SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
Check the appropriate box:
|_| Preliminary Information Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
|X| Definitive Information Statement
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CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
(Name of Registrant As Specified In Charter)
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Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
7 San Bartola Drive
St. Augustine, Florida 32086
INFORMATION STATEMENT
INTRODUCTION
This information statement is being mailed or otherwise furnished to
stockholders of Conversion Technologies International, Inc., a Delaware
corporation, in connection with the prior receipt by the Company of written
consents of the holders of shares representing a majority of the voting power of
our outstanding common stock and preferred stock approving a merger (the
"Merger") for the purpose of increasing our authorized number of shares of
common stock, par value $.00025 per share, from 50,000,000 to 200,000,000 shares
(the "Charter Amendment"). In the Merger, CTI Subsidiary Corp., a newly formed
wholly-owned subsidiary of ours will merge into us and our Restated Certificate
of Incorporation will be amended to effect the increase in authorized shares.
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Our Board of Directors believes that it is advisable and in our best
interest to increase our authorized common stock, by means of the Merger, to
have available sufficient authorized shares of common stock for issuance upon
conversion of a new class of convertible preferred stock which we are offering
in a private financing, to permit exercise of options which have been authorized
for grant upon consummation of the financing and to otherwise provide for our
future needs.
This information statement is being sent to stockholders on or about July
26, 1999.
We Are Not Asking You For A Proxy And
You Are Requested Not To Send Us A Proxy
The date of this information statement is July 26, 1999
Vote Required
Under Delaware law, the vote which was required to approve the Merger and
Charter Amendment was the affirmative vote of the holders of a majority of the
voting power represented by our outstanding common stock and preferred stock,
voting together as a class. As of July 9, 1999, there were 6,947,045 shares of
common stock outstanding and 545,830 shares of Series A Preferred Stock
outstanding. Each share of common stock is entitled to one vote and each share
of preferred stock, which is designated as Series A Preferred Stock, is entitled
to 20 votes. To be entitled to vote, stockholders must have appeared as
stockholders of record on the books of our transfer agent, American Stock
Transfer & Trust Company, as of July 9, 1999.
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Vote Obtained - Section 228 of the Delaware General Corporation Law
Section 228 of the Delaware General Corporation Law provides that in lieu
of a stockholder meeting the written consent of the holders of the outstanding
shares of stock entitled to vote, having not less than the minimum number of
votes which would be necessary to authorize or take action at a meeting at which
all shares entitled to vote thereon were present and voted, may be substituted
for such meeting. In order to eliminate the costs and management time involved
in holding a special meeting and in order to effect the Merger and Charter
Amendment as early as possible in order to accomplish the purposes as hereafter
described, our Board of Directors determined to seek, and did in fact obtain,
the written consent of the holders of a majority of the voting power represented
by our common stock and preferred stock, voting together as a class.
Pursuant to Section 228 of the Delaware General Corporation Law, we are
required to provide prompt notice of the taking of the corporate action without
a meeting to stockholders who have not consented in writing to such action. This
information statement is intended to provide such notice and to comply with
Section 14(c) of the Securities Exchange Act of 1934, as amended. Section 14(c)
requires that issuers who have not solicited consents from each holder of its
registered securities entitled to vote must distribute to such holders an
information statement.
Our stockholders are entitled to appraisal rights with respect to the
Merger provided that they comply with the conditions established by Section 262
of the Delaware General Corporation Law. It is a condition to consummation of
the Merger, pursuant to the merger agreement with
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CTI Subsidiary Corp., that no more than 5% of the outstanding shares of each
class of voting stock have validly demanded statutory appraisal rights with
respect to the Merger within the 20 day period prescribed by Delaware law;
provided, however, that our Board of Directors shall have the authority to waive
such condition if, in its business judgment, it deems such waiver to be in our
best interests. Stockholders who desire to exercise appraisal rights must
deliver to us a written demand for appraisal within 20 days after the date of
this Information Statement and must otherwise comply with the requirements of
Section 262 (as summarized below and set forth in Annex A attached hereto).
Stockholders who provided their written consent approving the Merger will not be
eligible for appraisal rights. See "Appraisal Rights" below.
