UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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US 1 INDUSTRIES, INC.
________________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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PRELIMINARY PROXY
US 1 INDUSTRIES, INC.
336 W. US HWY 30
VALPARAISO, INDIANA 46385
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September __, 2008 at 10:00A.M. local time
Dear Fellow Shareholder:
On behalf of the Board of Directors, you are cordially invited to attend
the Annual Meeting of Shareholders (the "Annual Meeting") to be held on
September ___, 2008, at 10:00 A.M., local time, at __________________________.
At the Annual Meeting, action will be taken on the following proposals:
1. To elect five (5) directors to constitute the Board of Directors
to serve until the next Annual Meeting and until their successors
are elected and qualified;
2. To approve and adopt an amendment to our Articles of Incorporation
to effect between a one -for- ___ and one-for-___ reverse stock
split of all of our outstanding shares of common stock (the "Reverse
Stock Split") immediately followed by a forward stock split between
___ -for-one and ___-for-one of all of our outstanding shares of
common stock (the "Forward Stock Split," and, collectively, the
"Reverse/Forward Stock Split.") Shares that are owned by any
shareholder who owns less than between ____ and _____ shares of
common stock will be converted into the right to receive a cash
payment for such shares in an amount equal to ____ per share, and
holders of a greater number of shares will receive a cash payment for
their fractional shares.
3. To conduct any other business properly before the meeting or any
adjournment thereof.
Attendance and voting at the Annual Meeting are limited to shareholders
of record at the close of business on August ___, 2008. A list of shareholders
entitled to vote at the meeting will be available, upon written demand, for
inspection and copy between the hours of 9:00 a.m. and 5:00 p.m. at our offices
during the five days prior to the meeting and also at the meeting. Such list
will be arranged in alphabetical order, by voting group, and will contain the
address and number of shares that each shareholder is entitled to vote.
Your vote is important. Whether you plan to attend the meeting in person
or not, please complete, sign and date the enclosed proxy card and return it in
the envelope provided. If you attend the Annual Meeting and prefer to vote in
person, you may do so even if you have previously submitted a proxy.
Thank you for your continued support of our company.
Harold E. Antonson
Secretary
Valparaiso, Indiana
August ___, 2008
US 1 INDUSTRIES, INC.
336 W. US HWY 30
VALPARAISO, INDIANA 46385
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PROXY STATEMENT
[PRELIMINARY COPY]
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INTRODUCTION
Annual Meeting: The Annual Meeting will be held at __________________
on September ____, 2008, at 10:00 A.M., local time.
Record Date: The date fixed to determine shareholders entitled to
notice of and to vote at the meeting is the close of
business on August ___, 2008.
Mailing Date: We anticipate first mailing this proxy statement, the
attached Notice of Annual Meeting and the enclosed proxy
card on or about August ___, 2008.
Agenda: The agenda for the meeting is:
1. To elect five (5) directors to constitute the Board of Directors
to serve until the next Annual Meeting and until their successors
are elected and qualified;
2. To authorize the Board of Directors to adopt and amend the
Articles of Incorporation (the "Articles") to effect between a one
-for- ___ and one-for-___ Reverse Stock Split of all of our shares
of common stock immediately followed by a Forward Stock Split between
___ -for-one and ____-for-one of all of our shares of common stock; and
3. To conduct any other business properly before the meeting or any a
djournment thereof.
Proxy Solicitation: Our Board of Directors is soliciting proxies. Certain of
our officers and employees may solicit proxies personally and by
telephone. [In addition, we have retained Morrow & Co. to assist
with the distribution of materials to street name holders.] We are
paying the cost of solicitation, including the cost of mailing. We
have requested banks, brokers and other custodian nominees and
fiduciaries to supply, at our expense, proxy materials to the
beneficial owners of common stock of the Company.
Voting of Proxies: Properly dated, executed and returned proxies will be
voted in accordance with your instructions. If no specific
instructions are given, your shares will be voted "FOR" Proposals
1 and 2.
We do not intend to bring any matters before the meeting
except those indicated in the Notice of Annual Meeting, and we do
not know of any matter that anyone else intends to present for
action at the meeting. If any other matters properly come before
the meeting, however, the persons named in the enclosed proxy will
be authorized to vote or otherwise act in accordance with their
judgment.
Revoking Proxies: You may revoke your proxy at any time before it is voted
at the meeting by:
* Delivering to the Secretary of the Company a signed, written
revocation letter dated later than the proxy;
* Submitting a proxy with a later date; or
* Attending the meeting and voting in person.
Outstanding Shares: On the record date, there were _____________ shares of
our common stock outstanding, the only class of voting securities
outstanding.
Quorum: A quorum of shareholders is necessary to take action at the
Annual Meeting. The holders of a majority of all outstanding
shares of common stock of the Company issued, outstanding and
entitled to vote, represented in person or by proxy, will
constitute a quorum. Abstentions and broker non-votes, as
described below, are counted for purposes of determining whether
a quorum is present.
Voting: Each share of common stock held as of the record date entitles
the holder to one vote on each matter to be voted upon at the
Annual Meeting. As of August ___, 2008 there were _____ holders
of record of the Company's common stock. Abstentions and broker
non-votes, as described below, have no effect on the election of
directors but will have the same effect as a vote against the
proposal to amend the Company's Articles of Incorporation to
effect a Reverse Stock Split of the Company's common stock.
Required Vote: With respect to Proposal 1, directors will be elected by a
plurality of the votes cast at the Annual Meeting, meaning the
five nominees receiving the highest number of votes will be
elected. Only votes cast for a nominee will be counted, except
that a properly executed proxy that does not specify a vote with
respect to the nominees will be voted in favor of the five
nominees whose names are listed on the proxy.
With respect to Proposal 2 (the "Proposed Transaction"), the
affirmative vote of the holders of a majority of the shares of common
stock outstanding on the Record Date is required to approve the amendment
to the Company's Articles of Incorporation to effect the Reverse and
Forward Stock Splits.
Broker Votes: Brokers who hold shares in street name have the authority to
vote on certain routine matters on which they have not received
instructions from beneficial owners. However, brokers holding shares
of common stock in street name who do not receive instructions from
beneficial owners by the date specified in the statement accompanying
these proxy materials are not entitled to vote on any non-routine matter
presented and such shares are considered "broker non-votes." We believe
that Proposal 1 constitutes a "routine matter."
Annual Report: The Company's 2007 Annual Report is being mailed to you with
this proxy statement.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall
consist of not less than five nor more than nine persons, the exact number
within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of a majority of the Board of Directors. The
Board of Directors currently consists of five members. At the Annual
Meeting, a shareholder cannot vote for a greater number of persons for
director than the number of nominees named in this Proxy Statement, which
is five members.
For purposes of the Annual Meeting, the directors will be elected by a
plurality of the votes cast at the Annual Meeting in person or by proxy, so
long as a quorum is present at the meeting.
Each proxy card executed and returned by a shareholder will be voted as
specified thereon by the shareholder. If no specification is made, the proxy
will be voted for the election of the nominees named below to constitute the
entire Board of Directors. If any nominee withdraws or for any reason is not
able to serve as a director, the proxy will be voted for such other person as
may be designated by the Board of Directors as a substitute nominee, but in no
event will the proxy be voted for more than five substitute nominees.
The Board of Directors has nominated and recommends to the Company's
shareholders the election of each of the nominees set forth below as a director
of the Company until the next Annual Meeting of shareholders, or until his
successor is duly elected and qualified. All of the nominees are currently
directors of the Company. If any nominee is unable to serve as a director,
shares represented by proxy will be voted in favor of such nominee as the Board
may adopt as a substitute by majority vote of the Board. At this time, the
Board knows of no reason any nominee will be unable to serve as a director.
Set forth below are the names of each nominee for election to a term as
a director and to serve until the 2009 Annual Meeting of shareholders, or until
his successor is duly elected and qualified. It is the intention of the persons
designated in the proxy card to vote for the election of the nominees listed
below.
