<PAGE> 1
As filed with the Securities and Exchange Commission on July ___, 1997
Registration No. _________
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SFORZA ENTERPRISES INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
Florida 5812 65-0580931
<S> <C> <C>
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
330 Clematis Street #211
West Palm Beach, Florida 33401
(561) 802-3535
(Address and telephone number of principal executive offices)
Mark H. Mirkin, Esq.
Mirkin & Woolf, P.A.
1700 Palm Beach Lakes Boulevard #580
West Palm Beach, Florida 33401
(561) 687-4460
(Name, address and telephone number of agent for service)
with a copy to:
Scott W. Alderton, Esq.
Troop Meisinger Steuber & Pasich LLP
10940 Wilshire Boulevard
Los Angeles, California 90024-3902
(310) 824-7000
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE> 2
CALCULATION OF REGISTRATION FEE
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===================================================================================================
TITLE OF EACH PROPOSED PROPOSED
CLASS OF SEC- MAXIMUM OF- MAXIMUM AG- AMOUNT OF
URITIES TO BE AMOUNT TO BE FERING PRICE GREGATE OF- REGISTRATION
REGISTERED REGISTERED PER UNIT(1) FERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock
(2)(3) 920,000 $ 5.25 $ 4,830,000.00 $1,463.63
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Warrants(2)(4) 920,000 $ 0.25 $ 230,000.00 $ 69.70
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Common Stock
Underlying War-
rants(5) 920,000 $ 5.25 $ 4,830,000.00 $1,463.63
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Underwriter's
Option 80,000 $0.001 $ 80.00 ---
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Common Stock
Underlying
Underwriter's
Option 80,000 $ 6.60 $ 528,000.00 $ 160.00
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Warrants Underly-
ing Underwriter's
Option 80,000 --- --- ---
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Common Stock
Underlying War-
rants Included in
Underwriter's
Option 80,000 $ 6.60 $ 528,000.00 $ 160.00
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Total Registration
Fee --- --- $10,946,080.00 $3,316.96
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) The Common Stock and Warrants will be initially registered together.
(3) Includes 120,000 shares of Common Stock issuable upon exercise of the
Underwriter's Over-Allotment Option.
(4) Includes 120,000 Warrants contained in the Underwriter's Over-Allotment
Option.
(5) Includes 120,000 shares of Common Stock issuable upon exercise of the
Warrants contained in the Underwriter's Over-Allotment Option.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGIS-
TRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 3
PRELIMINARY PROSPECTUS DATED ____________, 1997
SUBJECT TO COMPLETION
SFORZA ENTERPRISES INC.
800,000 UNITS
EACH UNIT CONTAINING ONE SHARE OF COMMON STOCK AND ONE REDEEMABLE WARRANT
Sforza Enterprises Inc., a Florida corporation (the "Company"), is
offering hereby 800,000 units (the "Units") each containing one share of common
stock, par value $0.01 per share (the "Common Stock"), and one redeemable Common
Stock purchase warrant (the "Warrants"). The Units, the Common Stock and the
Warrants are sometimes collectively referred to as the "Securities". Each
Warrant entitles the registered holder thereof (a "Warrantholder") to purchase
one share of Common Stock at an exercise price of $5.25 at any time during the
period commencing on the effective date of this Prospectus and terminating five
years thereafter (the "Warrant Exercise Period"). All, but not less than all, of
the Warrants are subject to redemption by the Company, at $0.01 per Warrant, at
any time during the Warrant Exercise Period on 30 days prior written notice to
the Warrantholders if the per share closing bid price of the Common Stock as
reported by NASDAQ or the National Quotation Bureau, as the case may be, equals
or exceeds $7.50 (136% of the Unit public offering price) for any 20 consecutive
trading days ending within five days of the notice of redemption. See
"Description of Securities".
Prior to this offering, there has been no public market for the Units,
the Common Stock or the Warrants and there can be no assurance that any such
market will develop or, if developed, that it will be sustained. It is
anticipated that the Units, the Common Stock and the Warrants will be quoted on
the NASDAQ SmallCap Market under the symbols "SFZAU", "SFZA" and "SFZAW",
respectively. For a discussion of the factors considered in determining the
initial public offering price of the Units, see "Underwriting".
------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGIN-
NING ON PAGE 9 AND "DILUTION" BEGINNING ON PAGE 17 FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY INVESTORS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECUR-
ITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================
Underwriting Dis-
counts and Com- Proceeds to
Price to Public missions(1) Company(2)
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<S> <C> <C> <C>
Per Unit $ 5.50 $ 0.55 $ 4.95
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Totals(3) $4,400,000.00 $440,000.00 $3,960,000.00
=======================================================================================
</TABLE>
(1) The Company has agreed to issue and sell to the Underwriter, for
nominal consideration, warrants to purchase 80,000 Units exercisable at
$6.60 per Unit (120% of the Price to Public) and to pay the Underwriter
a non-accountable expense allowance equal to 3% of the aggregate gross
proceeds from sale of the Units. The Company has also agreed to
indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting".
[FOOTNOTES CONTINUE ON NEXT PAGE]
<PAGE> 4
(2) Before deducting offering expenses payable by the Company estimated at
approximately $225,000, including the non-accountable expense
allowance.
(3) The Company has granted the Underwriter a 60-day option to purchase an
aggregate of up to 120,000 additional Units solely to cover
over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $5,060,000.00, $506,000.00 and
$4,554,000.00, respectively. See "Underwriting".
------------------
The Units are being offered by the Underwriter subject to prior sale when, as
and if delivered to and accepted by it, and subject to the right of the
Underwriter to withdraw, cancel or modify this offering and reject any order in
whole or in part. It is expected that delivery of the certificates representing
the Units will be made against payment therefor at the office of Joseph Charles
& Associates, Inc., Beverly Hills, California or through the facilities of The
Depositary Trust Company on or about September ___, 1997.
JOSEPH CHARLES & ASSOCIATES, INC.
THE DATE OF THIS PROSPECTUS IS ______________, 1997
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<PAGE> 5
[PHOTO OR RENDERING]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES, INCLUDING
PURCHASES OF THE SECURITIES TO STABILIZE THE MARKET PRICE, PURCHASES OF THE
SECURITIES TO COVER SOME OR ALL OF A SHORT POSITION IN THE SECURITIES MAINTAINED
BY THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING".
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<PAGE> 6
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD
BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING FINANCIAL
INFORMATION, INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
THE "COMPANY" REFERS TO SFORZA ENTERPRISES INC. AND ITS WHOLLY OWNED
SUBSIDIARIES: CASTLE ROOM, INC., CLEMATIS BISTRO CORPORATION AND SUSHI
ENTERPRISES, INC.
THE COMPANY
The Company has three wholly-owned subsidiaries, each of which owns one
restaurant (the West Palm Beach Restaurants), and has entered into an agreement
to acquire 50 percent equity interests in four companies, each of which owns one
restaurant (the Max's Grille Restaurants). Currently, two of the West Palm Beach
Restaurants are open and one of the Max's Grille Restaurants is open.
The Company's strategy is to own upscale, moderately priced, casual dining
restaurants that are known for providing quality, affordable, contemporary food,
service and ambiance in South Florida. Ultimately the Company plans to open
restaurants in selected markets outside of South Florida.
Unique Restaurant Concepts, Inc. ("URCI"), a professional developer and manager
of restaurants and the owner of the Max's Grille Restaurants, operates the
current and will operate the future West Palm Beach Restaurants and Max's Grille
Restaurants owned by the Company.
THE WEST PALM BEACH RESTAURANTS
SFORZA RISTORANTE. Sforza Ristorante is a full-service, midpriced, casual dining
northern Italian restaurant which opened in February 1996 on Clematis Street in
downtown West Palm Beach, Florida. Sforza Ristorante offers an extensive menu
featuring a wide variety of seafood, chicken and pasta dishes, appetizers,
salads and desserts and full bar service. The restaurant serves generous
portions at moderate prices while providing friendly and efficient service in a
high-energy casual atmosphere intended to appeal to a broad customer base,
particularly young upscale adults. The restaurant has generated a high level of
repeat business and customer loyalty.
Sforza Ristorante reflects an elegant yet casual European concept featuring a
plush red and gold decor. The eclectic
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<PAGE> 7
design blends the ambiance of renaissance Tuscany with the energy of a
rejuvenated urban area. Lush fabrics and red velvet drapery treatments are
enhanced by unique hand faux finished walls. Contemporary styled sconces and
pendants illuminate the dining and bar areas with soft, inviting light,
enhancing the casual upscale dining experience and establishing a distinct
identity for the restaurant.
MY MARTINI GRILLE. My Martini Grille is a full-service upscale grill which
opened in February 1997 on Clematis Street in downtown West Palm Beach, Florida,
next to Sforza Ristorante. My Martini Grille was designed to serve a
sophisticated clientele, including business diners. The My Martini Grille
concept embraces an elegant and timeless early twentieth century motif. My
Martini Grille is Gotham City revisited. This sleek art nouveau restaurant and
bar recaptures the sophisticated allure of the martini culture. Smooth cocktails
are complemented with deep mahogany walls and rich purples and golds. Stylish
stainless steel accents mix with unique Italian light fixtures to create a
relaxed sexy elegance. All of the elements enhance the dining experience and
establish a distinct identity for My Martini Grille.
PLANNED SUSHI RESTAURANT. The Company plans to open a full-service, mid-priced
casual dining sushi restaurant in November 1997 just off Clematis Street in
downtown West Palm Beach, Florida, next to My Martini Grille. The planned
restaurant has been designed to reflect Tokyo in the year 2050. An ocean green
tile floor, blonde maple sushi bar and stainless steel highlights will create a
unique techno atmosphere. Japanese animation and comic books will assume larger
than life scale in artwork incorporated into the design and construction. Large
TV screens over the sushi bar will transform Godzilla, Ultra Man and Speed Racer
into animated art. The funky, innovative design will make dining an experience,
not just fish and rice.
THE MAX'S GRILLE RESTAURANTS
The Company intends to use the bulk of the proceeds of this offering to acquire
50 percent equity interests in the entities that own Max's Grille restaurants
located in the Beach Place and Las Olas Riverfront developments in Fort
Lauderdale, Florida, in Weston, Florida and the entity that will own the next
Max's Grille to be developed, the location of which is to be determined. Max's
Beach Place Grille opened in May, 1997. The Las Olas Riverfront and Weston
restaurants are expected to open in early 1998.
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<PAGE> 8
Max's Grille in Boca Raton, Florida, the model for the Max's Grille Restaurants,
incorporates casual dining, moderate prices and a cosmopolitan ambiance in a
comfortable relaxed ambiance. Opened in 1991, the 225-seat restaurant has been
serving a mix of new American and Continental cuisine with a wide variety of
wines and a full-service bar. The decor features a free-standing mahogany bar,
high ceilings with star chandeliers and floating window treatments. Its fresh,
simply-prepared dishes are imaginative but not intimidating, enhanced with the
flavors of Florida, California, New Orleans, Europe and the Pacific.
The Max's Grille concept was first replicated in 1995 in Celebration, Florida,
The Walt Disney Co.'s planned community near Orlando, Florida.
RESTAURANT MANAGEMENT
The Company believes that achieving customer satisfaction by providing
knowledgeable, friendly, efficient service is critical to its restaurants'
long-term success. Consequently, the Company has contracted with URCI to operate
all of its restaurants (including the Max's Grille Restaurants to be developed
with the proceeds of this offering). In order to foster the level of customer
satisfaction desired by the Company, URCI's training program teaches restaurant
managers to promote the Company's team-oriented atmosphere among restaurant
employees, with emphasis on preparing and serving food in accordance with strict
standards and providing friendly, courteous and attentive service. The Company
believes that the quality and training of its restaurant managers and staff
results in friendly, courteous, efficient service which contributes to a casual
and pleasurable dining experience for the customer. See "Business -- Restaurant
Management".