Increase in Authorized Common Stock and Merger
We currently have 50,000,000 shares of common stock authorized,
substantially all of which shares would be outstanding on a fully diluted basis,
giving effect to shares issuable on conversion or exercise of securities
convertible into or exercisable for common stock at current conversion and
exercise rates. We are currently offering in a private financing up to 5,000,000
shares of a new series of preferred stock, which will be designated as "Series B
Preferred Stock" (the "Series B Preferred Financing"). Each share of Series B
Preferred Stock will be initially convertible into 20 shares of common stock,
resulting in a potential issuance of an additional 100,000,000 shares of common
stock. In addition, our Board of Directors has authorized the grant of options
exercisable at $.03 per share to certain of our directors and officers. The
total number of options to be issued will be such that, after issuance, the
holders will be entitled to purchase upon exercise thereof, up to 20% of the
outstanding shares of common stock on a fully diluted basis. As such, we have an
insufficient number of authorized shares of common stock to
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permit conversion or exercise of all such securities. Accordingly, the Board of
Directors has authorized an increase in the number of authorized shares of
common stock from 50,000,000 to 200,000,000. Such increase will be accomplished
by means of the Merger into us of CTI Subsidiary Corp., a nonoperating
wholly-owned subsidiary of ours formed for the sole purpose of merging with us.
Upon effectiveness of the Merger, our Restated Certificate of Incorporation will
be automatically amended to effect the Charter Amendment increasing the
authorized shares of common stock. The sole purpose of the Merger is to effect
such increase and thereby enable us to issue and sell Series B Preferred Stock
in the Series B Preferred Financing, to permit exercise of options which have
been authorized for grant and to otherwise provide for our future needs. Upon
consummation of the Merger, we will be the surviving corporation and each share
of stock of CTI Subsidiary will be cancelled and cease to exist. The shares of
our stockholders will not be changed or affected by the Merger.
Appraisal Rights
Holders of shares of common stock and Series A Preferred Stock are
entitled to appraisal rights under Section 262 of the Delaware General
Corporation Law with respect to the Merger, provided that they comply with the
conditions established by Section 262.
The following discussion is not a complete statement of the law relating
to appraisal rights and is qualified in its entirety by reference to Annex A.
This discussion and Annex A should be reviewed carefully by any holder who
wishes to exercise statutory appraisal rights or who wishes to preserve the
right to do so, as failure to comply with the procedures set forth herein or
therein will result in the loss of appraisal rights.
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A record holder of shares of common stock or Series A Preferred Stock who
makes the demand described below with respect to such shares, who does not vote
in favor of or deliver a written consent approving the Merger, and who otherwise
complies with the statutory requirements of Section 262, will be entitled to an
appraisal by the Delaware Court of Chancery of the fair value of his or her
shares of common stock and/or Series A Preferred Stock. All references in this
summary of appraisal rights to a "stockholder" or "holders of shares of common
stock or Series A Preferred Stock" are to the record holder or holders of shares
of common stock or Series A Preferred Stock.
Under Section 262, where a merger is accomplished pursuant to Section 228
of the Delaware General Corporation Law (Action by Written Consent in Lieu of
Stockholder Meeting), either before or within 10 days after the effective date
of the merger (the "Effective Time") each constituent corporation (or, after the
Effective Time, the surviving constituent corporation) must notify each
stockholder of each constituent corporation entitled to appraisal rights of the
merger and that appraisal rights are available to such stockholders and include
in each such notice a copy of Section 262.
Holders of shares of common stock or Series A Preferred Stock who desire
to exercise their appraisal rights must deliver a written demand for appraisal
to us within 20 days after the date of mailing of the statutory notice, which is
the date of this Information Statement. A demand for appraisal must be executed
by or on behalf of the stockholder of record and must reasonably inform us of
the identity of the stockholder of record and that such stockholder intends
thereby to demand appraisal of the common stock or Series A Preferred Stock.
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A person having a beneficial interest in shares of common stock or Series
A Preferred Stock that are held of record in the name of another person, such as
a broker, fiduciary, depositary or other nominee, must act promptly to cause the
record holder to follow the steps summarized herein properly and in a timely
manner to perfect appraisal rights. If the shares of Common Stock or Series A
Preferred Stock are owned of record by a person other than the beneficial owner,
including a broker, fiduciary (such as a trustee, guardian or custodian),
depositary or other nominee, such demand must be executed by or for the record
owner. If the shares of common stock or Series A Preferred Stock are owned of
record by more than one person, as in a joint tenancy or tenancy in common, such
demand must be executed by or for all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner. If a stockholder holds
shares through a central securities depository nominee such as Cede & Co., a
demand for appraisal of such shares must be made by or on behalf of the
depository nominee and must identify the depository nominee as record holder.
