SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
NOTICE OF CHANGE IN THE MAJORITY OF DIRECTORS
Date of Designation Pursuant to Section 14(f) of the Securities Exchange Act of
1934: 10 days after the date of filing of this Notice and transmittal thereof to
the Registrant's shareholders.
Commission File number: 000-31553
HOUSTON OPERATING CO.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 76-0307819
- -------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
67 Federal Road, Building A, Suite 300, Brookfield, CT 06804
- ------------------------------------------------------------
(Address of principal Executive Offices Zip Code)
Registrant's telephone number, including area code: (203) 775-1178
HOUSTON OPERATING COMPANY
67 Federal Road
Building A
Suite 300
Brookfield, CT 06804
(203) 775-1178
---------
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 15, 2004,
to holders of record on December 15, 2004, of shares of Common Stock ("Common
Stock") of Houston Operating Company, a Delaware corporation (the "Company") in
connection with an anticipated change in members of the Company's Board of
Directors. The information contained in this Information Statement regarding the
persons designated to become directors of the Company has been furnished to the
Company by third parties and the Company assumes no responsibility for its
accuracy or completeness. The information contained in this Information
Statement is being provided pursuant to Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated
thereunder by the Securities and Exchange Commission (the "SEC").
On December 9, 2004, the shareholders (collectively, the "Shareholders") of
NetFabric Corporation ("NetFabric") and NetFabric entered into an Exchange
Agreement (the "Exchange Agreement") with the Company, pursuant to which the
Shareholders exchanged all of their shares of the common stock of NetFabric for
an aggregate of 32,137,032 shares of the common stock of the Company
representing control of the Company (the "Control Shares"), with the result
being that NetFabric will become a wholly-owned subsidiary of the Company.
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
As a result of the closing of the Exchange Agreement (the "Closing"), which
took place on December 9, 2004, the current directors of the Company will
resign, and persons designated by NetFabric will be appointed as the new
directors of the Company effective 10 days after the mailing of this Information
Statement. Effective immediately upon the Closing the officers of the Company
resigned and the officers of NetFabric became the officers of the Company.
This Information Statement is being delivered to provide information
regarding anticipated changes in the membership of the Board of Directors of the
Company in conjunction with completion of the issuance of the Control Shares,
and is provided for information purposes only. You are urged to read this
Information Statement carefully. However, no action on your part is sought or
required.
TERMS OF THE STOCK EXCHANGE
Under the terms of the Exchange Agreement, the Shareholders shall receive
the Control Shares; in exchange, the Company shall receive shares of NetFabric
representing all of the outstanding common stock of NetFabric. No Shareholder
shall have any right to receive fractional Control Shares but any fractional
share shall be rounded to the nearest whole Control Share. In addition, the
Company shall reserve (i) a total of 6,097,796 shares of common stock to support
the exercise of options and warrants in the Company in exchange for 1,850,000 of
existing options and warrants in NetFabric; and (ii) a total of 2,000,000 shares
of common stock for issuance in connection with the conversion of existing
bridge loans owed by NetFabric. As part of the Closing, Littlehampton
Investments, LLC and the Company will cancel a total of 6,030,000 shares of
common stock held by Littlehampton Investments, LLC. The issuance of the Control
Shares will not be registered under the Securities Act of 1933, as amended (the
"Act"), but will be made in reliance upon an exemption from the Act's
registration requirements.
INFORMATION CONCERNING THE COMPANY
BUSINESS
Information concerning the business of the Company and its results of
operations and financial condition are incorporated by reference to its report
on Form 8-K, as filed with the Securities and Exchange Commission (the "SEC" or
the "Commission") on December 15, 2004, and available electronically on EDGAR at
www.sec.gov.
DESCRIPTION OF SECURITIES
The following description is a summary and is qualified in its entirety by
the provisions of the Company's Articles of Incorporation and Bylaws, copies of
which have been filed with the Commission and available electronically on EDGAR
at www.sec.gov.
COMMON STOCK.
General. The Company is authorized to issue 50,000,000 shares of common
stock, par value $0.001. As of December 9, 2004, there were 38,652,204 common
shares issued and outstanding. All shares of common stock outstanding are
validly issued and non-assessable.
