WASTEMASTERS, INC.
Promenade II, Suite 2545
1230 Peachtree Street
Atlanta, Georgia 30309
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS IS
REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT
This Information Statement (the "Information Statement") is being mailed
on or about November 26, 1997, to the holders of record at the close of
business on November 18, 1997, of the common stock, par value $0.01 per share
(the "Common Stock"), and the Series A Preferred Stock, par value $0.01 per
share (the "Preferred Stock"), of WasteMasters, Inc., a Maryland corporation
(formerly F & E Resource Systems Technology, Inc.) (the "Company"), in
connection with the appointment of certain persons to the Board of Directors
of the Company other than at a meeting of the stockholders of the Company. You
are urged to read this Information Statement carefully. However, no action is
required by the shareholders of the Company in connection with the appointment
of the new directors.
This Information Statement is being distributed pursuant to the
requirement of Section 14(f) of the Securities Exchange Act of 1934, as
amended, and Rule 14f-1 thereunder.
INFORMATION RELATING TO THE COMPANY'S VOTING SECURITIES
As of the close of business on November 18, 1997, the Company had
outstanding 34,794,712 shares of Common Stock and 5,000,000 shares of
Preferred Stock. Each share of Common Stock and each share of Preferred Stock
is entitled to one vote on all matters which may be voted upon at a meeting
of stockholders.
TRANSACTION WITH CONTINENTAL INVESTMENT CORPORATION
Pursuant to the terms of a Stock Issuance and Stock Purchase Agreement,
dated as of September 6, 1997 (the "Stock Purchase Agreement"), between the
Company, Continental Investment Corporation, a Georgia corporation
("Continental"), and Continental Technologies Corporation of Georgia (a
wholly-owned subsidiary of Continental), a Georgia corporation ("Continental
Technologies"), the Company acquired 400,000 shares of the common stock, par
value $0.50 per share, of Continental (the "Continental Common") and an option
to purchase up to 100,000 additional shares of Continental Common for a period
of five years at an exercise price of $23.00 per share (the "Continental
Option"). In consideration for the Continental Common and the Continental
Option, the Company (i) issued to Continental 4,500,000 shares of its
authorized but previously unissued Common Stock and 5,000,000 shares of its
authorized but previously unissued Preferred Stock, being all of the Company's
authorized preferred stock, and (ii) conveyed to Continental Technologies 100%
of the issued and outstanding shares of the capital stock of Rye Creek/Trantex
and WasteMasters of Georgia, Inc., both of which were subsidiaries of the
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Company. The Stock Purchase Agreement also provided for the delivery of
voting proxies, irrevocable for a period of one year from September 6, 1997,
in favor of Continental from six stockholders of the Company representing
9,358,169 shares of the Company's Common Stock (of which Continental expects
to exercise proxies for 7,752,216 shares of the Company's Common Stock), and
the issuance to Continental of a Warrant, pursuant to which Continental may
acquire up to 100,000,000 shares of the Company's Common Stock in exchange for
up to 1,000,000 shares of Continental Common, for a period of two years.
Further, as stipulated in the Stock Purchase Agreement, of the 400,000 shares
of the Continental Common received in the exchange, 100,000 shares were
received for the sale of the capital stock of Rye Creek/Trantex and
WasteMasters of Georgia, Inc., and the remaining 300,000 shares of Continental
Common, valued at $23.50 per share, were received for the issuance of
WasteMasters Common Stock and Preferred Stock. The Preferred Stock is
convertible into Common Stock, at the option of Continental, at the rate of
5.1 shares of common for each share of preferred.