Harold E. Antonson Brad A. James
Michael E. Kibler Robert I. Scissors
Lex L. Venditti
The following are the names and ages of the nominees, the year each
individual began continuous service as director of the Company and the
business experience of each, including principal occupations, at present and
for at least the past five years.
Harold E. Antonson
Age 68
Mr. Antonson has been the Chief Financial Officer of the Company for
over ten years. Mr. Antonson is also a shareholder of American Interfidelity
Corporation, and the attorney-in-fact of American Inter-Fidelity Exchange
("AIFE"), an affiliated entity that provides auto liability and cargo insurance
to the Company. Mr. Antonson was elected a director of the Company in 1999.
Brad A. James
Age 52
Mr. James has been the President of Seagate Transportation Services,
Inc. for over ten years. Mr. James was elected a director of the Company
in 1999.
Michael E. Kibler
Age 67
Mr. Kibler has been President and Chief Executive Officer of the
Company for more than ten years. He also has been President of Enterprise
Truck Lines, Inc., an interstate trucking company engaging in operations
similar to the Company's, since 1972. Mr. Kibler is a shareholder of
American Inter-Fidelity Corporation. Mr. Kibler has been a director of
the company since 1993.
Robert I. Scissors
Age 74
Mr. Scissors is a retired insurance broker and currently works
as an insurance consultant. Mr. Scissors has been a director of the
Company since 1993.
Lex L. Venditti
Age 55
Mr. Venditti has been the General Manager of AIFE, an insurance
reciprocal located in Indiana for more than ___ years. Mr. Venditti is
also a shareholder of American Inter-Fidelity Corporation. Mr. Venditti
has served as a director of the Company since 1993.
There are no family relationships between any director or
executive officer of the Company.
Unless otherwise specified thereon, the enclosed proxy will be
voted in favor of the election of the nominees named herein, all of whom
are currently directors. Abstentions and non-votes by brokers and other
nominees have no effect on the election of directors.
The Board of Directors recommends that shareholders vote "FOR"
all of the nominees listed above.
Directors and Executive Officers
Board and Committee Meetings
In 2007, our full Board held ____ meetings. In addition to our
full Board meetings, our directors attended meetings of permanent
committees established by our Board. Each director participated in at
least 75% of the total number of meetings of our Board and the
committees on which he serves.
Independence Standards
The Board of Directors considers director independence based on
the meaning of the term "independent director" set forth in Rule
303A.02 of the listing standards for NYSE listed companies and on an
overall review of transactions and relationships, if any, between the
director and us.
In August 2008, the Board of Directors undertook its annual review
of director independence. During this review, the Board of Directors
considered transactions and relationships, if any, between each
director or any member of his or her immediate family and us. The
purpose of this review was to determine whether any such relationships
or transactions existed that were inconsistent with a determination
that the director is independent.
The Board of Directors has determined that Messrs. James and
Scissors are independent because there is no material relationship
that exists between them and the Company.
The independent directors of the Board of Directors meet in
executive session in connection with every scheduled meeting.
Audit Committee
The Audit Committee held ___ meetings during 2007. The
Audit Committee consists of Robert I. Scissors and Lex L. Venditti,
both of whom are non-employee directors. For a description of the
Audit Committee's responsibilities and findings, see "Audit Committee
Report." The Board of Directors has determined that Mr. Vendetti
is an "Audit Committee financial expert" as defined under the
United States Securities nd Exchange Commission ("SEC") rules.
Nominating Committee
The Board of Directors does not have a Nominating Committee.
However, the Company's Bylaws provide that only persons who are
nominated in accordance therewith are eligible for election as
directors. The Bylaws provision requires nomination be made by the
Board of Directors or by a shareholder who follows certain advance
notice procedures. In general, the notice procedures require that
the record shareholder (i) give actual written notice of his or her
intent to make such nomination to the Secretary of the Company no
later than 10 days and no earlier than 60 days before the date of
the meeting in order for elections to be held at the first annual
or special meeting of shareholders after such written notice is
given and (ii) deliver to the Company certain information about
shareholder's common stock holdings, any arrangements pursuant to
which such nomination is made, certain biographical and other
information regarding such nominee or nominees and the
certification by such nominee that he or she will serve as
director of the Company if elected. A copy of this provision of
the Bylaws is available upon request to the Secretary of the
Company. In addition, shareholders are urged to contact any
director in order to make recommendations with respect to
potential directors.
Compensation Committee
The Company does not have a compensation committee. The
current members of the Board of Directors (Harold Antonson, Brad James,
Michael Kibler, Robert Scissors and Lex Venditti) participated in
deliberation concerning the Company's executive officer compensation
and determined the amounts set forth in the "Annual Compensation Table"
below. The Chief Financial Officer, Harold Antonson, and Chief
Executive Officer, Michael Kibler, abstain from all votes relating to
their own compensation.
Compensation Committee Interlocks and Insider Participation
There are no compensation committee interlocks. Executive
compensation was determined by the Board of Directors which includes
Harold Antonson, Brad James, Michael Kibler, Robert Scissors and Lex
Venditti.
Shareholder Communication
Shareholders and other interested persons may communicate
with the full Board of Directors, a specified committee of the Board
of Directors or a specified individual member of the Board of
Directors in writing by mail at US 1 Industries, Inc., 336 W. US
HWY 30, Valparaiso, Indiana 46385, Attention: Corporate Secretary.
Provided that it does not relate to routine business of the
Company and does not contain offensive language, the Corporate
Secretary will forward all communications as requested.
Compensation of Directors and Executive Officers
Summary Compensation Table
The following Summary Compensation Table sets forth
compensation paid by the Company during the years ended December
31, 2007 and 2006 to Michael A. Kibler, the Company's Chief
Executive Officer, and Harold E. Antonson, the Company's Chief
Financial Officer. No other executive officer earned in excess
of $100,000.
Annual Compensation
Name and Position Year Salary ($) Stock Awards ($) All Other Total ($)
_________________________________________________________________________________________________________
Michael A. Kibler 2007 $126,593 0 0 $126,593
President and 2006 $ 93,841 0 0 $ 93,841
Chief Executive Officer
Harold E. Antonson 2007 $122,460 0 0 $122,460
Chief Financial Officer 2006 $ 98,071 0 0 $ 98,071
Option Exercises and Option Values
No stock options were issued to, or exercised by,
Mr. Kibler, or Mr. Antonson, during the years ended December
31, 2007 or 2006, and they held no such options as of
December 31, 2007.
Pension, Retirement and Savings Plans
The Company does not maintain any employee pension,
retirement or savings plans and is not a party to any
executive employment agreements.
Compensation of Directors
Directors who are also employees of the Company
receive no additional compensation for their services as
directors. In 2007 and 2006, the Company paid consulting
fees of $33,000 and $19,000, respectively, to Robert Scissors
relating to insurance services. The Company reimburses its
directors for travel expenses and other out-of-pocket costs
incurred in connection with the Company's Board of Directors'
meetings. Because the Company has held its Board of
Directors' meetings via teleconference during the past
year, no costs were incurred associated with these meetings.
Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Management
The following table sets forth the number and percentage
of shares of common stock that as of August ___, 2008 are
deemed to be beneficially owned (i) by each director of the
Company and director nominee, (ii) by each executive officer
of the Company and (iii) by all directors and executive
officers of the Company as a group
Number of Shares of
Common Stock
Name and Position Beneficially Owned Percentage of Class
____________________________________________________________________________________________________
Harold E. Antonson
Chief Financial Officer,
Treasurer and Director 5,129,374(1) 36.0%
Michael E. Kibler
President, Chief Executive Officer and Director 5,009,263(1) 35.2%
Brad A. James
Director 166,981(2) 1.2%
Robert I. Scissors
Director 64,770(3) *
Lex L. Venditti
Director 217,500(4) 1.5%
All Directors and Executive Officers 7,998,962 56.2%
(5 persons)
___________________________________
*Indicates less than 1% ownership.