A record holder, such as a broker, fiduciary, depositary or other nominee,
who holds shares of common stock or Series A Preferred Stock as a nominee for
others, may exercise appraisal rights with respect to the shares held for all or
less than all beneficial owners of shares as to which such person is the record
owner. In such case, the written demand must set forth the number of shares
covered by such demand. Where the number of shares is not expressly stated,
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the demand will be presumed to cover all shares of common stock or Series A
Preferred Stock outstanding in the name of such record owner.
Within 120 days after the Effective Time, either we or any stockholder who
has complied with the required conditions of Section 262 may file a petition in
the Delaware Court, with a copy served on us in the case of a petition filed by
a stockholder, demanding a determination of the fair value of the shares of all
dissenting stockholders. We have no present intent to file an appraisal petition
and stockholders seeking to exercise appraisal rights should not assume that we
will file such a petition or that we will initiate any negotiations with respect
to the fair value of such shares. Accordingly, holders of common stock or Series
A Preferred Stock who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the time
periods and in the manner prescribed in Section 262. Within 120 days after the
Effective Time, any stockholder who has theretofore complied with the applicable
provisions of Section 262 will be entitled, upon written request, to receive
from us a statement setting forth the aggregate number of shares of common stock
or Series A Preferred Stock not voting in favor of the Merger and with respect
to which demands for appraisal were received by us and the number of holders of
such shares. Such statement must be mailed within 10 days after we have received
the written request therefor.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
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for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed, the
Delaware Court will appraise the shares of common stock or Series A Preferred
Stock owned by such stockholders, determining the fair value of such shares
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value.
No representation is made as to the outcome of the appraisal of fair value
as determined by the Court. In determining "fair value", the Delaware Court is
required to take into account all relevant factors. In Weinberger v. UOP, Inc.,
the Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered and
that "[f]air price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court has stated that in
making this determination of fair value the court must consider market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which could be ascertained as of the date of the merger which throw
any light on future prospects of the merged corporation. Section 262 provides
that fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger." In Cede & Co. v. Technicolor,
Inc., the Delaware Supreme Court stated that such exclusion is a "narrow
exclusion [that] does not encompass known elements of value," but which rather
applies only to the speculative elements of value arising from such
accomplishment or
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expectation. In Weinberger, the Delaware Supreme Court construed Section 262 to
mean that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on the factual
circumstances, may or may not be a stockholder's exclusive remedy in connection
with transactions such as the merger.
The cost of the appraisal proceeding may be determined by the Delaware
Court and taxed against the parties as the Delaware Court deems equitable in the
circumstances. However, costs do not include attorneys' and expert witness fees.
Each dissenting stockholder is responsible for his or her attorneys' and expert
witness expenses, although, upon application of a dissenting stockholder, the
Delaware Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of stock entitled
to appraisal.
Any holder of shares of common stock or Series A Preferred Stock who has
duly demanded appraisal in compliance with Section 262 will not be entitled to
vote for any purpose any shares subject to such demand or to receive payment of
dividends or other distributions on such shares, except for dividends or
distributions payable to stockholders of record as of a date prior to the
Effective Time.
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At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger (i.e., to retain their shares); after this period, the
stockholder may withdraw such demand for appraisal only with our consent. If no
petition for appraisal is filed with the Delaware Court within 120 days after
the Effective Time, stockholders' rights to appraisal shall cease, and all
holders of shares of common stock or Series A Preferred Stock will be entitled
to retain their shares pursuant to the terms of the merger agreement. Inasmuch
as we have no obligation to file such a petition, and we have no present
intention to do so, any holder of shares of common stock or Series A Preferred
Stock who desires such a petition to be filed is advised to file it on a timely
basis. Any stockholder may withdraw such stockholder's demand for appraisal by
delivering to us a written withdrawal of his or her demand for appraisal, except
(i) that any such attempt to withdraw made more than 60 days after the Effective
Time will require our written approval and (ii) that no appraisal proceeding in
the Delaware Court shall be dismissed as to any stockholder without the approval
of the Delaware Court, and such approval may be conditioned upon such terms as
the Delaware Court deems just.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of July 9, 1999, certain information as
to the stock ownership and voting power of all persons (or groups of persons)
known by us to be the beneficial owner of more than five percent (5%) of the
common stock, each of our directors, each of the executive officers and all
directors and executive officers as a group.
