WASTEMASTERS, INC.
Notice of
Annual Meeting
and Proxy Statement
YOUR VOTE IS IMPORTANT!
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN YOUR
PROXY CARD IN THE ENCLOSED ENVELOPE
WasteMasters, Inc.
Promenade II, Suite 2545
1230 Peachtree Street
Atlanta, GA 30309
<PAGE>
WasteMasters, Inc.
- --------------------------------------------------------------------------------
Promenade II, Suite 2545 10254 Miller Road
1230 Peachtree Street Dallas, Texas 75238
Atlanta, Georgia 30309 (214) 691-1100
(404) 888-0158 Fax (214) 691-1173
Fax (404) 888-9447
January 16, 1998
Dear WasteMasters Stockholder:
Enclosed please find a Notice of Annual Meeting/Proxy Statement for the
Annual Meeting of Stockholders of WasteMasters, Inc. to be held on Friday,
February 6, 1998. Please read it carefully. If you have any questions, please do
not hesitate to call the company at (214) 691-1100. Your vote is important.
Whether you own one hundred shares or one million shares, you are a valued
stockholder of what we hope will be an extremely successful and valuable
enterprise.
This year's annual stockholders meeting is of special importance in that
(as discussed in greater detail in the proxy material) the future of
WasteMasters, its ability to consummate acquisitions, its ability to raise
equity capital, and its ability to retain its listing on the Nasdaq Automated
Stock Quotation System depend upon an affirmative vote on several proposals by
two-thirds of our outstanding voting shares. Therefore, as per the enclosed
proxy material, the Board of Directors of WasteMasters, Inc. strongly and
unanimously recommends that you vote "FOR" each and every one of the proposals
that are on the agenda of our stockholders meeting.
Heretofore, being a WasteMasters, Inc. stockholder has not been a very
pleasant or profitable experience. But now, with a new management team in place
and with the strong possibility of a reinvigorated balance sheet (assuming the
passage of the proposals on which you are voting) our long suffering
stockholders will hopefully begin to see the returns that they truly deserve.
Thank you and God bless you.
Sincerely,
/S/ R. Dale Sterritt, Jr.
--------------------------
R. Dale Sterritt, Jr.
Chairman of the Board and
Chief Executive Officer
Enclosures
<PAGE>
WASTEMASTERS, INC.
Promenade II, Suite 2545
1230 Peachtree Street
Atlanta, Georgia 30309
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held February 6, 1998
To the Stockholders of WasteMasters, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
WasteMasters, Inc. will be held at the Medallion Hotel, 4099 Valley View Lane
(IH-635 and Midway Road), Dallas, Texas, on Friday, February 6, 1998 at 10:00
a.m., local time, for the following purposes:
1. To consider and act upon a proposal to amend the Company's Articles of
Incorporation to provide for the classification of the Board of Directors into
three classes;
2. To elect seven (7) directors of the Company to serve as initial members of
each class for the terms indicated and until their successors are duly elected
and qualified, as follows:
(i) Two (2) Class A directors to serve terms of three years,
(ii) Two (2)Class B directors to serve terms of two years, and
(iii) Three (3) Class C directors to serve terms of one year;
3. To consider and act upon a proposal to amend the Company's Articles of
Incorporation to effect a reverse split of the Company's authorized Common Stock
and Preferred Stock at the rate of 1 share for each 10 shares;
4. To consider and act upon a proposal to further amend the Company's Articles
of Incorporation to increase the authorized shares of the Company's capital
stock, after the reverse split, from 3,500,000 shares of Common Stock and
500,000 shares of Preferred Stock to 50,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock;
5. To ratify the appointment of Turner, Jones & Associates, p.c., as independent
certified public accountants for 1997; and
6. To transact such other business as may properly come before the meeting and
any adjournment thereof.
The Board of Directors has fixed the close of business on December 30, 1997
as the record date for determining the stockholders entitled to notice of and to
vote at the meeting and any adjournment thereof. A list of such stockholders
will be open to examination by any stockholder at the Company's offices at
Promenade II, Suite 2545, 1230 Peachtree Street, Atlanta, Georgia 30309 during
normal business hours, for a period of at least ten days prior to the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/S/ G. Michael Lawshe
-------------------------
G. MICHAEL LAWSHE
CORPORATE SECRETARY
Atlanta, Georgia
January 16, 1998
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR PROXY.
<PAGE>
WASTEMASTERS, INC.
Promenade II, Suite 2545
1230 Peachtree Street
Atlanta, Georgia 30309
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held February 6, 1998
The Board of Directors of WasteMasters, Inc., a Maryland corporation (the
"Company"), hereby solicits your proxy in the form enclosed for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Medallion Hotel, 4099 Valley View Lane (IH-635 and Midway Road), Dallas, Texas,
at 10:00 a.m., local time, on Friday, February 6, 1998, and at any adjournment
thereof. The expenses of this solicitation of proxies, which are not expected to
exceed $25,000, will be borne by the Company. Proxies may be solicited by mail,
telefax transmission, personal interview, telegram, and telephone by directors,
officers, employees, and agents of the Company without compensation for such
solicitation. The Company expects to reimburse banks, brokers and certain other
persons for their reasonable out-of-pocket expenses in handling proxy materials
for beneficial owners of the Company's capital stock.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about January 16, 1998. The principal executive office of the
Company is located at Promenade II, Suite 2545, 1230 Peachtree Street, Atlanta,
Georgia 30309.
