned
to the pool of common stock available for issuance under the plan. Those shares
will be available for the outstanding options that are contingent on the
availability of shares of common stock under the plan, restricted stock to be
issued in connection with this offer and future awards, without any potential
dilution of our stockholders ownership or any further stockholder action (except
as required by applicable law or the rules of the Nasdaq National Market or any
other securities exchange on which our common stock is then listed).
We consistently evaluate strategic opportunities that may arise, including
additional capital infusions, joint ventures and the purchase or sale of assets.
Subject to the foregoing, and except as otherwise disclosed in this offer to
purchase, we presently have no plans or proposals that relate to or would result
in:
(a) the acquisition by any person of any of our securities or the
disposition of any of our securities;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving us;
(c) a sale or transfer of a material amount of our assets;
(d) any change in our present board of directors or management, including
any plans or proposals to change the number or the term of directors or to fill
any existing vacancies on the board, or to change any material terms of an
employment agreement with any of our executive officers;
(e) any material change in our present dividend rate or policy, or our
indebtedness or capitalization;
(f) any other material change in our corporate structure or business;
(g) any change in our certificate of incorporation or bylaws, or any
actions that may impede the acquisition of control of us by any person;
(h) a class of equity securities being delisted from a national securities
exchange;
(i) a class of our equity securities becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act; or
(j) the suspension of our obligation to file reports pursuant to Section
15(d) of the Securities Exchange Act.
Neither we nor our board of directors makes any recommendation as to
whether you should tender your options, nor have we authorized any person to
make any such recommendation. You are urged to evaluate carefully all
information in this offer to purchase and to consult your own investment and tax
advisers. You must make your own decision whether to tender your options for
purchase.
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3. Procedures for Tendering Options.
Proper Tender of Options. To validly tender your options pursuant to this
------------------------
offer, a properly completed and duly executed letter of transmittal, or
facsimile thereof, in accordance with the letter of transmittal, and any other
required documentation, including the option agreement(s) evidencing your
options, or a copy of each option agreement the original of which we are
holding, must be received by us at our address set forth on the back cover of
this offer to purchase prior to the expiration date of this offer.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING LETTERS OF TRANSMITTAL,
OPTION AGREEMENT(S), AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING OPTIONHOLDER. IF DELIVERY IS BY MAIL, WE RECOMMEND THAT
YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND PROPERLY INSURE YOUR
PACKAGE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY
DELIVERY.
Determination of Validity; Rejection of Options; Waiver of Defects; No
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Obligation to Give Notice of Defects. All questions as to the validity, form,
------------------------------------
eligibility (including time of receipt) and acceptance of any tender of options
will be determined by us, in our sole discretion, and our determination will be
final and binding on all parties. We reserve the right to reject any or all
tenders of options that we determine are not in the appropriate form or the
acceptance for payment of which may be unlawful. We also reserve the right to
waive any of the conditions of this offer or any defect or irregularity in any
tender with respect to any particular options or any particular optionholder. No
tender of options will be deemed to have been properly made until all defects or
irregularities have been cured by the tendering optionholder or waived by us.
Neither we nor any other person will be obligated to give notice of any defects
or irregularities in tenders, nor will anyone incur any liability for failure to
give any such notice.
Our Acceptance Constitutes an Agreement. Your tender of options pursuant to
---------------------------------------
the procedures described above will constitute your acceptance of the terms and
conditions of this offer. OUR ACCEPTANCE OF THE OPTIONS TENDERED BY YOU PURSUANT
TO THIS OFFER WILL CONSTITUTE A BINDING AGREEMENT BETWEEN YOU AND US UPON THE
TERMS AND SUBJECT TO THE CONDITIONS OF THIS OFFER.
Lost, Stolen, Destroyed or Mutilated Option Agreements Evidencing the
---------------------------------------------------------------------
Tendered Options. If the option agreement(s) evidencing the options you want to
----------------
tender has been lost, stolen, destroyed or mutilated, you must complete the box
captioned "Lost, Stolen, Destroyed or Mutilated Agreements" on the letter of
transmittal, indicating the number of option shares subject to the lost, stolen,
destroyed or mutilated option agreement(s). You will need to contact us to
ascertain the steps that you must take to replace the option agreement(s)
evidencing the options you want to tender. To avoid delay, you should
immediately contact Xxxxx X. Xxxxxx, our Vice President and General Counsel, at
(000) 000-0000.
4. Withdrawal Rights.
You may only withdraw your tendered options in accordance with the
provisions of this Section 4.
You may withdraw your tendered options at any time before 5:00 p.m.,
Austin, Texas time, on Wednesday, May 2, 2001. If we extend this offer beyond
that time, you may withdraw your tendered options at any time until the extended
expiration date of this offer. In addition, unless we accept your tendered
options for purchase before 12:00 midnight, Austin, Texas time, on Friday, June
1, 2001, you may withdraw your tendered options at any time after that date.