THE OFFERING
Securities offered hereby........... 800,000 Units, each Unit consisting of
one Share and one Warrant, at an init-
ial public offering price of $5.50 per
Unit. Each Warrant entitles the regis-
tered holder thereof to purchase at any
time during the Warrant Exercise Period
one share of Common Stock at an exer-
cise price of $5.25 per share. The
Warrants are subject to redemption by
the Company for $0.01 per Warrant at
any time during the Warrant Exercise
Period, on 30 days written notice, pro-
vided that the closing bid price of the
Common Stock equals or exceeds $7.50
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<PAGE> 9
per share for any 20 consecutive trad-
ing days ending within five days of the
notice of redemption to the
Warrantholders.
Outstanding Securities BEFORE the
Offering:
Common Stock(1)..................... 2,040,000 Shares
Options and Warrants................ 150,000
Preferred Stock..................... 160,000 Shares
Outstanding Securities AFTER the
Offering:
Common Stock........................ 2,920,000 Shares(2)
Options and Warrants................ 1,054,167(3)
Preferred Stock..................... 0
Proposed Symbols
Units............................... SFZAU
Common Stock........................ SFZA
Warrants............................ SFZAW
Use of Proceeds..................... The net proceeds (after payment of un-
derwriting discounts and a non-account-
able expense allowance to the Under-
writer and other expenses of the Offer-
ing) to the Company from the sale of
the Units offered hereby are expected
to be approximately $3,625,000 (assum-
ing an initial public offering price of
$5.50 per Unit), $4,200,000 if the
Underwriter's Over-Allotment Option is
exercised in full. Such net proceeds
will be used to finance the construc-
tion, development and opening of four
restaurants that replicate Max's Grille
of Boca Raton, Florida, to repay cer-
tain short-term indebtedness and ac-
crued interest thereon, to redeem out-
standing preferred stock and for gener-
al corporate purposes. See "Use of
Proceeds".
Risk Factors........................ An investment in the Securities offered
hereby is speculative and involves a
high degree of risk. Purchasers of the
Units offered hereby will experience
immediate and substantial dilution with
respect to their investment. See "Risk
Factors".
- --------------------------------
(1) Does not include shares of Common Stock issuable upon the exercise of
(a) the Warrants; (b) the Underwriter's Over-Allotment Option; or (c)
options granted to the Underwriter to purchase up to 80,000 Units.
(2) Excludes exercise of any options or warrants but includes conversion of
80,000 shares of the Series A Preferred Stock.
(3) Excludes the Underwriter's Option but includes the Warrants comprising
the Units and the warrant to be issued to Company counsel.
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<PAGE> 10
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
Year Ended March 31,
December 31, 1996 1996 1997
----------------- --------- ----------
(unaudited)
<S> <C> <C> <C>
SELECTED STATEMENT OF
OPERATIONS DATA:
Net sales $2,333,530 $ 363,030 $1,394,298
---------- ---------- ----------
Cost and expenses:
Cost of sales 1,299,501 212,028 766,949
Operating expenses 881,856 135,817 623,601
Interest expense, net - - 10,248
---------- ---------- ----------
Total cost and expenses 2,181,357 347,845 1,400,798
---------- ---------- ----------
Operating income (loss) 152,173 15,185 (6,500)
Other income, net 3,051 368 -
---------- ---------- ----------
Income (loss) before
income taxes 155,224 15,553 (6,500)
Income tax (expense)
benefit (9,319) - 2,200
---------- ---------- ----------
Net income (loss) $ 145,905 $ 15,553 $ (4,300)
========== ========== ==========
Earnings (net loss) per
common share(1):
Primary $ 0.07 $ 0.01 $ -
========== ========== ==========
Fully diluted $ 0.07 $ 0.01 $ -
========== ========== ==========
Weighted average common
shares outstanding:
Primary 2,026,328 1,986,363 2,076,136
========== ========== ==========
Fully diluted 2,146,328 2,106,363 2,196,136
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ----------------------------
(unaudited)
Actual As Adjusted(2)
-------- -------------
<S> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
CASH AND CASH EQUIVALENTS $ 202,639 $ 194,781 $3,294,781
WORKING CAPITAL (DEFICIT) (59,502) (216,606) 2,883,394
TOTAL ASSETS 1,086,151 1,503,728 4,603,728
TOTAL LIABILITIES 462,940 853,567 603,567
TOTAL SHAREHOLDERS'
EQUITY 623,211 650,161 4,400,161
</TABLE>
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(1) See "Selected Financial Data" for an explanation of the computations of
primary and fully diluted earnings (net loss) per common share.
(2) As adjusted to give effect to (i) the sale of 800,000 Units offered by
the Company hereby at the initial offering price of $5.50 per Unit
after deducting underwriting discounts and commissions and estimated
offering expenses, (ii) the issuance of 160,000 shares of Series A
Preferred Stock, (iii) the conversion of 80,000 shares of Series A
Preferred Stock into Common Stock of the Company, (iv) the redemption
of 80,000 shares of Series A Preferred Stock, (v) the conversion of a
promissory note into 40,000 shares of Common Stock, and (vi) the
repayment of the $125,000 note payable. See "Use of Proceeds".
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<PAGE> 11
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. EACH PROSPECTIVE
INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN
INVESTMENT DECISION.
LIMITED OPERATING HISTORY. The Company was formed in July 1996 to serve as a
holding company for Castle Room, Inc., which was formed in May 1995, Clematis
Bistro Corporation, which was formed in April 1996, and Sushi Enterprises, Inc.,
which was formed in July 1996. The Company's initial restaurant, Sforza
Ristorante, was opened in February 1996 by Castle Room, Inc., then owned by Dale
J. Brisson and Joseph C. Visconti. The Company's second restaurant, My Martini
Grille, was opened in February 1997 by Clematis Bistro Corporation. Accordingly,
the Company has a limited relevant operating history upon which an evaluation of
its current operations and prospects can be made. The Company's prospects must
be considered in light of the risks, expenses and difficulties frequently
encountered in the operation of a new business in the highly competitive
restaurant industry, which is characterized by a high failure rate. There can be
no assurance that the Company's rate of revenue growth will continue in the
future or that the Company's operations will be profitable. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Selected Financial Data".
SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON PROCEEDS OF THIS OFFERING; NEED
FOR ADDITIONAL FINANCING. The Company's capital requirements for the operations
of its existing restaurants and proposed restaurants are significant. The
Company will be dependent upon the proceeds of this offering to fund its
proposed expansion. Although the pre-opening costs, including capital
improvements, of each Max's Grille Restaurant are estimated to exceed
$1,000,000, landlord contributions for tenant improvements are expected to
decrease those costs. If the proceeds of this offering prove to be insufficient
to fund the Company's proposed expansion, the Company could be required to
modify its proposed expansion plans or to seek additional financing from sources
not currently identified. The Company has no current commitments or arrangements
with respect to, or current sources of, such additional financing. There can be
no assurance that such financing will be available to the Company when needed,
on acceptable terms, or at all. Any inability to obtain such financing or other
additional financing when required could have a material adverse effect on the
Company. Any additional equity financing may involve substantial dilution to the
interests of the Company's shareholders. See "Use of Proceeds" and "Business".
DEPENDENCE UPON LIMITED RESTAURANT BASE; PROPOSED EXPANSION. In light of the
Company's current portfolio of two wholly-owned restaurants and expected
year-end 1997 portfolio of three wholly-owned restaurants and one partly-owned
restaurant, the lack of
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<PAGE> 12
success or closing of any of the restaurants could have an adverse effect upon
the financial condition and results of operations of the Company.
The Company intends to open a new sushi restaurant in November 1997. With the
proceeds of this offering, the Company intends to acquire 50 percent equity
interests in four entities, each of which will own a Max's Grille Restaurant,
one of which opened in May 1997 and three of which are anticipated to open in
1998. The Company's profitability will be dependent on, among other things, (i)
achieving positive cash flow from operations, (ii) market acceptance for the
Company's sushi concept, (iii) timely development and construction of the Max's
Grille Restaurants, (iv) securing of required governmental permits and approvals
therefor, (v) hiring, training and retention of skilled management and other
personnel, (vi) the ability to integrate the new restaurants into its
operations, and (vii) the general ability successfully to manage growth, if any,
(including successfully monitoring the restaurants, controlling costs and
maintaining effective quality controls). Three of the four proposed Max's Grille
Restaurants and the Company's planned sushi restaurant are not yet in operation
and there can be no assurance that the Company will be successful in its
proposed expansion. Additionally, there can be no assurance that the Company's
planned expansion will not result in reduced sales at existing restaurants to
the benefit of the newly opened restaurants. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business -- The
West Palm Beach Restaurants" and "The Max's Grille Restaurants".
GEOGRAPHIC CONCENTRATION; FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY. The
Company's existing restaurants and its planned sushi restaurant (the "West
Palm Beach Restaurants") are located in adjacent storefronts in downtown West
Palm Beach, Florida. The restaurant interests to be acquired with the proceeds
of the offering will also be developed in South Florida (the "Max's Grille
Restaurants"). The Company thus faces risks tied to a single geographic region,
including seasonality and the health of South Florida's economy and the tourism
industry, as well as the continuing popularity of downtown West Palm Beach as a
social gathering spot. Furthermore, given the Company's geographic
concentration, adverse publicity relating to the Company's restaurants could
have a more pronounced adverse effect on the Company's operating results than
might be the case if the Company's restaurants were geographically dispersed. A
decline in tourism in South Florida, or in general economic conditions, which
would likely affect the South Florida economy or the tourism industry, could
have a material adverse effect on the Company's operations and prospects. In
addition, the geographic concentration has the result of causing the Company's
restaurants to compete with each other for the same customers, which would not
be the case if the restaurants were more geographically dispersed. See "Manage-
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<PAGE> 13
ment's Discussion and Analysis of Financial Condition and Results
of Operations".
DEPENDENCE ON MANAGEMENT COMPANY; FAILURE TO ATTRACT QUALIFIED PERSONNEL. The
success of the Company is largely dependent upon the efforts of the management
company, Unique Restaurant Concepts, Inc. ("URCI"), operating the Company's two
existing restaurants. URCI also manages Max's Beach Place Grille, one of the
Max's Grille Restaurants, and will manage all of the West Palm Beach Restaurants
and the proposed Max's Grille Restaurants. The Management Agreement in effect
between the Company and URCI runs through May 1998 for Sforza Ristorante and My
Martini Grille. If it is not renewed, the Company would need to hire another
management company to manage its restaurants. Although the Company has
demonstrated an ability to operate a restaurant, having operated Sforza
Ristorante during the first year of its existence, and although Company
personnel have been studying the procedures utilized by URCI, there can be no
assurance that the cessation of management by URCI would not have a material
adverse effect on the Company.
The Company believes that it will need, both in the short-term and long-term, to
hire additional qualified administrative and management personnel to manage and
support planned expansion. Competition for qualified employees in the restaurant
industry is intense, and the Company may not be able to find suitable personnel
to meet its immediate needs. The inability to recruit and hire necessary
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations.
RISKS OF GROWTH AND EXPANSION. The Company is in an early stage of development
and has yet to establish substantial internal management, personnel and other
resources. Any measurable growth in the Company's business will result in
additional demands on its infrastructure, and will place a significant strain on
the Company's management, administrative, operational, financial and technical
resources and increased demands on its systems and controls. There can be no
assurance that the Company's resources will be adequate to support future
operations and growth. The inability to continue to upgrade the operating and
financial control systems, the emergence of unexpected expansion difficulties or
failure to manage the Company's proposed expansion properly could have a
material adverse effect on the Company's business, financial condition and
results of operations.