(1) Includes shares held by August Investment Partnership, August
Investment Corporation, Eastern Refrigerated Transport, Inc., Enterprise
Truck Lines, Inc., Seagate Transportation Services, Inc. and American
Inter-Fidelity Exchange, of which Messrs. Kibler and Antonson are either
directors, partners or significant shareholders or otherwise share the
voting and dispositive authority with respect to these shares.
(2) Includes shares held by Seagate Transportation Services, Inc., of
which Mr. James is a director, partner or significant shareholder.
(3) Includes 11,770 shares held in the Saundra L. Scissors Trust of
which Mr. and Mrs. Scissors are joint trustees.
(4) Includes shares held by American Inter-Fidelity Exchange, of which
Mr. Venditti is a director and significant shareholder of the
attorney-in-fact.
Security Ownership of Certain Beneficial Owners
The following table sets forth the number and percentage of shares of
common stock beneficially owned as of August __, 2008 by any person who is
known to the Company to be the beneficial owner of more than five percent of
the outstanding shares of common stock:
Name and Address of Common Stock
Beneficial Owner Beneficially Owned Percentage of Class
___________________________________________________________________________________________
Harold E. Antonson 5,129,374(1) 36.0
August Investment Partnership 1,150,946 8.1%
Michael E. Kibler 5,009,263(1) 35.2%
____________________________
(1) Includes shares held by August Investment Partnership, August Investment Corporation,
Eastern Refrigerated Transport, Inc., Enterprise Truck Lines, Inc., Seagate Transportation
Services, Inc. and American Inter-Fidelity Exchange, of which Messrs. Kibler and Antonson
are either directors, partners or significant shareholders or otherwise share the voting and
dispositive authority with respect to these shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act, directors and
executive officers of the Company and beneficial owners of more than 10 percent
of the outstanding common stock are required to file reports with the
Securities and Exchange Commission on Forms 3, 4 and 5 regarding their
beneficial ownership of securities of the Company and any changes in such
ownership. Based on our review of reports filed with the Securities and
Exchange Commission by our directors and executive officers and by beneficial
owners of 10% or more of our shares, and based on written representations
received from these same persons, we believe that all reports required under
Section 16(a) of the Securities and Exchange Act were filed in a timely manner
with the following exception: Mr. Antonson made two late filings reporting
nine transactions.
Compensation Committee Report
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the 1934
Securities Exchange Act, as amended, except to the extent that we specifically
incorporate it by reference in such filing.
Overview
The Company does not have a formalized compensation plan for determining
executive compensation. Any executive compensation changes are taken before
the Board of Directors for approval. In general, our executive officers
receive compensation consisting of a salary and on occasion, there have been
stock bonuses issued. Executive officers participate in the same group health
insurance program as the Company full-time employees. The Company has not
used, nor intends to use, an outside consultant in connection with making
compensation decisions.
Executive Compensation Objectives
The Company's compensation of executive officers is intended to provide
requisite compensation to the Chief Executive Officer and the Chief Financial
Officer. Because the Chief Executive Officer and Chief Financial Officer are
large shareholders of the Company, they should be motivated to act in the best
interest of the Company's shareholders.
Annual and Long-Term Incentives
Due to the financial circumstances of the Company, limited annual or
long-term incentives are offered. The Board of Directors has, on occasion,
granted shares of restricted stock to its executives. The Company granted
restricted stock to Messrs. Kibler and Antonson in the amount of $100,000
each in the year ended December 31, 2005.
Chief Executive Officer Compensation
Michael E. Kibler, President and Chief Executive Officer of the
Company, receives an annual salary in the amount of $126,593. Harold E.
Antonson, Chief Financial Officer of the Company, receives an annual
salary in the amount of $122, 460. No stock options, performance bonus
or other performance based incentive compensation are generally offered,
although we will consider grants of restricted stock as incentive
compensation from time to time to supplement Mr. Kibler's and
Mr. Antonson's base salary. No incentive compensation was paid in 2007.
Tax Treatment of Executive Compensation
Given the magnitude of the compensation paid by the Company,
tax treatment generally is not, and is not expected to be, a
significant issue.
Audit Committee Report
The information contained in this report shall not be deemed to
be "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor shall such information be incorporated by
reference into any future filing under the Securities Act of 1933, as
amended, or the 1934 Securities Exchange Act, as amended, except to
the extent that we specifically incorporate it by reference in such
filing.
The Audit Committee of the Board of Directors is responsible for
evaluating audit performance, recommending engagement of and managing
relations with our independent accountants and evaluating policies and
procedures relating to internal accounting functions and controls. The
Audit Committee is currently comprised of Mr. Venditti and Mr. Scissors,
each a non-employee director, and operates under a written charter adopted
by the Board of Directors. A copy of the Audit Committee Charter is attached
as Appendix A. Although Mr. Scissors receives fees for consulting services
provided to the Company, our Board of Directors has determined that Mr.
Scissors is considered an independent director because the payment of fees
does not disqualify Mr. Scissors from qualifying as an independent director
under Rule 303A.02 of the NYSE listing standards. Mr. Venditti is also
independent, as defined under Rule 303A.02 of the NYSE listing standards
because his position as general manager of AIFE and as a shareholder of
American Inter-Fidelity Corporation, do not disqualify him as being
"independent" under the listing standards. The Board of Directors has
determined that, in its business judgment that the relationships in question
do not interfere with the directors' exercise of independent judgment.
The Audit Committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or to certify
the activities of management and the independent auditor, nor can the Audit
Committee certify that the independent auditor is "independent" under
applicable rules. The Audit Committee serves a board-level oversight role in
which it provides advice, counsel and direction to management and the auditors
on the basis of the information it receives, discussions with management and
the auditors and the experience of the Audit Committee's members in business,
financial and accounting matters. Our management has the primary
responsibility for the financial statements and reporting process, including
our systems of internal controls. In fulfilling its oversight
responsibilities, the Audit Committee reviewed with management the audited
financial statements included in the Annual Report on Form 10-K for the
fiscal year ended December 31, 2007. This review included a discussion of
the quality and the acceptability of our financial reporting and controls,
including the clarity of disclosure in the financial statements.
The Audit Committee has discussed with BDO Seidman, LLP, the Company's
independent accountants for the year ended December 31, 2007 the matters
required to be discussed by SAS 61 (Codification of Statements on Accounting
Standards) which include, among other items, matters related to the conduct of
the audit of the Company's financial statements. The Audit Committee has also
received written disclosures and the letter from BDO Seidman, LLP required by
Independence Standards Board Standard No. 1 (which relates to the accountant's
independence from the Company and its related entities) and has discussed with
BDO Seidman, LLP their independence from the Company.
During fiscal year 2007 the Company paid BDO Seidman, LLP fees in the
amount of $175,000 to audit and review its financial statements. No other
fees were paid to BDO Seidman, LLP for non-auditing or other services.
Based on the review and discussion referred to above, the Audit
Committee recommended to the Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2007 and be filed with the
United States Securities and Exchange Commission.
This report is submitted by Messrs. Venditti and Scissors, being all of
the members of the Audit Committee.
Lex Venditti
Robert I. Scissors
Certain Relationships and Related Transactions
One of the Company's subsidiaries provides safety, management and
accounting services to companies controlled by the Chief Executive Officer
and Chief Financial Officer of the Company. These services are priced to
cover the cost of the employees providing the services. Revenues related to
those services were approximately $67,000, $67,000 and $66,000 in 2007, 2006
and 2005, respectively. Accounts receivable due from entities affiliated
through common ownership were $357,000 and $691,000 as of December 31, 2007
and 2006 respectively.
