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]
February __, 1999 Thomas P. Dolan
Secretary
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 upon the filing of the Reverse Stock Split
Amendment with the Secretary of State of Delaware (the "Effective Time"). The
following discussion is qualified in its entirety by the full text of the
Reverse Stock Split Amendment, which is incorporated by reference herein.
At the Effective Time, 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 of outstanding 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%
Max Schmid President,
Director 42,120 .37%
Thomas P. Dolan Secretary,
Executive
Vice President,
Director 141,816 1.23%
Robert W. Lewis, Jr. Treasurer,
Director 94,412 .82%
All Officers and Directors
as a group (3 persons) 278,348 2.41%
- ----------------------
(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.
<PAGE>
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 immediately upon the filing of this Amended Certificate of
Incorporation in the office of the Secretary of State of the State of
Delaware, 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