FLUCTUATIONS IN FOOD AND OTHER COSTS. The Company's profitability is dependent
on its ability to anticipate and react to increases in food, labor, employee
benefits and similar costs over which the Company has limited control. During
its limited operating history, the Company has been able to anticipate and react
to fluctuations in food costs at its two existing restaurants
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<PAGE> 14
through selected menu price adjustments. However, there can be no assurance that
the Company will be able to continue to anticipate and respond to supply and
price fluctuations in the future, and significantly increased costs in the
future could have a material adverse effect on the Company's operations. See
"Business".
SEAFOOD SUPPLY AND QUALITY. The Company plans to open a sushi restaurant in
November 1997. Sushi is a Japanese style of seafood. All of the other Company
restaurants offer traditionally-prepared seafood. In recent years, the
availability of certain types of seafood has fluctuated, resulting in
corresponding fluctuations in prices. Substantial price increases could have a
material adverse effect on the Company. Failure to obtain adequate supplies of
seafood could have a material adverse effect on the Company's operations and
profitability. Seafood contamination, a greater risk in uncooked seafood such as
sushi than in cooked seafood, or consumer perception of inadequate seafood
quality, in the industry in general or as to the Company specifically, could
have a material adverse effect on the Company. See "Business".
COMPETITION. The restaurant industry, particularly the full-service casual
dining segment, is intensely competitive with respect to price, service, food
quality (including taste, freshness, and nutritional value), ambiance and
location, as well as other factors. There are many well-established competitors
that possess greater financial, marketing, personnel and other resources than
the Company. Many of the Company's competitors have achieved significant
national, regional and local brand name and product recognition and engage in
extensive advertising and promotional programs, both generally and in response
to efforts by additional competitors to enter new markets or introduce new
products. These competitors include national, regional and local full-service
casual dining chains. The Company believes that the full-service casual dining
segment is likely to attract a significant number of new entrants. The Company
can also be expected to face competition from a broad range of other restaurants
and food service establishments, including fast food restaurants which
specialize in a variety of cuisines.
The full-service restaurant industry is also characterized by the frequent
introduction of new food products, accompanied by substantial promotional
campaigns. In recent years, numerous companies in the full-service restaurant
industry have introduced products intended to capitalize on growing consumer
preference for food products which are, or are perceived to be, healthy,
nutritious, low in calories and low in fat content. It can be expected that the
Company will be subject to increasing competition from companies whose products
or marketing strategies address these consumer preferences. While the Company
believes that it offers a broad variety of quality food products, there
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<PAGE> 15
can be no assurance that consumers will regard the Company's products as
sufficiently distinguishable from competitive products, that substantially
equivalent food products will not be introduced by the Company's competitors or
that the Company will be able to compete successfully. Additionally, because of
their geographic concentration, the Company's restaurants compete with each
other for the same customers. Consequently, even when a customer patronizes one
of the Company's restaurants, the Company's operations could be impacted by
shifting of customers from a higher priced Company restaurant to a lower priced
one, or from one operated by a wholly-owned subsidiary to one operated by a
partly-owned subsidiary, either of which events could adversely affect the
Company's operating results. See "Business -- Competition".
CERTAIN FACTORS AFFECTING THE FULL-SERVICE RESTAURANT INDUSTRY. The Company will
be required to respond to various factors affecting the restaurant industry
including changes in consumer preferences, tastes and eating habits; demographic
trends and traffic patterns; increases in food and labor costs; inflation; and
national, regional and local economic conditions. A number of full-service
restaurant companies have experienced declining growth rates resulting from
general market saturation, in response to which certain of these companies have
adopted "value pricing" strategies. These strategies could have the effect of
drawing customers away from restaurants such as those owned by the Company that
do not engage in discount pricing and could also negatively affect the Company's
operating margins. The continued or sustained practice of price discounting in
the restaurant industry could have an adverse effect on the results of
operations of the Company. See "Business -- Competition".
POTENTIAL LIABILITY FOR SALE OF ALCOHOLIC BEVERAGES. The Company's restaurants
serve alcoholic beverages and consequently the Company is subject to "dram-shop"
laws, which generally provide a person injured by an intoxicated person the
right to recover damages from an establishment that wrongfully served alcoholic
beverages to the intoxicated person. Florida law currently provides that a
vendor of alcoholic beverages may be held liable in a civil cause of action for
injury or damage caused by or resulting from the intoxication of a minor (under
21 years of age) if the vendor wilfully, knowingly and unlawfully sells or
furnishes alcoholic beverages to the minor and knows that the minor will soon
thereafter be driving a motor vehicle. A vendor may be similarly held liable if
it knowingly provides alcoholic beverages to a person who is in a noticeable
state of intoxication, knows that the person will soon thereafter be driving a
motor vehicle and injury or damage is caused by that person. In addition,
significant national attention is focused on the problem of drunk driving, which
could result in the adoption of additional legislation and increased potential
liability of the Company for damage or injury caused by its customers. Such
liability is uninsurable. See "Business -- Governmental Regulation".
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<PAGE> 16
SERVICEMARK PROTECTION AND PROPRIETARY INFORMATION. The Company has obtained
Florida servicemark registration for Sforza Ristorante and has applied for
registration of My Martini Grille. The Company believes that its servicemarks
have significant value and are essential to its ability to create demand for and
awareness of its restaurants. There can be no assurance, however, that the
Company's servicemarks do not or will not violate the proprietary rights of
others, that they would be upheld if challenged or that the Company, in such an
event, would not be prevented from using its servicemarks, any of which events
could have a material adverse effect on the Company. In addition, there can be
no assurance that the Company will have the financial resources necessary to
enforce or defend its servicemarks. The Company also relies on trade secrets and
proprietary know-how to protect its concepts and recipes. However, such methods
may not afford complete protection and there can be no assurance that others
will not independently develop similar know-how or obtain access to the
Company's know-how, concepts and recipes. Furthermore, although the Company
expects to have confidentiality and non-competition agreements with certain of
its executives and key management, there can be no assurance that such
agreements will adequately protect the Company's trade secrets. See "Business --
Servicemarks and Proprietary Information".
GOVERNMENT REGULATION. The Company is subject to extensive state and local
government regulation by various governmental agencies, including state and
local licensing, zoning, land use, construction and environmental regulations
and various regulations relating to the sale of food and alcoholic beverages,
sanitation, disposal of refuse and waste products, public health, safety and
fire standards. The Company's restaurants are subject to periodic inspections by
governmental agencies to ensure conformity with such regulations.
Although seafood is not currently subject to a nationwide program of inspection
by the U.S. Food and Drug Administration (the "FDA"), the FDA has in the past
proposed such a program for inspection of seafood suppliers and processors, but
not restaurants. If such a program were to be implemented, the Company's seafood
costs could increase as a result of the increased expense to seafood suppliers
and processors in complying with such a program. There can be no assurance that
such costs could be passed on to customers.
Difficulties or failure in obtaining required licensing or other regulatory
approvals could delay or prevent the opening of a new restaurant, and the
suspension of, or inability to renew a license at an existing restaurant, would
adversely affect the operations of the Company. Restaurant operating costs are
also affected by other government actions which are beyond the Company's
control, including increases in the minimum hourly wage requirements, workers
compensation insurance rates, health care insur-
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<PAGE> 17
ance costs and unemployment and other taxes. These and other initiatives
could adversely affect the Company, as well as the restaurant industry in
general. See "Business -- Governmental Regulation".
INSURANCE AND POTENTIAL LIABILITY. The Company maintains insurance, including
insurance relating to personal injury, in amounts which the Company currently
considers adequate. Nevertheless, a partially or completely uninsured claim
against the Company, if successful, could have a material adverse effect on the
Company.
CONTROL BY MANAGEMENT; BENEFITS TO RELATED PARTIES. Upon consummation of this
offering, executive officers and directors of the Company beneficially will own,
in the aggregate, approximately 55% of the Company's outstanding Common Stock.
As a result, such persons, acting together, will be able to control the Company,
cause the dissolution, merger or sale of the assets of the Company, and
generally direct the affairs of the Company. See "Management" and "Principal
Shareholders".
SHARES ELIGIBLE FOR FUTURE SALE. Upon the consummation of this offering, the
Company will have 3,040,000 shares of Common Stock outstanding (including the
Underwriter's Over-Allotment Option). The shares of Common Stock being offered
hereby, unless purchased by affiliates of the Company, will be freely tradeable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"). The remaining shares of Common Stock are deemed
to be "restricted securities", as that term is defined in Rule 144 promulgated
under the Securities Act, and may only be sold pursuant to an effective
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act. In addition, the holders of such shares of Common Stock have
entered into lock-up agreements restricting the sale or disposition of such
shares of Common Stock for 12 months from the date of this Prospectus without
the prior written consent of the underwriter. Accordingly, subject to Rule 144
volume limitations, 2,120,000 shares of Common Stock may be sold in the public
market beginning in September 1998, which may adversely affect prevailing prices
for the Common Stock and could impair the Company's ability to raise additional
capital through the sale of its equity securities. See "Shares Eligible for
Future Sale" and "Underwriting".
NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF PUBLIC OFFERING PRICE;
POSSIBLE VOLATILITY OF COMMON STOCK PRICE. Prior to this offering, there has
been no public trading market for the Company's Common Stock. Consequently, the
proposed initial public offering price of the Common Stock has been determined
by negotiation between the Company and the "qualified independent underwriter"
and does not necessarily reflect the Company's book value or other established
criteria of value. Although the Com-
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<PAGE> 18
pany intends to apply for listing on the NASDAQ SmallCap Market, there can be no
assurance that a regular trading market for the Common Stock will develop after
this offering or that, if developed, it will be sustained. The market price of
the Common Stock following the consummation of this offering may be highly
volatile as has been the case with the securities of many emerging companies.
Factors such as the Company's financial results, quarter-to-quarter variations
in operating results, announcements by the Company or its competitors, general
market trends and various factors affecting the restaurant industry generally,
may have a significant impact on the market price of the Common Stock. In
addition, in recent years, the stock market has experienced a high level of
price and volume volatility and market prices for the stock of many companies
have experienced wide fluctuations which have not necessarily been related to
the operating performances of such companies. See "Underwriting".
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS. The
Company will be able to issue shares of Common Stock upon exercise of the
Warrants only if there is a current prospectus relating to such Common Stock
under an effective registration statement filed with the Securities and Exchange
Commission and only if such shares of Common Stock are qualified for sale or
exempt from qualification under applicable state securities laws of the
jurisdictions in which the various Warrantholders reside. Although the Company
has agreed to use its best efforts to meet such regulatory requirements, there
can be no assurance that the Company will be able to do so. Although the
Warrants will not knowingly be sold to purchasers in jurisdictions in which the
Warrants are not registered or otherwise qualified for sale, purchasers may buy
Warrants in the aftermarket or may move to jurisdictions in which the Common
Stock issuable upon exercise of the Warrants is not so registered or qualified.
In this event, the Company would be unable to issue shares of Common Stock to
those Warrantholders upon exercise of the Warrants unless and until the Common
Stock issuable upon exercise of the Warrants is qualified for sale or exempt
from qualification in jurisdictions in which such holders reside. Accordingly,
the Warrants may be deprived of any value if a then current prospectus covering
the Common Stock issuable upon exercise of the Warrants is not effective
pursuant to an effective registration statement or if such Common Stock is not
qualified or exempt from qualification in the jurisdictions in which the
Warrantholders reside. There can be no assurance that the Company will be able
to effect any required registration or qualification.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock and
Warrants offered hereby are estimated to be approximately $3,625,000 ($4,200,000
if the Underwriter's Over-Allotment Option is fully exercised).
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<PAGE> 19
The Company expects to use $3,000,000 of the net proceeds to cover the
pre-opening costs and expenses (including construction and equipment) of four
Max's Grille Restaurants. On July 1, 1997 the Company entered into an agreement
with URCI pursuant to which the Company committed $3,000,000 in net proceeds of
this offering in exchange for 50 percent equity interests in the entities that
own or will own the four Max's Grille Restaurants. See "Business -- The Max's
Grille Restaurants".