Only stockholders of record at the close of business on December 30, 1997
are entitled to notice of and to vote at the Annual Meeting. On that date, there
were 34,794,712 shares of the Company's common stock, par value $0.01 per share,
(the "Common Stock") and 5,000,000 shares of the Company's preferred stock, par
value $0.01 per share, (the "Preferred Stock") outstanding. Each share of the
Common Stock and each share of the Preferred Stock is entitled to one vote on
all matters that may come before the Annual Meeting.
You are encouraged to attend the Annual Meeting and vote in person.
Execution of the enclosed proxy will not in any way affect your right to do so.
A stockholder may revoke a proxy at any time prior to the voting thereof by
filing with the Secretary of the Company, prior to the stockholder vote, a
written revocation or duly executed form of proxy bearing a later date, or by
voting in person at the Annual Meeting.
Attendance at the Annual Meeting, either in person or by proxy, by the
record holders of a majority of the outstanding shares of the capital stock
constitutes a quorum. Cumulative voting is not permitted.
-2-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
The following table sets forth certain information, as of December 30,
1997, with respect to the beneficial ownership of the Company's voting
securities by each person known to the Company to be the beneficial owner of
more than five percent (5%) of any class of the Company's voting securities.
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Beneficial Class
Owner Ownership
- --------------------------------------------------------------------------------
Common Stock
- ------------
Continental Investment Corporation 13,921,804 (a) 40.0%
10254 Miller Road
Dallas, Texas 75238
Julius W. Basham, II 4,642,072 (b) 13.3%
6176 Laurelwood Drive
Reno, Nevada 89509
Preferred Stock
- ---------------
Continental Investment Corporation 5,000,000 100.00%
10254 Miller Road
Dallas, Texas 75238
- ----------------------
(a) Does not include beneficial ownership as to 100,000,000 shares which
Continental has the right to purchase pursuant to a Warrant issued to
Continental and 25,500,000 shares issuable upon the conversion of
5,000,000 shares of the Company's Preferred Stock owned by Continental
because, at present, the Company does not have sufficient authorized but
unissued shares of its Common Stock to issue in the event Continental
seeks to exercise the Warrant or convert the Preferred Stock. Includes
9,421,804 shares as to which Continental holds irrevocable proxies to
vote such shares.
(b) Does not include 1,200,000 shares which Mr. Basham has the right to
purchase pursuant to Warrants because, at present, the Company does not
have sufficient authorized and unissued shares of its Common Stock to
issue in the event Mr. Basham seeks to exercise the Warrants.
-3-
<PAGE>
The following table sets forth certain information, as of December 30,
1997, with respect to the beneficial ownership of the Company's Common Stock by
all (i) all directors and nominees for director of the Company (ii) each
executive officer of the Company named in the Summary Compensation Table set
forth in this Proxy Statement, and (iii) all directors and executive officers of
the Company as a group.
- --------------------------------------------------------------------------------
(1) (2) (3)
Name and Amount and Percent of Class
Address of Nature of
Beneficial Beneficial
Owner Ownership
A. Leon Blaser, Ph.D. 1,466,743 (a) 4.2%
3350 Americana Terrace, Suite 200
Boise, Idaho 83706-2506
Brian Galligan - -
60 Riverside Drive
New York, New York 10024
Douglas C. Holsted, CPA - -
c/o Sales Equipment Company
2824 N.W. 43rd Street
Oklahoma City, Oklahoma
William L. Hutchinson - -
c/o Dunhill Partners
4807 W. Lovers Lane
Dallas, Texas 75209
Noel F. Khalil - -
c/o Affordable Housing Partnership
1718 Peachtree Street NW Suite 153
Atlanta, Georgia 30309
S. Theis Rice - -
c/o Trinity Industries, Inc.
2525 Stemmons Freeway
Dallas, Texas 75207
R. Dale Sterritt, Jr. (b) - -
Promenade II, Suite 2545
1230 Peachtree Street
Atlanta, Georgia 30309
J. B. Morris - -
Promenade II, Suite 2545
1230 Peachtree Street
Atlanta, Georgia 30309
(Continued)
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<PAGE>
- -------------------------------------------------------------------------------
(1) (2) (3)
Name and Amount and Percent of Class
Address of Nature of
Beneficial Beneficial
Owner Ownership
(Continued)
Richard C. Masters (c) 1,456,521 4.2%
11940 Coman Road
Waldron, Michigan 49288
Peter Stefanou (d) 7,950 *
1360 Beverly Road, Suite 305
McLean, VA 22101
Robert P. Crabb (e) - -
583 Lombard Road
Rising Sun, MD 21911
All Officers and Directors 2,928,164 8.4%
as a Group (9 persons)
* Less than 1%.
(a) Excludes a Warrant for the purchase of 1,000,000 shares of the
Company's Common Stock because, at present, the Company does not
have sufficient authorized but unissued shares of its Common Stock
to issue in the event Mr.
Blaser seeks to exercise the Warrant.
(b) Mr. Sterritt, CEO and Chairman of WasteMasters, Inc., is also CEO
and Chairman of Continental Investment Corporation. See
"Transaction With Continental Investment Corporation."
(c) Mr. Masters was the Company's CEO from January, 1996 until July
14, 1997. He also served as a director of the Company since
January, 1996, having served as its Chairman from January, 1996
until May 1996. Mr. Masters is not standing for re-election as a
director.
(d) Mr. Stefanou is a former officer of the Company, having served as
CFO from January, 1997 until September 2, 1997 and additionally as
Interim CEO from July 14, 1997 until September 2, 1997.
