March 11, 1999




Dear Shareholder:

On February 21, 1999, the Board of Directors adopted a shareholder rights plan
(the "Rights Plan") and declared a dividend of one right (each, a "Right") on
each outstanding share of the Company's Common Stock (the "Rights"). The Board
of Directors fixed March 8, 1999 as the record date for this rights dividend
distribution, and the distribution to holders of record of the Company's Common
Stock occurred at the close of business on that date. No action on your part is
required. This distribution does not involve any cash dividend, stock dividend
or stock split. This letter describes the Rights Plan and explains our reasons
for adopting it.

The Rights Plan was adopted to protect your interests in the event the Company
is confronted with coercive or unfair takeover tactics. The Rights Plan contains
provisions designed to safeguard you in the event of an unsolicited offer to
acquire the Company, whether through a gradual accumulation of shares in the
open market, a partial or two-tiered tender offer that does not treat all
shareholders equally, the acquisition in the open market or otherwise of shares
constituting control without offering fair value to all shareholders, or other
abusive takeover tactics which the Board believes are not in the best interests
of the Company's shareholders. These tactics unfairly pressure shareholders,
squeeze them out of their investment without giving them any real choice and
deprive them of the full value of their shares. The Rights Plan was not adopted
in response to any specific effort to acquire control of the Company, nor is the
Company aware of such an effort.

More than 2,500 companies have rights plans similar to the one we have adopted.
We consider the Rights Plan to be the best available means of protecting your
right to retain your equity investment in the Company and obtaining the fair
value of that investment, while not foreclosing a fair acquisition bid for the
Company.

The Rights Plan is not intended to prevent a takeover or proxy contest for
control of the Company. The Rights serve as a mechanism to encourage negotiation
and should increase the ability of the Board of Directors to effectively
represent the interests of shareholders in the event of any unsolicited attempt
to acquire the Company.

Issuance of the Rights does not in any way weaken the financial strength of the
Company or interfere with its business plan. The issuance of the Rights has no
dilutive effect, will not affect reported earnings per share, is not taxable to
the Company or to you, and will not change the way





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March 10, 1999


in which you can currently trade shares of the Company's Common Stock. C3, Inc.
Common Stock certificates outstanding on the record date will, as of that date,
be deemed to represent both shares and Rights, at the rate of one Right per
share of Common Stock. As explained in detail in the enclosed summary, the
Rights will only be exercisable if and when an event occurs which triggers their
effectiveness. They will then operate to protect you against abusive and
coercive takeover tactics.

A summary of the terms of the Rights Plan is enclosed. The summary is not
complete and is qualified in its entirety by the Rights Agreement relating
thereto, a copy of which can be obtained free of charge from C3, Inc., 3800
Gateway Boulevard, Suite 310, Morrisville, NC 27560, Attention: Secretary.

Your Board and management are enthusiastic about the potential of the Company
and are committed to serving the best interests of its shareholders. These new
Rights are intended to preserve the value of your investment in the Company

On behalf of the Board of Directors,



Jeff N. Hunter
Chairman of the Board and Chief Executive Officer


Enclosure