13
To withdraw tendered options you must deliver to us a written notice of
withdrawal, or facsimile thereof, prior to the expiration of the period during
which you have the right to withdraw the tendered options. Withdrawals may not
be rescinded and any options withdrawn will thereafter be deemed not properly
tendered for purposes of this offer unless such withdrawn options are properly
re-tendered (by following the procedures described in Section 3) prior to the
expiration date (or the extension thereof) of this offer.
Neither we nor any other person will be obligated to give notice of any
defects or irregularities in any notice of withdrawal, nor will anyone incur any
liability for failure to give any such notice. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by us, in our sole discretion, which determination will be final and binding on
all parties.
5. Acceptance of Tendered Options and Payment of Purchase Price.
Upon the terms and subject to the conditions of this offer and as promptly
as practicable following the expiration date, we will accept for payment and pay
for options properly tendered and not validly withdrawn. If your options are
properly tendered and are accepted for payment, you will receive a new
restricted stock agreement. You must properly execute and return this agreement
to us. Upon our receipt of your executed restricted stock agreement, we will
issue the appropriate number of shares of restricted stock.
You will receive one share of restricted stock for each five option shares
issuable upon exercise of the options you tender. We will not issue fractional
shares of restricted stock. If the total number of option shares issuable upon
exercise of the options you tender are not divisible by five, you will receive
the next highest whole number of shares of restricted stock. We will accept
partial tenders of any amount of options. To tender less than all of your
options, you must indicate in the letter of transmittal the number of option
shares that you wish to tender. If you tender less than all of your options, you
will receive a proportionate number of shares of restricted stock.
If we accept for purchase a partial tender of an option, we will first
accept the option shares as to which the option has not vested, if any. If the
number of option shares that you tender exceeds the number of option shares that
have not vested under that option, we will first accept the option shares that
have not vested and then will accept vested option shares available under that
option sequentially, starting with those option shares scheduled to vest latest.
If we accept your partial tender, we will forward to you a new option agreement
evidencing your remaining options.
For purposes of this offer, we will be deemed to have accepted for payment
options that are validly tendered and not properly withdrawn when we give oral
or written notice to the optionholders of our acceptance for payment of such
options, which may be by press release.
6. Certain Conditions of the Offer.
Notwithstanding any other provision of this offer, we will not be required
to accept or make any payment for any options tendered, and may terminate or
amend this offer or postpone the acceptance of, or payment for, any options
tendered, subject to Rule 13e-4(f)(5) under the Securities Exchange Act, if at
any time on or after April 4, 2001 and prior to the time of payment for any such
options (whether any options have previously been accepted for payment pursuant
to this offer) any of the following events occurs (or are determined by us to
have occurred) and, in our reasonable judgment in any such case and regardless
of the circumstances giving rise thereto (including any action or omission to
act by us), the occurrence of such event or events makes it inadvisable to
proceed with this offer:
14
(a) there is threatened, instituted or pending any action or proceeding by
any governmental, regulatory or administrative agency, authority or tribunal or
any other person, domestic or foreign, before any court, authority, agency or
tribunal that directly or indirectly (i) challenges the making of this offer,
the acquisition of some or all of the options, the payment by us for such
options, or otherwise relates in any manner to this offer; or (ii) in our
reasonable judgment, could materially adversely affect our business, condition
(financial or other), income, operations or prospects, taken as whole, or
otherwise materially impair in any way the contemplated future conduct of our
business, or materially impair the contemplated benefits of this offer to us;
(b) any action is threatened, pending or taken, or approval withheld, or
any statute, rule, regulation, judgment, order or injunction threatened,
proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to
be applicable to this offer or us, by any court or any authority, agency or
tribunal that, in our reasonable judgment, would or might directly or indirectly
(i) make the acceptance for payment of, or payment for, some or all of the
tendered options illegal or otherwise restrict or prohibit consummation of this
offer or otherwise relates in any manner to this offer; (ii) delay or restrict
the ability of us, or render us unable, to accept for payment or pay for some or
all of the tendered options; (iii) materially impair the contemplated benefits
of this offer to us; or (iv) materially and adversely affect our business,
condition (financial or other), income, operations or prospects, taken as whole,
or otherwise materially impair in any way the contemplated future conduct of our
business;
(c) there is (i) any general suspension of trading in, or limitation on
prices for, securities on any national securities exchange or in the over-the-
counter market; (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not mandatory);
(iii) the commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States; (iv) any
limitation (whether or not mandatory) by any governmental, regulatory or
administrative agency or authority on, or any event that, in our reasonable