(e) Mr. Crabb is a former officer, having served as Vice President and
Secretary from mid-1993 until January, 1996, and as Secretary from
January, 1996 until August 28, 1997.
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 Company.
The Stock Purchase Agreement also provided for the delivery of voting proxies,
irrevocable for a period of five to twelve months from September 6, 1997, in
favor of Continental from six stockholders of the Company, from which
Continental expects to exercise proxies for 9,421,804 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
-5-
<PAGE>
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 represent 23.9% of the total of the Common
Stock and Preferred Stock issued and outstanding. When combined with the
9,421,804 shares of Common Stock on which Continental holds irrevocable proxies
that can be voted, Continental is entitled to vote 18,921,804 shares of the
voting securities of the Company, which represents 47.5% of the total voting
securities outstanding and entitled to vote at a meeting of stockholders. Prior
to the transaction described, the then directors of the Company owned
beneficially approximately 31% of the Company's issued and outstanding voting
securities and may be deemed to have controlled the Company.
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 Proxy 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.
PROPOSAL NO. 1
AMENDMENT OF ARTICLES OF INCORPORATION TO PROVIDE FOR
A CLASSIFIED BOARD OF DIRECTORS
The Board of Directors of the Company presently consists of seven members,
each of whom serves for a period of one year. Under Proposal No. 1, Article
SIXTH of the Company's Articles of Incorporation would be amended to provide for
a Board of Directors consisting of three classes. The initial directors of Class
A would each serve a three year term, as would each succeeding Class A director;
the initial directors of Class B would each serve a two year term and succeeding
Class B directors would each serve a three year term; and the initial Class C
directors would each serve until the next annual meeting and succeeding Class C
directors would each serve a three year term. The individuals who would serve as
the initial directors of each class are the persons nominated for election under
Proposal No. 2. The text of the proposed amendment and the text of the present
Article SIXTH are set forth in Exhibit A to this Proxy Statement.
In the opinion of the Board of Directors, a classification of the Board
will allow for greater continuity among Board members. However, the existence of
a classified Board may have a deterrent effect on any efforts by unrelated
parties to acquire control of the Company.
An affirmative vote of two-thirds of the shares of the Company's issued and
outstanding voting stock is necessary for the approval of Proposal No. 1. The
Board of Directors recommends that stockholders vote FOR Proposal No. 1. Shares
represented by proxies will be voted FOR Proposal No. 1 unless stockholders
specify otherwise in their proxies.
PROPOSAL NO. 2
ELECTION OF DIRECTORS
As noted above, the Board of Directors presently consists of seven members.
Of the incumbent directors, Mr. Masters and Mr. Morris have decided not to stand
for re-election. The nominees for election at the Annual Meeting have been
designated by class in the expectation that the stockholders will vote in favor
of Proposal No. 1. Should stockholders reject Proposal No. 1, the following
slate of nominees will be presented for terms of one year each, instead of the
term for the indicated class.
-6-
<PAGE>
Nominees for Election at the Annual Meeting
Name Class Age Present Position with Company
R. Dale Sterritt, Jr. A 41 Chairman of the Board, Chief
Executive Officer (1)
Douglas C. Holsted A 37 Acting Chief Financial Officer,
Director (1)(2)
S. Theis Rice B 46 Director (1)(2)
A. Leon Blaser, Ph.D. B 54 Director
William L. Hutchinson C 39 Director (1)(2)
Noel F. Khalil C 46 None
Brian Galligan C 39 None
(1) Executive Committee member.
(2) Audit Committee member.
The following information sets forth the backgrounds and business
experience of the nominees for director.
R. Dale 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 on
November 7, 1997. Since July 1, 1991, Mr. Sterritt has served as the 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. Mr. Sterritt has also served as the
President and Treasurer of Continental since July 14, 1997. 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.
Douglas C. Holsted has served as a member of the Company's Board since
September 2, 1997 and, on November 7, 1997, was appointed as Acting Chief
Financial Officer. From January, 1996 to the present, Mr. Holsted has been the
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, Inc. of Waco, Texas, a publicly owned company in the franchise
industry. Mr. Holsted is a certified public accountant licensed in the State of
Oklahoma.
S. Theis Rice has served as a member of the Company's Board since September
2, 1997. 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.
A. Leon Blaser, Ph.D. has served as a member of the Company's Board since
January 4, 1996. He was a founder of WasteMasters, Inc., the private predecessor
company formed in 1995 and, from May 22, 1996 until September 2, 1997, was
Chairman of the Board of the Company. Mr. Blaser is involved in several private
business enterprises and, since 1990, has served principally as the President of
Interwest Development, Inc., an Idaho land development company.
William L. Hutchinson has served as a member of the Company's Board since
September 2, 1997. 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.
-7-
<PAGE>
Noel F. Khalil is a principal in Affordable Housing Partnership, Inc.,
located in Atlanta, Georgia, and through that company has been engaged in the
development of real estate in the Atlanta area since 1991, including joint
ventures in the construction industry with Browning Ferris Industries and H. J.
Russell Construction Company, Inc.
Brian Galligan, President of Millennium Hospitality Group, Inc., has since
1984 served in executive positions of ever-increasing responsibility with
corporations engaged in the hotel and restaurant industry.
There are no family relationships among any of the officers or directors of
the Company.
Meetings of the Board of Directors and Committees
During 1997, the Board of Directors held 17 meetings. Each Director
participated in at least 75% of the meetings held during the period in which he
was holding the position of Director.