One of the insurance providers to the Company's subsidiaries, AIFE,
is managed by Lex Venditti, a director of the Company. The Company has an
investment of $126,461 in AIFE. AIFE provides auto liability insurance to
several subsidiaries of the Company as well as other entities related to the
Company by common ownership. For the years ended December 31, 2007, 2006 and
2005, cash paid to AIFE by the Company's subsidiaries for insurance premiums
and deductibles was approximately $6,064,000, $5,366,000 and $4,787,000,
respectively.
The Company's subsidiaries exercised no control over the operations
of AIFE. As a result, the Company recorded its investment in AIFE under the
cost method of accounting for each of the three years in the period ended
December 31, 2007. Under the cost method, the investment in AIFE is
reflected at its original amount and income is recognized only to the extent
of dividends paid by the investee. There were no dividends declared by AIFE
for the years ended December 31, 2007, 2006 and 2005.
If AIFE incurs a net loss, the loss may be allocated to the various
policyholders based on each policyholder's premium as a percentage of the
total premiums of AIFE for the related period. There has been no such loss
assessment for each of the three years in the period ended December 31, 2007.
The Company's subsidiaries currently account for the majority of the premiums
of AIFE.
For the years ended December 31, 2007 and 2006, a subsidiary insurance
agency of the Company has recorded commission income of $353,000 and $400,000
related to premiums with AIFE.
In addition, the Chief Executive Officer and Chief Financial Officer, as
well as Lex Venditti, a director of the Company, are the sole shareholders of
American Inter-Fidelity Corporation (AIFC), which serves as the attorney in
fact of AIFE. AIFC is entitled to receive a management fee from AIFE. AIFE
incurred management fees of approximately $529,000, $579,000 and $300,000, for
the years ended December 31, 2007, 2006 and 2005, respectively.
The Company is considering consolidating AIFE for financial reporting
purposes because, as described above, a major part of the business activities of
AIFE come from subsidiaries of the Company and both the Company and AIFC share
common ownership. For the fiscal year 2006, the Company, through its
subsidiaries, accounted for approximately 71% of the total premium revenue of
AIFE. The Company is not certain what, if any, impact this consolidation would
have with respect to the market value of the Company, but as of December 31,
2007 AIFE had net worth of approximately $11.3 million. In addition, the
Company has in the past considered, and in the future is likely to again
consider, ways to combine the Company and AIFE.
In 2007 the Company paid $33,000 in consulting fees to Robert I.
Scissors,one of its directors relating to insurance services. In 2006, the
Company paid $19,000 in consulting fees.
The Company had notes payable due to its Chief Executive Officer and
Chief Financial Officer aggregating _____that were converted into 2,668,918
shares of common stock of the Company in September 2007.
The Company's Board of Directors are advised of all related party
transactions and reviews these transactions as deemed appropriate.
PROPOSAL TWO
TO AUTHORIZE OUR BOARD
OF DIRECTORS TO EFFECTUATE
BETWEEN A ONE-FOR-__ AND ONE-FOR-__ REVERSE STOCK SPLIT
FOLLOWED BY A FORWARD STOCK SPLIT
BETWEEN ___-FOR-ONE AND __-FOR-ONE
General
As of August ____, 2008, 14,838,657 shares of our common stock were
outstanding and the per share closing price of our common stock on that date
was $_____. A large number of our shareholders hold small shareholdings. As
of December 31, 2007, approximately _____ registered holders held fewer than
_____ shares of our common stock, and a number of other shareholders held other
than round multiples of 100 shares. Holders of a small number of shares are
expensive for the Company, on a relative basis, to communicate with. In order
to reduce the number of holders of small numbers of shares, and to increase the
trading price for the Company's shares, the Board of Directors has unanimously
adopted a resolution seeking shareholder approval to grant the Board of
Directors authority to amend and restate our Articles of Incorporation to
effect between a one-for-__ and one-for-__ Reverse Stock Split followed by a
Forward Stock Split between ____-for-one and __-for-one of our common stock.
Approval of this Reverse/Forward Stock Split proposal would give the Board of
Directors authority to implement the Reverse/Forward Stock Split at any time it
determines prior to December 31, 2008. Each shareholder who owns fewer than
_____ shares of common stock ("the Minimum Number") at the effective time of
the Reverse Stock Split (also referred to as a "Cashed-Out Shareholder") will
receive a cash payment instead of a fractional share, as permitted under
Indiana law, of $____ per share. This cash payment will be paid as described
under "Effect of the Proposed Transaction on Company Shareholders" below.
Immediately following the Reverse Stock Split, all holders of shares of common
stock who are not Cashed-Out Shareholders will receive between ____ and ____
shares of common stock for every one share of common stock they held following
the Reverse Stock Split. The Board has expressly conditioned the consummation
of the Forward Stock Split on the shareholders' approval of the Reverse Stock
Split. In addition, approval of this proposal would also give the Board of
Directors authority to decline to implement a Reverse/Forward Stock Split
prior to such date or at all. If our shareholders approve the Reverse/Forward
Stock Split proposal and the Board of Directors decides to implement the
Reverse/Forward Stock Split, we will file Articles of Amendment to the
Articles of Incorporation (the "Articles of Amendment") with the Secretary
of State of the State of Indiana. Because the shareholders owning over 50%
have informed the Company that they intend to vote their shares in favor
of adopting the Articles of Amendment to effect the Reverse/Forward Stock Split,
the Reverse/Forward Stock Split will be approved.
If the shareholders approve the Reverse/Forward Stock Split, the Reverse/
Forward Stock Split would be consummated upon the filing the Articles of
Amendment with the Secretary of State of the State of Indiana (the "Effective
Date") on a date after the Annual Meeting as determined by the Board of
Directors. The forms of proposed Articles of Amendment necessary to effect the
Reverse/Forward Stock Split are attached to this Proxy Statement as Appendix B.
The Reverse Stock Split is expected to occur at 5:00 P.M. (local time) on the
Effective Date. Following the necessary adjustments to the Company's transfer
books giving effect to the Reverse Stock Split, the Forward Stock Split will
occur. We anticipate several days to several weeks could elapse between the
Effective Date of the Reverse Stock Spit and the Effective Date of the Forward
Stock Split.
Purpose and Structure of Transaction
Over the past few years, the market price of our common stock has
remained relatively flat within a narrow range. In order to reduce the number
of shares of our common stock outstanding and thereby attempt to proportionally
raise the per share price of our common stock, the Board of Directors
determined that a Reverse Stock Split followed by a Forward Stock Split was
desirable in order to: (i) encourage greater investor interest in our common
stock by making the stock price more attractive to many investors, particularly
institutional investors, who refrain from investing in lower-priced stocks;
(ii) reduce trading fees and commissions incurred by shareholders, since these
costs are based to a significant extent on the number of shares traded; and
(iii) create greater liquidity in the Company so as to qualify for a listing
on a national exchange. The Board of Directors believes that the Reverse/
Forward Stock Split may help encourage greater interest in our common stock.
The Board of Directors also believes that the current market price of our
common stock may impair its acceptability to institutional investors,
professional investors and other members of the investing public. Many
institutional and other investors look upon stock trading at low prices as
unduly speculative in nature and, as a matter of policy, avoid investing in
such stocks. Various brokerage house policies and practices also tend to
discourage individual brokers from dealing in low-priced stocks. Moreover,
the analysts at many brokerage firms do not monitor the trading activity or
otherwise provide research coverage of lower- priced stocks.
Finally, the Board of Directors believes eliminating those
shareholders who hold less than the Minimum Number of shares of the
Company's stock will be beneficial because it has become too expensive
to communicate with small shareholders and the Reverse/Forward Stock Split
will cut down on those administrative costs.