judgment, might affect the extension of credit by banks or other lending
institutions in the United States; (v) any significant decrease in the market
price of the shares of our common stock or any change in the general political,
market, economic or financial conditions in the United States or abroad that
could, in our reasonable judgment, have a material adverse effect on our
business, condition (financial or other), operations or prospects or on the
trading in our common stock, or makes it inadvisable to proceed with this offer;
(vii) in the case of any of the foregoing existing at the time of the
commencement of the offer, a material acceleration or worsening thereof; or
(vii) any decline in either the Dow Xxxxx Industrial Average or the Standard and
Poor's Index of 500 Companies by an amount in excess of 10% measured from the
close of business on April 4, 2001;
(d) a tender or exchange offer with respect to some or all of our common
stock, or a merger or acquisition proposal for us, is proposed, announced or
made by another person or entity, or we learn that (i) any person, entity or
"group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act)
has acquired or proposed to acquire beneficial ownership of more than 5% of the
outstanding shares of our common stock, or any group has been formed that
beneficially owns more than 5% of the outstanding shares of our common stock
(other than any such person, entity or group who has filed a Schedule 13D or
Schedule 13G with the Securities and Exchange Commission on or before April 4,
2001); (ii) any such person, entity or group who has filed a Schedule 13D or
Schedule 13G with the Securities and Exchange Commission on or before April 4,
2001, has acquired or proposed to acquire beneficial ownership of an additional
2% or more of the outstanding shares of our common stock; or (iii) any person,
entity or group files a Notification and Report Form under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 or makes a public announcement reflecting an
intent to acquire us or any of our subsidiaries or any of their respective
assets or securities; or
15
(e) any change occurs in our business, condition (financial or other),
assets, income, operations, prospects or stock ownership that, in our reasonable
judgment, is or may be material to us. The conditions to this offer are for our
benefit. We may assert them in our discretion regardless of the circumstances
giving rise to them prior to the time we accept options for payment. We may
waive them, in whole or in part, at any time and from time to time prior to the
time we accept options for payment, in our discretion, whether or not we waive
any other condition in this offer. Our failure at any time to exercise any of
these rights will not be deemed a waiver of any such rights. The waiver of any
of these rights with respect to particular facts and circumstances will not be
deemed a waiver with respect to any other facts and circumstances. Any
determination we make concerning the events described in this Section 6 will be
final and binding upon all persons.
7. Price Range of Our Common Stock.
There is no established trading market for the options. Our common stock
has been quoted on the Nasdaq National Market under the symbol "NPLI" since our
initial public offering on March 17, 2000. Prior to that time, there was no
public market for our common stock. The following table shows the high and low
daily closing sale prices per share of our common stock on the Nasdaq National
Market for the periods indicated.
Price Range
---------------------
2001 High Low
------------- -------- --------
First quarter......................................... $ 0.5625 $ 0.25
2000
-------------
First quarter (Beginning on March 17, 2000)........... $22.0625 $ 12.25
Second quarter........................................ 16.00 4.375
Third quarter......................................... 8.625 1.50
Fourth quarter........................................ 1.9375 0.34375
On March 30, 2001, the closing sale price per share of our common stock was
$0.4375. YOU ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK.
On January 17, 2001, we received notice from Nasdaq that our stock price
had failed to maintain the minimum bid price of at least $1.00 for 30
consecutive trading days. As a result, our common stock is subject to being
delisted on April 17, 2001 unless the bid price for our common stock closes
above $1.00 for ten consecutive trading days before that day or we receive a
waiver of such requirement from Nasdaq. We intend to pursue discussions with the
Nasdaq regarding such a waiver and secure continued listing on the Nasdaq
National Market. However, we can give no assurances that we will be granted such
a waiver. If we lose our Nasdaq National Market status, our common stock would
trade in the over-the-counter market, which is viewed by most investors as a
less desirable, and less liquid, marketplace.
8. Source and Amount Of Consideration; Terms Of Restricted Stock Award.
Source and Amount of Consideration. Assuming we purchase all the
----------------------------------
outstanding options that were issued to our continuing employees and non-
employee directors with an exercise price of $1.00 per share or more pursuant to
this offer, the aggregate amount of restricted stock we will issue to
optionholders will be 734,630 shares. The restricted stock issued pursuant to
this offer will be drawn from a pool of common stock authorized for issuance
under the plan, or made available by our purchase of tendered options.
16
Terms of Restricted Stock. The restricted stock issued pursuant to this
-------------------------
offer will be issued pursuant to the plan. Our statements concerning the plan
and the restricted stock are merely summaries and do not purport to be complete.
Any such statements are subject to, and are qualified in their entirety by
reference to, all provisions of the plan and the restricted stock agreement
between you and us. A copy of the form of the restricted stock agreement has
been provided to you with this offer to purchase and the letter of transmittal.
