SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 31, 1999
USA SERVICE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-22095 84-1039267
(State or other jurisdiction of (Commission (I.R.S.Employer
incorporation or organization) File Number) Identification No.)
1750 University Drive, Suite 117
Coral Springs, Florida 33071
(Address of principal executive offices) (Zip Code)
(954) 796-8060
(Registrant's telephone number, including area code)
10770 Wiles Road
Coral Springs, Florida 33076
Former name,former address and former fiscal year,
if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
See Item 2 of this report.
Item 2. Acquisition or Disposition of Assets.
Acquisition of East Coast Beverage Corp.
Between November 1998 and July 1999 USA Service Systems, Inc. (the
"Company") provided retail stores and manufacturers with product assembly,
product demonstrations, point - of - sale product displays, and inventory counts
and audits. As of July 1999 the Company had entered into letters of intent for
the acquisition of four companies engaged in the same business as that conducted
by the Company. However, the Company was unable to obtain approximately
$4,000,000 in additional equity capital which was needed to finance these
acquisitions. In July 1999 the Company essentially discontinued its business and
made plans to distribute its remaining assets (having a minimal value) to George
Pursglove, a former officer and director of the Company.
Effective August 31, 1999 the Company acquired all of the issued and
outstanding shares of East Coast Beverage Corp. ("ECBC") in exchange for
41,300,758 shares of the Company's common stock. Immediately prior to this
transaction, certain officers and directors of the Company surrendered 2,734,202
shares of the Company's common stock. Following this transaction the Company had
43,354,058 issued and outstanding shares of common stock. The former
shareholders of ECBC now own approximately 93% of the Company's common stock. In
connection with this transaction the management of the Company resigned and was
replaced by the management of ECBC.
The Company's board of directors will shortly propose that the
shareholders of the Company approve (i) a change of the name of the Company to
East Coast Beverage Corp. and (ii) an 8.194595-for-1 reverse split of the
Company's common stock.
The business of the Company, which is conducted through ECBC, now involves
the development, production and distribution of Coffee House USA(TM), a
proprietary line of all natural, ready to drink ("RTD") bottled coffee drinks.
ECBC's product is more than just a cold coffee, but rather tastes like a
milkshake and is marketed as such. It can be substituted at any occasion where a
milkshake might be used - with a hamburger at lunch, as a stand-alone snack,
etc. ECBC's iced coffee is naturally flavored and enhanced with whole milk and
rich coffee bean extract. ECBC's products are all natural, low in fat, visually
exciting and have a broad spectrum of flavors.
ECBC's product can be differentiated with those of competitors by its
taste, advanced technological Fuji wrap and ECBC's proprietary glass container.
Each of the flavors used by ECBC has gone through extensive consumer tasting and
approval. ECBC's iced coffee comes in the following flavors:
<PAGE>
Cinnamon, Mocha, Vanilla Mousse, Regular, Hazelnut, Toasted Almond,
German Chocolate, and Banana's Foster
ECBC's proprietary formulas for its products are trade secrets and ECBC
requires its manufacturers, employees, brokers and consultants to sign
confidentiality agreements. ECBC's glass container is also proprietary and
design protected.
ECBC sells its products through distributors and wholesalers to
supermarkets, mass-marketers, convenience stores, drug store chains and oil
company convenience stores. As of August 31, 1999 ECBC's products were being
sold in 40 states.
As of September 1, 1999 ECBC had nine full time employees. ECBC plans to
hire additional employees as may be required by the level of its operations.
The Company's offices now located at 1750 University Drive, Suite 117,
Coral Springs, Florida 33071. The Company's new telephone number is (954)
796-8060 and its new facsimile number is (954) 796-0802.
The following is a summary of the statement of operations and balance
sheet of ECBC for the six month period ending June 30, 1999.
Statement of Operations Six Months Ended
June 30,1999
Sales $4,564,957
Cost of Goods Sold (2,868,771)
Other Expenses (1,164,516)
-----------
Net Profit $ 531,670
===========
Balance Sheet Data June 30,1999
Current Assets $3,137,217
Total Assets $4,320,530
Current Liabilities $2,095,811
Total Liabilities $3,787,634
Working Capital $1,041,406
Stockholders' Equity $532,895
MANAGEMENT
In connection with the acquisition of ECBC, the Company's officers and
directors resigned and were replaced by the management of ECBC. The following
sets forth certain information concerning the present management of the Company.
The Company's executive officers will devote their full time to the Company's
business.
<PAGE>
Name Age Position with Company
John Calebrese 47 Chief Executive Officer and a Director
Alex Garabedin 46 President
Edward Shanahan 47 Vice President - Eastern Division
John Dauymeyer 59 Vice President - Central Division
William Perry Maxwell 59 Vice President - Western Division
Drew Carver 53 Vice President -Business Development
John Calebrese has been an officer and director of ECBC since March 1998.
From 1993 to 1995 Mr. Calebrese was a broker for Arizona Beverage Company
(Arizona Iced Tea) in the Florida market. From 1980 to 1992 Mr. Calebrese was an
officer of A & C Italian Bakery, a large Italian wholesale bakery which was sold
to Ferrara's of New York in 1990. From 1981 to 1984 Mr. Calebrese opened a
number of deli/restaurants which were purchased by Subway in 1984. During this
period of time Mr. Calebrese also developed the concept for ECBC's
ready-to-drink iced coffee beverages. From 1990 to 1993 Mr. Calebrese developed
and marketed an iced coffee beverage which was acquired in 1993 by Lewis and
Clark Snake River.