The 9,500,000 aggregate shares of the WasteMasters Preferred Stock and Common
Stock owned by Continental represents 23.9% of the total of the Common Stock
and Preferred Stock issued and outstanding. When combined with the 7,752,216
shares of Common Stock on which Continental holds irrevocable proxies that
can be exercised, Continental is entitled to vote 17,252,216 shares of the
voting securities of the Company, which represents 43.4% of the total voting
securities outstanding and entitled to vote at a meeting of stockholders. If
all of the Preferred Stock were converted to Common Stock, 25,500,000 shares
of Common Stock would be issued and the 5,000,000 shares of Preferred Stock
would be canceled, resulting in a net increase in outstanding voting
securities of 20,500,000 shares and, on a post-conversion basis, Continental
would own 30,000,000 shares of Common Stock, or 49.8% of the total voting
securities. If further combined with the 7,752,216 shares on which Continental
holds a proxy, Continental would be entitled to vote 62.6% of the total voting
securities. However, the Company does not presently have adequate authorized
shares from which to issue additional shares of Common Stock should
Continental exercise its right to convert, and the future ability of the
Company to issue additional shares to Continental is dependent upon the
approval of shareholders at a meeting to increase the number of authorized
shares. Thus far, Continental has not sought to exercise its right to convert
the shares of Preferred Stock into shares of Common Stock.
Previously, on July 30, 1997, pursuant to a Securities Purchase Agreement
between Continental and Infinity Investors Limited, Continental acquired all
of the outstanding 8% convertible debentures of WasteMasters, Inc. (the
"Debentures") with an outstanding principal amount of $3,161,800 in the
aggregate, and then accrued interest of approximately $296,297. On
September 29, 1997, Continental sold and conveyed the Debentures, together
with the then accrued interest of approximately $338,570, to Nikko Trading of
America Corporation ("Nikko"). Series A Debentures totaling $1,161,800
principal amount are due April 12, 1998 and the Series B Debentures, which
total $2,000,000 principal amount are due June 26, 1998. Under the provisions
of the Debentures, as modified by the Board of Directors on August 28, 1997,
the Debentures may be converted into shares of Common Stock of the Company at
the option of the holder based upon a conversion price for each share equal to
$0.255 of the unpaid principal balance, accrued and unpaid interest,
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penalties and/or costs due to the holder of the Debentures. Based upon the
outstanding principal amount of $3,161,800 and accrued interest to
November 18, 1997 of approximately $372,527, the total amount that could be
converted into shares of Common Stock of the Company is approximately
$3,534,327. If Nikko should exercise its right to convert the total amount
due, approximately 13,860,106 shares of Common Stock would be newly issued by
the Company to Nikko, which would represent 25.8% of the total voting shares
outstanding on a post-conversion basis, or 26.8% when combined with the
514,000 shares presently owned by Nikko. However, the Company does not
presently have adequate authorized shares from which to issue additional
shares should Nikko exercise its right to convert, and the future ability of
the Company to issue additional shares to Nikko is dependent upon the approval
of shareholders at a meeting to increase the number of authorized shares.
Thus far, Nikko has not sought to exercise its right to convert the
Debentures into shares of Common Stock.
The Stock Purchase Agreement was attached as an Exhibit to the Company's
Quarterly Report on Form 10-QSB for the period ended September 30, 1997. The
description in this Information Statement of the Stock Purchase Agreement and
its terms and conditions is qualified in its entirety by reference to the
Stock Purchase Agreement and the respective exhibits and schedules thereto
and is not, and does not purport to be, complete.
As described above, Continental presently owns 23.9% of the aggregate of
the outstanding Common Stock and Preferred Stock of the Company. With the
shares owned by Continental and the irrevocable proxies for 7,752,216 shares
that Continental may exercise, Continental is entitled to vote 43.4% of the
total voting securities outstanding and entitled to vote at a meeting of
stockholders. If the Preferred Stock owned by Continental were converted to
Common Stock, and if the Debentures owned by Nikko, together with accrued
interest thereon, were converted to Common Stock, then Continental would then
be entitled to vote 50.9% of the total voting securities of the Company, and
Nikko would own and be entitled to vote 19.4% of the total voting securities
of the Company. However, as described more fully above, the Company does not
presently have the necessary amount of authorized Common Stock to allow the
conversion of either the Preferred Stock or the Debentures.
BOARD OF DIRECTORS
Change in the Majority of Board of Directors
At a special meeting of the Board of Directors held on September 2, 1997,
the Board authorized an increase in its size from five to seven members and
the Board accepted the resignations of three of its members. The members
resigning were Julius W. Basham, II, Robert Fahey, and Paul Williamson. The
continuing directors are Richard D. Masters and A. Leon Blaser, Ph.D.
Thereafter, the Board elected Douglas C. Holsted, William L. Hutchinson, J. B.