The executive committee of the Board of Directors was appointed on
September 2, 1997. The Company established an Audit Committee at a meeting of
the Board of Directors on November 7, 1997. Appointed to serve on the Audit
Committee were Douglas C. Holsted, S. Theis Rice and William L. Hutchinson. Upon
the election of directors proposed for the Annual Meeting, the Company intends
for these three Board members to continue to serve as an Audit Committee. One of
the members of the Audit Committee will be selected to serve as chairman. Such
committee will have responsibility for recommending retention or change of the
Company's independent auditors, reviewing with management and the independent
auditors the Company's financial statements, accounting and financial policies
and practices, audit scope and adequacy of the Company's internal control
structure.
The Company has not established a formal nominating or compensation
committee. Presently, the full Board of Directors considers director nominations
and executive compensation.
(This space left blank intentionally)
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officers during the last three fiscal years and other officers
who received compensation in excess of $100,000 during any of the last three
fiscal years.
<TABLE>
<CAPTION>
Summary Compensation Table
<S> <C> <C> <C> <C>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Name Annual Restricted Under- All Other
and Compen- Stock lying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary ($) Bonus ($) ($) ($) SARs (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------
(1)
Richard D. Masters 1997 - - $125,544 - - - -
CEO (2) 1996 - - $509,931 - 1,000,000 - -
1995 - - - - - - -
Peter Stefanou 1997 - - $342,896 - - - -
CFO and Interim 1996 - - - - 500,000 - -
CEO (3) 1995 - - - - - - -
J. B. Morris 1997 - - - - - - -
Interim 1996 - - - - - - -
President (4) 1995 - - - - - - -
R. Dale Sterritt, Jr. 1997 - - - - - - -
CEO and 1996 - - - - - - -
Chairman (5) 1995 - - - - - - -
Robert P. Crabb 1997 - - $122,475 - - - -
Secretary (6) 1996 $80,000 - - - 500,000 - -
1995 $90,000 - - - - - -
</TABLE>
(1) The securities underlying these options are the shares of the Company's
Common Stock, $0.01 par value.
(2) Mr. Masters served as CEO from January, 1996 until July 14, 1997. The
amount for 1997 represents compensation and expenses paid with shares of
Common Stock of the Company. The compensation for 1996 includes expense
reimbursements. $383,008 of 1996 compensation was paid with Common Stock of
the Company. Compensation amounts for Mr. Masters exclude amounts paid to
his wife of $7,575 and $43,307 in 1997 and 1996, respectively.
(3) Mr. Stefanou served as CFO from January, 1997 until September 2, 1997;
additionally, he served as Interim CEO from July 14 to September 2, 1997.
All compensation reported in the table to Mr. Stefanou was paid in shares
of Common Stock of the Company, and includes expense reimbursements and
payments to Stefanou & Company, Certified Public Accountants, for
accounting services provided to the Company. Stefanou & Company was also
paid for accounting services provided to the Company during 1996.
(4) Mr. Morris was appointed as Interim President on September 2, 1997. He was
not compensated by the Company during this period.
(5) Mr. Sterritt was appointed as the Company's CEO on November 7, 1997. He has
received no compensation since his appointment.
(6) Mr. Crabb served as Vice President and Secretary from mid-1993 until
January, 1996, and as Secretary from January, 1996 until August 28, 1997.
All compensation for 1997 to Mr. Crabb was paid in shares of Common Stock
of the Company pursuant to a consulting agreement.
The Company does not have any employment agreements with any of its
executive officers.
-9-
<PAGE>
During the year 1997, the Company made no grants of options or stock
appreciation rights (SARs) to any officer or director. Therefore, the required
table on options and SARs granted is omitted from this Proxy Statement.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<S> <C> <C>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
FY-End(#) at FY-End($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized ($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
Richard D. Masters - - 1,000,000 $43,750
Peter Stefanou - - 500,000 $21,875
Robert P. Crabb - - 500,000 $21,875
</TABLE>
All outstanding Warrants are exercisable by their terms; however, the
Company does not have sufficient authorized but unissued shares should the
holders of the Warrants seek to exercise their Warrants.
Compensation of Directors
Directors are entitled to reimbursement for expenses in attending meetings
but receive no other compensation for services as directors. Directors who are
employees may receive compensation for services other than as director.
Directors will be elected by a vote of a majority of the shares represented
at a meeting at which a quorum is present. Shares represented by proxies will be
voted FOR the election of the Board of Directors' nominees unless otherwise
indicated on the proxy. A stockholder may withhold votes from any or all
nominees by notation to that effect on the accompanying form of proxy. If at the
time of the meeting, a nominee has become unavailable for any reason, the
persons entitled to vote the proxy shall vote for a substitute nominee as they,
in their discretion, may determine. The Company knows of no reason why any
nominee would be unavailable to serve.
The Board of Directors recommends that the Stockholders vote FOR the
election of the nominees.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals (but not on
the election of directors) and will be counted as present for purposes of the
item on which the abstention is noted.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As indicated above under "Transaction With Continental Investment
Corporation," pursuant to the terms of the Stock Purchase Agreement, 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 received, 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
-10-
<PAGE>
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. 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. Continental has
made loans to the Company aggregating $174,011 as of November 30, 1997.