The Company expects to use $400,000 of the net proceeds to redeem its
outstanding Series A Preferred Stock. See "Description of Securities".
The Company expects to use $125,000 of the net proceeds to repay its debt to
Daniel S. Catalfumo. Mr. Catalfumo is a principal of URCI, owns a construction
company that has built several restaurrants for URCI and which built Max's Beach
Place Grille (one of the Max's Grille Restaurants) and is building the other
Max's Grille Restaurants and is a director of the Company. See "Description of
Securities".
The balance of the net proceeds will be utilized by the Company to cover its
working capital needs.
Proceeds not immediately required for the purposes described above will be
invested principally in short-term bank certificates of deposit, United States
Government obligations, money market instruments or short-term investment grade
securities.
DIVIDEND POLICY
The Company generally has not paid dividends in the past and anticipates that
earnings will be retained by the Company for the operation of its business.
Accordingly, the Company does not anticipate paying cash dividends on the Common
Stock in the foreseeable future. Future financing entered into by the Company
may contain provisions prohibiting the Company's ability to pay dividends.
DILUTION
The difference between the initial public offering price per Unit and the
adjusted net tangible book value per share of Common Stock after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share on any given date is determined by dividing the net tangible book
value of the Company on that date by the number of shares of Common Stock
outstanding on that date.
At March 31, 1997 the pro forma net tangible book value of the Company was
$775,161 or $0.37 per share of Common Stock, after giving effect to $125,000
total proceeds from the partial conver-
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<PAGE> 20
sion of an outstanding promissory note and the conversion of 80,000 shares of
Series A Preferred Stock into 40,000 and 80,000 shares of Common Stock,
respectively. After giving effect to the sale of 920,000 shares of Common Stock
and 920,000 Warrants being offered hereby (including the Underwriter's
Over-Allotment Option) at a combined offering price of $5.50 and the anticipated
application of the net proceeds therefrom, the adjusted net tangible book value
of the Company at March 31, 1997 would have been $4,975,161 or $1.64 per share,
representing an immediate increase in net tangible book value of $1.27 per share
to existing shareholders and an immediate dilution of $3.86 per share to new
investors. The following table illustrates the foregoing information with
respect to dilution to new investors on a per share basis:
Combined public offering price(1)........................................ $5.50
Pro forma net tangible book value per share
at March 31, 1997(2)...................................... $0.37
Increase per share attributable to investors
in this offering.......................................... 1.27
-----
Adjusted net tangible book value after offering.......................... 1.64
-----
Dilution per share to new investors(3)................................... $3.86
=====
- --------------------
(1) Represents the purchase price of one Unit.
(2) Represents net tangible book value, adjusted for conversion of promissory
note of $125,000 into 40,000 shares of Common Stock and adjusted for
conversion of 80,000 shares of Series A Preferred Stock into 80,000 shares
of Common Stock.
(3) Assumes no exercise of options or warrants.
- --------------------
The following table sets forth a comparison of the number of shares of Common
Stock acquired from the Company by the Company's shareholders as of March 31,
1997 and to be acquired from the Company by investors in this offering, the
percentage ownership of such shares, the total consideration paid, the
percentage of total consideration paid and the average price per share.
<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE/UNIT(3)
------------------ --------------------- -----------------
NUMBER PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Existing Shareholders(1) 2,120,000 70% $ 660,000 12% $0.31
New Investors 920,000(2) 30% 5,060,000 88% $5.50
--------- ---- ---------- ----
Total 3,040,000 100% $5,720,000 100%
========= ==== ========== ====
</TABLE>
- ------------------------
(1) Includes conversion of Series A Preferred Stock into 80,000 shares of
Common Stock and conversion of a promissory note into 40,000 shares of
Common Stock.
(2) Includes Underwriter's Over-Allotment Option.
(3) For existing shareholders price is per share of Common Stock. For new
investors, price is per Unit.
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<PAGE> 21
SELECTED FINANCIAL DATA
The following presents selected consolidated financial data of the Company at
the dates and for the periods indicated. The historical operations and balance
sheet data at and for the year ended December 31, 1996 have been derived from
the financial statements of the Company, which have been audited by Templeton &
Company, P.A., independent public accountants, whose report on the consolidated
balance sheet as of December 31, 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended December 31,
1996 and the period May 17, 1995 (inception) to December 31, 1995, is included
elsewhere herein. The historical statement of operations and balance sheet data
at March 31, 1997 and for the three months ended March 31, 1997 and 1996 have
been derived from unaudited consolidated financial statements and include all
adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the Company's financial
statements for these interim periods. The results for the three months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for any other interim period or the entire year ending December 31,
1997. The following selected financial information should be read in conjunction
with the financial statements and the related notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" presented elsewhere herein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE> 22
<TABLE>
<CAPTION>
Year Ended Three Months Ended March 31,
December 31, 1996 1996 1997
----------------- ------------ ---------------
(unaudited)
<S> <C> <C> <C>
SELECTED STATEMENT OF
OPERATIONS DATA:
Net sales $2,333,530 $ 363,030 $1,394,298
---------- ---------- ----------
Cost and expenses:
Cost of sales 1,299,501 212,028 766,949
Operating expenses 881,856 135,817 623,601
Interest expense, net - - 10,248
---------- ---------- ----------
Total cost and expenses 2,181,357 347,845 1,400,798
---------- ---------- ----------
Operating income (loss) 152,173 15,185 (6,500)
Other income, net 3,051 368 -
---------- ---------- ----------
Income (loss) before
income taxes 155,224 15,553 (6,500)
---------- ---------- ----------
Income tax (expense)
benefit (9,319) - 2,200
---------- ---------- ----------
Net income (loss) $ 145,905 $ 15,553 $ (4,300)
========== ========== ==========
Earnings (net loss) per
common share(1):
Primary $ 0.07 $ 0.01 $ -
========== ========== ==========
Fully diluted $ 0.07 $ 0.01 $ -
========== ========== ==========
Weighted average common
shares outstanding:
Primary 2,026,328 1,986,363 2,076,136
========== ========== ==========
Fully diluted 2,146,328 2,106,363 2,196,136
========== ========== ==========
SELECTED BALANCE SHEET DATA:
CASH AND CASH EQUIVALENTS $ 202,639 $ 194,781
WORKING CAPITAL DEFICIT (59,502) (216,606)
TOTAL ASSETS 1,086,151 1,503,728
TOTAL LIABILITIES 462,940 853,567
TOTAL SHAREHOLDERS' EQUITY 623,211 650,161
</TABLE>
(1) Primary earnings (net loss) per common share is based on the average
number of common shares outstanding during each period, assuming the
effect of exercising options which have an exercise price less than the
average market price of common stock (assumed to be $5.50 per share)
using the modified treasury stock method. In addition, primary per
share amounts include the dilutive effect of common shares issued for
cash consideration below the assumed average market price during the
one year period prior to July 1997. The fully diluted earnings (net
loss) per common share calculation assumes the conversion of the
promissory note and Series A Preferred Stock, issued by the Company
subsequent to December 31, 1996, into shares of common stock. The net
loss for the three months ended March 31, 1997 used in the fully
diluted calculation was adjusted for interest incurred on the
promissory note, net of tax benefits.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The historical financial statements appearing elsewhere in this Prospectus
present the consolidated historical results of operations and financial
condition of Sforza Enterprises Inc. and its
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<PAGE> 23
subsidiaries (Castle Room, Inc., Clematis Bistro Corporation and Sushi
Enterprises, Inc.) The following discussion is based upon the consolidated
results of operations of the Company.
The Company's net sales comprise the food and beverage sales by the restaurants
it operates. The first restaurant, Sforza Ristorante, opened in February 1996
and the second restaurant, My Martini Grille, opened in February 1997. A third
restaurant is expected to open in November 1997. The Company's expenses include
the cost of food and beverages sold, salaries and wages for food and beverage
preparation and service, rent and other occupancy expenses, advertising, repairs
and maintenance, general supplies, depreciation and amortization, interest and
administrative expenses.
The following discussion and analysis should be read in conjunction with the
Company's audited financial statements and related notes thereto, which are
presented elsewhere herein.
RESULTS OF OPERATIONS
The following table sets forth selected historical consolidated operating
results for the Company as a percentage of net sales.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH 31,
DECEMBER 31, 1996 1996 1997
----------------- ---- ----
(unaudited)
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
----- ----- -----
Cost and expenses:
Cost of sales 55.7 58.4 55.0
Operating expenses 37.8 37.4 44.7
Interest expense, net - - .7
----- ----- -----
Total cost and expenses 93.5 95.8 100.4
----- ----- -----
Operating income (loss) 6.5 4.2 (.4)
Other income, net .1 .1 -
----- ----- -----
Income (loss) before income taxes 6.6 4.3 (.4)
Income tax (expense) benefit (.3) - .1
----- ----- -----
Net income (loss) 6.3% 4.3% (.3%)
===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1996
NET SALES. Net sales increased from $363,030 to $1,394,298, an increase of
284.1%. This increase was due to the operation of Sforza Ristorante for the full
three month period in 1997 and the opening of My Martini Grille during the three
months ended March 31, 1997.
COST OF SALES. Cost of sales increased from $212,028 to $766,949, or by 261.7%
due principally to the increase in sales volume.
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<PAGE> 24
OPERATING EXPENSES. Operating expenses increased by $487,784 from $135,817 to
$623,601. This increase was due to the increased level of sales, an increase in
corporate salaries and expenses approximating $110,000 and certain non-recurring
compensation paid to certain principals during the three months ended March 31,
1997, which aggregated $64,970.
INCOME TAX EXPENSE. During the three months ended March 31, 1996, the Company
operated as an S corporation for income tax purposes, whereby taxable income or
loss was apportioned among the shareholders rather than taxed to the Company.
NET INCOME (LOSS). As a result of the above, the Company incurred a net loss of
$4,300 for the three months ended March 31, 1997 versus net income of $15,553
for the three months ended March 31, 1996.
YEAR ENDED DECEMBER 31, 1996
Results of operations for 1996 solely include the operations of Sforza
Ristorante, the only full year in which any of the Company's restaurants was
open, and therefore it is not possible to compare full year results.
LIQUIDITY AND CAPITAL RESOURCES
The Company's two operating restaurants are located in West Palm Beach, Florida
and are therefore subject to the seasonality of the tourist industry in South
Florida. Restaurant sales are expected to be very brisk in the tourist season,
which is generally from mid-fall to mid-spring and slow during the off-season.
The Company does not expect to generate any working capital from operations
during the off-season.
The Company's principal financing for the construction and opening of its
restaurants through December 31, 1996 was provided by its shareholders. During
the three months ended March 31, 1997, the Company borrowed $250,000 from URCI
(subsequently assigned to a principal thereof) pursuant to a promissory note and
raised $31,250 through the issuance of 25,000 shares of its common stock. During
May 1997, the Company raised $400,000 through the issuance of 160,000 shares of
Series A Preferred Stock. Such funding was obtained to complete construction and
opening of the sushi restaurant in November 1997 (estimated to require
$250,000), and provide working capital to support operations, as needed, during
the off-season. The Company does not have an existing arrangement for a credit
facility with a financial institution for short-term financing. Management
believes that cash flow generated from operations, together with the above
financing transactions and the net proceeds from this offering, will be
sufficient to meet the Company's working capital requirements and anticipated
capital expenditures through fall 1998. In order
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<PAGE> 25
to continue to open additional restaurants, the Company is likely to require
additional financing.
On July 1, 1997, the Company entered into a Funding Agreement with URCI which
provides that the Company will receive a 50% percent equity interest in each of
four limited partnerships, each of which was or will be formed to construct and
operate a Max's Grille Restaurant, in exchange for an aggregate commitment of
$3,000,000 of the proceeds from this offering. In addition, the Company granted
an option to URCI to purchase 150,000 shares of Common Stock at an exercise
price of $2.50 per share, exercisable through December 31, 1999. Unless extended
by the parties, such commitment terminates in the event the offering is not
completed and sufficient funds raised by September 30, 1997.