Alex Garabedian has been the President of ECBC since October 1998. From
1968 to 1997 Mr. Garabedian was President and Chief Executive Officer of Fine
Distributing, a subsidiary of Hagameyer, a large national food distributor.
Edward Shanahan has been an officer and director of ECBC since October
1998. From 1993 to 1994 Mr. Shanahan served as Vice President of Sales and
Marketing for Westmark, Inc./Clearly Canadian where he was responsible for
product distribution in seven states. While at Westmark, Mr. Shanahan was
responsible for sales, pricing, packaging, distribution, brand management, media
advertising and key account development. From 1976 to 1993 Mr. Shanahan worked
for Coca-Cola Enterprises, Inc. in various capacities.
John Dauymeyer has been an officer of ECBC since October 1998. From 1995
to 1997 Mr. Dauymeyer was Vice-President of Geyser Bottled Water Company. From
1993 to 1995 Mr. Dauymeyer was Vice President of Sales, Western Division for
Arizona Iced Tea. In the late 1960's Mr. Dauymeyer was a co-founder of Wendy's
Old Fashioned Hamburger Restaurants and served as President and General Manager
of Wendy's.
Drew Carver has been an officer of ECBC since October 1998. From 199
to 1993 Mr. Carver was National Sales Manager for Arizona Iced Tea. From 1993
to 1998 Mr. Carver was employed by the Geyser Bottled Water Company as Vice
President of Sales.
<PAGE>
William Perry Maxwell has been an officer of ECBC since 1998. From 1991 to
1993 Mr. Maxwell was Vice President of Sales for the William Hoelskin company, a
food broker. From 1993 to 1998 Mr. Maxwell was Vice President for the Arizona
Beverage Company where he was responsible for developing Arizona's distributor
network.
Consultant
James Hartford has been retained by ECBC as a consultant in the areas of New
Business Development. Mr. Hartford is a soft drink industry veteran who has
managed large and small bottling operations in the Seven Up, R.C. and Coca Cola
systems, as well as serving as Vice President of Sales and Marketing for the
Royal Crown Cola Company and President of the Seven Up Bottling Company.
Executive Compensation
The following shows the amount which ECBC has paid to each officer during
the twelve-month period ending December 31, 1998 and the amounts which ECBC
expects to pay to its officers during the twelve month period ending December
31, 1999.
Name Amount Paid Proposed Compensation
John Calebrese $160,000 $250,000
Alex Garabedin $21,634 $130,000
Edward Shanahan $24,038 $125,000
John Dauymeyer $18,269 $95,000
William Perry Maxwell $14,711 $85,000
Drew Carver $18,269 $95,000
ECBC has employment agreements with the following officers:
Expiration of
Employment
Name Agreement Compensation (1)
Alex Garabedin 9-10-01 Annual salary of $130,000, plus
2,663,243 shares of the
Company's common stock.
Edward Shanahan 10-26-00 Annual Salary of $125,000, a
monthly car allowance of $500,
a one time
signing bonus of $10,000, and
1,597,946 shares of the
Company's common stock.
John Dauymeyer 10-19-00 Annual Salary of $95,000, a
monthly car allowance of $500, a
bonus of $0.20 for each case of the
Company's beverages sold in the
employee's region,a one time signing
bonus of $7,500, and 1,065,297
shares of the Company's common stock.
William Perry Maxwell 11-2-00 Annual Salary of $85,000, a monthly
car allowance of $500, a bonus of
$0.20 for each case of the Company's
beverages sold in the employee's
region, a one time signing bonus of
$7,500, and 1,065,297 shares of the
Company's common stock.
Drew Carver 10-10-00 Annual Salary of $95,000, a monthly
car allowance of $500, a bonus of
$0.20 for each case of the Company's
beverages sold in the employee's
region, a one time signing bonus of
$10,000, and 1,065,297
shares of the Company's common stock.
(1) Number of shares of common stock has been adjusted to reflect the shares
issued by the Company to these persons in connection with the Company's
acquisition of ECBC.
Transactions with Affiliates and Recent Sales of Securities
ECBC has issued shares of its common stock to the persons, in the amounts,
and for the consideration set forth in the following table. The amounts have
been adjusted to reflect the shares issued to the former shareholders of ECBC in
connection with the August 1999 acquisition of ECBC:
<PAGE>
Number
Name Date of Shares Consideration
John Calebrese 3/1/98 19,760,897 Services Rendered
Alex Garabedin 9/10/98 2,663,243 (1)
Edward Shanahan 10/26/98 1,597,946 (1)
John Dauymeyer 10/19/98 1,065,297 (1)
William Perry Maxwell 11/02/98 1,065,297 (1)
Drew Carver 10/10/98 1,065,297 (1)
FPI, Inc 4/04/99 5,736,216 Services Rendered
Arnold Rosen 8/01/99 546,300 Services Rendered
Arnold Rosen 08/31/99 2,048,648 Modification of Loan Terms
(1) Shares were issued as part of the compensation provided in the employment
agreement with this person.