On August 5, 1996, the Company adopted a stock compensation plan entitled
1996 Employee, Consultant and Advisor Stock Compensation Plan (the "Plan") to
compensate eligible persons, including officers and members of management, for
certain services provided to the Company and its subsidiaries. Participants in
the Plan are required to execute a stock payment agreement whereby the
participant agrees to accept shares of Common Stock in full satisfaction of
entitled compensation. Beginning in the fourth quarter of 1996 and continuing
throughout 1997, the Company did not have adequate funds to pay its officers,
and issued shares of its Common Stock in lieu of salary and expense payments.
During 1997, two present directors and other former officers and/or directors of
the Company, received shares of the Company's Common Stock as compensation and
for reimbursement of expenses pursuant to the Plan, as indicated in the table
below. The compensation amount was based upon the value of the shares issued at
the date of such issuance.
Number of Compensation
Name Shares Amount
--------------------- ----------- ------------
A. Leon Blaser, Ph.D. 206,667 $ 45,219
Robert P. Crabb 661,600 $ 122,475
Richard C. Masters 891,740 $ 125,544
Peter Stefanou 1,194,000 $ 342,896
Paul Williamson 50,000 $ 5,470
The amounts for Mr. Masters above do not include stock issued in 1997 to
Mr. Masters' wife as compensation that was valued at $7,575.
On November 26, 1996, the Company issued Warrants to seven persons who
were, at that time, officers and/or directors of the Company for the purchase of
an aggregate of 4,800,000 shares of Common Stock. The Warrants are exercisable
until November 26, 1999, at $.30 per share and all were outstanding as of
December 22, 1997.
On January 16, 1997, the Company sold 1,033,333 shares of its restricted
Common Stock to Julius W. Basham, II, a then director of the Company who has
since resigned. The purchase price for the stock was $.145 per share, as
compared to the closing market price of $.28125 per share on the date of
issuance. The Company's historical accounting records reflect indebtedness
totaling $190,000 to Mr. Basham for loans to the Company. These loans were made
during the time he was serving as a director, and consisted of advances of
$150,000 in September, 1996 and $40,000 in May, 1997. Both notes bear interest
at 12%, and matured in 45 days. Mr. Basham was also issued a Warrant for the
purchase of 200,000 shares of Common Stock in connection with the loan on
September 16, 1996, which is exercisable at $.75 per share until September 16,
1998.
In August, 1996, the Company began operating a waste transfer station for
construction and demolition materials at a site located in Philadelphia,
Pennsylvania under a one-year renewable contract. The facility is owned by
Construction Transfer Station of Philadelphia, Ltd. ("Construction Transfer"), a
limited liability company of which Messrs. Basham, Blaser and Masters are the
principal owners. The contract to operate the facility was terminated by both
parties in February, 1997. The Company no longer operates the facility. During
1996, Construction Transfer made cash advances to the Company aggregating
$480,000, and carried no interest and were unsecured. As of September 30, 1997,
the historical accounting records reflect outstanding indebtedness to
Construction Transfer of $271,090.
On December 16, 1996, Richard D. Masters pledged 840,000 shares of Common
Stock of the Company owned by him personally as security for the payment of
financial advisory services provided to the Company by an outside firm pursuant
to an agreement. The outside firm sought to seize the shares on August 29, 1997
as collateral for the loan, although the amount due under the agreement is
presently in dispute. The matter is currently pending in a court proceeding
which commenced in November, 1997.
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Certain former officers and directors claim amounts due for advances to the
Company and for reimbursable expenses in 1996 and 1997 aggregating $174,078.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equities securities, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than 10% stockholders are also required by SEC regulations
to furnish the company with copies of all Section 16(a) forms they file.
The Company does not have access to the records that would disclose whether
its former officers, directors and greater than 10% beneficial owners complied
with the reporting requirements of Section 16(a). Director A. Leon Blaser,
Ph.D., has stated that he filed one late report on Form 4 during the year 1997.
Based solely on its review of copies of such forms received by it, the Company
believes that, during the period September 2, 1997 to November 30, 1997 all
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were in compliance.
PROPOSALS NO. 3 AND NO. 4
AUTHORIZATION OF REVERSE SPLIT OF CAPITAL STOCK AND
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK
The Articles of Incorporation currently authorize the Company to issue
35,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock. As of
December 31, 1997, there were 34,794,712 shares of Common Stock issued and
outstanding and 5,000,000 shares of Preferred Stock issued and outstanding,
which left the Company with 205,288 shares of Common Stock that could be validly
issued.
As of December 31, 1997, however, the Company had outstanding debentures in
the principal amount of $3,161,800 (the "Debentures") with accrued interest of
$402,326. The Debentures are convertible into shares of the Company's Common
Stock at the rate of $0.255 per share of the unpaid principal and accrued
interest. Should the Debentures, including accrued interest, be presented for
conversion, the Company would be obligated to issue approximately 13,976,965
shares of its Common Stock. At December 31, 1997, the Company also had
outstanding Warrants for the purchase of an aggregate of 6,262,000 shares of
Common Stock. In addition, the Company issued a Warrant to Continental on
September 2, 1997 giving Continental the right to purchase up to 100,000,000
shares of the Company's Common Stock. Finally, the 5,000,000 shares of the
Company's Preferred Stock owned by Continental are convertible into 25,500,000
shares of the Company's Common Stock at Continental's option. Thus, if the
holders of the Debentures, the Warrants, and the Preferred Stock were to
exercise their rights under those instruments, the Company would be obligated to
issue up to approximately 146,000,000 shares of its Common Stock, which it could
not do.