If effected, the Reverse/Forward Stock Split would reduce the number of
outstanding shares of our common stock and should increase the trading price of
our common stock. Any shareholder who holds fewer than the Minimum Number of
shares of common stock in his or her account at the time of the Reverse Stock
Split (also referred to as a "Cashed-Out Shareholder") will receive a cash
payment instead of fractional shares. All shareholders holding fractional
shares and whole shares immediately following the Reverse Stock Split will
receive their whole shares and will also receive a right to receive a cash
payment for their fractional shares. No shareholder will receive fractional
shares. This amount of the cash payment will be determined and paid as
described below under "Determination of Cash-Out Price" and "Stock
Certificates." Following the Reverse Stock Split, the shares of all
shareholders who are not Cashed-Out Shareholders will be Forward Stock Split
between a ___-for-one and ___-for-one basis. The Proposed Transaction will
provide shareholders with fewer than the Minimum Number of shares of common
stock with a cost-effective way to cash out their investment in the Company,
because these shareholders will not incur transaction costs, such as
brokerage or service fees, in connection with the Proposed Transaction.
Otherwise, shareholders with small holdings would likely incur brokerage
fees which are disproportionately high relative to the market value of
their shares if they wanted to sell their stock in the market. The
Proposed Transaction will eliminate this problems for most shareholders
with small holdings.
We intend for the Proposed Transaction to treat shareholders holding
common stock in street name through a nominee (such as a bank or broker) in
the same manner as shareholders whose shares are registered in their names,
and nominees will be instructed to effect the Proposed Transaction for their
beneficial holders. Accordingly, we also refer to those street name holders
who will hold only fractional shares immediately following the Reverse Stock
Split and will, therefore,receive the right to receive a cash payment instead
of fractional shares as Cashed-Out Shareholders. However, nominees may have
different procedures, and shareholders holding shares in street name should
contact their nominees.
The Board of Directors believes that raising the trading price of our
common stock will increase the attractiveness of our common stock to the
investment community and possibly promote greater liquidity for our existing
shareholders. Because broker commissions on lower-priced stocks generally
represent a higher percentage of the stock price than commissions on higher-
priced stocks, the current share price of our common stock, in the absence
of the Reverse/Forward Stock Split, may continue to result in individual
shareholders paying transaction costs (commissions, markups or markdowns)
which are a higher percentage of their total share value than would be the
case if the share price was substantially higher. For this reason, individual
and institutional investors may be unwilling to purchase our common stock at
its current market price.
The Board of Directors recommends that shareholders approve the
Proposed Transaction and the Reverse/Forward Stock Split will be effected by
the Board of Directors if the shareholders approve the proposal. No further
action on the part of shareholders will be required to either implement or
abandon the Reverse/Forward Stock Split. If the Board of Directors does not
implement a Reverse/Forward Stock Split prior to December 31, 2008, the
authority granted in this proposal to implement a Reverse/Forward Stock Split
on these terms will terminate. The Board of Directors reserves its right to
elect not to proceed with the proposal; if it determines, in its sole
discretion, that the split is no longer in the best interest of the Company
or our shareholders.
Risks Associated With This Transaction
There can be no assurance that the total market capitalization of our
common stock after the proposed Reverse/Forward Stock Split will be equal to
or greater than the total market capitalization before the proposed Reverse/
Forward Stock Split or that the per share market price of our common stock
following the Reverse/Forward Stock Split will either exceed or remain higher
than the current per share market price. For example, based on the closing
market price of our common stock on August ___, 2008 of $____ per share, if
the Board of Directors decided to implement a net one-for-__ Reverse/Forward
Stock Split, there can be no assurance that the post-split market price of
our common stock would be $____ per share or greater. Accordingly, the total
market capitalization of our common stock after the proposed Reverse/Forward
Stock Split may be lower than the total market capitalization before the
proposed Reverse/Forward Stock Split and, in the future, the market price of
our common stock following the Reverse/Forward Stock Split may not exceed or
remain higher than the market price prior to the proposed Reverse/Forward
Stock Split. In many cases, the total market capitalization of a company
following a Reverse/Forward Stock Split is lower than the total market
capitalization before the Reverse/Forward Stock Split.
There can be no assurance that the Reverse/Forward Stock Split will
result in a per share price that will attract institutional investors and
brokers. While the Board of Directors believes that a higher stock price
may help generate investor interest, there can be no assurance that the
Reverse/Forward Stock Split will result in a per share price that will
attract institutional investors and brokers. A decline in the market price
for our common stock after the Reverse/Forward Stock Split may result in a
greater percentage decline than would occur in the absence of a Reverse/
Forward Stock Split, and the liquidity of our common stock could be adversely
affected following a Reverse/Forward Stock Split. The market price of our
common stock will also be based on other factors, some of which are unrelated
to the number of shares outstanding. If the Reverse/Forward Stock Split is
effected and the market price of our common stock declines, the percentage
decline as an absolute number and as a percentage of our overall market
capitalization may be greater than would occur in the absence of a Reverse/
Forward Stock Split. In many cases, both the total market capitalization
of a company and the market price of a share of such company's common stock
following a Reverse/Forward Stock Split are lower than they were before the
Reverse/Forward Stock Split. Furthermore, the liquidity of our common stock
could be adversely affected by the reduced number of shares that would be
outstanding after the Reverse/Forward Stock Split.
Hypothetical Scenarios
In general, the Proposed Transaction can be illustrated by the
following examples. These examples effect a Reverse Stock Split of one-
for-___ followed by a Forward Stock Split of ___-for-one.
Hypothetical Scenario Result
_____________________________________________________ _____________________________________
Mr. Brown is a registered shareholder Instead of receiving a fractional share of common stock
who holds 21 shares of common stock in his account immediately after the Reverse Stock Split, Mr. Brown's shares will be
prior to the Proposed Transaction. converted into the right to receive cash. If the procedure described
below under "Determination of Cash-Out Price" resulted in a per share
price of $1.50 per share, Mr. Brown would receive $31.50
($1.50 per share x 21 shares).
Note: If Mr. Brown wants to continue his investment in the Company,
he can, prior to the Effective Date, buy at least _____ more shares and
hold them in his account. Mr. Brown would have to act far enough in
advance of the Proposed Transaction so that the purchase is completed and
the additional shares are credited in his account by the close of business
(local time) on the Effective Date of the Reverse Stock Split.
Ms. Green has two separate accounts. Immediately As described above, Ms. Green will receive a right to receive a cash payment
prior to the Effective Date of the Reverse Stock Split, equal to the cash-out price of her common stock held of record in her own
she holds 37 shares of common stock held of record in name and in street name in her brokerage account instead of receiving
her own name and 85 shares of common stock in street fractional shares. Assuming a cash-out price of $1.50 per share, Ms. Green
name in a brokerage account. would receive $183.00 (37 shares x $1.50 per share = $55.50; 85 shares x $1.50
per share = $127.50; $55.50 + $127.50 = $183).
Note: If Ms. Green wants to continue her investment in the Company, she can
consolidate or transfer her two accounts prior to the Effective Date into an
account with at least the Minimum Number of shares of common stock.
Alternatively, she can buy at least ____ more shares in her own name and ____
more shares in her brokerage account and hold them. She would have to act
far enough in advance of the Proposed Transaction so that the consolidation or
the purchase is completed by the close of business (local time) on the
Effective Date of the Reverse Stock Split.
Mr. Red holds 43 shares in of common stock in the record Even though in total Mr. Red is the beneficial owner of more than the
name of "John Red" and 66 shares of common stock in the Minimum Number of shares of common stock, because those shares are held of
record name of "John J. Red" record in two distinct names, Mr. Red will receive a right to a cash payment
equal to the cash-out price of the common stock instead of receiving fractional
Assuming a cash-out price of $1.50 per share, Mr. Red would receive a total of
shares $_____ (43shares x $1.50 per share = $64.50; 66 shares x $1.50 per
share = $99.00; $64.50 + $99.00 = $163.50).
Note: If Mr. Red wants to continue his investment in the Company, he can
consolidate or transfer his certificates into one record name prior to the
Effective Date with at least the Minimum Number of shares of common stock.
