U.S. Environmental, Inc.
8130 66 th. St. N.
Pinellas Park, Florida 33781
To our Shareholders:
The following Information Statement is being mailed to shareholders of
record as of the close of business on February 15, 1999.
On January 15, 1999 the Company entered into an agreement with Virtual
Empowerment Network, Inc. (VEN) a Kansas corporation wherein VEN agreed to
purchase shares equaling 83% of the outstanding shares of USE after the
purchase. In consideration for the issuance of the shares, VEN will negotiate,
secure and assign, with full rights, contracts in the aggregate amount of
$5,000,000 to USE, whereby USE will receive not less than $5,000,000 in gross
revenues during a five year period after the closing date of the VEN Agreement.
The assignment of such contracts is to occur within one year of the Company's
ability to perform under such contracts. Additionally, VEN agreed to loan funds
for payment of outstanding accounts payable and working capital for the next
year.
VEN is a minority-owned, for profit, development stage company with
principal offices in the State of Kansas, organized to promote economic
empowerment, business development and financial resources in urban communities
throughout America. VEN was formed as a holding company to facilitate ownership
and management in the areas of construction, telecommunications, financial
services, insurance, environmental services and products, and acquisition and
development of real estate and businesses. It will conduct these business
activities through several autonomous subsidiaries.
The VEN Agreement requires that as a condition precedent to Closing, the
Company must undergo a one share for one hundred shares reverse stock split and
a reduction of the number of authorized shares to 100 million.
It is anticipated that at Closing, VEN will be issued 9,620,842 shares of
common stock representing 83% of the shares of common stock of approximately
11,591,376 shares of common stock which will be issued and outstanding after the
Closing. Under the terms of the agreement VEN's shares will be held by an escrow
agent to be released when the consideration agreed to has been met.
After the Reverse Stock Split is effected, shareholders will be asked to
surrender their pre-Split share certificates in exchange for post-Split share
certificates. STOCKHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE A LETTER OF TRANSMITTAL FROM AMERICAN STOCK TRANSFER & TRUST COMPANY.
This Letter of Transmittal will provide instructions for returning your shares.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND IN A
PROXY.
[signature]
March 5, 1999 Thomas P. Dolan
Secretary
<PAGE>
INFORMATION STATEMENT
THIS IS AN INFORMATION STATEMENT, AND NOT A PROXY STATEMENT. WE ARE NOT ASKING
YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND IN A PROXY.
GENERAL
On January 15, 1999 the Company entered into an agreement with Virtual
Empowerment Network, Inc. (VEN) a Kansas corporation wherein VEN agreed to
purchase shares equaling 83% of the outstanding shares of USE after the
purchase. In consideration for the issuance of the shares, VEN will negotiate,
secure and assign, with full rights, contracts in the aggregate amount of
$5,000,000 to USE, whereby USE will receive not less than $5,000,000 in gross
revenues during a five year period after the closing date of the VEN Agreement.
The assignment of such contracts is to occur within one year of the Company's
ability to perform under such contracts.
As further payment for the shares being purchased by VEN, it has agreed to
a series of loans to provide for payment of the Company's outstanding accounts
payable and to provide working capital for the next year.
In the event VEN is unable to provide the $5,000,000 in contracts, then the
outstanding loans from VEN to USE will be forgiven.
REVERSE STOCK SPLIT
One of the conditions imposed by VEN with respect to the purchase of the
USE shares was that prior to closing on the VEN Agreement, the Company would
undergo a one share for one hundred shares reverse stock split (the 'Reverse
Stock Split'). The present capitalization of the Company is 200 million shares
of common stock, with 197,053,438 shares of common stock issued and
outstanding. Following the Reverse Stock Split, there will be 1,970,534 shares
of common stock, plus a small number of shares necessary to round fractional
shares to the next full share. At closing, VEN will be issued 9,620,842 shares
of common stock, so that the total capitalization post-closing will be
approximately 11,591,376 shares of common stock. Under the terms of the
agreement VEN's shares will be held by an escrow agent to be released when the
consideration agreed to has been met.