Please contact us at the address and telephone number on the back cover of this
offer to purchase to receive a copy of the plan. We will promptly furnish you a
copy at our expense.
Awards of restricted stock under the plan may be granted to any of our
officers, key employees, directors or consultants.
The shares of restricted stock you receive in exchange for your tendered
options that are accepted for purchase will be subject to forfeiture and other
restrictions until those shares vest. These restrictions include prohibitions
against sale, exchange, transfer (including, without limitation, any transfer to
a nominee or agent of a grantee), assignment, pledge, hypothecation or other
disposal, including by operation of law.
Your shares of restricted stock will vest ratably in three equal annual
installments commencing on May 1, 2002, the first anniversary of the vesting
record date. Therefore, you may receive restricted stock with a new vesting
schedule in exchange for options that have already vested. If there is a "change
in control" (as defined in your restricted stock agreement), to the extent your
restricted stock is not fully vested, one-third of the shares of the restricted
stock will immediately vest. Any remaining unvested shares after the change in
control will continue to vest in one-third installments, as scheduled, on each
anniversary of the vesting record date, until fully vested.
You will generally forfeit any portion of the restricted stock you receive
in this offer that is not vested when your service with us terminates for any
reason. In such case, your unvested restricted stock will expire, and will not
continue to vest, immediately upon the termination of your service with us for
any reason. Notwithstanding the forgoing, (i) if you are terminated for
dishonesty or other acts detrimental to our interests or (ii) if you compete
with us or solicit our employees to leave our employ during the period of your
service with us or within the 18 month period after your service is terminated,
our board of directors may, by written notice to you, immediately terminate your
rights in any of your restricted stock, whether vested or unvested.
You will not receive a stock certificate for your restricted stock until
after that restricted stock vests. Until then, your shares of restricted stock
will be held in our custody. Your award of restricted stock will be evidenced by
the restricted stock agreement between you and us. At any time after the initial
vesting date, at your request, you will receive a certificate for the number of
shares of common stock that had vested as of the most recent vesting date.
You will have dividend, voting and other stockholder rights (subject to the
transfer and forfeiture restrictions discussed above) with respect to all shares
of restricted stock you receive in the offer as of the date we issue your
restricted stock to your account. We will deliver to you, by mail or otherwise,
all notices of meetings, proxy statements, proxies and all other materials
distributed to our stockholders.
9. Certain Information About Us.
Since our organization in 1999, we have primarily offered consumers
Internet access through devices commonly known as Internet appliances, which we
also marketed and sold to our customers. Recently, however, we have changed our
strategic focus and are exiting this consumer business. We are
17
now developing a business plan to launch a hardware and software offering
designed to enable broadband service providers to provide premium services over
their telecommunications networks.
We were incorporated in the State of Texas in January 1999 as Shbang! Inc.
In May 1999, we changed our name to Netpliance, Inc. On March 15, 2000 the
Company was reincorporated in the State of Delaware. We became publicly traded
on March 17, 2000.
We maintain executive offices at 0000X X. Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxxx,
Xxxxx 00000 and our telephone number is (000) 000-0000. We also maintain a web
site at xxx.xxxxxxxxxx.xxx.
10. Certain Financial Information
Set forth below is a selected summary of our financial information. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited
financial statements and the notes thereto included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2000, a copy of which has been
provided to you with this offer to purchase and the letter of transmittal.
18
Period from
January 12,
1999
(Inception)
Year ended through
December 31, December 31,
2000 1999
---- ----
Statements of Operations Data:
Operating expenses:
Research and development................................................. $ 4,732,750 $ 1,880,864
Stock-based compensation................................................. 5,211,790 22,551
General and administrative............................................... 4,121,248 1,740,610
------------- ------------
Total operating expenses.................................................... 14,065,788 3,644,025
------------- ------------
Operating Loss.............................................................. (14,065,788) (3,644,025)
Interest income, net........................................................ 5,928,213 164,843
------------- ------------
Loss from continuing operations............................................. (8,137,575) (3,479,182)
Loss from discontinued operations........................................... (135,827,699) (23,806,513)
------------- ------------
Net loss.................................................................... (143,965,274) (27,285,695)
Effect of beneficial conversion feature of
convertible preferred stock............................................. 42,089,262) (16,242,121)
------------- ------------
Net loss applicable to common stock......................................... $(186,054,536) $(43,527,816)
============= ============
Net basic and diluted loss from continuing operations
(net of effect of beneficial conversion feature
of convertible preferred stock) per common share........................ $ (0.97) $ (1.26)
Net basic and diluted loss from discontinued operations
per common share............................................................ (2.63) (1.53)
------------- ------------
Net loss per common share - basic and diluted............................... $ (3.60) $ (2.79)
============= ============
As of December 31, As of December 31,
2000 1999
----------------- ----------------
Balance Sheet Data:
Working capital............................................................. $ 53,736,052 $ 4,642,017
Total assets................................................................ 86,320,596 20,625,183
Stockholders' equity........................................................ 71,015,090 12,917,086
Book value per common share................................................. $ 1.17 $ 0.68
============= ============
19
11. Interests of Directors and Officers; Transactions and Arrangements
Concerning the Options.