The Company may seek to obtain a line of credit for working capital from a bank
following this offering. There can be no assurance, however, that the Company
will be successful in obtaining a bank line of credit on acceptable terms or at
all.
IMPACT OF INFLATION
The Company has not operated in a highly inflationary period and its management
does not believe that inflation has had a material effect on sales or expenses.
As operating expenses increase, the Company expects to recover increased costs
by increasing prices, to the extent permitted by competition. Because the
Company's business is somewhat dependent on tourism in Florida, any significant
decrease in tourism caused by inflation would likely have a material adverse
effect on revenues and profitability.
SEASONALITY
The Company's business exhibits some seasonality. Historically, net sales have
been the highest in the winter and spring seasons, when Florida is a popular
warm weather tourist destination.
ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS123"). FAS123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. FAS123 is effective for
stock options granted in fiscal years beginning after December 15, 1995. The
Company plans to use the intrinsic value method to account for its stock
options, which generally does not result in compensation expense.
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<PAGE> 26
BUSINESS
GENERAL
The Company has three wholly-owned subsidiaries, each of which owns one
restaurant (the West Palm Beach Restaurants), and entered into an agreement to
acquire 50 percent equity interests in four companies, each of which owns or is
developing one restaurant (the Max's Grille Restaurants). Currently, two of the
West Palm Beach Restaurants are open and one of the Max's Grille Restaurants is
open.
CONCEPTS AND DESIGN
The Company's strategy is to own upscale, moderately priced, casual dining
restaurants that are known for providing quality, affordable, contemporary food,
service and ambiance. Although the Company's existing and presently planned
restaurants are in South Florida, ultimately the Company plans to open
restaurants in selected markets outside of South Florida. The Company strives to
provide excellent values and an enjoyable and distinctive dining experience by
offering first quality food in high energy yet casual settings with efficient,
attentive and friendly service.
SITE SELECTION
The Company believes that the downtown West Palm Beach sites are critical to the
success of its West Palm Beach Restaurants, with the high levels of pedestrian
traffic and close proximity to heavily populated residential and/or tourist
areas. Palm Beach County's population is expected to grow 24% by the end of the
decade and another 24% by the year 2010, making Palm Beach County one of the
country's fastest growing areas. West Palm Beach is an exciting example of urban
revitalization. Located across the intracoastal waterway from the storied island
of Palm Beach and less than 10 minutes from Palm Beach International Airport,
downtown West Palm Beach is benefitting immensely from the growth the county
continues to experience.
In response to the swelling influx of visitors, second home buyers and
relocating and expanding businesses, anticipated county employment growth is
also extremely strong. In the job growth projections for 1994-1996,
DRI/McGraw-Hill ranked West Palm Beach first in the nation with an expected
annual employment increase of 4.5% against a national average of 1.7%.
URCI selected the two Fort Lauderdale locations and the Weston location for its
newest Max's Grille restaurants because of their proximity to Boca Raton, where
the original Max's Grille has been thoroughly and successfully tested.
Additional high-profile up-scale communities and developments are targeted for
future expansion.
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<PAGE> 27
THE WEST PALM BEACH RESTAURANTS
SFORZA RISTORANTE. The Company owns a full-service, mid-priced, casual dining
northern Italian restaurant named "Sforza Ristorante". Sforza Ristorante
offers an extensive menu featuring a wide variety of seafood, chicken and pasta
dishes, appetizers, salads and desserts. The restaurant offers full bar service.
Since its February 1996 opening, food and alcoholic beverages have accounted for
approximately 57% and 43% of restaurant sales, respectively. The restaurant
offers generous portions at moderate prices while providing friendly and
efficient service in a high-energy casual atmosphere intended to appeal to a
broad customer base, particularly young upscale adults. As a result, the Company
believes that the restaurant has generated a high level of repeat business and
customer loyalty. Sforza Ristorante offers dinner entrees between $8 and $18,
with an average dinner entree price of $14. The Company believes that by
emphasizing casual dining, high quality, large portions and moderate prices,
Sforza Ristorante will remain popular with consumers.
Sforza Ristorante reflects an elegant yet casual European concept featuring a
plush red and gold decor. The eclectic design blends the ambiance of renaissance
Tuscany with the energy of a rejuvenated urban area. Lush fabrics and red velvet
drapery treatments are enhanced by unique hand faux finished walls. Contemporary
styled sconces and pendants illuminate the dining and bar areas with soft,
inviting light, enhancing the casual upscale dining experience and establishing
a distinct identity for the restaurant.
MY MARTINI GRILLE. The Company operates a full-service upscale grill named "My
Martini Grille". My Martini Grille was designed to serve a sophisticated
clientele, including business diners. The My Martini Grille concept embraces an
elegant and timeless early twentieth century motif. My Martini Grille is Gotham
City revisited. This sleek art nouveau restaurant and bar recaptures the
sophisticated allure of the martini culture. Cocktails are complemented with
deep mahogany walls and rich purple and golds. Stylish stainless steel accents
mix with unique Italian light fixtures to create a relaxed sexy elegance. All of
the elements enhance the dining experience and establish a distinct identity for
My Martini Grille. My Martini Grille offers dinner entrees between $16 and $30,
with an average dinner entree price of $20.
PLANNED SUSHI RESTAURANT. The Company plans to open a full-service, mid-priced
casual dining sushi restaurant in November 1997. The planned restaurant has been
designed to reflect Tokyo in the year 2050. An ocean green tile floor, blonde
maple sushi bar and stainless steel highlights will create a unique techno
atmosphere. Japanese animation and comic books will assume larger than life
scale in artwork incorporated into the design and construction. Large TV screens
over the sushi bar will transform
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Godzilla, Ultra Man and Speed Racer into animated art. The funky, innovative
design will make dining an experience, not just fish and rice. The Company's
sushi restaurant will offer dinner entrees between $15 and $30, with an average
dinner entree price of $24.
THE MAX'S GRILLE RESTAURANTS
The Company intends to acquire 50 percent equity interests in the entities that
own Max's Grille restaurants located at 17 South Atlantic Boulevard ("Beach
Place") and 300 Southwest First Avenue ("Las Olas Riverfront") in Fort
Lauderdale, Florida, at 2210 Weston Road, in Weston, Florida ("Weston") plus
the entity that will own the next Max's Grille to be developed, the location of
which is to be determined. Each of the Max's Grille Restaurants will replicate
the Max's Grille restaurant in Boca Raton, Florida. Beach Place opened in May,
1997. Las Olas Riverfront and Weston are expected to open in early 1998.
The Las Olas Riverfront, a new 270,000 square foot shopping center on the New
River, the main water thoroughfare dissecting the downtown, will be anchored by
a 24 screen stadium seating movie theater and an 80,000 square foot amusement
center. The Max's Grille Restaurant will be 6500 square feet, seating 200 inside
and 40 on an outside patio.
In Weston, the Max's Grille Restaurant will co-anchor the new 200,000 square
foot Waterway Shoppes. It will also be 6500 square feet, seating 200 inside and
40 on an outside lakefront patio.
Max's Grille in Boca Raton, Florida, the model for the Max's Grille Restaurants,
incorporates casual dining, moderate prices and a cosmopolitan ambiance in a
comfortable relaxed atmosphere. Opened in 1991, the 225-seat restaurant has been
serving a mix of new American and Continental cuisine with a wide variety of
wines and a full-service bar. The decor features a free-standing mahogany bar,
high ceilings with star chandeliers and floating window treatments. Its fresh,
simply-prepared dishes are imaginative but not intimidating, enhanced with the
flavors of Florida, California, New Orleans, Europe and the Pacific.
The typical setting for a Max's Grille restaurant is a high-profile upscale
community, where an average food and beverage check of $25 could foster repeat
visits by patrons. Young professional and prosperous active "golden agers" --
the demographic group that according to the National Restaurant Association
spends more money dining out than any other age group -- comprises Max's
Grille's regular clientele.
The Max's Grille concept was first replicated in 1995 in Celebration, Florida,
The Walt Disney Co.'s planned community near Or-
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lando, Florida. URCI successfully competed against restaurant companies from
across the nation for the right to open a restaurant in that community.
URCI is also known for its successful Maxaluna, Max's Cafe and Coffee Shop (2
locations), Prezzo's (3 locations) and Astor Place restaurants.
RESTAURANT MANAGEMENT
URCI operates the current and will operate the future West Palm Beach
Restaurants and Max's Grille Restaurants as well as nine other existing
restaurants. URCI manages the West Palm Beach Restaurants pursuant to the terms
of a Management and Consulting Agreement dated June 1, 1997. For a one year
term, URCI assumed responsibility for operations in exchange for a fee of one
percent of net sales plus 20 percent of the net operating profit, paid monthly.
(Net operating profit equals net sales less direct operating and other allocable
expenses.)
The staff of each Company restaurant consists of a general manager, a chef and
between 20 and 70 other employees managed by URCI. Restaurant managers are
entitled to participate in an annual discretionary bonus program based upon the
financial and operational results of their particular restaurant.
The Company believes that achieving customer satisfaction by providing
knowledgeable, friendly, efficient service is critical to the restaurants'
long-term success. During URCI's training program, restaurant managers are
taught to promote the Company's team-oriented atmosphere among restaurant
employees, with emphasis on preparing and serving food in accordance with strict
standards and providing friendly, courteous and attentive service. The Company
believes that the quality and training of its restaurant managers and staff
results in friendly, courteous, efficient service which contributes to a casual
and pleasurable dining experience for the customer.
COMMITMENT AND CUSTOMER SATISFACTION
The Company's utilization of URCI evidences the Company's commitment to
providing its customers with efficient and friendly service, keeping
table-to-wait staff ratios low and staffing each restaurant with an experienced
management team to help ensure attentive customer service and a pleasurable
dining experience. The Company's commitment is further underscored by URCI's
employee training program, which is required for all Company personnel. URCI has
refined its training program over 10 years, producing manuals on policies and
procedures and an employee handbook. The Company's restaurant employees spend a
full week training, from orientation on cultures and standards to classroom
lessons to hands-on instruction. Tests are given each day to monitor reten-
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tion. Food tasting is included. The final step is a three-day mock service for
family, friends and vendors.
Through the use of comment cards and table visits, Company management and URCI
receive valuable customer feedback and, through prompt responses, demonstrate a
continuing devotion to customer satisfaction.
QUALITY CONTROL
The Company maintains a continuous inspection program for all its food
purchases. Each shipment of food is inspected upon receipt for quality and
conformance to the Company's specifications. In addition, fresh fish is
inspected by kitchen staff at the time of delivery. The restaurants' employees
are educated as to the correct handling and proper physical characteristics of
each product.
The Company's general managers are all responsible for properly training hourly
employees and ensuring that the Company's restaurants are operated in accordance
with strict health and quality standards. The Company believes that its
inspection procedures and its employee training practices help the Company to
maintain a high standard of quality for the food and service it provides.
PURCHASING
Obtaining a reliable supply of quality food at competitive prices is critical to
the Company's success. By affiliating with URCI, the Company is part of a group
that purchases over $14 million of food and other products and services for 13
restaurants. Food and supplies are shipped directly to the Company's
restaurants. The Company does not maintain a central product warehouse or
commissary. The Company believes its diverse menu selection reduces the risk and
minimizes the effect of the shortage of any food products. To date, the Company
generally has not experienced any significant delays in receiving its food and
beverage inventories, restaurant supplies or equipment.
ADVERTISING AND MARKETING
Advertising and marketing expenditures in 1996 and the first quarter of 1997
were approximately 2% of sales. The Company sponsored charitable events,
participated in cooking competitions (regional and national), advertised in
local magazines and newspapers and gave away drinks and meals at tables and on
the radio.
