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FILED PURSUANT TO RULE 424 (B)(3)
REGISTRATION STATEMENT NO. 333-20075
OCTAGON, INC.
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
SUPPLEMENT NO. 1 TO PROXY STATEMENT/PROSPECTUS
DATED MAY 14, 1997
Reference is made to the Proxy Statement/Prospectus dated May 14, 1997 (the
"Proxy Statement/ Prospectus") and the accompanying Notice of Special Meeting of
Stockholders of Octagon, Inc. ("Octagon"). The purpose of this Supplement No. 1
(this "Supplement") is to advise the stockholders of Octagon that the Special
Meeting of the stockholders of Octagon (the "Special Meeting") will be adjourned
until 10:00 a.m. local time on Monday, June 16, 1997, at the offices of
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., 153 East 53rd Street,
35th Floor, New York, New York 10022 and to provide the stockholders of Octagon
certain additional information set forth herein under the caption "Recent
Developments." The record date for the determination of the holders of Octagon
Common Stock entitled to receive notice of, and to vote at, the Special Meeting
(as adjourned) will continue to be April 18, 1997. In the event that any
stockholder of Octagon wishes to revoke a previously delivered proxy with
respect to the matters to be considered at the Special Meeting, a new proxy card
has been enclosed with this Supplement. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Proxy
Statement/Prospectus.
RECENT DEVELOPMENTS
TERMINATION OF GOVERNMENT CONTRACT. Subsequent to the date of the Proxy
Statement/Prospectus, Octagon became aware that the United States Army has
issued a Notice of Termination for Default with respect to a contract (the
"Prime Contract") under which Octagon serves as the subcontractor.
Octagon performed range decontamination services at a military installation
in California as a subcontractor pursuant to the Prime Contract. These services
consisted primarily of the collection and identification of scrap ammunition and
explosives used by the military during training exercises conducted at the site.
Octagon performed its services under a subcontract with a prime contractor (the
"Prime Contractor").
On March 18, 1997, a fatal explosion occurred on the premises of a civilian
salvage firm that received ordinance from the California site, among others. On
April 3, 1997, the Department of the Army issued a stop work order to the Prime
Contractor in response to the explosion, and subsequently terminated the Prime
Contract. Because of the termination of the Prime Contract, Octagon's services
at the site were concurrently terminated. The Notice of Termination alleges (i)
failure to provide adequate assurance of performance of the Prime Contract and
(ii) failure to properly identify and certify that ordnance that was removed
from the site was free of explosive materials as a result of fraud or gross
negligence amounting to fraud.
Following the explosion, an investigation was commenced by the San
Bernardino County District Attorney (the "DA"). Although no criminal or other
charges have been filed to date, the DA initially speculated that personnel of
the Prime Contractor and/or Octagon failed to detect the explosive ordnance.
Octagon conducted an investigation of this matter, including reviewing its
internal operating procedures, retaining special counsel, interviewing witnesses
and communicating with the Department of the Army. Because the salvage firm
regularly received ordnance from multiple locations, presently it cannot be
determined whether Octagon handled or certified the ordnance that exploded on
March 18, 1997. It is for this reason that Octagon cannot presently assess its
potential liability for this matter. However, Octagon acknowledges that this
incident could give rise to the threatened or actual loss of or decline in new
federal contracts or subcontracts; threatened or actual suspension or debarment
from government contracting for up to three years; threatened or actual civil
claims for tort, contract, administrative and other liabilities for which
Octagon may not be insured adequately or at all; threatened or actual criminal
claims; and other
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unknown contingencies. In 1996, government contract revenues accounted for
approximately 33% of Octagon's revenues. Any such loss, decline, suspension,
debarment, liabilities and claims could have a material adverse effect on the
business, results of operations and financial condition of Octagon, the
Surviving Corporation and Conversion following the Merger.
Octagon's business of handling, transporting, decontaminating and disposing
of hazardous, toxic and nuclear materials is inherently dangerous. In light of
the dangers, any loss by Octagon resulting from its own intentional or negligent
conduct, or from any action subject to a strict liability standard, has the
potential to significantly or totally impair Octagon's operations. In some
instances, Octagon may also be exposed to the possibility of criminal sanctions
or debarment from government work. It can be expected that, as long as Octagon
continues its current line of business, it will periodically and routinely be
included in investigations of projects on which it has worked.
RESIGNATION OF HARVEY GOLDMAN. The Proxy Statement/Prospectus disclosed
that it was expected that none of the executive officers of Conversion as of
such date would serve as executive officers of Conversion following consummation
of the Merger. The Proxy Statement/Prospectus also disclosed that Harvey
Goldman, Vice-Chairman, President and Chief Executive Officer of Conversion, was
expected to resign as an executive officer and as a director of Conversion
following consummation of the Merger, although it was also disclosed that Mr.
Goldman was expected to be available on a consulting basis for a period of time
at consulting rates less than his current salary of $180,000 per annum. Mr.
Goldman has announced that he will resign from all of his positions with
Conversion effective as of June 6, 1997 to accept another position. Conversion
has entered into a Consulting Agreement with Mr. Goldman pursuant to which Mr.
Goldman will be available to assist (in a manner which does not interfere with
his ability to perform his duties in the new position) in transition matters for
a period of nine months at a fixed rate of $10,000 per month. The Consulting
Agreement also contains mutual releases and customary non-disclosure and
non-compete covenants and allows 80,000 shares of restricted stock held by Mr.
Goldman to continue to vest during the consulting period, which shares shall
vest in full on January 1, 1998. Eckardt C. Beck, Conversion's Chairman, will
serve as Acting President and Chief Executive Officer until the closing of the
Merger.
Reference is made to the Proxy Statement/Prospectus for a complete
description of the Merger and other important information concerning Conversion
and Octagon.
THE SECURITIES TO BE ISSUED PURSUANT TO THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Supplement is June 4, 1997.
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