The Board of Directors believes that a revision of the Company's capital
structure is necessary and desirable. The Company must be able to comply with
its obligations to validly issue shares of its Common Stock should any of its
securities be presented for conversion or the Warrants be presented for
exercise. Under the proposals for the reverse stock split and subsequent
increase in authorized capital stock, the number of shares issuable upon
conversion of the outstanding Debentures and Preferred Stock and the exercise of
outstanding Warrants would be proportionally reduced and the additional
authorized shares would allow the Company to effectuate any requested conversion
or exercise. In addition, the Board of Directors believes that the Company
should have shares of its Common Stock available to allow the Company
flexibility to take advantage of potential financing or acquisition
opportunities or for grants under employee compensation plans. Accordingly, the
Board of Directors has approved, and recommends that the stockholders approve, a
reverse stock split and an increase in the number of authorized shares of Common
Stock and Preferred Stock to numbers that would allow the Company to meet its
existing obligations and have additional shares available for issuance should
the need arise.
The intent of the Board of Directors in recommending the reverse stock
split is to comply with the requirements of The Nasdaq Stock Market, Inc.
("Nasdaq") as a condition for continued listing on the Nasdaq SmallCap Market.
Furthermore, the Board of Directors believes that the relatively low per share
market price of the Common Stock impairs the marketability of the Common Stock
to institutional investors and members of the investing public, and creates a
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<PAGE>
negative impression with respect to the Company. The Board believes that a
decrease in the number of shares of Common Stock outstanding without any
diminution in the proportionate economic interest in the Company represented by
each post-split share may increase the perceived value of such shares and thus,
of the Company as a whole. Many investors look upon a low priced stock and/or a
stock which is not traded on Nasdaq as unduly speculative in nature and, as a
matter of policy, avoid investing in such a stock. Management believes that the
current low stock price renders it, by definition, a "penny stock" and adversely
affects not only the liquidity of the Common Stock, but also the Company's
ability to raise additional capital through a sale of equity securities or other
similar transactions.
The Company has been informed by Nasdaq that, pursuant to rules recently
adopted, the minimum bid price of the Company's Common Stock must remain at or
above $1.00 per share commencing on February 23, 1998. The effect of the
proposed reverse stock split on the trading price of the Common Stock,
immediately after such reverse split becomes effective, is expected to be an
increase in the trading price by a factor equal to approximately ten times the
trading price immediately preceding the reverse stock split. However, no
assurance can be given that even after the approval and occurrence of the
proposed reverse stock split, the Company's Common Stock will be traded for
prices that will satisfy continuing Nasdaq requirements. On January 8, 1998, the
reported closing bid price of the Company's Common Stock on the Nasdaq SmallCap
Market was $.375 per share.
The additional shares of Common Stock resulting from these actions, upon
issuance, would have the same voting and other rights as all other issued shares
of Common Stock. The Board of Directors of the Company, pursuant to the
Company's Certificate of Incorporation, will determine the relative rights
(which include dividend rates, conversion prices, voting rights, liquidation
rights, sinking fund or redemption provisions, number of shares per series and
maturity dates), preferences and limitations of the shares of Preferred Stock to
be authorized by the proposed Amendment. No further authorization from the
Company's stockholders need be obtained for the issuance of the shares of
Preferred Stock to be authorized by the proposed Amendments.
It is not the intention of the Board to eliminate any existing stockholders
through the device of a reverse split. Accordingly, no fractional shares will be
issued and all fractions resulting from the split will be rounded up to the next
whole number of shares. Because the proposal to effect a 1 for 10 reverse split
will result in an increase in the par value from $.01 to $.10 per share,
certificates of the Company's Common Stock issued after approval of the proposed
stock split will reflect a par value of $.10 per share and will be clearly
distinguishable from previous certificates that reflect a par value of $.01 per
share. Therefore, no exchange of certificates for existing stockholders will be
necessary. As existing stockholders submit their shares to the Company's stock
transfer agent for transfer, new certificates reflecting a par value of $.10 per
share will be issued to the transferee in the 1 for 10 ratio of new shares for
old shares.
Because one of the purposes of the proposed amendment to the Articles of
Incorporation is to authorize additional shares of Common Stock that may be
issued in connection with the acquisition of shares of Continental's Common
Stock upon any exercise of the Warrant, there are attached to this Proxy
Statement, as Exhibit C, copies of the following reports of Continental: Form
10-KSB Annual Report for the period ended December 31, 1996 and Form 10-QSB
Quarterly Report for the period ended September 30, 1997.
An affirmative vote of the holders of two-thirds of the Company's issued
and outstanding shares of voting Stock entitled to vote at the Annual Meeting is
necessary for approval of the amendments to the Articles of Incorporation.
Recommendation for Proposal No. 3
As the first step in creating what it believes to be a more practical and
desirable capital structure, the Board of Directors has approved, and recommends
that the stockholders approve, an amendment to Paragraph (A) of Article FIFTH of
the Company's Articles of Incorporation to authorize a 1 for 10 reverse split of
the Company's capital stock. Stockholders should realize that if Proposal No. 3
is adopted without the approval of Proposal No. 4, the result would be an
unsatisfactory capital structure. Under this situation, the Company would
continue to remain unable to meet its obligations to issue shares of Common
Stock for conversion of Debentures and Preferred Stock and exercise of Warrants,
and would have no stock available for acquisitions or other purposes. If
Proposal No. 3 is not approved by stockholders, the Board of Directors will not
present Proposal No. 4 for action. The text of the proposed amendment and the
text of the present Paragraph (A) of Article FIFTH are set forth on Exhibit B-1
hereto.