A list of our current directors and executive officers is attached to this
offer of purchase as Schedule A. As of March 30, 2001, our directors and
----------
executive officers as a group (ten persons) beneficially own options to purchase
an aggregate of 1,675,000 shares of our common stock, representing approximately
13.0% of the total number of option shares purchasable under options issued and
outstanding as of such date. Our directors and executive officers as a group
beneficially own options to purchase an aggregate of 1,390,000 shares of our
common stock for an exercise price of $1.00 or more, representing approximately
37.9% of the total number of option shares purchasable under options that may be
tendered pursuant to this offer. The number of option shares that may be
tendered by our directors and executive officer, and the percentage of the total
number of option shares purchasable under options that may be tendered pursuant
to this offer represented thereby, is included on Schedule A.
----------
The following table sets forth, as of March 1, 2001, the beneficial
ownership of each current director, each executive officer, the directors and
executive officers as a group, and each stockholder known to us to own
beneficially more than 5% of the our common stock. Except as noted below, each
named person has sole voting power and dispositive power with respect to the
shares shown.
Number of Shares Percent of
---------------- ----------
Name and Address of Beneficial Owner (1) of Common Stock Class
--------------------------------------- ---------------- ----------
Xxxx X. XxXxxx (2) 17,514,095 28.9%
Xxxxxxx X. Xxxxxx (3) 348,301 *
Xxxxx X. Xxxxxxxx (4) 210,000 *
Xxxxx X. Xxxx (5) 120,000 *
Xxxxx X. Xxxxxxx (6) 155,000 *
Xxxxx X. Xxxxxxx (7) 1,077,203 1.8%
Xxxxxx X. Xxxxxxxxxxx (8) 1,027,284 1.7%
Xxxx X. Xxxxxx (9) 4,529,199 7.5%
Xxxxxxx X. Xxxxxxx XXX - *
Xxxx X. Xxxx (10) 1,406,585 2.2%
Xxxxxxx X. Xxxxxxxxx (11) 4,403,868 7.3%
Watershed Capital I, L.P. 4,873,023 8.0%
All Executive Officers and Directors as a Group (10 persons) 26,435,167 43.6%
____________________________
* Less than 1%.
(1) The address of Watershed Capital I, L.P. is 0000 Xxx Xxxxx Xxxx, Xxxxx 000,
Xxxxxx, Xxxxx 00000. The address of Xxxxxxx X. Xxxxxxxxx is 0000 Xxxxxxxxx
Xxxx, Xxxxxx, Xxxxx 00000. The address of each other beneficial owner is
c/o Netpliance, Inc., 0000X X. Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxxx, Xxxxx
00000.
(2) Xx. XxXxxx beneficially owns 17,514,095 shares of Common Stock. Xx.
XxXxxx'x 17,514,095 shares include: (i) 17,198,375 shares held by Xx.
XxXxxx individually; and (ii) an aggregate of 315,720 shares held in trust
for the benefit of family members of Xx. XxXxxx. More detailed Information
relating to Xx. XxXxxx'x beneficial ownership of our securities may be
found in his Schedule 13D filed with the Securities Exchange Commission
(the "SEC") on December 22, 2000 and subsequent amendments thereto.
(3) Includes 120,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(4) Includes 120,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
20
(5) Includes 120,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(6) Xx. Xxxxxxx beneficially owns 155,000 shares of Common Stock. Xx. Xxxxxxx'x
125,000 shares include: (i) 35,000 shares held by Xx. Xxxxxxx directly and
(ii) 120,000 shares that Xx. Xxxxxxx may acquire upon the exercise of
options exercisable within the next 60 days; and exclude 4,873,023 shares
held directly by Watershed Capital I, L.P. with respect to which Xx.
Xxxxxxx disclaims beneficial ownership (Xx. Xxxxxxx is a member of the
general partner of the general partner of Watershed Capital I, L.P.). More
detailed information relating to Xx. Xxxxxxx'x beneficial ownership of our
securities may be found in his Schedule 13D filed with the SEC on December
22, 2000 and subsequent amendments thereto.
(7) Includes 120,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(8) Includes 30,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(9) Xx. Xxxxxx beneficially owns 4,529,199 shares of Common Stock. Xx. Xxxxxx'x
4,529,199 shares include: (i) 563,652 shares held by Xx. Xxxxxx
individually: (ii) an aggregate of 90,000 shares held in trust for the
benefit of family members of Xx. Xxxxxx; (iii) 3,725,547 shares held by
Savage Interests L.P.; (iv) 150,000 shares that Xx. Xxxxxx may acquire upon
the exercise of options exercisable within the next 60 days. More detailed
information relating to Xx. Xxxxxx'x beneficial ownership of our securities
may be found in his Schedule 13D filed with the SEC on December 22, 2000
and subsequent amendments thereto.