Voting Rights. Each share of common stock entitles the holder to one vote,
either in person or by proxy, at meetings of shareholders. The holders are not
permitted to vote their shares cumulatively. Accordingly, the holders of common
stock holding, in the aggregate, more than fifty percent of the total voting
rights can elect all of the Company's directors and, in such event, the holders
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of the remaining minority shares will not be able to elect any of such
directors. The vote of the holders of a majority of the issued and outstanding
shares of common stock entitled to vote thereon is sufficient to authorize,
affirm, ratify or consent to such act or action, except as otherwise provided by
law.
Dividend Policy. All shares of common stock are entitled to participate
proportionally in dividends if the Board of Directors declares them out of the
funds legally available and subordinate to the rights, if any, of the holders of
outstanding shares of preferred stock. These dividends may be paid in cash,
property or additional shares of common stock. The Company has not paid any
dividends since inception and presently anticipates that all earnings, if any,
will be retained for development of its business. Any future dividends will be
at the discretion of our Board of Directors and will depend upon, among other
things, the Company's future earnings, operating and financial condition,
capital requirements, and other factors. Therefore, there can be no assurance
that any dividends on the common stock will be paid in the future.
Miscellaneous Rights and Provisions. Holders of common stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of our dissolution, whether voluntary or
involuntary, each share of common stock is entitled to share proportionally in
any assets available for distribution to holders of our equity after
satisfaction of all liabilities and payment of the applicable liquidation
preference of any outstanding shares of preferred stock.
PREFERRED STOCK.
General. The Board of Directors of the Company is authorized to provide for
the issuance of 10,000,000 shares of preferred stock in series and, by filing a
certificate pursuant to the applicable law of Delaware, to establish from time
to time the number of shares to be included in each of these series, and to fix
the designation, powers, preferences and rights of the shares of each of these
series and the qualifications, limitations or restrictions applicable to each
series without any further vote or action by the stockholders. Any shares of
preferred stock so issued would have priority over the common stock with respect
to dividend or liquidation rights. Any future issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders and may adversely affect the
voting and other rights of the holders of common stock. At present, the Company
has no plans to issue any preferred stock or adopt any series, preferences or
other classification of preferred stock.
The issuance of shares of preferred stock, or the issuance of rights to
purchase shares of preferred stock, could be used to discourage an unsolicited
acquisition proposal. For instance, the issuance of a series of preferred stock
might impede a business combination by including class voting rights that would
enable the holder to block a business combination transaction, or facilitate a
business combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, the issuance of preferred
stock could adversely affect the voting power of the holders of the common
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stock. Although the Board of Directors is required to make any determination to
issue such stock based on its judgment as to the best interests of the Company's
stockholders, the Board of Directors could act in a manner that would discourage
an acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market price
of such stock. At present, the Board of Directors does not intend to seek
stockholder approval prior to any issuance of currently authorized stock, unless
otherwise required by law or applicable stock exchange rules. The Company has no
present plans to issue any preferred stock.
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following tables set forth the beneficial ownership of the Company
prior to and immediately following the Closing:
STOCKHOLDINGS PRIOR TO AND FOLLOWING THE CLOSING
The following table sets forth, as of the date of this Information
Statement: (i) the stock ownership of each executive officer and director of the
Company, all directors and executive officers as a group, and each person known
by the Company to be a beneficial owner of more than five percent of its issued
and outstanding Common Stock prior to the Closing, and (ii) the name and address
of every person who, following the Closing, will be a director or executive
officer of the Company, such directors and executive officers as a group, and
other persons who will, to the Company's knowledge, own of record or
beneficially more than five percent of its issued and outstanding Common Stock.
Except as otherwise noted, each person listed below is the sole beneficial owner
of the shares and has sole investment and voting power as to such shares. Except
as otherwise noted, no person listed below has any options, warrants, or other
rights to acquire additional securities of the Company.