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<PAGE>
The Board of Directors recommend that the stockholders vote FOR Proposal
No. 3 to amend Article FIFTH of the Company's Articles of Incorporation to
authorize a 1 for 10 reverse split of the authorized capital stock of the
Company. Shares represented by proxies will be voted FOR Proposal No. 3 unless
stockholders specify otherwise in their proxies.
Recommendation for Proposal No. 4
As the second step in creating what it believes to be a more practical and
desirable capital structure, the Board of Directors has approved, and recommends
that the stockholders approve, a further amendment to Paragraph (A) of Article
FIFTH of the Company's Articles of Incorporation to authorize an increase in the
number of authorized and issued and outstanding shares of capital stock from the
4,000,000 shares $.10 per value capital stock resulting from the reverse split
to 55,000,000 shares $.10 par value per share, of which Common Stock will be
increased from 3,500,000 shares to 50,000,000 shares and Preferred Stock will be
increased from 500,000 shares to 5,000,000 shares. If Proposal No. 3 is not
approved by stockholders, the Board of Directors will not present Proposal No. 4
for action. The text of the proposed amendment is set forth on Exhibit B-2
hereto.
The Board of Directors recommend that the stockholders vote FOR Proposal
No. 4 to further amend Article FIFTH of the Articles of Incorporation to
increase the authorized capital stock of the Company. Shares represented by
proxies will be voted FOR Proposal No. 4 unless stockholders specify otherwise
in their proxies.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Turner, Jones & Associates, p.c., as
independent certified public accountants to audit the consolidated financial
statements of the Company for 1997. Stockholders are being asked to ratify this
appointment. Turner, Jones & Associates, p.c., has served the Company in this
capacity since 1995. Representatives of Turner, Jones & Associates, p.c., will
be given the opportunity to be present at the Annual Meeting, to make a
statement if they desire to do so, and to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented and entitled to vote at the Annual Meeting is
necessary for ratification of the appointment of the independent certified
public accountants.
The Board of Directors recommends that stockholders vote FOR such
ratification. Shares represented by proxies will be voted FOR Proposal No. 5
unless stockholders specify otherwise in their proxies.
OTHER BUSINESS
The Board of Directors is not aware of any matters other than those set
forth above which will be presented for action by the stockholders at the Annual
Meeting, but if any other matters should be presented, the persons named in the
proxy intend to vote such proxies in accordance with their best judgment.
FINANCIAL STATEMENTS
The Company's Annual Report on Form 10-KSB for the year ended December 31,
1996 and the Quarterly Report on Form 10-QSB for the period ended September 30,
1997 are being mailed to stockholders with this Proxy Statement.
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<PAGE>
STOCKHOLDER PROPOSALS
Under rules promulgated by the Securities and Exchange Commission, any
proposal which a stockholder intends to present at the Company's next annual
meeting of stockholders which is anticipated to take place in June, 1998 must be
received by the Company by January 26 , 1998 in order to be eligible for
inclusion in the proxy statement and form of proxy relating to such meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/S/ G. Michael Lawshe
-----------------------------------
G. MICHAEL LAWSHE
CORPORATE SECRETARY
Atlanta, Georgia
January 16, 1998
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<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION TO PROVIDE FOR
A CLASSIFIED BOARD OF DIRECTORS
Article SIXTH of the Articles of Incorporation now provides as follows:
SIXTH: The number of directors of the Corporation shall not be less than
one (1), which number may be increased or decreased according to the bylaws of
the Corporation, and so long as there are less than three stockholders, the
number of directors may be less than three but not less than the number of
stockholders, and the names of the directors who shall act until the first
meeting or until their successors are duly chosen and qualified are: J Paul
Provance, Mary Jo Bain, and Bernard A. Bain.
As amended, Article SIXTH of the Articles of Incorporation will provide as
follows:
SIXTH: The Board of Directors shall consist of not less than three nor more
than fifteen directors. The exact number of directors shall be determined from
time to time by resolution adopted by the affirmative vote of a majority of the
Board of Directors. The directors shall be divided into three classes,
designated Class A, Class B and Class C. Each class shall consist, as nearly as
may be possible, of one-third of the total number of directors constituting the
entire Board of Directors. The first directors serving as members of Class A
shall hold office until the annual meeting of shareholders to be held in 2000,
the first directors serving as members of Class B shall hold office until the
annual meeting of shareholders to be held in 1999, and the first directors
serving as members of Class C shall hold office until the second meeting of
shareholders to be held in 1998. At each annual meeting of shareholders,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. Directors shall serve until the
expiration of their terms and until their successors have been elected and
qualified, subject to the director's prior death, resignation, disqualification,
or removal from office. If the number of directors is changed in accordance with
the terms of these Articles of Incorporation, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible. Any vacancy on the Board of Directors that
results from a newly created directorship, and any other vacancy occurring on
the Board of Directors shall be filled by the affirmative vote of a majority of
the Board of Directors then in office, although less than a quorum, or by a sole
remaining director. A director of any class elected by the Board of Directors to
fill a vacancy shall hold office until the next annual meeting of shareholders.
A director of any class elected by the shareholders to fill a vacancy shall hold
office for a term that shall coincide with the remaining term of that class. In
no case will a decrease in the number of directors shorten the term of any
incumbent director. The election of directors need not be by written ballot
unless the Corporation's Bylaws so require.