(10) Includes 120,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(11) Xx. Xxxxxxxxx beneficially owns 4,403,868 shares of Common Stock, which are
held by Xxxxxxxxx, LTD for the benefit of Xx. Xxxxxxxxx and family members
and which include 240,000 shares held by the two minor children of Xx.
Xxxxxxxxx. More detailed information relating to Xx. Xxxxxxxxx'x
beneficial ownership of our securities may be found in his Schedule 13D
filing, dated December 22, 2000 and subsequent amendments thereto.
Based upon our records and upon information provided to us by our directors
and executive officers, except as set forth in this offer to purchase, neither
we nor, to the best of our knowledge, any of our directors or executive officers
have effected any transactions in the options or our common stock during the 60
days prior to March 30, 2001.
We have been advised that most of our non-employee directors and executive
officers, including a majority of those that are directors, intend to tender
their options pursuant to this offer.
Except for outstanding options to purchase common stock issued pursuant to
the plan, and except as set forth in this offer to purchase, neither we nor any
person controlling us nor, to our knowledge, any of our directors or executive
officers, is a party to any contract, arrangement, understanding or relationship
with any other person relating, directly or indirectly, to this offer with
respect to any of our securities (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer, disposition
or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding of proxies, consents or authorizations, or the pledge of
any of our securities).
On December 21, 2000, our chairman and chief executive officer, Xxxx X.
XxXxxx, entered into management buyout agreements with each of Xxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxx and Watershed Capital I, L.P. for the
purpose of opening negotiations for a possible management buyout of our publicly
held common stock. Together, this group beneficially owns approximately 52% of
our outstanding stock as of March 30, 2001, and pursuant to these agreements
Xx. XxXxxx could initiate or block significant matters affecting us. In January
2001, this group terminated discussions with our board of directors relating to
a possible management buyout. However, given that the management buyout
agreements are still in effect, it is possible that this group or a portion
thereof may initiate discussions for a going private transaction with respect to
us in the future. Messrs. XxXxxx, Xxxxxx and Xxxxxxx are members of our board of
directors.
On February 21, 2001, Xx. XxXxxx, purchased 1,600,000 shares of our common
stock from Xx. Xxxxxx, one of our directors and a former executive officer, at a
price of $0.3125, the closing price per share of our common stock on the day
prior to the sale. On March 3, 2001, Xx. XxXxxx and Xx. Xxxxxx entered into a
series of additional transactions. Pursuant to a stock purchase agreement, Xx.
XxXxxx agreed to purchase from Xx. Xxxxxx on September 15, 2001 a number of
shares of our common stock
21
determined by dividing $887,000.00 by the greater of (i) $0.50 per share, and
(ii) the average of the closing prices for our common stock on the five trading
days prior to September 15, 2001. The purchase price for the shares to be
purchased under that agreement will be paid by an offset against $887,000
previously loaned to Xx. Xxxxxx by Xx. XxXxxx. Xx. Xxxxxx and Xx. XxXxxx also
documented that previous loan and the pledge of 1,774,000 shares of our common
stock by Xx. Xxxxxx to secure that loan. On that same date, Xx. XxXxxx also
loaned Xx. Xxxxxx $500,000, which loan is secured by 4,289,199 shares of our
common stock held by Xx. Xxxxxx and Xxxxxx Interests L.P. The Schedule 13D filed
by the proposed buyout group on December 22, 2000, and subsequent amendments
thereto, contains more detailed information relating to the transactions
described in this Section.
12. Status of Options Acquired by Us in this Offer.
Options we acquire pursuant to this offer will be canceled and the option
shares purchasable thereunder will be returned to the pool of common stock
available for issuance under the plan. Such common stock will be available for
the outstanding options that are contingent on the availability of shares of
common stock under the plan, restricted stock to be issued in connection with
this offer and future awards future awards to our eligible employees, directors
and consultants without further stockholder action (except as required by
applicable law or the rules of the Nasdaq National Market or any other
securities exchange on which our common stock is then listed).
13. Certain Legal Matters; Regulatory Approvals.
We are not aware of any license or regulatory permit material to our
business that might be adversely affected by our acquisition of the options or
the payment of shares of restricted stock as contemplated herein or of any
approval or other action by any governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
acquisition or ownership of our options or the payment of the restricted stock
as contemplated herein. Should any such approval or other action be required, we
presently contemplate that such approval or other action will be sought. We are
unable to predict whether we would be required to delay the acceptance of or the
payment for options tendered pursuant to this offer pending the outcome of any
such matter. There can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that the failure to obtain any such approval or other action might not result
in adverse consequences to our business. Our obligations under this offer are
subject to certain conditions as set forth in Section 6. We are not aware of any
legal proceedings threatened or pending relating to this offer.