MANAGEMENT INFORMATION
The Company maintains financial and accounting controls for each restaurant
through a central management information system.
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<PAGE> 31
Sales data is collected daily, and managers are provided with daily sales and
cash information for their respective restaurants. A point-of-sale accounting
and cash management system enables the Company to access each restaurant's
sales, inventory, costs and other financial data on a real-time basis. The
point-of-sale accounting and cash management system enables both restaurant
management and Company management to react quickly to changing sales trends,
better manage food, beverage and labor costs, minimize theft and improve the
quality and efficiency of accounting and audit procedures. State-of-the-art
software programs enable the Company to forecast and schedule labor
requirements.
COMPETITION
Competition in the restaurant industry is intense. The industry, particularly
the full-service casual dining segment, is likely to attract a significant
number of new entrants. The Company also expects to face competition from a
broad range of other restaurants and food service establishments, including fast
food restaurants which specialize in a variety of cuisines. In addition, the
full-service restaurant industry is characterized by the frequent introduction
of new food products accompanied by substantial promotional campaigns. In recent
years, numerous companies in the full-service restaurant industry have
introduced products intended to capitalize on growing consumer preference for
food products which are, or are perceived to be, healthy, nutritious, low in
calories and low in fat content. It can be expected that the Company will be
subject to increasing competition from companies whose products or marketing
strategies address these consumer preferences.
The Company competes with other restaurants on the basis of price, atmosphere,
decor and service.
GOVERNMENT REGULATION
The Company is subject to extensive state and local government regulation by
various governmental agencies, including state and local licensing, zoning, land
use, construction and environmental regulations and various regulations relating
to the sale of food and alcoholic beverages, sanitation, disposal of refuse and
waste products, public health, safety and fire standards. The Company's
restaurants are subject to periodic inspections by governmental agencies to
ensure conformity with such regulations. The Company believes it complies with
all applicable government regulations.
The Company is also subject to laws governing its relations with employees,
including wage and hour laws, and laws and regulations relating to working and
safety conditions and citizenship or immigration status.
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<PAGE> 32
SERVICEMARKS AND PROPRIETARY INFORMATION
The Company has registered the servicemark "Sforza" and has applied to register
the servicemark "My Martini" with the Secretary of State of Florida. The Company
believes that its servicemarks have significant value and are essential to its
ability to create demand for and awareness of its restaurants. See "Risk
Factors".
PROPERTIES
The Company leases 450 square feet of space at 330 Clematis Street #211 in West
Palm Beach, Florida for its executive offices from Renaissance Partners LLC. The
lease runs month to month and is terminable by either party upon one month's
prior written notice. The monthly rent payable under the lease is $1166.
All of the Company's West Palm Beach Restaurants are housed in adjacent
storefronts leased from Clematis Development Group, L.C., a real estate holding
company partly owned by Joseph C. Visconti, a principal in the Company and in
the Underwriter. See "Certain Transactions". Each restaurant lease provides that
the tenant pay rent plus the cost of insurance, taxes and a portion of the
landlord's operating costs to maintain common areas. The leases have initial
terms of 10 years with renewal options. The Company leases properties with 2500
to 5500 square feet total space and seating capacity for 90 to 220 persons.
EMPLOYEES
The Company employs 175 persons, of whom eight are management or administrative
personnel and the rest are employed in non-management restaurant positions.
Approximately 165 of these individuals are employed by the Company on a
full-time basis. Seven of such persons are employed on a salaried basis and 158
on an hourly basis. The Company considers its employee relations to be good.
None of the Company employees is covered by a collective bargaining agreement.
LEGAL PROCEEDINGS
From time to time the Company has been involved in minor legal disputes
customary in the dining industry, none of which is believed by management to be
material to its operating results. The Company is not currently a party to any
threatened or pending legal proceedings.
MANAGEMENT
DIRECTORS AND OFFICERS
The Company's directors and officers are as follows:
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<PAGE> 33
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C>
Dale J. Brisson 37 President and Director
Gerald J. Visconti Jr. 34 Vice President, Chief Financial
Officer, Secretary and Director
Daniel S. Catalfumo 41 Director
Dennis R. Max 52 Director
Burton M. Rapoport 47 Director
Joseph C. Visconti 32 Director
</TABLE>
MR. BRISSON has served as president and as a director of the Company since its
inception in July 1996. Mr. Brisson has served as president and as a director
of Castle Room, Inc. since May 1995, Clematis Bistro Corporation since April
1996 and Sushi Enterprises, Inc. since July 1996. Mr. Brisson, who was born
and raised in Palm Beach County, Florida, has spent his entire career in the
restaurant business. In 1986 he opened the first Rosie's Key West Grille in
Lake Worth, Florida, which by 1994 had grown into a chain of four restaurants in
Palm Beach County with 110 employees.
MR. G. VISCONTI has served as an officer and director of the Company since its
inception in July 1996. He established the Company's accounting and management
information systems departments. Prior to joining the Company he owned and
operated a trucking company in Los Angeles for 11 years. Mr. Visconti graduated
from Morrisville Agricultural and Technical College, Morrisville, New York in
1983 with a degree in automotive technology. Mr. G. Visconti is the older
brother of Mr. J. Visconti.
MR. CATALFUMO has spent his entire career in South Florida in the construction
industry. He founded Catalfumo Construction & Development Inc. in West Palm
Beach in 1978 and has built over 12 million square feet of office, medical,
warehouse, country club, industrial, retail and residential space. He is a part
owner of URCI with Messrs. Max (and his wife Patti Max) and Rapoport.
MR. MAX has served as a director of the Company since May 1997. After a short
stint in the banking and brokerage industries, he entered the restaurant
industry in 1972, where he has spent his entire career. He has been successful
in national chains and as an entrepreneur. He has enjoyed tremendous success in
South Florida, where his restaurants are well-known. Mr. Max owns URCI with his
wife, Patti Max, and Messrs. Catalfumo and Rapoport.
MR. RAPOPORT has spent his entire career in the restaurant industry, beginning
as a bartender at the Victoria Station chain in Los Angeles in 1971, where he
met Mr. Max. In 1978 Messrs. Rapoport and Max created Carlos & Pepe's in Ft.
Lauderdale, Florida, a tremendous success, followed by Raffles in Miami, which
grew to 11 locations before being sold. Mr. Rapoport served for 12 years on the
Advisory Board of Johnson & Wales University, the large culinary institute based
in Providence, Rhode Island.
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<PAGE> 34
MR. J. VISCONTI has served as a director of the Company since its inception in
July 1996. Mr. Visconti has served as vice president, secretary and treasurer
and as a director of Castle Room, Inc. since May 1995, Clematis Bistro
Corporation since April 1996 and Sushi Enterprises, Inc. since July 1996. A
Syracuse, New York native, Mr. Visconti founded Joseph Charles & Assoc., Inc.,
the full-service brokerage firm underwriting the offering, in 1991, which he
serves as chairman, president and chief executive officer. The firm employs over
300 people in its two Florida and its Beverly Hills, Denver and Phoenix offices.
In 1993 Mr. Visconti founded Clematis Development Group, L.C. ("CDG") to
acquire and develop vacant buildings in downtown West Palm Beach. CDG leases
storefronts to the Company for the West Palm Beach Restaurants. In 1995 he
teamed with Mr. Brisson to form Castle Room, Inc. which opened Sforza Ristorante
in February 1996.
Messrs. Catalfumo, Max and Rapoport are defendants along with URCI in a civil
lawsuit pending in the Florida state court in Palm Beach County, Florida brought
in May 1996 by former partners in a defunct URCI restaurant who have alleged,
among other things, that the three men breached their fiduciary duties to the
limited partners. The defendants have filed motions attacking the plaintiffs'
complaint and are awaiting a hearing on their motions. Discovery is underway.
Each director of the Company is elected for a term of one year which expires at
the annual meeting of the Company's shareholders or at such other time as his
successor is duly elected and qualified. Pursuant to the Funding Agreement dated
July 1, 1997 among the Company, URCI, Mr. Max and others, Messrs. Brisson, G.
Visconti and J. Visconti agreed to vote their shares to elect designees of Mr.
Max to comprise a majority of the Company's directors. Each officer is appointed
by the Board of Directors and serves at the pleasure of the Board. See "Certain
Transactions".
Directors are not compensated for their services on the Board of Directors. The
Company will reimburse directors for reasonable travel expenses incurred in
connection with their activities on behalf of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
Subsequent to the offering, the Company will have an Audit Committee and a
Compensation Committee. The Audit Committee will be responsible for (i)
reviewing the scope of, and the fees for, the annual audit, (ii) reviewing with
the independent auditors the corporate accounting practices and policies and
recommending to whom reports should be submitted within the Company, (iii)
reviewing with the independent auditors their final report, (iv) reviewing with
the independent auditors the overall accounting and financial controls, and (v)
being available to the independent auditors during the year for consultation
purposes. The
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<PAGE> 35
Compensation Committee will determine the compensation of the officers of the
Company and will perform other similar functions and grant options under the
Company's 1997 Equity Incentive Plan. Messrs. Max, Rapoport and G. Visconti
shall serve on the Audit Committee. Messrs. Max, Rapoport, G. Visconti and J.
Visconti shall serve on the Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information for 1996 concerning
all cash and non-cash compensation awarded to, earned by or paid to the
Company's president and vice president. No officer of the Company earned
$100,000 or more during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Compensation All Other
Name and Principal Posiiton Year Salary Bonus Options Compensation
- --------------------------- ---- ------ ----- ------- ------------
<S> <C> <C> <C>
Dale J. Brisson, President 1996 $69,230 0 N/A N/A
and Director
Gerald J. Visconti, Vice
President, Chief Financial 1996 $ 0 0 N/A $8,000
Officer and Director
</TABLE>
EMPLOYMENT AGREEMENTS
The Company is not a party to any employment agreements.
STOCK OPTION PLANS
On July 1, 1997, the Company's Board of Directors enacted the 1997 Equity
Incentive Plan (the "Plan") which provides for the issuance of options to
purchase a total of 285,000 shares of the Company's Common Stock. The Plan
authorizes the Board of Directors to issue incentive stock options ("ISOs") as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and stock options that do not conform to the requirements of that Code
section ("Non-ISOs"). The exercise price of an ISO may not be less than 100% of
the fair market value of the Common Stock at the time of grant, except that in
the case of a grant to an employee who owns (within the meaning of Code Section
422) 10% or more of the outstanding stock of the Company (a "10% Shareholder"),
the exercise price shall not be less than 110% of such fair market value.
Options may not be exercised prior to the first anniversary, or on or after the
tenth anniversary (fifth anniversary in the case of an ISO granted to a 10%
Shareholder), of his grant. Options may not be transferred during the lifetime
of an optionee.
The Plan is administered by the Board of Directors. Subject to the provisions of
the Plan, the Board of Directors has the authority to determine the individuals
to whom stock options are to be granted, the number of shares to be covered by
each option,
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the option price, the type of option, the option period, the restrictions, if
any, on the exercise of the option, the terms for the payment of the option
price and other terms and conditions. Payment by optionees upon exercise of an
option may be made (as determined by the Board of Directors) in cash, by
promissory note or other such form of payment acceptable to the Board of
Directors, including shares of Common Stock.
As of the date of this Prospectus, the Company has not granted any options under
the Plan.
PRINCIPAL SHAREHOLDERS
As of the date of this Prospectus, the Company has issued 2,040,000 shares of
Common Stock and 160,000 shares of Series A Preferred Stock. The Preferred Stock
will be converted in part and redeemed in part in connection with the offering.