Between March and May 1999 ECBC sold 1,000 shares of its Series A
Preferred Stock to a group of private investors for $1,000,000. All Series A
Preferred shares were subsequently converted into shares of ECBC's common stock.
In connection with the Company's acquisition of ECBC, the former Series A
Preferred Shareholders received 6,161,343 shares of the Company's common stock
for which they effectively paid $0.16 per share, as adjusted for the shares
received from the Company. Arnold Rosen, a principal shareholder of ECBC,
together with his wife and their respective IRA accounts, purchased 520 of the
Series A preferred shares.
Between May and August 1999 ECBC borrowed $1,000,000 from to Arnold Rosen,
a principal shareholder and a consultant to ECBC. The loan from Mr. Rosen
enabled ECBC to fund a level of operations associated with increased orders. The
loans are represented by a series of convertible notes (the "Notes") which bear
interest at 12% per annum and are due and payable in May 2000. The Notes
originally provided Mr. Rosen with certain rights (i) with respect to payment if
ECBC was sold, (ii) conversion of the notes into ECBC stock, and (iii) under
certain circumstances, to a percentage of ECBC's net income.
In exchange for 250,000 shares of ECBC's common stock, which shares were
subsequently exchanged for 2,048,648 shares of the Company's common stock, ECBC
and Mr. Rosen agreed to the following modifications to the terms of the Notes:
o The Company will repay Mr. Rosen $400,000 plus accrued interest, prior to
September 6, 1999.
o An additional $300,000 plus accrued interest, will be repaid to Mr. Rosen
prior to October 15, 1999.
o The remaining $300,000, plus accrued interest, will be payable on or before
April 1, 2000.
o The rights (i) to receive, under certain circumstances, a percentage interest
in ECBC's net income; and (ii) to receive 150% of the unpaid principal if
ECBC was sold, were terminated.
At any time after October 1, 1999 Mr. Rosen may convert up to $300,000 of
the amount owed into such number of shares of the Company's common stock as may
be determined by dividing the amount to be converted by $0.3355. The Company has
agreed to include in any registration statement which may be filed by the
Company the shares of common stock which Mr. Rosen may receive as a result of
the conversion.
As of September 7, 1999 the Company has not granted any options for the
purchase of its Company's common stock. The Company, however, expects to grant
options to officers, directors, employees, consultants and others.
PRINCIPAL SHAREHOLDERS
The following table sets forth the number of and percentage of outstanding
shares of common stock beneficially owned by the Company's new officers and
directors and those shareholders now owning more than 5% of the Company's common
stock.
<PAGE>
Shares of
Name and Address Common Stock Percent of Class
John Calebrese 19,351,167 44.5%
1750 University Drive
Suite 117
Coral Springs, Florida 33071
Alex Garabedin 2,663,243 6%
1750 University Drive
Suite 117
Coral Springs, FL 33071
Edward Shanahan 1,597,946 3.6%
78 Harrington Ridge Road
Sherborn, MA 01770
John Dauymeyer 1,065,297 2.4%
8621 Brookridge Dr.
West Chester, OH 45069
William Perry Maxwell 1,065,297 2.4%
2679 Corey Place
San Ramon, CA 94583
Drew Carver 1,065,297 2.4%
3852 E. Keresan
Phoenix, AZ 85044
Arnold Rosen 5,798,854 (1) 13%
7138 Ayrshire Lane
Boca Raton, FL 33496
FPI, Inc. 5,736,216 13%
Mizner Park Corporate Center
433 Plaza Real, Suite 275
Boca Raton, FL 33445
All Officers and Directors 26,808,247 61.4%
as a Group (6 persons)
(1) Includes shares held by Mr.Rosen, Mr. Rosen's wife, and their respective IRA
accounts.
Item 7(a) and 7(b). Financial Statements and Pro Forma Financial Statements.
The Company hereby undertakes to file with the Commission an amendment to
this Form 8-K wherein the Company will provide the audited financial statements
of East Coast Beverage Corp. and the Company's pro forma financial statements
within sixty (60) days after the filing of this Form 8-K.
Item 7(c). Exhibits.
Number Exhibit
2 Share Exchange Agreement between the Company and East Coast
Beverage Corp.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
USA SERVICE SYSTEMS, INC.
By /s/ John calabrese
John Calabrese,Chief Executive Officer
DATE: September 14, 1999
<PAGE>
USA SERVICE SYSTEMS, INC.
--------------------------------
EXHIBITS TO FORM 8-K
--------------------------------
SHARE EXCHANGE AGREEMENT
BETWEEN THE COMPANY AND
EAST COAST BEVERAGE CORP.
--------------------------------
AGREEMENT TO EXCHANGE COMMON STOCK
BETWEEN
USA SERVICE SYSTEMS, INC.
AND
EAST COAST BEVERAGE CORP.