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<PAGE>
EXHIBIT B-1
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION FOR A
REVERSE SPLIT OF THE CAPITAL STOCK
Paragraph (A) of Article FIFTH of the Articles of Incorporation
now provides as follows:
FIFTH: (A) The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 40,000,000 shares of par
value of $.01 per share, and an aggregate per value of $400,000, of which
5,000,000 shares shall be shares of Preferred Stock of $.01 par value each, or
such other par value set by the Board of Directors (hereinafter called
"Preferred Stock") and 35,000,000 shares shall be shares of Common Stock of $.01
par value each (hereinafter called "Common Stock").
As amended, Article FIFTH of the Articles of Incorporation will provide as
follows:
FIFTH: (A) The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 4,000,000 shares of par
value of $.10 per share, and an aggregate par value of $400,000, of which
500,000 shall be shares of Preferred Stock of $.10 par value each, (hereinafter
called "Preferred Stock") and 3,500,000 shares shall be shares of Common Stock
of $.10 par value each (hereinafter called "Common Stock"). Upon the amendment
of this Article, each authorized share of capital stock of par value $.01 is
converted into one-tenth (1/10) of a share of par value $.10, except that each
fraction of a share so created shall be rounded up to the next whole share.
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<PAGE>
EXHIBIT B-2
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION FOR AN
INCREASE IN NUMBER OF AUTHORIZED SHARES
OF CAPITAL STOCK
As further amended, Article FIFTH of the Articles of Incorporation will
provide as follows:
FIFTH: (A) The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 55,000,000 shares of par
value of $.10 per share, and an aggregate par value of $5,500,000, of which
5,000,000 shall be shares of Preferred Stock of $.10 par value each,
(hereinafter called "Preferred Stock") and 50,000,000 shares shall be shares of
Common Stock of $.10 par value each (hereinafter called "Common Stock").
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<PAGE>
EXHIBIT C
ANNUAL AND QUARTERLY REPORTS
OF
CONTINENTAL INVESTMENT CORPORATION
The following annual and quarterly reports of Continental Investment
Corporation are enclosed:
1) Quarterly Report on Form 10-QSB for the period ended September 30, 1997.
2) Annual Report on Form 10-KSB for the period ended December 31, 1996.
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<PAGE>
FORM OF PROXY
WASTEMASTERS, INC.
The undersigned hereby appoint(s) as proxy R. Dale Sterritt, Jr. and G. Michael
Lawshe, and each of them (with power of substitution), to vote for the
undersigned all of the shares of Common Stock of WasteMasters, Inc. (the
"Company") standing in the name of the undersigned at the Annual Meeting of
Stockholders of the Company, to be held on Friday, February 6, 1998, at 10:00
a.m. local time or at any adjournment thereof, with all the power the
undersigned would have if personally present. The shares represented by this
proxy will be voted as instructed.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
YOUR VOTE IS IMPORTANT
Please date and sign this proxy and return it in the enclosed, pre-addressed,
postage paid envelope to:
American Securities Transfer & Trust, Inc.
P. O. Box 1596
Denver, CO 80201-9975
Attn: Proxy Department
PLEASE INDICATE YOUR VOTE BY MARKING AN `X' IN THE APPROPRIATE BOX BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
Proposal No. 1: Proposal to Establish a Classified Board
Proposal to amend the Articles of Incorporation in order to establish a
classified Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 2: Election of Directors
(INSTRUCTION: To withhold authority to vote for any individual nominee, print
the nominee's name on the line provided below and mark the "FOR ALL EXCEPT" box.
IF THE PROXY DOES NOT WITHHOLD AUTHORIZATION TO VOTE FOR ELECTION OF THE
NOMINEES, IT SHALL BE DEEMED TO GRANT SUCH AUTHORITY.)
Election of the following persons to the Company's Board of Directors to serve
as a member of the class indicated and until their successors are duly elected
and qualified:
Class A Class B Class C
-------------------- --------------------- ---------------------
Douglas C. Holsted A. Leon Blaser, Ph.D. Brian Galligan
R. Dale Sterritt, Jr. S. Theis Rice William L. Hutchinson
Noel F. Khalil
[ ] FOR ALL [ ] FOR ALL EXCEPT [ ] WITHHOLD ALL
---------------------------------------------------------------------------
Proposal No. 3: Proposal to Effect a Reverse Stock Split
To consider and act upon a proposal to amend the Company's Articles of
Incorporation to effect a reverse split of the Company's authorized Common Stock
and Preferred Stock at a rate of 1 share for each 10 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
Proposal No. 4: Proposal to Increase the Authorized Capital Stock
To consider and act upon a proposal to further amend the Company's Articles of
Incorporation to increase the authorized shares of the Company's capital stock
from 3,500,000 shares of Common Stock and 500,000 shares of Preferred Stock to
50,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 5: Ratification of the Appointment of Accountants
Proposal to ratify the appointment of Turner Jones & Associates, p. c. as
independent public accountants for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 6: Other Matters
Proposal to vote, in their discretion, on such other matters which may properly
come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3, 4 AND 5, AND AT THE DISCRETION OF THE BOARD OF DIRECTORS ON
ANY OTHER MATTERS THAT PROPERLY COME BEFORE THE MEETING.
SIGNATURE(S) ___________________________________ DATE_______________, 1998
___________________________________
NOTE: Please sign exactly as your name appears on the proxy. If your stock is
jointly owned, both parties must sign. Fiduciaries and representatives should so
indicate when signing, and when more than one is named, a majority should sign.