Number of Shares
Beneficially Percentage of
Name of Beneficial Owner(1) Owned (2) Voting Power (3)
- --------------------------- ---------------- ----------------
Eckardt C. Beck (4) 429,171 2.4
Peter H. Gardner (5) 46,338 *
Alexander P. Haig (6) 15,121 *
Douglas M. Costle (7) 15,000 *
Stephen D. Fish (8) 463,000 2.6
Irwin M. Rosenthal (9) 15,121 *
John G. Murchie (10) 37,062 *
All officers and directors as a
group (7 persons) (11) 1,020,813 5.6
Technology Funding Venture
Partners V, An Aggressive
Growth Fund, L.P. (12) 1,547,266 8.4
The Aries Fund,
a Cayman Islands Trust (13)
787 7th Avenue
48th Floor
New York, New York 10019 2,175,891 11.7
Aries Domestic Fund, L.P. (14)
787 7th Avenue, 48th Floor
New York, New York 10019 1,268,697 6.9
Porter Partners, L.P. (15)
100 Shoreline, Suite 211B
Mill Valley, California 94941 896,000 5.0
P.A.W. Offshore Fund, Ltd. (16)
90 Mees Pierson
904 East Bay Street
P.O. Box 55-6233
Nassau, Bahamas 1,120,000 6.3
- ----------
* Less than one percent.
(1) Unless otherwise indicated and subject to applicable community property
laws, each stockholder has sole voting and investment power with respect
to all shares of common stock beneficially owned by such
(footnotes continued on next page)
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stockholder. Unless otherwise indicated, the address of each stockholder
is c/o Conversion Technologies International, Inc., 7 San Bartola Drive,
St. Augustine, Florida 32086.
(2) The number of shares beneficially owned by each person named in the table
includes shares held by each individual of (i) the Company's common stock;
(ii) the Company's Series A Preferred Stock, as converted into common
stock; (iii) Series A Preferred Stock subject to warrants that are
presently exercisable, as converted into common stock; and (iv) common
stock subject to options or warrants that are presently exercisable or
exercisable within 60 days of July 9, 1999.
(3) Applicable percentage of voting power is based on the 17,863,645 shares of
common stock outstanding (on a diluted basis) as of July 9, 1999. That
number is comprised of 6,947,045 outstanding shares of common stock and
10,916,600 shares of common stock issuable upon conversion of 545,830
outstanding shares of Series A Preferred Stock. Shares of Series A
Preferred Stock and common stock subject to options and warrants that are
presently exercisable or exercisable within 60 days are deemed to be
beneficially owned by the person holding such options and warrants for the
purpose of computing the percentage of ownership of such person but are
not treated as outstanding for the purpose of computing the percentage of
any other person.
(4) Includes 13,833 shares of common stock held and 224,000 shares of common
stock issuable upon conversion of 11,200 outstanding shares of Series A
Preferred Stock. Also includes currently exercisable options to purchase
191,338 shares of common stock. Excludes options to purchase 120,000
shares of common stock which are not exercisable within 60 days. Also
excludes options to be granted to such individual upon consummation of, as
well as shares which the individual may purchase in, the Series B
Preferred Financing. The address of such stockholder is 6345 NW 26th
Terrace, Boca Raton, Florida 33496.
(5) Includes currently exercisable options to purchase 46,338 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing. Mr.
Gardner was formerly an Investment Officer at Technology Funding, Inc.
("TFI"), the Managing General Partner of Technology Funding Partners III,
L.P. ("TFP III") and Technology Funding Partners V, an Aggressive Growth
Fund, L.P. ("TFVP V"). Mr. Gardner disclaims beneficial ownership of all
securities of the Company owned by TFP III and TFVP V.
(6) Includes currently exercisable options to purchase 15,121 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing.
(7) Includes currently exercisable options to purchase 15,000 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing.
(8) Includes 448,000 shares issuable upon conversion of 22,400 shares of
Series A Preferred Stock and currently exercisable options to purchase
15,000 shares of common stock. Excludes options to purchase 10,000 shares
of common stock which are not exercisable within 60 days. Also excludes
options to be granted to such individual upon consummation of, as well as
shares which the individual may purchase in, the Series B Preferred
Financing.
(9) Includes currently exercisable options to purchase 15,121 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing.
(10) Includes currently exercisable options to purchase 37,062 shares of common
stock. Excludes options to purchase 66,668 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred
Financing.
(footnotes continued on next page)
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(11) Calculation does not include securities held by Mr. Goldman or Mr. Pappas
who are no longer directors or officers of the Company. Calculation
excludes options to purchase 236,668 shares of common stock which are not
exercisable within 60 days. Also excludes options to be granted to any of
such individuals upon consummation of, as well as shares which these
individuals may purchase in, the Series B Preferred Financing.