<PAGE>
INDEX Page
ARTICLE I - EXCHANGE OF SECURITIES ................................. 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES ........................ 5
2.0l - Organization ............................................. 5
2.02 - Capital ................................................. 5
2.03 - Directors and Officers' Compensation; Banks ............. 5
2.04 - Financial Statements .................................... 6
2.05 - Absence of Changes ...................................... 6
2.06 - Absence of Undisclosed Liabilities ...................... 6
2.07 - Tax Returns ............................................. 6
2.08 - Investigation of Financial Condition..................... 6
2.09 - Trade Names and Rights .................................. 6
2.l0 - Contracts and Leases .................................... 6
2.ll - Insurance Policies ...................................... 6
2.l2 - Compliance with Laws .................................... 7
2.l3 - Litigation .............................................. 7
2.l4 - Ability to Carry Out Obligations ........................ 7
2.l5 - Full Disclosure ......................................... 7
2.l6 - Assets .................................................. 7
2A - Organization .............................................. 7
2B - Directors and Officers' Compensation; Banks ............... 7
2C - Capital ................................................... 8
2D - Financial Statements ...................................... 8
2E - Absence of Changes ........................................ 8
2F - Absence of Undisclosed Liabilities ........................ 8
2G - Tax Returns ............................................... 8
2H - Investigation of Financial Condition of USA ............... 8
2I - Trade Names and Rights .................................... 9
2J - Contracts and Leases ...................................... 9
2K - Insurance Policies ........................................ 9
2L - Compliance with Laws ...................................... 9
2M - Litigation ................................................ 9
2N - Ability to Carry Out Obligations .......................... 10
2O - Full Disclosure ........................................... 10
2P - Assets .................................................... 10
ARTICLE III - SHAREHOLDER REPRESENTATIONS .......................... 10
ARTICLE IV - OBLIGATIONS BEFORE CLOSING ............................ 10
4.0l - Investigative Rights .................................... 10
4.02 - Surrender of Shares...................................... 11
4.03 - Conduct of Business ..................................... 11
<PAGE>
INDEX (cont'd) Page
ARTICLE V - CONDITIONS PRECEDENT TO PERFORMANCE BY USA .............. 11
5.0l - Conditions ............................................... 11
5.02 - Accuracy of Representations .............................. 12
5.03 - Performance............................................... 12
5.04 - Absence of Litigation .................................... 12
ARTICLE VI - CONDITIONS PRECEDENT TO PERFORMANCE
BY ECBC. ........................................................... 12
6.0l - Conditions .............................................. 12
6.02 - Accuracy of Representations .............................. 12
6.03 - Performance ............................................. 12
6.04 - Absence of Litigation ................................... 12
6.05 - Other .................................................... 12
ARTICLE VII - CLOSING ............................................... 13
7.0l - Closing .................................................. 13
7.02 - Exchange of Shares ....................................... 13
7.03 - No Fractional Shares ..................................... 13
7.04 - Appointment of Directors ................................. 13
ARTICLE VIII - REMEDIES ............................................. 13
8.0l - Arbitration .............................................. 13
8.02 - Costs .................................................... 14
8.03 - Termination .............................................. 14
ARTICLE IX - MISCELLANEOUS .......................................... 14
9.0l - Captions and Headings .................................... 14
9.02 - No Oral Change ........................................... 14
9.03 - Non-Waiver ............................................... 14
9.04 - Time of Essence .......................................... 15
9.05 - Entire Agreement ......................................... 15
9.06 - State Law ................................................ 15
9.07 - Counterparts ............................................. 15
9.08 - Notices .................................................. 15
9.09 - Binding Effect ........................................... 16
9.l0 - Effect of Closing ........................................ 16
9.ll - Mutual Cooperation ....................................... 16
9.12 - Expenses.................................................. 16
Exhibit A - Officers and Directors (ECBC)
Exhibit B - Financial Statements (ECBC) ........................
Exhibit C - Not Used..........
Exhibit D - Not Used.................
Exhibit E - Not Used
Exhibit F - Not Used
Exhibit G - Officers, Directors, Bank Accounts, Safe Deposit Boxes, Powers
of Attorney (USA)
Exhibit H - Financial Statements - Changes in Financial Condition (USA)
Exhibit I - Trademarks, Trade Names and Copyrights (USA)
Exhibit J - Material Contracts (USA)
Exhibit K- Insurance Policies (USA)
Ehibit L - Litigation (USA)
<PAGE>
AGREEMENT TO EXCHANGE COMMON STOCK
This AGREEMENT, made this day of August, 1999, by and between USA
Service Systems Inc.("USA"), EAST COAST BEVERAGE CORP. ("ECBC") and the
shareholders of ECBC (as to Article I and Article III only) is made for the
purpose of setting forth the terms and conditions upon which USA will acquire
all of the issued and outstanding common stock of ECBC in exchange for shares of
USA's common stock.
In consideration of the mutual promises, covenants, and representations
contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE I
EXCHANGE OF SECURITIES
Subject to the terms and conditions of this Agreement, USA agrees to
issue, and the shareholders of ECBC agree to accept 41,300,760 shares of the
common stock of USA in consideration for all of the issued and outstanding
common stock of ECBC. Immediately prior to the closing of this transaction, the
total issued capital of USA will not exceed 3,053,298 shares of Common Stock
ARTICLE IIREPRESENTATIONS AND WARRANTIES
ECBC represents and warrants to USA that:
2.0l Organization. ECBC is a corporation duly organized, validly
existing, and in good standing under the laws of Florida, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
2.02 Capital. The authorized capital stock of ECBC consists of
25,000,000 shares of common stock, $0.001, of which 5,040,000 shares will be
issued and outstanding at closing. ECBC is authorized to issue 5,000,000 shares
of preferred stock. All outstanding shares of preferred stock will be converted
into shares of common stock prior to closing. At closing, there will be no
outstanding subscriptions, options, rights, warrants, convertible securities, or
other agreements or commitments obligating ECBC to issue or to transfer from
treasury any additional shares of its capital stock of any class.