Alternatively, he can buy at least____ more shares in the record name of
"John Red" and ____ more shares in the record name of "John J. Red" and
hold them. He would have to act far enough in advance of the Proposed
Transaction so that the consolidation or the purchase is completed by the
close of business (local time) on the Effective Date of the Reverse
Stock Split.
Ms. Blue holds 2,000 shares of common stock as of After the Proposed Transaction, Ms. Blue will own ____ shares of common stock.
the Effective Date.
Mr. Orange holds 1500 shares of common stock in a The Company intends for the Proposed Transaction to treat shareholders holding
brokerage account as of the Effective Date. common stock in street name through a nominee (such as a bank or broker) in the
same manner as shareholders whose shares are registered in their names. Nominees
will be instructed to effect the Proposed Transaction for their beneficial holders.
However, nominees may have different procedures and shareholders holding common
stock in street name should contact their nominees.
Effect of the Proposed Transaction on Company Shareholders
Registered Shareholders with Fewer than the Minimum Number of Shares of Common
Stock
If we complete the Proposed Transaction and you are a Cashed-Out
Shareholder (i.e., a shareholder holding fewer than the Minimum Number of
shares of common stock immediately prior to the Reverse Stock Split):
* You will not receive fractional shares of stock as a result
of the Reverse Stock Split in respect of your shares being
cashed out.
* Instead of receiving fractional shares, you will receive the
right to receive a cash payment in respect of your affected
shares. See "Determination of Cash-Out Price" and "Stock
Certificates."
* After the Reverse Stock Split, you will have no further
interest in the Company with respect to your cashed-out
shares. These shares will no longer entitle you to the right
to vote as a shareholder or share in the Company's assets,
earnings, profits or in any dividends paid after the Reverse
Stock Split. In other words, you will no longer hold your
cashed-out shares, you will have only the right to receive
cash for these shares. In addition, you will not be entitled
to receive interest with respect to the period of time between
the Effective Date and the date you receive your payment for
the cashed-out shares.
* You will not have to pay any service charges or brokerage
commissions in connection with the Proposed Transaction.
* As soon as practicable after the time we effect the Reverse Stock
Split, you will receive a payment for the cashed-out shares you
held immediately prior to the Reverse Stock Split in accordance
with the procedures described below.
* If you are a Cashed-Out Shareholder with a stock certificate
representing your cashed-out shares, you will receive a transmittal
letter as soon as practicable after the Effective Date of the Reverse
Stock Split. The letter of transmittal will contain instructions on
how to surrender your certificate or certificates to our transfer
agent, Continental Stock Transfer & Trust Company, for your cash
payment. YOU WILL NOT RECEIVE YOUR CASH PAYMENT UNTIL YOU SURRENDER
YOUR OUTSTANDING CERTIFICATE OR CERTIFICATES TO CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, TOGETHER WITH A COMPLETED AND EXECUTED COPY
OF THE LETTER OF TRANSMITTAL. Please do not send your certificates
until you receive your letter of transmittal. For further information,
see "Stock Certificates" below.
* All amounts owed to you will be subject to applicable federal income
tax and state abandoned property laws.
* You will not receive any interest on cash payments owed to you as a
result of the Proposed Transaction.
Registered Shareholders with the Minimum Number of More Shares of Common Stock
If you are a registered shareholder with the Minimum Number or more, of
shares of common stock as of 5:00 P.M., local time, on the Effective Date of
the Reverse Stock Split, we will first reclassify your shares into a smaller
number of shares than you held immediately prior to the Reverse Stock Split and
you will continue to be a shareholder of the Company, will not receive a cash
payment and your equity positions in the Company will increase. If as a result
of the Reverse Stock Split, you become the holder of whole shares and
fractional shares:
* You will not receive the fractional shares of stock as a result of the
Reverse Stock Split.
* Instead of receiving fractional shares, you will receive a right to
receive a cash payment in respect of your fractional shares. See
"Determination of Cash-Out Price" and "Stock Certificates."
* After your fractional shares are cashed-out, you will have no further
interest in said fractional shares. The fractional shares will no
longer entitle you to the right to vote as a shareholder or share in
the Company's assets, earnings, profits or in any dividends paid after
the Reverse Stock Split. In other words, you will no longer hold your
cashed-out shares, you will have only the right to receive cash for
these shares. In addition, you will not be entitled to receive interest
with respect to the period of time between the Effective Date and the
date you receive your payment for the cashed-out shares. You will,
however, still maintain all your rights as a shareholder with respect to
the whole shares of the Company you own.
* You will not have to pay any service charges or brokerage commissions in
connection with the Proposed Transaction.
* As soon as practicable after the time we effect the Reverse Stock Split,
you will receive a payment for the fractional shares you hold immediately
following the Reverse Stock Split in accordance with the procedures
described below.
* If as a result of the Reverse Stock Split you become the holder of
fractional shares, you will receive a transmittal letter as soon as
practicable after the Effective Date of the Reverse Stock Split. The
letter of transmittal will contain instructions on how to surrender your
certificate or certificates to our transfer agent, Continental Stock
Transfer & Trust Company, for your cash payment. YOU WILL NOT RECEIVE
YOUR CASH PAYMENT UNTIL YOU SURRENDER YOUR OUTSTANDING CERTIFICATE OR
CERTIFICATES TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY, TOGETHER
WITH A COMPLETED AND EXECUTED COPY OF THE LETTER OF TRANSMITTAL.
Please do not send your certificates until you receive your letter of
transmittal. For further information, see "Stock Certificates" below.
* All amounts owed to you will be subject to applicable federal income tax
and state abandoned property laws.
* You will not receive any interest on cash payments owed to you as a
results of the Proposed Transaction.
Following completion of the adjustments to the Company's transfer
books to reflect the effects of the Reverse Stock Split, we will
reclassify your shares in the Forward Stock Split into ____ times the number of
shares you held after the Reverse Stock Split, which will result in you holding
approximately _______ (_____ th ) of the number of shares you held prior to the
Reverse Stock Split. To illustrate, if you held _______shares of common stock
immediately prior to the Reverse Stock Split, your shares would be converted
into _____ shares in the Reverse Stock Split and then converted to _____ shares
in the Forward Stock Split.
Street Name Holders of Common Stock
We intend for the Proposed Transaction to treat shareholders holding
common stock in street name through a nominee (such as a bank or broker) in the
same manner as shareholders whose shares are registered in their names.
Nominees will be instructed to effect the Proposed Transaction for their
beneficial holders. However, nominees may have different procedures and
shareholders holding common stock in street name should contact their
nominees.
Principal Effects of Reverse/Forward Stock Split
Odd Lots
If approved and effected, the Reverse Stock Split will result in
some shareholders owning "odd lots" of less than 100 shares of our common
stock. Brokerage commissions and other costs of transactions in odd lots are
generally somewhat higher than the costs of transactions in "round lots" of
even multiples of 100 shares.
Authorized Shares
Upon the effectiveness of the Reverse Stock Split, the number of
authorized shares of common stock that are not issued or outstanding would
increase due to the reduction in the number of shares of our common stock
issued and outstanding. As of August ___, 2008, we had 20,000,000 authorized
shares of common stock. As of August ___, 2008, there were [14,838,657] shares
of common stock issued and outstanding. Authorized but unissued shares will be
available for issuance, and we may issue such shares in financings or
otherwise. If we issue additional shares, the ownership interest of holders of
our common stock may also be diluted. Also, the issued shares may have rights,
preferences or privileges senior to those of our common stock.
Accounting Consequences
The fractional shares resulting from the Reverse Stock Split will be
retired and returned to the authorized common stock of the Company available
for future issuance. The per-share common stock net income or loss and net
book value will be increased because there will be fewer shares of our common
stock outstanding. Any fractional shares that are redeemed by the Cashed-Out
Shareholders will result in a decrease in paid in capital and cash. We do
not anticipate that any other accounting consequences would arise as a result
of the Proposed Transaction.