Name and Address of Beneficial Owner Amount of Beneficial Amount of Beneficial Percentage of Class
Ownership Pre-Closing Ownership Post-Closing Post-Closing
Jeffrey Robinson -- 14,832,476 38.37%
c/o NetFabric Corporation
67 Federal Road
Building A, Suite 300
Brookfield, CT 06804
Fred Nazem -- 14,832,477(1) 38.37%
c/o NetFabric Corporation
67 Federal Road
Building A, Suite 300
Brookfield, CT 06804
Walter Carozza -- 824,026(2) 1.68%
c/o NetFabric Corporation
67 Federal Road
4
Building A, Suite 300
Brookfield, CT 06804
Philip Barak -- 247,208(3) .64%
c/o NetFabric Corporation
67 Federal Road
Building A, Suite 300
Brookfield, CT 06804
Victoria Desidero -- 98,883(4) 0.26%
c/o NetFabric Corporation
67 Federal Road
Building A, Suite 300
Brookfield, CT 06804
Charlotte G. Denenberg -- -- --%
c/o NetFabric Corporation
67 Federal Road
Building A, Suite 300
Brookfield, CT 06804
Richard Howard -- -- --%
c/o NetFabric Corporation
67 Federal Road
Building A, Suite 300
Brookfield, CT 06804
Littlehampton Investments, LLC 7,030,000 1,000,000 2.5%
(Beneficially Michael Millon)
1365 York Ave. 28B
New York, NY 10021
Wesley F. Whiting -- -- --%
c/o Houston Operating Company
11145 West Rockland Drive
Littleton, CO 80127
Redgie Green -- -- --%
c/o Houston Operating Company
11145 West Rockland Drive
Littleton, CO 80127
ALL DIRECTORS AND OFFICERS AS A WHOLE 7,030,000 16,002,593 (5) 41.40%
(1) Includes 6,592,212 shares held by the Fred F. Nazem Children's Trust, whose
trustees are Alexander Nazem, Farhad Nazem and Soheyla Gharib .
(2) Includes 494,416 options at $0.152/share and 164,805 warrants at
$0.152/share
(3) Includes 247,208 options at $0.152/share
(4) Includes 98,883 options at $0.152/share
(5) Does not include shares held by the Fred F. Nazem Children's Trust, or by
Fred Nazem who resigned as the Chairman of the Board and the CEO of NetFabric
effective November 30, 2004
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The Company is not aware of any material proceeding to which any of the
above-named individuals (collectively, the "Designees") is a party adverse to
the interests of the Company or has a material interest adverse to the Company.
During the past five years, none of the Designees has:
(1) Petitioned for bankruptcy or had a bankruptcy petition filed by or
against any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that
time;
(2) Been convicted in a criminal proceeding or is currently subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Been subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) Been found by a court of competent jurisdiction (in a civil action),
the SEC or the Commodity Futures Trading Commission to have violated a federal
or state securities or commodities law, and the judgment has not been reversed,
suspended or vacated.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and holders of 10% or more of its Common Stock to
file reports of ownership (Form 3) and changes in ownership (Forms 4 and 5) with
the SEC and to furnish the Company with copies of all such forms which they file
with the SEC. During 2004, none of the above persons failed to comply on a
timely basis with Section 16(a). In making the foregoing disclosure, the Company
has relied solely on its review of copies of forms filed by such persons with
the SEC. Promptly following the Closing, the Designees each will file a Form 3
in compliance with their reporting obligations under Section 16(a) of the
Securities Exchange Act of 1934.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Within 60 days following the Closing of the acquisition, the Company
intends to enter into a consulting agreement with Fred Nazem, the former CEO and
Chairman of the Board of NetFabric and a major shareholder of the Company. The
terms of that agreement have not yet been negotiated with Mr. Nazem.
6
MANAGEMENT OF THE COMPANY
CURRENT BOARD OF DIRECTORS AND MANAGEMENT
The Company's Bylaws provide that it shall have a minimum of one director
on the board at any time. Vacancies are filled by a majority vote of the
remaining directors then in office. The directors and executive officers
immediately prior to Closing are as follows:
Name Age Positions Held
Redgie Green 51 Secretary and Director
Wesley F. Whiting 73 President and Director
The above-named directors will serve as the directors until their resignations
take effect 10 days following the mailing of this Information Statement, at
which time their successors will be appointed as described below.
REDGIE GREEN
Mr. Green has been Secretary and Director of Dynadapt Systems, Inc. since
1998. Mr. Green has been co-owner and operator of Green's B&R Enterprises, a
wholesale donut baker since 1983. He has been an active investor in small
capital and high-tech ventures since 1987. Mr. Green was a director of Colorado
Gold & Silver, Inc. in 2000. Mr. Green was elected a Director of Cheyenne
Resources, Inc. in August 2004 and served until November 2004 when he resigned.
WESLEY F. WHITING
Mr. Whiting was President, director, and Secretary of Berge Exploration,
Inc. (1978-88) and President, Vice President, and director of NELX, Inc.
