NOTICE TO THE SHAREHOLDERS OF USA SERVICE SYSTEMS, INC.
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:
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.
<PAGE>
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)
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Net Profit $ 531,670
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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 1990
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.
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.
<PAGE>
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:
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.
<PAGE>
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.
<PAGE>
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.
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
<PAGE>
Shares of
Name and Address Common Stock Percent of Class
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 61.8%
as a Group (6 persons)
(1) Includes shares held by Mr. Rosen, Mr. Rosen's wife, and their respective
IRA accounts.