Appraisal/Dissenter Rights
Shareholders do not have appraisal rights under Indiana state law or
under the Company's Articles of Incorporation or Bylaws in connection with
the Proposed Transaction. Under Indiana Business Corporation Law, our
shareholders are not entitled to dissenters' rights with respect to the
Reverse Stock Split, and the Company will not independently provide
shareholders with any such right.
Determination of Cash-Out Price
In order to provide a cost effective method for shareholders
holding fewer than the Minimum Number of shares of our common stock to
receive value for their shares which they might not otherwise realize, and
to avoid the expense and inconvenience of issuing fractional shares to
shareholders who will hold less than one share of our common stock after the
Reverse Stock Split, the Company will pay in money the value of each
fractional share. Section 21-1-25-4 of the Indiana Business Corporation
Law provides that a corporation may, "issue fractions of a share or pay
in money the value of fractions of a share" (emphasis added). If
shareholders approve the Proposed Transaction at the Annual Meeting
and the Proposed Transaction is completed, the Company will pay cash for
the fair market value of the fractional shares resulting from the Reverse
Stock Split. The fair market value of a stock that is publicly traded
is typically considered to be the price at which the stock may be
purchased in the open market and the Board of Directors has determined
that using the fair market value will result in a fair cash-out price to
our shareholders. In determining the cash-out price, the Board of
Directors will look at the average closing price 10 trading days prior to
the date on this proxy statement.
Effect of the Proposed Transaction on the Company
The Proposed Transaction will not affect the public registration
of our common stock with the SEC under the Securities Exchange Act of
1934, as amended.
The number of authorized shares of Company common stock will
not change as a result of the Reverse and Forward Stock Splits. On
August ___, 2008 there were [14,838,657] shares of common stock
issued and outstanding. As a result of the Reverse and Forward
Stock Splits and the cashing-out of fractional shares as discussed
herein, the total number of shares that will be cashed-out and the
total cash to be paid by us is unknown at this point in time. We
do not know how many street name shareholders will be cashed-out or
how that might affect the amount we will pay to Cashed-Out
Shareholders. The actual amounts will depend on the number of
Cashed-Out Shareholders on the Effective Date of the Reverse Stock
Split, which may vary from the number of such shareholders on
August ___, 2007.
Stock Certificates
All certificates will be affected by the Proposed
Transaction. If you hold at least the Minimum Number of
shares immediately preceding the Proposed Transaction, your
certificate or certificates will be adjusted in accordance
with the Proposed Transaction. You will not be required to
tender your stock certificate or certificates as a result of the
Proposed Transaction. Your current certificate or certificates
will continue to evidence ownership of common stock in the
Company on an adjusted basis.
Any Cashed-Out Shareholder with a share certificate or
certificates will receive a letter of transmittal after the
Reverse Stock Split is completed. The letter of transmittal
will contain instructions on how to surrender your certificate
or certificates to our transfer agent, Continental Stock Transfer
& Trust Company, for your cash payment. YOU WILL NOT RECEIVE
YOUR CASH PAYMENT UNTIL YOU SURRENDER YOUR OUTSTANDING STOCK
CERTIFICATE OR CERTIFICATES TO CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, TOGETHER WITH A COMPLETED AND EXECUTED COPY OF
THE LETTER OF TRANSMITTAL. Please do not send your
certificates until you receive your letter of transmittal.
Certain Federal Income Tax Consequences
We have summarized below certain federal income tax
consequences to you resulting from the Proposed Transaction.
This summary is based on U.S. federal income tax law existing
as of the date of this Proxy Statement, and such tax laws may
change, even retroactively. This summary does not discuss
all aspects of federal income taxation which may be important
to you in light of your individual circumstances. Many
shareholders (such as financial institutions, insurance
companies, broker-dealers, tax-exempt organizations and foreign
persons) may be subject to special tax rules. Other shareholders
may also be subject to special tax rules, including, but not limited
to, shareholders who received common stock as compensation for
services or pursuant to the exercise of an employee stock option,
or shareholders who have held, or will hold, stock as part of a
straddle, hedging or conversion transaction for federal income tax
purposes. In addition, this summary does not discuss any state,
local, foreign or other tax considerations. This summary assumes
that you have held, and will hold, your shares as capital assets
under the Code. You should consult your tax advisor as to the
particular federal, state, local, foreign and other tax consequences,
in light of your specific circumstances.
Federal Income Tax Consequences to Shareholders who are not
Cashed Out by the Proposed Transaction
If you (i) continue to hold common stock immediately after
the Proposed Transaction, and (ii) receive no cash as a result of the
Proposed Transaction, you will not recognize any gain or loss in the
Proposed Transaction and you will have the same adjusted tax basis and
holding period in your common stock as you had in such stock
immediately prior to the Proposed Transaction.
Federal Income Tax Consequences to Cashed-Out Shareholders
If you receive cash as a result of the Proposed Transaction,
your tax consequences will depend on whether, in addition to receiving
cash, you or a person or entity related to you continues to hold
common stock immediately after the Proposed Transaction, as explained
below.
Shareholders Whose Shares are Completely Cashed-Out as a
Result of the Proposed Transaction
If you (i) receive cash in exchange for a fractional share as a result
of the Proposed Transaction, (ii) do not continue to hold any common stock
immediately after the Proposed Transaction and (iii) are not related to any
person or entity which holds common stock immediately after the Proposed
Transaction, you will recognize capital gain or loss. The amount of capital
gain or loss you recognize will equal the difference between the cash you
receive for your cashed-out stock and your aggregate adjusted tax basis in
such stock.
If you are related to a person or entity who continues to hold common
stock immediately after the Proposed Transaction, you will recognize gain in
the same manner as set forth in the previous paragraph, provided that your
receipt of cash either (i) is "not essentially equivalent to a dividend" or
(ii) is a "substantially disproportionate redemption of stock," as described
below.
* "Not Essentially Equivalent to a Dividend." You will satisfy
the "not essentially equivalent to a dividend" test if the
reduction in your proportionate interest in the Company
resulting from the Proposed Transaction is considered a
"meaningful reduction" given your particular facts and
circumstances. The Internal Revenue Service has ruled that a
small reduction by a minority shareholder whose relative stock
interest is minimal and who exercises no control over the
affairs of the corporation will meet this test.
* "Substantially Disproportionate Redemption of Stock." The
receipt of cash in the Proposed Transaction will be a
"substantially disproportionate redemption of stock" for you
if the percentage of the outstanding shares of common stock
owned by you immediately after the Proposed Transaction is
less than 80% of the percentage of shares of common stock
owned by you immediately before the Proposed Transaction.
In applying these tests, you will be treated as owning shares actually or
constructively owned by certain individuals and entities related to you. If the
taxable amount is not treated as capital gain under any of the tests, it will be
treated first as ordinary dividend income to the extent of your ratable share of
our undistributed earnings and profits, then as a tax-free return of capital to
the extent of your aggregate adjusted tax basis in your shares, and any
remaining gain will be treated as capital gain.
Shareholders Who Receive Both Cash and Continue to Hold Common Stock
Immediately After the Proposed Transaction
If you receive both cash as a result of the Proposed Transaction and
continue to hold common stock immediately after the Proposed Transaction, you
generally will recognize gain, but not loss, in an amount equal to the lesser of
(i) the excess of the sum of aggregate fair market value of your shares of
common stock plus the cash received over your adjusted tax basis in the shares
or (ii) the amount of cash received in the Proposed Transaction. In
determining whether you continue to hold common stock immediately after the
Proposed Transaction, you will be treated as owning shares actually or
constructively owned by certain individuals and entities related to you.
Your aggregate adjusted tax basis in your shares of common stock held
immediately after the Proposed Transaction will be equal to your aggregate
adjusted tax basis in your shares of common stock held immediately prior to
the Proposed Transaction, increased by any gain recognized in the Proposed
Transaction, and decreased by the amount of cash received in the Proposed
Transaction.