(12) Includes (A) securities held by TFVP V consisting of (i) 207,547 shares of
common stock, (ii) 176,400 shares of common stock issuable upon conversion
of 8,820 shares of Series A Preferred Stock, (iii) shares of common stock
issuable upon exercise of 371,822 Class A Warrants (includes the Class B
Warrants underlying such Class A Warrants), and (iv) 51,884 shares of
common stock underlying additional warrants, and (B) securities held by
TFP III consisting of (i) 69,180 shares of common stock, (ii) 529,200
shares of common stock issuable upon conversion of 26,460 shares of Series
A Preferred Stock, (iii) shares of common stock issuable upon exercise of
123,940 Class A Warrants (includes the Class B Warrants underlying such
Class A Warrants) and (iv) 17,293 shares of common stock underlying
additional warrants.
(13) Paramount Capital Asset Management, Inc. ("PCAM") is the Investment
Manager to The Aries Fund, a Cayman Islands Trust (the "Aries Trust").
Lindsay A. Rosenwald, M.D. is President and sole shareholder of PCAM. PCAM
and Dr. Rosenwald may be considered to beneficially own the securities
owned by the Aries Trust by virtue of their authority to vote and/or
dispose of the securities. Securities held by the Aries Trust consist of
1,478,400 shares of common stock issuable upon conversion of 73,920 shares
of Series A Preferred Stock, shares of common stock issuable upon exercise
of 148,728 Class A Warrants (includes the Class B Warrants underlying such
Class A Warrants); 400,903 shares of common stock underlying additional
warrants, and 147,860 shares of common stock underlying Series A Preferred
Stock subject to warrants. In addition, Dr. Rosenwald beneficially owns
205,134 shares of our common stock and warrants to purchase 44,727 shares
of our common stock. Excludes shares which may be purchased in the Series
B Preferred Financing.
(14) PCAM is the General Partner of the Aries Domestic Fund L.P. Dr. Rosenwald
is the President and sole shareholder of PCAM. PCAM and Dr. Rosenwald may
be considered to beneficially own the securities owned by the Aries
Domestic Fund, L.P. by virtue of their authority to vote and/or dispose of
the securities. PCAM and Dr. Rosenwald beneficially own all securities of
the Company held by the Aries Domestic Fund, L.P. Securities held by Aries
Domestic Fund, L.P. consist of 761,600 shares of common stock issuable
upon conversion of 38,080 shares of Series A Preferred Stock, shares of
common stock issuable upon exercise of 247,882 Class A Warrants (including
the Class B Warrants underlying such Class A Warrants); warrants to
purchase an additional 183,035 shares of common stock, and warrants to
purchase Series A Preferred Stock which is convertible into 76,180 shares
of common stock. In addition, Dr. Rosenwald beneficially owns 205,134
shares of the Company common stock and warrants to purchase 44,727 shares
of Conversion Technologies common stock. Excludes shares which may be
purchased in the Series B Preferred Financing.
(15) Includes 896,000 shares of common stock underlying 44,800 shares of Series
A Preferred Stock. Jeffrey H. Porter is the Managing General Partner of
Porter Partners, L.P. Mr. Porter may be considered a beneficial owner of
the securities owned by Porter Partners, L.P. by virtue of his authority
to vote and/or dispose of the securities held by Porter Partners, L.P. Mr.
Porter disclaims beneficial ownership of all securities of the Company
held by Porter Partners, L.P.
(16) Includes 1,120,000 shares of common stock underlying 56,000 shares of
Series A Preferred Stock. Peter Wright is the Investment Manager for the
P.A.W. Offshore Fund, Ltd. Mr. Wright may be considered the beneficial
owner of the securities owned by the P.A.W. Offshore Fund, Ltd. by virtue
of his authority to vote and/or dispose of the Company's securities held
by P.A.W. Offshore Fund, Ltd. Mr. Wright disclaims beneficial ownership of
all securities of the Company held by P.A.W. Offshore Fund, Ltd.
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Interest of Certain Persons
Our Board of Directors has authorized the grant of options exercisable at
$.03 per share to certain of our directors and officers upon consummation of the
Series B Preferred Financing. The total number of options to be issued will be
such that, after issuance, the holders will be entitled to purchase upon
exercise thereof, up to 20% of the outstanding shares of common stock on a fully
diluted basis. Issuance of shares of common stock upon exercise of these options
would be contingent upon effecting the Merger and related Charter Amendment. In
addition, certain directors and/or associates may purchase Series B Preferred
Stock in the Series B Preferred Financing.
By Order of the Board of Directors
/s/ Eckardt C. Beck
--------------------------------------------
Eckardt C. Beck
Acting President and Chief Executive Officer
St. Augustine, Florida
July 26, 1999
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