(1994-98), and was Vice President and director of Intermountain Methane
Corporation (1988-91), and President of Westwind Production, Inc. (1997-98). He
was a director of Kimbell deCar Corporation from 1998, until 2000 and he has
been President and a director of Dynadapt System, Inc. since 1998. He was a
Director of Colorado Gold & Silver, Inc. from 1999 to 2000. He was President and
director of Business Exchange Holding Corp. from 2000 to 2002 and Acquisition
Lending, Inc. (2000-02). He was director and Vice President of Utilitec, Inc,
1999 to 2002, and has been Vice President and director of Agro Science, Inc.
since 2001. He was President and director of Premium Enterprises, Inc. from
October 2002 to December 31, 2002. He was appointed Director and Secretary of
BSA SatelLINK, Inc. in 2002. He has been President and Director of Fayber Group,
Inc. since 2003. He has also been Director of Life USA, Inc. since 2003.
Following the Closing, the officers named above will have resigned as
officers of the Company, and the new officers of the Company will be as set
forth below. In addition, 10 days after mailing this Information Statement, the
7
Board of Directors of the Company will be comprised of Jeffrey Robinson,
Charlotte Denenberg and Richard Howard.
During the year ended December 31, 2004, the Company held no meetings of
its Board of Directors; however, the Board acted by means of unanimous written
consents in lieu of a meeting when required.
COMMITTEES OF THE BOARD OF DIRECTORS
Currently, the Company has no standing audit, nominating or compensation
committees. It is contemplated that such committees will be formed after the
Closing.
MANAGEMENT AND BOARD OF DIRECTORS AFTER THE CLOSING
None of the Designees named below was an officer or Director of or holds
any position with the Company, nor are they known to own any shares of the
Company prior to Closing. The following identifies each of the Designees and
executive officers of the Company who will take office at the Closing:
JEFFREY ROBINSON
Mr. Robinson is a co-founder of NetFabric and has been the President and a
member of the Board of Directors of NetFabric since December 2002. Mr. Robinson
is an experienced entrepreneur and technologist. He was the CEO of IQ
NetSolutions from June 1994 to July 2002, a company that created one of the
first voice-over-packet systems with an emphasis on ease of installation. During
the period from Oct 1987 to July 1994, he was the Chairman and CTO of Star
Semiconductor, the company that created the world's first commercially available
multi-processor DSP. During the period from Dec 1982 to Sept 1987, Mr. Robinson
was the Director of VLSI at General DataComm, and an IC Design Manager at Texas
Instruments. Mr. Robinson is the owner of over 30 patents. Mr. Robinson is a
Director Designee and is the new Chairman of the Board and CEO of the Company.
RICHARD HOWARD
Mr. Howard has been a Director of NetFabric since November 2004. He
received a BS in Economics and Corporate Finance from the Wharton School at the
University of Pennsylvania. Since 2003, he has been the Managing Director of BLH
Strategies, a consulting firm that provides management services to companies and
nonprofit organizations. From 1985 to 2003, he worked for Genesis Health
Ventures, Inc. At various times during his seventeen years with Genesis he
served as Vice Chairman, President and Chief Operating Officer. He also served
as a member of the Board of Directors for all seventeen years. While he was with
Genesis, the company grew from a private company operating twelve skilled
nursing centers to a $2.5 billion publicly traded company employing over 45,000
people. Mr. Howard is a Director Designee.
8
CHARLOTTE DENENBERG
Ms. Denenberg has been a Director of NetFabric since November 2004. She
received a BA in Psychology and Mathematics with Highest Distinction, Phi Beta
Kappa from Northwestern University, and an MS and a PhD in Mathematics from the
Illinois Institute of Technology. For the past two years she has consulted to a
variety of companies in the telecommunications industry. From 1998 to 2002, she
worked for Metromedia Fiber Network Services, Inc. (MFN) as Vice President,
Optical Infrastructure and as Vice President and Chief Technology Officer. Ms.
Denenberg is a Director Designee.
WALTER CAROZZA
Mr. Carozza has been the Chief Financial Officer of NetFabric since August
2004. Mr. Carozza received his BA and JD degrees from The University of
Wisconsin. He is admitted to practice before the Court of International Trade,
the U.S. Supreme Court, and the District of Columbia Court of Appeals. He is a
member of the District of Columbia and Wisconsin Bars. For the past five years
he has been employed as a Manager of the General Partner of East River Ventures,
a venture capital firm based in New York City. Mr. Carozza is the new CFO of the
Company.