The following table sets forth, as of the date of this Prospectus, certain
information regarding the beneficial ownership of the Common Stock giving effect
to conversion of the Preferred Stock, by (i) each person known to the Company as
having beneficial ownership of more than 5% of the Common Stock, (ii) each
director of the Company, (iii) each officer of the Company, and (iv) all
directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Percentage of Common Stock
Beneficially Owned(1)
--------------------------
Number of Prior
Shares of to After
Name and Address of Beneficial Owner Common Stock Offering Offering(4)
- ------------------------------------ ------------ --------- -----------
<S> <C> <C> <C>
Dale J. Brisson(2) 762,500(6) 37.38 25.08
2815 Hampton Ct. E
Delray Beach, FL 33445
Gerald J. Visconti Jr.(2) 103,923 5.09 3.42
3500 N. Flagler Dr.
West Palm Beach, FL 33401
Daniel S. Catalfumo(3)(5) 40,000 1.96 1.32
4300 Catalfumo Way
Palm Beach Gardens, FL 33410
Dennis R. Max(3)(5) 0 0 0
490 E. Palmetto Park Rd. #110
Boca Raton, FL 33432
Burton M. Rapoport(3)(5) 0 0 0
490 E. Palmetto Park Rd. #110
Boca Raton, FL 33432
Joseph C. Visconti(3) 755,500(6) 37.03 24.85
525 S. Flagler Dr. #400
West Palm Beach, FL 33401
All directors and officers as a 1,661,923 81.47 54.67
group (6 persons)
</TABLE>
[FOOTNOTES APPEAR ON THE FOLLOWING PAGE]
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<PAGE> 37
(1) A person is deemed to be the beneficial owner of voting securities that
can be acquired by such person within 60 days from the date of this
Prospectus upon the exercise of options or warrants or conversion of
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants and convertible
securities that are held by such person (but not those held by any
other person) and which are exercisable or convertible within 60 days
of the date of this prospectus have been exercised or converted. Unless
otherwise indicated, the beneficial owner has sole voting and
investment power.
(2) An officer and director.
(3) A director.
(4) Assumes that no person listed in the table acquires shares in the
offering.
(5) URCI has an option to acquire 150,000 shares of Common Stock. Messrs.
Catalfumo, Max and Rapoport are principals of URCI. See "Certain
Transactions".
(6) Includes 300,000 shares of Common Stock owned by an entity owned in
equal halves by Messrs. Brisson and J. Visconti.
- ------------------------------
CERTAIN TRANSACTIONS
The information set forth below briefly describes certain transactions between
the Company and certain parties who or which may be deemed to be affiliated with
the Company.
NOTES PAYABLE; SHAREHOLDERS. During 1995 and 1996 Dale J. Brisson and Joseph
C. Visconti lent an aggregate of $175,000 to the Company or its subsidiaries
pursuant to notes collateralized by substantially all of the Company's assets.
Such notes bear interest at an annual rate of 10 percent and are payable in
monthly installments. In addition, such shareholders have made uncollateralized
loans to the Company aggregating $63,445 for working capital purposes. These
loans are non-interest bearing and payable on demand.
PREMISES LEASES. The Company leases the spaces for its three restaurants from
Clematis Development Group, L.C., a Florida limited liability company partly
owned by Joseph C. Visconti. Castle Room, Inc.'s lease expires in December 2005
and calls for annual rent of $51,500 in the first year, gradually rising to
$94,125 in 2005. Clematis Bistro Corporation's lease expires in January 2006 and
calls for annual rent of $96,250 in the first year, gradually rising to $145,750
in the final year. Sushi Enterprises, Inc.'s lease expires in January 2006 and
calls for annual rent of $20,000 in the first year, gradually rising to $46,875
in the final year. Each lease is "triple net", meaning that the tenant pays for
insurance, taxes and maintenance. The Company believes that each lease is on
terms no less favorable than those obtainable from an unrelated third party.
UNDERWRITING. The offering is being underwritten by Joseph Charles & Assoc.,
Inc., a full-service broker-dealer owned in part by several of the Company's
shareholders, including Joseph Visconti and Gerald Visconti. See
"Underwriting".
RESTAURANT MANAGEMENT. URCI, the restaurant management company controlled by
Messrs. Max, Rapoport and Catalfumo, manages and operates the Company's
restaurants. Its responsibilities include the determination of dining room and
bar menus, design of the
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menus, creation of recipes, testing of menu items, pricing, interviewing,
training and hiring personnel, developing personnel systems and manuals,
developing operations manuals covering product purchasing, vendor selection,
developing operating forms and checklists covering ordering, inventory,
preparation and sanitation, developing marketing plans covering advertising and
promotional programs, developing signage, conducting market research and related
duties. URCI receives a fee of one percent of net sales plus 20 percent of the
net operating profit, paid monthly. (Net operating profit equals net sales less
direct operating and other allocable expenses.) On January 31, 1997 URCI lent
the Company $250,000 pursuant to the terms of a Fixed Rate Promissory Note (the
"Note") with interest accruing thereon at the rate of 15 percent per annum. The
Note is secured by a lien on all the Company's assets and guaranteed by Joseph
Visconti and Dale Brisson. On June 1, 1997 URCI assigned the Note to Daniel
Catalfumo.
CONSTRUCTION. Mr. Catalfumo's construction company built Max's Beach Place
Grille, one of the Max's Grille Restaurants, and is building the Max's Grille
Restaurants in the Las Olas Riverfront development, Ft. Lauderdale, Florida and
in Weston, Florida. Mr. Catalfumo acquired the Note from URCI on June 1, 1997
and immediately converted $125,000 of the unpaid principal into 40,000 shares of
the Company's Common Stock.
FUNDING AGREEMENT. The Company, URCI, Dennis Max and related parties entered
into a Funding Agreement on July 1, 1997 pursuant to which the Company agreed to
devote $3,000,000 of the proceeds of this offering to the construction and
pre-opening expenses of four Max's Grille Restaurants and to grant URCI an
option to acquire 150,000 shares of the Company's Common Stock exercisable at
$2.50 per share through December 31, 1999 in exchange for 50 percent equity
interests in such Max's Grille Restaurants and URCI's agreement to manage such
restaurants at a discounted rate. Additionally, Mr. Max received the right to
designate a majority of the Company's directors, obtaining the agreement of
Joseph Visconti, Gerald Visconti and Dale Brisson to vote their Company shares
in favor of his director nominees.
DESCRIPTION OF SECURITIES
GENERAL
The Company's authorized capital stock consists of 20,000,000 shares of Common
Stock, $0.01 par value per share, and 400,000 shares of Preferred Stock, $0.01
par value per share. As of June 30, 1997 there were 2,040,000 shares of Common
Stock issued and outstanding, held by 15 holders of record, and 160,000 shares
of Series A Preferred Stock issued and outstanding, held by three holders of
record.
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<PAGE> 39
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters voted upon by shareholders, and a majority vote is
required for all actions to be taken by shareholders. In the event of a
liquidation, dissolution or winding-up of the Company, the holders of Common
Stock are entitled to share equally and ratably in the assets of the Company, if
any, remaining after the payment of all debts and liabilities of the Company.
The Common Stock has no preemptive rights, no cumulative voting rights and no
redemption, sinking fund or conversion provisions.
Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available therefor,
subject to any dividend restrictions imposed by the Company's creditors. No
dividend or other distribution (including redemptions or repurchases of shares
of capital stock) may be made if, after giving effect to such distribution, the
Company would not be able to pay its debts as they become due in the normal
course of business, or the Company's total assets would be less than the minimum
of its total liabilities.
If the Company realizes net profits in the future, its foreseeable policy will
be to retain such earnings for the operation and expansion of its business.
PREFERRED STOCK
The Board of Directors of the Company is authorized (without any further action
by the shareholders) to issue Preferred Stock in one or more series and to fix
the voting rights, liquidation preferences, dividend rates, conversion rights,
redemption rights and terms, including sinking fund provisions, and certain
other rights and preferences. Satisfaction of any dividend preferences of
outstanding Preferred Stock would reduce the amount of funds available for the
payment of dividends, if any, on the Common Stock. Also, holders of the
Preferred Stock would normally be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding up of the Company before
any payment is made to holders of Common Stock. In addition, under certain
circumstances, the issuance of Preferred Stock may render more difficult or tend
to discourage a merger, tender offer or proxy contest, the assumption of control
by a holder of a large block of the Company's securities, or the removal of
incumbent management. The Board of Directors of the Company, without shareholder
approval, may issue Preferred Stock with dividend, liquidation, redemption,
voting and conversion rights which could adversely affect the holders of Common
Stock.
As of June 30, 1997, 160,000 of the 400,000 authorized shares of Preferred Stock
were outstanding. Series A Preferred Stock was
-37-
<PAGE> 40
issued to three investors on May 19, 1997 who invested $400,000 in the
aggregate. The Series A Preferred Stock is entitled to cumulative cash dividends
at a rate of 10 percent per annum and a liquidation preference of $2.50 per
share. Upon completion of an initial public offering raising gross proceeds of
at least $4,000,000, 80,000 shares of Series A Preferred Stock automatically
convert into 80,000 shares of Common Stock while the other 80,000 shares of
Series A Preferred Stock are to be redeemed for $400,000 in the aggregate. If
such an initial public offering shall not have occurred by January 1, 1998 all
Series A Preferred Stock shall be redeemed at cost plus four percent. The
Company has no present intention to issue any additional shares of Preferred
Stock.
OPTION
Pursuant to the terms of the Funding Agreement, the Company granted URCI an
option, exercisable through December 31, 1999, to acquire 150,000 shares of
common stock for an exercise price of $2.50 per share.
REDEEMABLE WARRANTS
The Units being offered hereby include 800,000 Warrants.
The Warrants will be issued under and governed by the provisions of a Warrant
Agreement (the "Warrant Agreement") between the Company and Florida Atlantic
Stock Transfer, Inc. as warrant agent (the "Warrant Agent") and will be
evidenced by warrant certificates in registered form. The following summary of
the Warrant Agreement is not complete and is qualified in its entirety by
reference to the Warrant Agreement, a copy of which has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part.
Each Warrant entitles the holder thereof to purchase one share of Common Stock
at a price equal to $5.25 per share during the Warrant Exercise Period -- the
period commencing on the date of this Prospectus and terminating five years
thereafter. The shares of Common Stock underlying the Warrants will, upon
exercise of the Warrants, be validly issued, fully paid and non-assessable. The
Warrants are redeemable by the Company at any time during the Warrant Exercise
Period for $0.01 per Warrant if the average closing price or bid price of a
share of Common Stock, as reported by NASDAQ or the National Quotation Bureau,
as the case may be, equals or exceeds $7.50 for any 20 consecutive trading days
ending within five days prior to the date of the notice of redemption.
The Warrants can only be exercised when there is a current effective
registration statement covering the shares of Common Stock underlying the
Warrants. If the Company does not or is unable to
-38-
<PAGE> 41
maintain a current effective registration statement, the Warrantholders will
be unable to exercise the Warrants and the Warrants may become valueless.
Moreover, if the shares of Common Stock underlying the Warrants are not
registered or qualified for sale in the state in which a Warrantholder resides,
such holder might not be permitted to exercise the Warrants. In the event that
the Warrants are called for redemption, the Warrantholders may not be able to
exercise their Warrants in the event that the Company has not updated this
Prospectus in accordance with the requirements of the Securities Act or the
Warrants have not been qualified for sale under the laws of the state where the
Warrantholder resides. In addition, in the event that the Warrants have been
called for redemption, such call for redemption could force the Warrantholder
either to (i) assuming the necessary updating to the Prospectus and state blue
sky qualifications have been effected, exercise the Warrants and pay the
exercise price at a time when, in the event of a decrease in market price from
the period preceding the issuance of the call for redemption, it may be less
than advantageous economically to do so, or (ii) accept the redemption price,
which, in the event of an increase in the price of the Common Stock, could be
substantially less than the market value thereof at the time of redemption. See
"Risk Factors".
The Warrantholders are not entitled to vote, receive dividends or exercise any
of the rights of holders of shares of Common Stock for any purpose. The Warrants
are in registered form and may be presented for transfer, exchange or exercise
at the office of the Warrant Agent. Although the Company has applied for listing
of the Warrants under the symbol SFZAW, there can be no assurance that the
Warrants will be quoted or under such symbol. There is currently no established
market for the Warrants, and there is no assurance that any such market will
develop.