Any gain recognized in the Proposed Transaction will be treated, for
federal income tax purposes, as capital gain, provided that your receipt of
cash either (i) is "not essentially equivalent to a dividend" with respect
to you or (ii) is a "substantially disproportionate redemption of stock"
with respect to you. (Each of the terms in quotation marks in the
previous sentence is discussed above under the heading "Shareholders
whose Shares are Completely Cashed-Out as a Result of the Proposed
Transaction.") In applying these tests, you may possibly take into account
sales of shares of common stock that occur substantially contemporaneously
with the Proposed Transaction. If your gain is not treated as capital gain
under any of these tests, the gain will be treated as ordinary dividend
income to you to the extent of your ratable share of our undistributed
earnings and profits, then as a tax-free return of capital to the extent
of your aggregate adjusted tax basis in your shares, and any remaining gain
will be treated as a capital gain.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF THE PROPOSED TRANSACTION IN LIGHT OF YOUR
SPECIFIC CIRCUMSTANCES.
Reservation of Rights
The Board of Directors reserves the right to abandon the Proposed
Transaction without further action by our shareholders at any time before the
filing of the necessary Articles of Amendment with the Indiana Secretary of
State, even if the Proposed Transaction has been authorized by our shareholders
at the Special Meeting. By voting in favor of the Proposed Transaction you are
also expressly authorizing us to determine not to proceed with the Proposed
Transaction if we should so decide.
The Board of Directors Recommends that you vote "FOR" the Proposal to
Amend the Articles of Incorporation, to effect the Proposed Transaction.
INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of BDO Seidman, LLP, the Company's
independent public accountants who audited the consolidated financial
statements of the Company and its subsidiaries for 2007, will be present at
the Annual Meeting, will have an opportunity to make a statement if they so
desire and will be available to answer appropriate questions from
shareholders. The Company's independent public accountants are selected
annually by the Audit Committee of the Board of Directors to audit the
consolidated financial statements of the Company and its subsidiaries.
The Audit Committee has selected BDO Seidman, LLP as its accountants for
the past ____ years and as its independent public accountants for
2008.
The following table shows the fees paid or accrued (in thousand)
by the Company for the audit and other services provided by BDO Seidman,
LLP.
2007 2006 2005
Audit Fees (1) $175,000 $150,000 $144,000
Audit-Related Fees(2) $0 $0 $0
Tax Fees(2) $0 $0 $0
All Other Fees(3) $0 $0 $0
_________________________________________________________
Total $175,000 $150,000 $144,000
(1) Audit fees include fees associated with the annual audit of our consolidated financial
statements and reviews of our quarterly reports on Form 10-Q.
(2) There were no audit-related services or tax fees.
(3) There were no other services or fees.
The Audit Committee must pre-approve audit-related and non-audit
services not prohibited by law to be performed by the Company's independent
certified public accountants.
SHAREHOLDER PROPOSALS FOR THE
2009 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2009 Annual
Meeting of Shareholders (assuming that the Company holds one) pursuant to
Securities and Exchange Commission Rule 14a-8 must be received by
_____________ in order to be eligible for inclusion in our proxy statement
and form of proxy for that meeting. However, if the date of the 2009
Annual Meeting is more than 30 days from the date of this year's Annual
Meeting, then the deadline for shareholder proposals will be a reasonable
time before we begin to print and mail our proxy materials. Shareholders
who intend to present proposals at an Annual Meeting other than pursuant
to Rule 14a-8 must comply with the notice provisions in the Company's
Bylaws. These notice provisions require, for a proposal to be properly
brought before the 2009 Annual Meeting of Shareholders, that proper notice
of the proposal be received by the Company no earlier than 10 days and no
later than 60 days before the date of the meeting in order for the proposal
to be considered at the next Annual Meeting. Shareholder proposals should
be addressed to Harold E. Antonson, US 1 Industries, Inc., 336 W.
US HWY 30, Valparaiso, Indiana 46385.
OTHER MATTERS
The Board of Directors does not know of any matters to be submitted
to the shareholders at the Annual Meeting other than the matters described
in the Notice of Annual Meeting. If any other matters properly come before
the meeting, persons named in the enclosed proxy intend to vote the shares
they represent in accordance with their own judgments.
ANNUAL REPORT
The Company's Annual Report for 2007 is enclosed with this proxy
statement.
BY ORDER OF THE BOARD OF DIRECTORS
Harold E. Antonson
Secretary
August ___, 2008
Appendix A
Audit Committee Charter
Appendix B
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF US 1 INDUSTRIES, INC. TO EFFECT THE REVERSE/FORWARD STOCK SPLIT
In accordance with Section 23-1-38-6 of the Indiana Business
Corporation Law (the "Code"), US 1 Industries, Inc. (the "Company"),
a corporation organized and existing under and by virtue of the Code,
does hereby certify that the Company was organized under the laws of
the State of Indiana on October 28, 1993 and hereby adopts the
following amendment(the "Amendment") to its Articles of
Incorporation:
1. The name of the Company is US 1 Industries, Inc.
2. The following setting forth the Amendment to the
Company's Articles of Incorporation has been duly adopted by the
Company's shareholders:
"Article X
Immediately upon the effectiveness of this Amendment to the
Articles of Incorporation (the "Reverse Stock Split Effective Time")
dated _____ ___, 2008, every __________ shares of common stock of the
Company that are issued and outstanding immediately prior to the
Reverse Stock Split Effective Time shall automatically, without further
action on the part of the Company or any holder of common stock and
without requiring the surrender of certificates representingcommon stock,
be combined, converted, reclassified and changed into one (1) fully paid
and nonassessable share of common stock (the "Reverse Stock Split"),
except that holders of common stock who otherwise would be entitled to
receive only a fractional interest in less than one share of common stock
(an "Unattached Fractional Interest") as a result of the Reverse Stock
Split shall be entitled to receive in lieu of such Unattached Fractional
Interest, a cash payment in an amount equal to the product calculated by
multiplying ________ times _______ of one (1) share of common stock
immediately prior to the Reverse Stock Split Effective Time by the decimal
equivalent of such Unattached Fractional Interest. As of the Reverse Stock
Split Effective Time, no such Unattached Fractional Interest held by such
holder shall be issued and outstanding. The Fair Value shall be equal
to $____ per share of common stock issued and outstanding immediately
before the Reverse Stock Split Effective Time. The foregoing Amendment
shall take effect on the date of the filing of this Amendment to the
Articles of Incorporation.
Article XI
Immediately upon the effectiveness of this Amendment to the Articles
of Incorporation (the "Forward Stock Split Effective Time") dated _____ ___,
2008, every __________ shares of common stock of the Company that are issued
and outstanding immediately prior to the Forward Stock Split Effective Time
(which shall not include any Unattached Fractional Interest) held by a holder
of common stock shall automatically, without further action on the part of the
Company or any holder of common stock and without requiring the surrender of
certificates representing common stock, be changed into ______ fully paid and
nonassessable shares of common stock. The foregoing Amendment will take
effect on the date of the filing of this Amended Articles of Incorporation."
3. The foregoing resolution containing the Amendment was duly adopted
by the Board on ______, 2008.
4. Such Amendment was adopted by shareholder action pursuant to Section
23-1-38-3 of the Code on _____, 2008.
5. At the annual meeting of the shareholders (the "Annual Meeting")
there were 14,838,657 shares of common stock outstanding, ______
votes entitled to be cast, and ______ number of shareholders present
at the meeting to vote on the Amendment.
6. The number of votes against the Amendment was ____, and the number
in favor, which was sufficient for approval of the Amendment,
was ______.
IN WITNESS WHEREOF, the Company has caused this Amendment to be signed
by the undersigned duly authorized officer, this ___ day of _____, 2008.
US 1 Industries, Inc.
By: _______________________________
Title