To: BGM who wrote (16753 ) 10/21/1998 12:26:00 PM From: Henry Volquardsen Read Replies (1) | Respond to
Brad,the proposal to sell FL interests to finance CPM and other ventures From what little I was able to discern that was not how I thought it worked. I thought the CPM deals would be financed by another mechanism and the money from this private placement would fund the ongoing research of Franklin Lake. I may be wrong about this. I would have liked to have seen a written proposal to analyze. But to cut to the chase, I did not like the mechanism for just the reason that many have complained about, it appears to sell out a portion of Franklin Lake without direct aproval of the shareholders. The method I would have preferred would have been to split the company into two entities and spin Franklin Lake off to the shareholders. Then the shareholders who only wanted conventional could have sold Franklin Lake and those who wanted FL could have sold the conventional. The FL entitiy would then have needed to fund it's own research and, fwiw, I believe that would have been highly dilutive. But I believe this approach would preserve most of the sharholder's ability to chose their fate.Would you have invested in the CPM ventures if they were a stand alone company with all other things the same? Again I would have to see the poroposal. But it all likelihood I would not. But this is not a situation where I am making a decision from scratch. Naxos is, to be blunt, a distressed equity. I found the CPM an interesting alternative to try and work something out with an investment in which I already have a lot of money sunk. As the old saying goes, when you have lemons make lemonade.Do you feel is is proper to hold the expectations of an already invested (smart or not) group to the fire to pay for a new direction, or do you feel that interest should be financed on its own? If you keep all of Naxos under one umbrella then I feel it was well within the authority of management to pursue additional conventional properties. If the idea was to sell off FL, an interpretation I don't agree with, one of two approaches should have been adopted. Put it to a shareholder vote about changing direction or split the company into two entities and allow investors to sell the portion they don't wish to continue with.Do you think there are no existing investors willing to put more money into FL and its research if this money is properly and efficiently directed? No. I think there are investors who would be willing to finance a Franklin Lake research project if it was properly structured.