2.03 Directors and Officers' Compensation; Banks. Exhibit A to this
Agreement contains the names, and titles of all directors and officers of ECBC.
<PAGE>
2.04 Financial Statements. Exhibit B to this Agreement sets forth
balance sheets of ECBC as of December 31, 1998 and June 30, 1999, and the
related statements of income for the periods then ended. The financial
statements have been prepared in accordance with generally accepted accounting
principles consistently followed by ECBC throughout the periods indicated, and
fairly present the financial position of ECBC as of the dates of the balance
sheets included in the financial statements, and the results of its operations
for the periods indicated.
2.05 Absence of Changes. Since June 30,1999, there has not been any
change in the financial condition or operations of ECBC, except changes in the
ordinary course of business, which changes have not in the aggregate been
materially adverse.
2.06 Absence of Undisclosed Liabilities. ECBC did not as of June 30,
1999 have any debt, liability, or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, and whether due or to become due, that is
not reflected on Exhibit B.
2.07 Tax Returns. Within the times and in the manner prescribed by law,
ECBC has filed all federal, state, and local tax returns required by law and has
paid all taxes, assessments, and penalties due and payable. No federal income
tax returns of ECBC have been audited by the Internal Revenue Service. The
provision for taxes, if any, reflected in ECBC's balance sheet as of June 30
1999, is adequate for any and all federal, state, county, and local taxes for
the period ending on the date of that balance sheet and for all prior periods,
whether or not disputed. There are no present disputes as to taxes of any nature
payable by ECBC.
2.08 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, USA shall
have the opportunity to meet with ECBC's accountants and attorneys to discuss
the financial condition of ECBC. ECBC shall make available to USA the books and
records of ECBC. The minutes of ECBC are a complete and accurate record of all
meetings of the shareholders and directors of ECBC and accurately reflect all
actions taken at such meetings. The signatures of the directors and/or officers
on such minutes are the valid signatures of ECBC's directors and/or officers who
were duly elected or appointed on the dates that the minutes were signed by such
persons. The stock book of ECBC contains an accurate record of all transactions
with respect to the capital stock of ECBC.
2.09 Trade Names and Rights. No person other than ECBC owns any
trademark, trademark registration or application, service mark, trade name,
copyright, or copyright registration or application the use of which is
necessary or contemplated in connection with the operation of ECBC's business.
2.l0 Contracts and Leases. ECBC is not in default under any agreements
or lease to which it is a party.
2.ll Insurance Policies. ECBC's business and property are adequately
coverd by insurance policies that are in full force and effect.
<PAGE>
2.l2 Compliance with Laws. ECBC has complied with, and is not in
violation of, applicable federal, state, or local statutes, laws, and
regulations affecting its properties or the operation of its business, including
but not limited to applicable federal and state securities laws. ECBC does not
have any employee benefit plan which is subject to the provisions of the
Employee Retirement Income Security Act of 1974.
2.l3 Litigation. ECBC is not a party to any suit, action, arbitration,
or legal, administrative, or other proceeding, or governmental investigation
pending or, to the best knowledge of ECBC threatened, against or affecting ECBC
or its business, assets, or financial condition. ECBC is not in default with
respect to any order, writ, injunction, or decree of any federal, state, local,
or foreign court, department, agency, or instrumentality. ECBC is not engaged in
any legal action to recover moneys due to ECBC or damages sustained by ECBC.
2.14 Ability to Carry Out Obligations. ECBC has the right, power, and
authority to enter into, and perform its obligations under, this Agreement. The
execution and delivery of this Agreement by ECBC and the performance by ECBC of
its obligations hereunder will not cause, constitute, or conflict with or result
in (a) any breach or violation or any of the provisions of or constitute a
default under any license, indenture, mortgage, charter, instrument, articles of
incorporation, by-law, or other agreement or instrument to which ECBC is a
party, or by which it may be bound, nor will any consents or authorizations of
any party other than those hereto be required, (b) an event that would permit
any party to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of ECBC, or (c) an event that
would result in the creation or imposition or any lien, charge, or encumbrance
on any asset of ECBC.
2.15 Full Disclosure. None of representations and warranties made by
ECBC, or in any certificate or memorandum furnished or to be furnished by ECBC,
or on its behalf, contains or will contain any untrue statement of material
fact, or omit any material fact the omission of which would be misleading. ECBC
has disclosed to USA all reasonably foreseeable contingencies which, if such
contingencies transpired, would have a material adverse effect on ECBC's
business.
2.l6 Assets. ECBC has good and marketable title to all of its property.
USA represents and warrants to ECBC that:
2A. Organization. USA is a corporation duly organized, validly
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
2B. Directors and Officers' Compensation; Banks. Exhibit G to this
Agreement contains: (i) the names, addresses, and titles of all directors and
officers of USA and all persons whose compensation from USA as of the date of
this Agreement will equal or its expected to equal or exceed, at an annual rate,
the sum of $5,000; (ii) the name and address of each bank with which USA has an
account or safety deposit box, the identification number thereof, and the names
of all persons who are authorized to draw thereon or have access thereto; and
(iii) the names of all persons who have a power of attorney from USA and a
summary of the terms thereof.