14. Certain Federal Income Tax Consequences.
The following is a general summary of the material federal income tax
consequences of the tendering of options pursuant to this offer. This discussion
is based on the Internal Revenue Code of 1986, as amended, its legislative
history, treasury regulations thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change (possibly on a retroactive basis). This summary does not discuss all the
tax consequences that may be relevant to you in light of your particular
circumstances and it is not intended to be applicable in all respects to all
categories of stockholders.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISER WITH RESPECT TO THE FEDERAL,
STATE AND LOCAL CONSEQUENCES OF PARTICIPATING IN THIS OFFER, AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
22
There are no immediate tax consequences for receiving restricted stock in
exchange for your options, unless you make an election under Section 83(b) of
the Internal Revenue Code. If you do not make a Section 83(b) election, upon the
vesting of your restricted stock, you will be required to recognize additional
income in an amount equal to the fair market value of the restricted stock that
vests, determined on the date the shares vest.
If you decide to make a Section 83(b) election, the election must be made
and filed with the Internal Revenue Service within 30 days after your receipt of
your restricted stock. If you make a Section 83(b) election, you will be
required to recognize taxable income at the time you receive your restricted
stock in an amount equal to the fair market value of the restricted stock you
receive on that date. If you make a Section 83(b) election, any appreciation
between transfer of the restricted stock and the lapse of the restrictions is no
longer potential compensation income. Rather, it is potential capital gain if
and when the stock is sold at a gain. In addition, if you make a Section 83(b)
election, your holding period in the restricted stock for purposes of capital
gains begins when you receive the restricted stock. If you subsequently forfeit
your restricted stock, you are not entitled to a deduction for the loss.
In order to help you defray any related tax liability, if you make a
Section 83(b) election, we will pay you a bonus equal to 30% of the fair market
value of the restricted stock you receive. We will pay you this bonus within ten
business days after we receive your signed restricted stock agreement and a copy
of your executed Section 83(b) election. You will be required to recognize
additional taxable income in the amount of the bonus we pay to you. Depending on
your particular circumstances, the cash bonus may be less than (and possibly
even substantially less than) the federal income taxes you will owe as a result
of receiving the restricted stock and the cash bonus. WE ARE NOT MAKING A
RECOMMENDATION AS TO WHETHER YOU SHOULD MAKE A SECTION 83(B) ELECTION IF YOU
ELECT TO TENDER YOUR OPTIONS.
We will likely be allowed a business expense deduction in the amount of any
taxable income you recognize. Section 162(m) of the Internal Revenue Code,
however, may limit our deduction in certain circumstances.
15. Extension of this Offer; Termination; Amendment.
We expressly reserve the right, in our sole discretion, at any time and
from time to time, and regardless of whether or not any of the events set forth
in Section 6 have occurred or shall be deemed by us to have occurred, to extend
the period of time during which this offer is open and thereby delay acceptance
or the payment of any options by giving oral or written notice of such extension
to the optionholders and making a public announcement thereof.
We also expressly reserve the right, in our reasonable judgment, to
terminate this offer and not accept for payment or pay for any options
previously accepted for payment or paid for or, subject to applicable law, to
postpone payment for options upon the occurrence of any of the conditions
specified in Section 6, by giving oral or written notice of such termination or
postponement to the optionholders and making a public announcement thereof. Our
reservation of the right to delay payment for options that we have accepted for
payment is limited by Rule 13e-4(f)(5) promulgated under the Securities Exchange
Act, which requires that we pay the consideration offered or return the options
tendered promptly after termination or withdrawal of this offer.
Subject to compliance with applicable law, we further reserve the right, in
our sole discretion, and regardless of whether any of the events set forth in
Section 6 have occurred or shall be deemed by us to have occurred, to amend this
offer in any respect (including, without limitation, by decreasing or
23
increasing the consideration offered or by decreasing or increasing the number
of options being sought in this offer).
Amendments to this offer may be made at any time and from time to time by
public announcement of the amendment. In the case of an extension, the amendment
must be issued no later than 9:00 a.m., Austin, Texas time, on the next business
day after the last previously scheduled or announced expiration date. Any public
announcement made pursuant to this offer will be disseminated promptly to
optionholders in a manner reasonably designated to inform optionholders of such
change. Without limiting the manner in which we may choose to make a public
announcement, except as required by applicable law, we have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a press release to the Dow Xxxxx News Service.