The Board of Directors and holders of a majority of the outstanding common
stock of the Company have approved the Reverse Stock Split. The Reverse Stock
Split will be accomplished by amending the Company's Certificate of
Incorporation to effect a one share for one hundred shares reverse stock split
of the Company's outstanding Common Stock, each share having a par value of
$.0001 (the "Common Stock"). The Reverse Stock Split provides for the
combination and reclassification of the present outstanding shares of Common
Stock, into a smaller number of shares of identical Common Stock, on the basis
of one share of Common Stock for each one hundred shares of Common Stock
previously outstanding. Except as may result from rounding for fractional
shares as described below, each stockholder will hold the same percentage of
Common Stock outstanding immediately following the Reverse Stock Split as each
stockholder did immediately prior to the Reverse Stock Split. The amendment
will be in substantially the form attached to this Information Statement as
Appendix A (the "Reverse Stock Split Amendment"), and will become effective on
March 25, 1999. The following discussion is qualified in its entirety by the
full text of the Reverse Stock Split Amendment, which is incorporated by
reference herein.
On March 25, 1999, each share of Common Stock issued and outstanding will
automatically be reclassified and converted into one one-hundredth of a share
of Common Stock, with fractional shares to be rounded up to the next full share.
EFFECT OF THE REVERSE STOCK SPLIT PROPOSAL
The Reverse Stock Split will be effected by filing the Reverse Stock Split
Amendment to the Company's Certificate of Incorporation, and will be effective
immediately upon such filing.
Fractional shares of Common Stock resulting from the Reverse Stock Split
will be rounded up to the next full share. The number of shares of Common Stock
that may be purchased upon the exercise ofoutstanding options, warrants, and
other securities convertible into, or exercisable or exchangeable for, shares
of Common Stock (collectively, "Convertible Securities") and the per share
exercise or conversion prices thereof, will be adjusted as of the Effective
Date, so that the aggregate number of shares of Common Stock issuable in
respect of Convertible Securities immediately following the Effective Date will
be one one-hundredth of the number issuable in respect thereof immediately prior
to the Effective Date, the per share exercise price immediately following the
Effective Date will be one hundred times the per share exercise or conversion
price immediately prior to the Effective Date, and the aggregate exercise or
conversion prices thereunder shall remain unchanged.
The Reverse Stock Split will also result in some stockholders owning "odd
lots" of less than 100 shares of Common Stock. Brokerage commissions and other
costs of transactions in odd lots may be higher, particularly on a per-share
basis, than the cost of transactions in even multiples of 100 shares.
The Company is authorized to issue 200,000,000 shares of Common Stock, of
which 197,053,438 shares were outstanding at the close of business on the
Record Date.
Adoption of the Reverse Stock Split will reduce the shares of Common Stock
outstanding on the Record Date from 197,053,438 to 1,970,534, and the number of
authorized shares of Common Stock will be reduced to 100,000,000, par value
$.0001. After the Reverse Stock Split, the Company will have the same number of
stockholders. Except for the rounding of fractional shares to the next full
share, the Reverse Stock Split will not affect any stockholder's proportionate
equity interest in the company.
As a result of the Reverse Stock Split, the Company will have a greater
number of authorized but unissued shares of Common Stock than prior to the
Reverse Stock Split. The increase in the authorized but unissued shares of
Common Stock could make a change in control of the Company more difficult to
achieve. Under certain circumstances, such shares of Common Stock could be used
to create voting impediments to frustrate persons seeking to effect a takeover
or otherwise gain control of the Company. Such shares could be sold privately
to purchasers who might side with the Board of Directors in opposing a takeover
bid that the Board determines is not in the best interests of the Company and
its stockholders.
The increase in the authorized but unissued shares of Common Stock also
may have the effect of discouraging an attempt by another person or entity,
through acquisition of a substantial number of shares of Common Stock, to
acquire control of the Company with a view to effecting a merger, sale of
assets or a similar transaction, since the issuance of new shares could be used
to dilute the stock ownership of such person or entity. Shares of authorized
but unissued Common Stock could be issued to a holder who would thereby have
sufficient voting power to assure that any such business combination or any
amendment to the Company's Certificate of Incorporation would not receive the
stockholder vote required for approval thereof. The Board of Directors has no
current plans to issue any shares of Common Stock for any such purpose, and
does not intend to issue any stock except on terms or for reason which the
Board of Directors deems to be in the best interests of the Company.