<PAGE>
2C. Capital. The authorized capital stock of USA consists of
100,000,000 shares of common stock, $0.0001 par value, of which 3,053,298 shares
will be issued and outstanding immediately prior to closing. USA has not issued
any shares of preferred stock. All of the shares are validly issued, fully paid,
and non-assessable. At closing, there will be no outstanding subscriptions,
options, rights, warrants, convertible securities, or other agreements or
commitments obligating USA to issue or to transfer from treasury any additional
shares of its capital stock of any class.
2D. Financial Statements. Exhibit H to this Agreement sets forth
balance sheets of USA as of May 31,1999, and the related statements of income
and retained earnings for the period then ended. The financial statements have
been prepared in accordance with generally accepted accounting principles
consistently followed by USA throughout the periods indicated, and fairly
present the financial position of USA as of the dates of the balance sheets
included in the financial statements, and the results of its operations for the
periods indicated.
2E. Absence of Changes. Since May 31,1999, there has not been any
change in the financial condition or operations of USA, except (i) changes in
the ordinary course of business, which changes have not in the aggregate been
materially adverse, and (ii) changes disclosed on Exhibit H.
2F. Absence of Undisclosed Liabilities. USA did not as of May 31,1999
have any debt, liability, or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, and whether due or to become due, that is
not reflected on Exhibit H.
2G. Tax Returns. Within the times and in the manner prescribed by law,
USA has filed all federal, state, and local tax returns required by law and has
paid all taxes, assessments, and penalties due and payable. No federal income
tax returns of USA have been audited by the Internal Revenue Service. The
provision for taxes, if any, reflected in USA's balance sheet as of May 31,1999,
is adequate for any and all federal, state, county, and local taxes for the
period ending on the date of that balance sheet and for all prior periods,
whether or not disputed. There are no present disputes as to taxes of any nature
payable by USA.
2H. Investigation of Financial Condition of USA. Without in any manner
reducing or otherwise mitigating the representations contained herein, ECBC
shall have the opportunity to meet with USA's accountants and attorneys to
discuss the financial condition of USA. USA shall make available to ECBC the
books and records of USA. The minutes of USA are a complete and accurate record
of all meetings of the shareholders and directors of USA and accurately reflect
all actions taken at such meetings. The signatures of the directors and/or
officers on such minutes are the valid signatures of USA's directors and/or
officers who were duly elected or appointed on the dates that the minutes were
signed by such persons.
<PAGE>
2I. Trade Names and Rights. Exhibit I attached hereto and made a part
hereof lists all trademarks, trademark registrations or applications, trade
names, service marks, copyrights, copyright registrations or applications which
are owned by USA. No person, other than USA, will own any trademark, trademark
registration or application, service mark, trade name, copyright, or copyright
registration or application the use of which is necessary or contemplated in
connection with the operation of the business of USA, as such business is to be
conducted after the closing of this transaction.
2J. Contracts and Leases. Exhibit J attached hereto and made a part
hereof contains a summary of provisions of all material contracts, leases, and
other agreements of USA presently in existence or which have been agreed to by
USA. USA is not in default under any of these agreements or leases.
2K. Insurance Policies. Exhibit K to this Agreement is a description of
all insurance policies held by USA concerning its business and properties. All
these policies are in the respective principal amounts set forth in Exhibit K.
2L. Compliance with Laws. USA has complied with, and is not in
violation of, applicable federal, state, or local statutes, laws, and
regulations affecting its properties or the operation of its business, including
but not limited to federal and state securities laws. USA does not have any
employee benefit plan which is subject to the provisions of the Employee
Retirement Income Security Act of 1974. USA has filed with the Securities and
Exchange Commission ("SEC") and any applicable state securities agency, all
required forms, reports, schedules, statements and other documents
(collectively, the "SEC Documents"). The SEC Documents filed by USA, including
without limitation any financial statements or schedules included therein, at
the time filed, (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; and (b) complied in all material respects with
applicable federal and state securities laws, as the case may be, and the rules
and regulations of the SEC and any applicable state securities agency. The
financial statements of USA included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the period involved (except as may be indicated in the
notes thereto) and fairly presented (subject, in the case of the unaudited
statements, to normal year-end audit adjustments) the consolidated financial
position of USA as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended.
2M. Litigation. Other than as disclosed on Exhibit L, USA is not a
party to any suit, action, arbitration, or legal, administrative, or other
proceeding, or governmental investigation pending or, to the best knowledge of
USA threatened, against or affecting USA or its business, assets, or financial
condition. USA is not in default with respect to any order, writ, injunction, or
decree of any federal, state, local, or foreign court, department, agency, or
instrumentality. USA is not engaged in any legal action to recover moneys due to
it or damages sustained by it other than as disclosed on Exhibit L.
<PAGE>
2N. Ability to Carry Out Obligations. Subject to the approval of this
Agreement by the shareholders of USA, USA has the right, power, and authority to
enter into, and perform its obligations under, this Agreement. The execution and
delivery of this Agreement by USA and the performance by USA of its obligations
hereunder will not cause, constitute, or conflict with or result in (a) any
breach or violation or any of the provisions of or constitute a default under
any license, indenture, mortgage, charter, instrument, articles of
incorporation, by-law, or other agreement or instrument to which USA is a party,
or by which it may be bound, nor will any consents or authorizations of any
party other than those hereto be required, (b) an event that would permit any
party to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of USA, or (c) an event that
would result in the creation or imposition or any lien, charge, or encumbrance
on any asset of USA.
