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ARCHIVED  September 10, 1999

ACT stockholders endorse ISP buy

DENVER — Trying to salvage what remains of their sinking fortunes, stockholders of Applied Computer Technology Inc. have approved the sale of ACT’s Internet business to a new company that might be a lifeboat.

Shareholders’ votes, almost all of which were tabulated from mail-in proxies, allow the new company, WebAccess Inc., to build its Internet service customer base through purchases of other Internet service providers. And if letters of intent live up to their name, WebAccess may have begun to do just that.

“We have four current letters of intent,´ said ACT president and CEO Bud Prentice, who is also the president of WebAccess. “If we closed all four of them, it would increase our base by close to 15,000 additional subscribers.”

In a Denver hotel conference room where the vote was formalized Aug. 30, Prentice and ACT vice president Cynthia Koehler waited three hours for vote results to be faxed from a New Jersey-based firm that compiled the results.

Just two years after news of a major contract sent ACT’s stock to the $8 mark, a bare majority of the company’s stockholders — but almost all of those voting — their shares now worth in the neighborhood of 2 cents, gave their blessing to the rescue plan.

Relieved that the necessary quorum had been reached, Prentice said he thought the move would benefit equally ACT’s 78 shareholders of record, and a number of creditors that might exceed that.

“Most companies don’t go through what we have had to go through,” Prentice said. “The easy way out would have been to just file (for bankruptcy). Once you become insolvent, as we did, you have fiduciary responsibility to your creditors as a public company.”

Following its initial public offering in October 1995, high-flying ACT built, sold, installed and serviced specialized computers, mostly for business, institutional and scientific uses. But outside market pressure, and what Prentice described last week as “internal errors,” sent ACT into a death spiral.

As costs rose, debts mounted and the ability to fulfill contracts waned, ACT suspended its operations and had laid off almost all employees by November 1998. Koehler said that a casual survey of today’s personal-computer market tells the story of ACT’s demise.

“Our average price per unit was around $2,200,” she said. “Look at what’s happening now. PCs are selling for $1,000 and below.”

Prentice said that as hardware profit margins began to shrink in 1996, he and other ACT managers looked to the higher-margin Internet service business as a way to increase revenue.

Actnet, a wholly-owned subsidiary formed in 1996 that did business under the WebAccess name, became ACT’s sole remaining asset.

The choice Prentice offered stockholders was a simple one: Declare bankruptcy and get nothing, or fund the new company with remaining shares and hope that new acquisitions would feed it.

Prentice said that the purchase prospects were located by direct contacts with Internet service providers in the Rocky Mountain region. The four letters of intent, which require that the companies not be identified, were signed with ISPs in Colorado and New Mexico, Prentice said.

Actnet in July sealed the purchase of one ISP, buying the Denver operations of Dallas-based Internet service firm H2.net.

Prentice said that ACT’s many creditors, as well as patient stockholders, might also realize gains from the potential sale of the public shell that once housed ACT.

“There is residual shareholder and creditor value in the shell,” he said. “It has value that could trickle down to shareholder and creditor alike.”

Prentice said that financial backing of WebAccess, through the private sale of stock, came from a set of investors with no prior interest in ACT.

“WebAccess is a great name, and they wanted to keep that,” he said, “but the people who have put that together are a completely different group.”

DENVER — Trying to salvage what remains of their sinking fortunes, stockholders of Applied Computer Technology Inc. have approved the sale of ACT’s Internet business to a new company that might be a lifeboat.

Shareholders’ votes, almost all of which were tabulated from mail-in proxies, allow the new company, WebAccess Inc., to build its Internet service customer base through purchases of other Internet service providers. And if letters of intent live up to their name, WebAccess may have begun to do just that.

“We have four current letters of intent,´ said ACT president and CEO Bud Prentice, who is also the president…

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