The Common Stock is currently listed on the OTC Bulletin Board under the
trading symbol USEV.
EXCHANGE OF STOCK CERTIFICATES AND ROUNDING FOR FRACTIONAL SHARES
The combination and reclassification of shares of Common Stock pursuant to
the Reverse Stock Split will occur automatically on the Effective Date without
any action on the part of stockholders of the Company and without regard to the
date certificates representing shares of Common Stock prior to the Reverse Stock
Split are physically surrendered for new certificates.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of certificates for shares of Common Stock to
be used in forwarding such certificates for surrender and exchange for
certificates representing the number of shares of Common Stock such stockholder
is entitled to receive as a consequence of the Reverse Stock Split. The
transmittal forms will be accompanied by instructions specifying other details
of the exchange. Upon receipt of such transmittal form, each stockholder should
surrender the certificates representing shares of Common Stock prior to the
Reverse Stock Split, in accordance with the applicable instructions. Each holder
who surrenders certificates will receive new certificates representing the whole
number of shares of Common Stock that he or she holds as a result of the Reverse
Stock Split. STOCKHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE A TRANSMITTAL FORM.
After the Effective Date, each certificate representing shares of Common
Stock outstanding prior to the Effective Date (an "Old Certificate") will, until
surrendered and exchanged as described above, be deemed, for all corporate
purposes, to evidence ownership of the whole number of shares of Common Stock,
into which the shares of Common Stock evidenced by such certificate have been
converted by the Reverse Stock Split, except that the holder of such unexchanged
certificates will not be entitled to receive any dividends or other
distributions payable by the Company after the Effective Date, until the Old
Certificates have been surrendered. Such dividends and distributions, if any,
will be accumulated, and at the time of surrender of the Old Certificates, all
such unpaid dividends or distributions will be paid without interest
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes certain material federal income tax
considerations relating to the Reverse Stock Split. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder, legislative history, judicial decisions, and
current administrative rulings and practices, all as amended and in effect on
the date hereof. Any of these authorities could be repealed, overruled, or
modified at any time. Any such change could be retroactive and, accordingly,
could cause the tax consequences to vary substantially from the consequences
described herein. No ruling from the Internal Revenue Service (the "IRS") with
respect to the matters discussed herein has been requested, and there is no
assurance that the IRS would agree with the conclusions set forth in this
discussion.
This discussion may not address certain federal income tax consequences
that may be relevant to particular stockholders in light of their personal
circumstances (such as persons subject to the alternative minimum tax) or to
certain types of stockholders (such as dealers in securities, insurance
companies, foreign individuals and entities, financial institutions, and
tax-exempt entities) who may be subject to special treatment under the federal
income tax laws. This discussion also does not address any tax consequences
under state, local, or foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT, INCLUDING THE APPLICABILITY
OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS, AND
ANY PENDING OR PROPOSED LEGISLATION.
The Company should not recognize any material gain or loss as a result of
the Reverse Stock Split, and no material gain or loss should be recognized by
a stockholder. Except as provided with respect to fractional shares, the
aggregate tax basis of the shares of Common Stock held by a stockholder
following the Reverse Stock Split will equal the stockholder's aggregate basis
in the Common Stock held immediately prior to the Reverse Stock Split and
generally will be allocated among the shares of Common Stock held following the
Reverse Stock Split on a pro-rata basis. Stockholders who have used the
specific identification method to identify their basis in shares of Common
Stock combined in the Reverse Stock Split should consult their own tax advisors
to determine their basis in the post-Reverse Stock Split shares of Common
Stock received in exchange therefor.
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of
February 10, 1999 by (i) each stockholder known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
director, (iii) the Company's Chief Executive Officer and the Company's two
other executive officers as of February 10, 1999 and (iv) all executive officers
and directors as a group. The table also indicates the number of votes to which
each person would be entitled in the event of a shareholders meeting and the
percentage of the total voting power represented thereby. None of the persons
identified below owns any securities of the Company other than Common Stock.