2O. Full Disclosure. None of representations and warranties made by
USA, or in any certificate or memorandum furnished or to be furnished by USA, or
on its behalf, contains or will contain any untrue statement of material fact,
or omit any material fact the omission of which would be misleading. USA has
disclosed to ECBC all reasonably foreseeable contingencies which, if such
contingencies transpired, would have a material adverse effect on USA.
2P. Assets. USA has good and marketable title to all of its property.
ARTICLE III
SHAREHOLDER REPRESENTATIONS
Each shareholder of ECBC represents to USA that he has the right,
power, and authority to enter into, and perform his obligations under this
Agreement. The execution and delivery of this Agreement by such shareholder and
the delivery by such shareholder of his shares in ECBC pursuant to Article I
will not cause, constitute, or conflict with or result in any breach or
violation or any of the provisions of or constitute a default under any license,
indenture, mortgage, charter, instrument, or agreement to which he is a party,
or by which he may be bound, nor will any consents or authorizations of any
party be required. Each shareholder of ECBC represents and warrants to USA that
the shares of ECBC that such shareholder will deliver at closing will be free of
any liens or encumbrances.
Each shareholder of ECBC understands that the shares being acquired from USA
represent restricted securities as that term is defined in Rule l44 of the
Securities and Exchange Commission.
<PAGE>
ARTICLE IV
OBLIGATIONS BEFORE CLOSING
4.0l Investigative Rights. From the date of this Agreement until the
date of closing, each party shall provide to the other party, and such other
party's counsel, accountants, auditors, and other authorized representatives,
full access during normal business hours to all of each party's properties,
books, contracts, commitments, records and correspondence and communications
with regulatory agencies for the purpose of examining the same. Each party shall
furnish the other party with all information concerning each party's affairs as
the other party may reasonably request.
4.02 Surrender of Shares. Prior to the closing of this transaction, the
following shareholders of USA shall have surrendered for cancellation
certificates representing the following shares of USA's common stock.
Name Shares to be Cancelled
George Pursglove 1,261,030
Chester Howard 1,312,458
Scott McCoy 107,143
Douglas MacLellan 53,571
4.03 Conduct of Business. Prior to the closing, and except as
contemplated by this Agreement, each party shall conduct its business in the
normal course, and shall not sell, pledge, or assign any assets, without the
prior written approval of the other party, except in the regular course of
business. Except as contemplated by this Agreement, neither party to this
Agreement shall amend its Articles of Incorporation or By-laws, declare
dividends, redeem or sell stock or other securities, incur additional or
newly-funded material liabilities, acquire or dispose of fixed assets, change
senior management, change employment terms, enter into any material or long-term
contract, guarantee obligations of any third party, settle or discharge any
balance sheet receivable for less than its stated amount, pay more on any
liability than its stated amount, or enter into any other transaction other than
in the regular course of business.
Notwithstanding the above, ECBC, following the closing of this
transaction, plans to raise additional capital through the sale of approximately
12,000,000 shares of USA's common stock. Follwing the sale of these shares, USA
plans to request its shareholders to approve a 1 for 8.194595 reverse split of
its outstanding common stock.
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT TO PERFORMANCE BY USA
5.01 Conditions. USA's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in this
Article V. USA may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by USA of any other condition of or any of USA's other
rights or remedies, at law or in equity, if ECBC shall be in default of any of
its representations, warranties, or covenants under this agreement.
5.02 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by ECBC in this Agreement or in
any written statement that shall be delivered to USA by ECBC under this
Agreement shall be true on and as of the closing date as though made at those
times.
5.03 Performance. ECBC shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it, on or before the closing. ECBC shall have
obtained all necessary consents and approvals necessary to consummate the
transactions contemplated hereby.
5.04 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the closing.
ARTICLE VI
CONDITIONS PRECEDENT TO PERFORMANCE BY ECBC
6.01 Conditions. ECBC's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of the conditions set forth in this
Article VI. ECBC may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by ECBC of any other condition of or any of ECBC's
other rights or remedies, at law or in equity, if USA shall be in default of any
of its representations, warranties, or covenants under this agreement.
6.02 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by USA in this Agreement or in any
written statement that shall be delivered to ECBC by USA under this Agreement
shall be true on and as of the closing date as though made at those times.
6.03 Performance. USA shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it, on or before the closing. USA shall have
obtained all necessary consents and approvals necessary to consummate the
transactions contemplated hereby, including those required by Section 4.02.
6.04 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the closing.
6.05 Other. At the time of closing, the liabilities and accrued
expenses of USA, and the future amounts payable pursuant to any agreement to
which USA is a party (and which has not been assumed by a third party which has
indemnified USA as to the assumed obligations of such agreement) will be fully
satisfied by payments of not more than $200,000 to the creditors of USA.
ARTICLE VII
CLOSING
7.0l Closing. The closing of this transaction shall be held at the
offices of ECBC. Unless the closing of this transaction takes place before
september 6, 1999, then either party may terminate this Agreement without
liability to the other party, except as otherwise provided in Section 9.12.