Morris, S. Theis Rice and R. D. Sterritt, Jr. to fill the vacancies so
created. Also, at the special meeting of the Board, the Board elected J. B.
Morris as Interim President and G. Michael Lawshe as Secretary of the Company
and R. D. Sterritt, Jr. as Chairman of the Board. Subsequently, Douglas C.
Holsted was appointed Acting Chief Financial Officer.
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Directors and Executive Officers
The Board of Directors of the Company currently consists of the seven
members listed in the following table. Directors are elected for one year
terms or until their successors are elected and qualified or until earlier
resignation or removal. At the annual meeting of stockholders, to be held in
December, 1997, nominations will be voted upon to serve as members of the
Board of Directors for 1998, or until the next annual meeting of stockholders.
Name Age Title
- ------------------------- -------- ----------------------------
R. D. Sterritt, Jr. 41 Chairman of the Board, Chief
Executive Officer, Executive
Committee Member
J. B. Morris 57 Interim President and Director
A. Leon Blaser, Ph.D. 54 Director
Douglas C. Holsted, CPA 37 Acting Chief Financial
Officer, Director and
Executive Committee Member
William L. Hutchinson 39 Director, Executive Committee
Member
Richard D. Masters 53 Director
S. Theis Rice 46 Director, Executive Committee
Member
The following information sets forth the backgrounds and business
experience of the newly-appointed directors. Information concerning the
background and experience of the continuing directors, their compensation and
securities ownership was reported in Part III of the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996, filed with the Securities
and Exchange Commission on April 15, 1997.
R. D. Sterritt, Jr. was elected as Chairman of the Board of Directors on
September 2, 1997, and was appointed as the Company's Chief Executive Officer
and as a member of the Executive Committee of the Company's Board on
November 7, 1997. Since July 1, 1991, Mr. Sterritt has served as the
President, Chief Executive Officer and Chairman of the Board of Directors of
Continental Investment Corporation of Dallas, Texas, a publicly owned company
engaged in waste management and other businesses. Since 1980, he has served as
Chairman of the Board of Directors of Sterritt Energy, Inc., a company
involved in oil and gas production and as President of Sterritt Investments,
Inc., an investment company. Mr. Sterritt also has had extensive experience in
the acquisition, development and management of shopping centers, apartments
and office buildings in the sunbelt area.
J. B. Morris has served as Interim President of the Company since
September 2, 1997. Mr. Morris has owned and managed brokerage, syndication
and commercial real estate companies since the early 1970s and has been a
consultant in aviation, oil and gas, and sports business ventures. He has been
a member of the Board of Directors of Continental Investment Corporation since
1991.
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Douglas C. Holsted, CPA serves as a member of the Executive Committee
of the Company's Board and, on November 7, 1997 was appointed to serve as
Acting Chief Financial Officer. He is currently Chief Executive Officer of
Sales Equipment Company in Oklahoma City, Oklahoma, which is in the business
of distributing equipment in the pressurized gas industry. From 1991 through
1995, he was the Chief Financial Officer of the Dwyer Group of Waco, Texas, a
publicly owned company in the franchise industry.
William L. Hutchinson serves as a member of the Executive Committee of
the Company's Board. Since 1983, he has been President of Dunhill Partners,
Inc., an investment and brokerage firm in Dallas, Texas, specializing in the
acquisition, syndication and management of investments in commercial real
estate.
S. Theis Rice serves as a member of the Executive Committee of the
Company's Board. Mr. Rice has served in various capacities with Trinity
Industries, Inc., of Dallas, Texas, since 1989. Since 1994, he has been Senior
Corporate Counsel and Corporate Environmental Director, responsible for all
aspects of Trinity's environmental compliance. Trinity Industries, Inc., is a
diversified industrial corporation listed on the New York Stock Exchange.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only newly appointed director who is a beneficial owner of any the
Company's equity securities is William L. Hutchinson, who is the beneficial
owner of 4,900 shares of the Company's Common Stock.
EXECUTIVE COMPENSATION
No compensation to officers or directors was paid for the period from
September 2, 1997 through November 18, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ G. Michael Lawshe
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G. MICHAEL LAWSHE
CORPORATE SECRETARY
Date: November 26, 1997