Name and Address of Title Number of Percent of
of Beneficial Owner Shares Outstanding Shares
- ---------------------- ----- ------ ------------------
Kilgarvan Investment
& Holding, Ltd. 5% owner 81,379,500 41.290%
Chatsworth Asset
Management, Ltd 5% owner 14,291,981 7.252%
Max Schmid President,
Director 4,212,000 2.138%
Thomas P. Dolan Secretary,
Executive
Vice President,
Director 14,181,519 7.197%
Robert W. Lewis, Jr. Treasurer,
Director 9,441,125 4.791%
All Officers and Directors
as a group (3 persons) 27,834,644 14.125%
Assuming the Reverse Stock Split has occurred and VEN has been issued 9,620,842
shares pursuant to the VEN Agreement, the following table sets forth information
with respect to beneficial ownership of the Company's Common Stock by (i) each
stockholder who would be the beneficial owner of more than 5% of the Company's
Common Stock, (ii) each director, (iii) the Company's Chief Executive Officer
and the Company's two other executive officers and (iv) all executive officers
and directors as a group.
Name and Address of Title Number of Percent of
of Beneficial Owner Shares Outstanding Shares(1)
- ---------------------- ----- ------ ------------------
Virtual Empowerment
Network, Inc. 5% owner 9,620,842 83.000%
Kilgarvan Investment
& Holding, Ltd. 5% owner 813,795 7.021%
Max Schmid President,
Director 42,120 .363%
Thomas P. Dolan Secretary,
Executive
Vice President,
Director 141,816 1.223%
Robert W. Lewis, Jr. Treasurer,
Director 94,412 .815%
All Officers and Directors
as a group (3 persons) 278,348 2.401%
- ----------------------
(1) Does not take into account additional shares issued to round up for
fractional shares
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute
and return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
OTHER INFORMATION
The Company files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
You may read and copy any reports, statements or other information filed by the
Company at the SEC's public reference rooms in Washington, D.C., New York City,
and Chicago, Illinois. The Company's SEC filings are also available from
commercial document retrieval services or on the SEC's web site at
http://www.sec.gov. You may also request a copy of the Company's financial
reports filed with the SEC by contacting Thomas P. Dolan, Corporate Secretary,
U.S. ENVIRONMENTAL, INC., 8130 66th Street N., Pinellas Park, Florida, 33781.
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
U.S. ENVIRONMENTAL, INC.
U.S. ENVIRONMENTAL, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, at a meeting called
for such purpose, duly adopted resolutions setting forth the proposed amendment
to the Certificate of Incorporation of the Corporation and calling for the
submission of the proposed amendment to a vote on the stockholders of the
Corporation, for their approval and adoption. The resolution setting forth
proposed amendment is as follows:
RESOLVED, that the Corporation amend its Certificate of Incorporation so
that:
ARTICLE 4 of the Certificate of Incorporation shall read as follows:
IV.
Effective March 25, 1999, the outstanding shares of Common Stock shall be
and hereby are combined and reclassified as follows: each share of Common Stock
shall be reclassified as and converted into one one- hundredth of a share of
Common Stock, with fractional shares to be rounded up to the next full share.
Certificates representing shares combined and reclassified as provided in
this Amendment to the Certificate of Incorporation are hereby canceled, and,
upon presentation of the canceled certificates to the Corporation, the holders
thereof shall be entitled to receive new certificates representing the shares
resulting from such combination and reclassification.
After the above combination and reclassification, the Corporation shall be
authorized to issue one class of shares to be designated as Common Stock. The
total number of shares of stock which the Corporation shall have authority to
issue shall be One-Hundred Million (100,000,000) shares, each having a par value
of $.0001 (the "Common Stock").
SECOND: That the holders of a majority of the outstanding shares of common
stock of the Corporation did duly adopt said amendment proposed by the Board
of Directors, by consent dated December 18, 1998.
THIRD: That these amendments were duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Laws.
The undersigned hereby acknowledges that the foregoing Certificate of
Incorporation is his act and deed and that the facts stated herein are true.
---------------------------------------------
Max Schmid
President and Chief Executive Officer
- ------------------------------------------------
Attest: Thomas P. Dolan, Secretary
Dated: March ____, 1999