At the closing, the following documents, in form reasonably acceptable to
counsel to the parties or as set forth herein, shall be delivered:
<PAGE>
By ECBC:
A. An officer's certificate, dated the closing date, that all
representations, warranties, covenants, and conditions set
forth in this Agreement on behalf of ECBC are true and
correct as of, or have been fully performed and complied
with by, the closing date.
By USA:
A. An officer's certificate, dated the closing date, that all
representations, warranties, covenants, and conditions set
forth in this Agreement on behalf of USA are true and
correct as of, or have been fully performed and complied
with by, the closing date.
7.02 Exchange of Shares. On the closing date, each share of common
stock of ECBC then issued and outstanding, will be exchanged, on a pro-rata
basis, for fully paid and nonassessable shares of USA in accordance with this
Agreement.
7.03 No Fractional Shares. No certificates for fractional share
interests of common stock of USA will be issued, but, in lieu thereof, USA will
issue one share of its common stock for each fractional share held in ECBC.
7.04 Appointment of Directors. At the closing of this Agreement, USA
will cause John Calebrese to be appointed to USA's Board of Directors. Following
such appointment, all present officers and directors of USA will resign.
ARTICLE VIII
REMEDIES
8.01 Arbitration. Any controversy or claim arising out of, or relating
to, this Agreement, or the making, performance, or interpretation thereof, shall
be settled by arbitration in Miami, Florida in accordance with the Rules of the
American Arbitration Association then existing, and judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter of
the controversy.
<PAGE>
8.02 Costs. If any legal action or any arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorney's fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
8.03 Termination. In addition to the other remedies, USA or ECBC may on
or prior to the closing date terminate this Agreement, without liability to the
other party:
(i) If any bona fide action or proceeding shall be pending against USA or ECBC
on the closing date that could result in an unfavorable judgment, decree, or
order that would prevent or make unlawful the carrying out of this Agreement or
if any agency of the federal or of any state government shall have objected at
or before the closing date to this acquisition or to any other action required
by or in connection with this Agreement;
(ii) If the legality and sufficiency of all steps taken and to be taken by each
party in carrying out this Agreement shall not have been approved by the
respective party's counsel, which approval shall not be unreasonably withheld.
(iii) If a party breaches any representation, warranty, covenant or obligation
of such party set forth herein and such breach is not corrected within ten days
of receiving written notice from the other party of such breach.
ARTICLE IX
MISCELLANEOUS
9.01 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
9.02 No Oral Change. This Agreement and any provision hereof, may not
be waived, changed, modified, or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
9.03 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to insist
in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future of
any such provisions, convenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision hereof
shall not be deemed a waiver of such breach or failure, and (iii) no waiver by
any party of one breach by another party shall be construed as a waiver with
respect to any other or subsequent breach.
<PAGE>
9.04 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
9.05 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements,
understandings and the letters of intent between the parties.
9.06 State Law. This Agreement and its application shall be governed
by the laws of the State of Florida.
9.07 Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.08 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
USA Service Systems Inc.
George Pursglove
USA Service Systems, Inc.
10770 Wiles Road
Coral Springs, Florida 33076
(954) 752-4289
With a copy to:
East Coast Beverage Corp.
East Coast Beverage
1750 University Drive, Suite 117
Coral Springs, Florida 33071
(954) 796-8060
(954) 796-0802 (fax)
With a copy to:
William T. Hart, Esq.
Hart & Trinen, LLP
1624 Washington Street
Denver, Colorado 80203
303-839-0061
303-839-5414 (fax)
<PAGE>
9.09 Binding Effect. This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
9.10 Effect of Closing. All representations, warranties, covenants, and
agreements of the parties contained in this Agreement, or in any instrument,
certificate, opinion, or other writing provided for in it, shall survive the
closing of this Agreement.
9.ll Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein. Neither party will
intentionally take any action, or omit to take any action, which will cause a
breach of such party's obligations pursuant to this Agreement.
9.12 Expenses. Each of the parties hereto agrees to pay all of its own
expenses (including without limitation, attorneys' and accountants' fees)
incurred in connection with this Agreement, the transactions contemplated herein
and negotiations leading to the same and the preparations made for carrying the
same into effect. Each of the parties expressly represents and warrants that no
finder or broker has been involved in this transaction and each party agrees to
indemnify and hold the other party harmless from any commission, fee or claim of
any person, firm or corporation employed or retained by such party (or claiming
to be employed or retained by such party) to bring about or represent such party
in the transactions contemplated by this Agreement.
<PAGE>
AGREED TO AND ACCEPTED as of the date first above written.
USA Service Systems Inc.
By _________________________
George Pursglove, President
East Coast Beverage Corp.
By ___________________________
John Calabrese, Chief Executive Officer
<PAGE>
AGREED TO AND ACCEPTED as to Articles I and III only:
_________________________
John Calabrese
________________________
W.R. Smith
________________________
Arnold Rosen
_________________________
Sachiko Miwa
_________________________
Steven R. Marks
W.R. Smith Profit Trust
By __________________
Sanford I. Litchman Trust
By _____________________
Bonnie Rosen I.R.A. Trust
By ______________________
________________________
Edith G. Osmon
Arnold L. Rosen I.R.A. Trust
By _______________________