PHILIP BARAK
Mr. Barak has been the VP Finance of NetFabric since December 2002. He
holds a BS in Accounting from Rider University and is a Certified Public
Accountant and a member of the AICPA and NYSSCPA. For the past five years he has
been employed as a General Partner and CFO of Nazem & Company, a venture capital
firm founded in 1976. Mr. Barak is the new VP of Finance of the Company.
VICTORIA DESIDERO
Ms. Desidero has been the VP Marketing of NetFabric since June 2004. For
the past five years, she has been employed as VP Marketing for Merlot
Communications. Ms. Desidero is the new VP of Marketing of the Company.
None of the above Designees has received any compensation from the Company,
and there have been no transactions between the Company and any of these
Designees other than as set forth in this Information Statement.
INDEBTEDNESS OF MANAGEMENT
None.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to all executive officers of
NetFabric who were serving as of September 30, 2004, for services in all
capacities. These officers and directors will hold identical salaries and option
positions in the Company following the acquisition, except as set forth in the
footnotes below.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Awards Payouts Other
Compen-
sation
($)
Name
And Principal Year Salary Bonus Other Restricted Securities LTIP
Position (1) ($) ($) Annual Stock Under-lying Payouts
Comp- Awards Options/ ($)
ensation ($) (#)
($)
Fred Nazem 2004 175,000 0 0 0 0 0 0
Chief Executive
Officer (2)
Jeff Robinson 2004 175,000 0 0 0 0 0 0
President (3)
Walter Carozza, 2004 60,000 0 0 0 988,832 0 0
Chief Financial
Officer
Philip Barak, 2004 0 0 0 0 494,416 0 0
VP Finance
Victoria Desidero 2004 110,000 0 0 0 395,533 0 0
VP Marketing
William Meltzer 2004 120,000 0 0 0 164,805 0 0
Director, Software
Joseph Welfeld 2004 110,000 0 0 0 148,325 0 0
Senior Firmware
Engineer
Dominick Zumbo 2004 110,000 0 0 0 148,325 0 0
Director, Hardware
(1) No compensation was paid in 2003 by NetFabric.
10
(2) Effective November 30, 2004 Fred Nazem resigned as Chairman and CEO of
NetFabric. He will not be an officer or Director of the Company.
(3) Effective November 30, 2004 Jeff Robinson was elected Chairman of the Board
and appointed CEO of NetFabric, and he will hold those identical positions in
the Company.
EMPLOYMENT AGREEMENTS
None of the above individuals has an employment agreement with the Company.
Jeff Robinson does not have any employment agreement with NetFabric. All other
individuals above have limited employment agreements with NetFabric that
stipulate amount of annual compensation, other employment benefits, and any
participation in NetFabric's stock option plan. There are currently no
agreements with NetFabric or the Company with regard to severance or
non-competition.
OPTION GRANTS IN FISCAL YEAR 2004
The following table sets forth the grant of stock options made as of
September 30, 2004 to the persons named in the Summary Compensation Table:
Name Number of Securities % of Total Options Exercise Expiration Date
Underlying Granted to Employees Price per Share
Options Granted in Fiscal
Period
Walter Carozza 988,832 34.68% $0.152 January 1, 2014
Philip Barak 494,416 17.34% $0.152 January 1, 2014
Victoria Desidero 395,533 11.56% $0.152 June 14, 2014
William Meltzer 164,805 5.78% $0.152 January 1, 2014
Joseph Welfeld 148,325 5.20% $0.152 April 26, 2014
Dominick Zumbo 148,325 5.20% $0.152 August 16, 2004
LITIGATION
None.
INDEMNIFICATION POLICY
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, it is the opinion of the SEC that such indemnification
is against public policy as expressed in the act and is therefore unenforceable.
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NO STOCKHOLDER ACTION REQUIRED
This Information Statement is being provided for informational purposes
only, and does not relate to any meeting of stockholders. Neither applicable
securities laws, nor the corporate laws of the State of Delaware require
approval of the sale of the Control Shares by the Company's stockholders. NO
VOTE OR OTHER ACTION IS BEING REQUESTED OF THE COMPANY'S STOCKHOLDERS. THIS
INFORMATION STATEMENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY.
This Information Statement has been filed with the Commission and is
available electronically on EDGAR at www.sec.gov.
The Board of Directors
December 15, 2004
Brookfield, Connecticut