If we materially change the terms of this offer, or the information
concerning this offer, or if we waive a material condition of this offer, we
will extend this offer to the extent required by Rules 13e-4(d)(2) and 13e-
4(e)(3) promulgated under the Securities Exchange Act. The minimum period during
which this offer must remain open following material changes in the terms or
information (other than a change in price or a change in percentage of
securities sought) will depend on the facts and circumstances, including the
relative materiality of such terms or information. If we increase or decrease
the amount of consideration being offered or increase or decrease the number of
subject options being sought in this offer and, in the event of an increase in
the number of options being sought exceeds 2% of the outstanding subject
options, then this offer will remain open for ten business days following the
notice of any such changes.
For purposes of this offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, Austin, Texas time.
16. Fees and Expenses.
We will not pay any fees or commissions to any broker, dealer or other
person for soliciting tenders of options pursuant to this offer.
17. Additional Information
We are subject to the informational filing requirements of the Securities
Exchange Act and, in accordance therewith, are obligated to file reports and
other information with the Securities and Exchange Commission relating to our
business, financial condition and other matters. Information, as of particular
dates, concerning our directors and officers, their remuneration, options
granted to them, the principal holders of our securities and any material
interest of such persons in transactions with us is required to be disclosed in
proxy statements distributed to our stockholders and filed with the Securities
and Exchange Commission.
These reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Securities and
Exchange Commission at 000 Xxxxx Xxxxxx, X.X., Xxxx 0000, 0xx Xxxxx, Xxxxxxxxxx,
X.X. 00000.
Copies of such material may also be obtained by mail, upon payment of the
Securities and Exchange Commission's customary charges, from the Public
Reference Section of the Securities And Exchange Commission at Judiciary Plaza,
000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. The Securities And Exchange
Commission also maintains a Web site on the World Wide Web at xxxx://xxx.xxx.xxx
that contains reports, proxy statements and other information regarding
registrants
24
that file electronically with the Securities and Exchange Commission. These
reports, proxy statements and other information concerning us also can be
inspected at the offices of the Nasdaq National Market, 0000 Xxxxxxxxxx Xxxx.,
0xx Xxxxx, Xxxxxxxxxx, XX 00000.
We urge you to review our Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 prior to making a decision on whether to tender your
options. We have included a copy of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 with this offer of purchase and the
transmittal letter.
18. Miscellaneous.
We are not aware of any jurisdiction where the making of this offer is not
in compliance with applicable law. If we become aware of any such jurisdiction,
we will make a good faith effort to comply with any such applicable law. If,
after such good faith effort, we cannot comply, this offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of options
residing in such jurisdiction.
Pursuant to Rule 13e-4 of the general rules and regulations under the
Securities Exchange Act, we have filed with the Securities and Exchange
Commission a Tender Offer Statement on Schedule TO that contains additional
information with respect to this offer. Such Schedule TO, including the exhibits
and any amendments thereto, may be examined, and copies may be obtained, at the
same places and in the same manner as is set forth in Section 17.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS PURSUANT
TO THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE
YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER
OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF TRANSMITTAL. IF
ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR REPRESENTATION, YOU
MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR AUTHORIZATION AS HAVING
BEEN AUTHORIZED BY US.
Netpliance, Inc.
April 4, 2001
25
Schedule A
----------
The directors and executive officers of the company, their positions and
offices as of March 30, 2001, and the number of option shares (and the
percentage of total option shares) that may be tendered in this offer are set
forth in the following table:
Name Position Number of Percentage of
---- -------- --------- -------------
Option Shares Option Shares
------------- -------------
Xxxx X. XxXxxx Chairman of the Board and Chief
Executive Officer --- ---
Xxxxxxx X. Xxxxxxx XXX Chief Financial Officer and
Director 850,000 23.1%
Xxxxxxx X. Xxxxxx Director 90,000 2.5%
Xxxxx Xxxxxxxx Director 90,000 2.5%
Xxxxx X. Xxxx Director 90,000 2.5%
Xxxxx X. Xxxxxxx Director 90,000 2.5%
Xxxxx X. Xxxxxxx Director 90,000 2.5%
Xxxxxx X. Xxxxxxxxxxx Director --- ---
Xxxx X. Xxxxxx Director --- ---
Xxxx X. Xxxx Director 90,000 2.5%
The address of each director and executive officer is: Netpliance, Inc. 0000X X.
Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxxx, Xxxxx, 00000, (000) 000-0000.
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================================================================================
Offer To Purchase
Outstanding Options
With an Exercise Price of $1.00 or More
of
NETPLIANCE, INC.
__________________
Any questions or requests for assistance or additional copies of any documents
incorporated by reference into this offer to purchase may be directed to Xxxxx
X. Xxxxxx, Vice President and General Counsel, Netpliance, Inc., 0000X X.
Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxxx, Xxxxx, 00000, (000) 000-0000.
__________________
April 4, 2001
================================================================================
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