Assuming there is a current effective registration statement covering the shares
of Common Stock underlying such Warrants, each Warrant may be exercised by
surrendering the Warrant certificate, with the form of election to purchase on
the reverse side of the Warrant certificate properly completed and executed,
together with payment of the exercise price to the Warrant Agent. The Warrants
may be exercised from time to time in whole or in part. If less than all of the
Warrants evidenced by a Warrant certificate are exercised, a new Warrant
certificate will be issued for the remaining number of Warrants.
The Warrant Agreement provides for adjustment of the exercise price and the
number of shares of Common Stock purchasable upon exercise of the Warrants to
protect Warrantholders against dilution in the event of stock dividends and
distributions, stock splits, recapitalizations, mergers, consolidations and
similar transactions.
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<PAGE> 42
DIRECTORS' LIABILITY
Under the Florida Business Corporation Act (the "FBCA"), a director of a Florida
corporation is not personally liable for monetary damages to the corporation or
any other person for any statement, vote, decision or failure to act, regarding
corporate management or policy, by a director unless (i) the director breached
or failed to perform his duties as a director; and (ii) the director's breach
of, or failure to perform, those duties constitutes: (1) a violation of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reason to believe his conduct was unlawful; (2) a
transaction from which the director derived an improper personal benefit, either
directly or indirectly; (3) a circumstance under which an unlawful distribution
is made; (4) in a proceeding by or in the right of the corporation to procure a
judgment in its favor by or in the right of a shareholder, conscious disregard
for the best interest of the corporation or willful misconduct; or (5) in a
proceeding by or in the right of someone other than the corporation or a
shareholder, recklessness or an act or omission which was committed in bad faith
or with malicious purpose or in a manner exhibiting wanton and willful disregard
of human rights, safety or property. A corporation may purchase and maintain
insurance on behalf of any director or officer against any liability asserted
against him and incurred by him in his capacity or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the FBCA. The Company may elect to purchase such
insurance on behalf of its directors and officers.
The Articles of Incorporation provide that the Company shall indemnify all
directors and officers of the Company, as well as any employees or agents of the
Company to whom the Company has agreed to grant indemnification. Section
607.0850(1) of the FBCA provides that a Florida corporation, such as the
Company, shall have the power to indemnify any person who is or was a party to
any proceeding (other than an action by, or in the right of, the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against liability incurred in connection with
such proceeding, including any appeal thereof, if he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful, to the fullest extent
permitted by applicable law, as amended from time to time. This indemnification
includes the right to advancement of expenses when allowed pursuant to
applicable law.
-40-
<PAGE> 43
In addition, the Bylaws provide that a director of the Company shall not be
personally liable to the Company or its shareholders for monetary damages for
breach of the director's fiduciary duty. However, the Bylaws do not eliminate or
limit the liability of a director for any of the following reasons: (i) a breach
of the director's duty of loyalty to the shareholders; (ii) acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law; (iii) a violation under Section 607.0834 of the FBCA (which imposes
liability upon directors for unlawful dividends and other distributions); (iv) a
transaction from which the director derived an improper personal benefit; or (v)
an act or omission occurring before the effective date of the Articles of
Incorporation.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
LIABILITY INSURANCE
The Company intends to procure and maintain a policy of insurance under which
the directors and officers of the Company will be insured, subject to the limits
of the policy, against certain losses arising from claims made against such
directors and officers by reason of any acts or omissions covered under such
policy in their respective capacities as directors or officers, including
liabilities under the Securities Act.
ANTI-TAKEOVER PROVISIONS OF FLORIDA LAW
Following the offering to which this Prospectus relates, the Company may be
subject to the anti-takeover provisions of Section 607.0901 of the FBCA (the
"Affiliated Transaction Statute"). In general, the Affiliated Transaction
Statute requires the approval of the holders of two-thirds of the voting shares
of a corporation, other than shares owned by an "interested shareholder", in
order to effectuate an "affiliated transaction", such as a merger, sale of
assets or sale of shares, between a corporation and an interested shareholder.
An "interested shareholder" is defined as the beneficial owner of more than 10%
of the outstanding voting securities of the corporation. Such approval is not
required where the (i) affiliated transaction is approved by a majority of the
disinterested directors, (ii) an interested shareholder owns 90% or more of the
corporation's outstanding voting stock, or has owned 80% or more for five years,
or (iii) consideration paid in connection with the affiliated transaction
satisfies the statutory "fair price" formula and the transaction meets certain
other requirements. A corporation may elect, by the vote
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<PAGE> 44
of a majority of the outstanding voting securities of the corporation (not
including shares held by an interested shareholder), or by amendment to the
articles or bylaws of the corporation, not to be subject to the provisions of
the Affiliated Transaction Statute. The election will not be effective until 18
months after it is made, and will not apply to any affiliated transaction
between the corporation and someone who was an interested shareholder prior to
the effective date of the election.
The application of the Affiliated Transaction Statute could prohibit or delay a
merger, takeover or other change in control of the Company, and therefore could
discourage attempts to acquire the Company.
TRANSFER AGENT
Florida Atlantic Stock Transfer, Inc., 5701 North Pine Island Rd. #310A,
Tamarac, Florida 33321, is the transfer agent and registrar for the Common
Stock.
REPORTS TO SHAREHOLDERS
Subject to the sale of the shares of Common Stock offered hereby, the Company
will register its Common Stock under the provisions of Section 12(g) of the
Exchange Act. Such registration will require the Company to comply with the
periodic reporting, proxy solicitation and certain other requirements of the
Exchange Act.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 2,920,000 shares
of Common Stock outstanding (3,040,000 if the Underwriter's Over-Allotment
option is fully exercised). Of those shares, the 800,000 shares and 800,000
Warrants being offered hereby will be freely tradeable without restriction
(except as to affiliates of the Company) or further registration under the
Securities Act. Notwithstanding Rule 144 of the Securities Act, 2,120,000 of the
remaining shares of Common Stock outstanding after this offering would be
immediately eligible for sale in the public market without registration except
that the 15 holders thereof have agreed not to sell their Shares before the
first anniversary of the effective date of the registration statement of which
this Prospectus is a part.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned restricted securities within
the meaning of Rule 144 for at least one year, including the holding period of
any prior owner except an affiliate, would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock or the average weekly
trading volume of the Common Stock in the over-the-
-42-
<PAGE> 45
counter market during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned shares for at least three
years, would be entitled to sell such shares under Rule 144(k) without regard to
the volume limitations, manner of sale provisions, public information
requirements or notice requirements. An "affiliate" is a person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or under common control with, such issuer.
Prior to this offering, there has been no public trading market for the Common
Stock. The Company intends to file an application to list its stock on the
NASDAQ SmallCap Market upon completion of this offering.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement, the
Company has agreed to sell to Joseph Charles & Associates, Inc. (the
"Underwriter") and the Underwriter has agreed to purchase from the Company all
800,000 shares of Common Stock and 800,000 Warrants to be sold in this offering.
The Securities are being sold on a firm commitment basis. The Underwriting
Agreement provides, however, that the obligations of the Underwriter are subject
to certain conditions precedent. The Underwriter is committed to purchase all
the Securities offered hereby if any are purchased.
The Underwriter has advised the Company that it proposes to offer the Common
Stock and Warrants directly to the public at the initial public offering price
set forth on the cover page of this Prospectus, and to selected dealers at that
price, less a concession of not more than $0.___ per share. The Underwriter may
allow a discount of not more than $_____ per share on sales to certain other
dealers. After the initial public offering, the price to the public of the
Common Stock and Warrants and the other terms may be changed.
Several shareholders of the Company, most notably Joseph Visconti and Gerald
Visconti, are shareholders of the Underwriter, which Joseph Visconti founded in
1991. Joseph Visconti serves the Underwriter as a director and officer and as
its largest shareholder and serves the Company as a director and as its second
largest shareholder, owning 37.03 percent of the Company's Common Stock prior to
completion of this offering. The offering, therefore, is being conducted in
accordance with the applicable provisions of Rule 2720 (previously Schedule E to
the Bylaws of the NASD) of
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<PAGE> 46
the Conduct Rules of the NASD, which provides that, among other things, when an
NASD member participates in an underwriting of equity securities in which it or
its affiliates has an economic interest, the initial public offering price can
be no higher than that recommended by a "qualified independent underwriter"
meeting certain standards. In accordance with this requirement, Kashner,
Davidson Securities, Inc. has served in such role and will recommend a price in
compliance with the requirements of Rule 2720. The initial public offering price
of the Common Stock set forth on the cover page of this Prospectus will be no
higher than such recommended price. In addition, the Underwriter may not confirm
sales to any discretionary account without the prior specific written approval
of the customer. The Underwriter has informed the Company that it does not
expect to sell any Securities to any account over which it has discretionary
authority.
The Company has granted the Underwriter an option (the "Underwriter's
Over-Allotment Option"), exercisable during the 60-day period following the date
of this Prospectus, to purchase up to 120,000 additional Units, at the initial
public offering price less the underwriting discount. The Underwriter may
exercise such option only for the purpose of covering any over-allotments in the
sale of the Units offered hereby.
The Company has agreed to indemnify the Underwriter against certain liabilities,
losses and expenses, including liabilities under the Securities Act, or to
contribute to payments that the Underwriter may be required to make in respect
thereof.
The Company has agreed to pay the Underwriter a non-accountable expense
allowance of 3% of the gross proceeds from the sale of Securities and to pay a
consulting fee of $60,000 for 24 months of consulting services to be rendered.
The officers, directors and shareholders of the Company have agreed that they
will not offer, sell or otherwise dispose of any Common Stock of the Company
owned by them to the public for a period of at least 12 months from the closing
of this offering without the prior written consent of the Underwriter. The
Underwriter may in its discretion and without notice to the public waive these
lock up agreements and permit holders otherwise agreeing to lock up their shares
to sell any or all of their shares of Common Stock, although the Underwriter has
no current intention of doing so.
The Company has agreed with the Underwriter not to solicit Warrant exercises
other than through the Underwriter. Upon exercise of any Warrants commencing one
year from the date of this Prospectus, the Company will pay the Underwriter a
fee of 4% of the aggregate exercise price, if (i) the market price of the
Company's Common Stock on the date the Warrant is exercised is greater than the
then exercise price of the Warrants; (ii) the
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<PAGE> 47
exercise of the Warrant was solicited by a member of the NASD who is so
designated in writing by the holder exercising the Warrant; (iii) the Warrant is
not held in a discretionary account; (iv) disclosure of compensation
arrangements was made both at the time of the offering and at the time of
exercise of the Warrant; and (v) the solicitation of the exercise of the Warrant
was not in violation of Regulation M promulgated under the Exchange Act. No
solicitation fee will be paid to the Underwriter for Warrants exercised within
one year of the date of this Prospectus or for Warrants voluntarily exercised at
any time without solicitation.
At the closing of this offering, the Company will sell and deliver to the
Underwriter for an aggregate purchase price of $80.00, the "Underwriter's
Option" to purchase 80,000 shares of Common Stock and 80,000 Warrants at a price
that is equal to 120% of the initial public offering price for the Common Stock
and Warrants. The Warrants underlying the Underwriter's Option will have an
exercise price and other terms identical to the Warrants being offered to the
public pursuant to this Prospectus except that the Underwriter's Option shall
not be redeemable.
The Underwriter's Option will be non-transferable for a period of one year
following the date of this Prospectus except to officers of the Underwriter. The
Underwriter's Option will also contain anti-dilution provisions for stock
splits, stock dividends, recombinations and reorganizations, a one-time demand
registration provision (at the Company's expense) and piggyback registration
rights (which registration rights will expire five years from the date of this
Prospectus).
The Underwriter may engage in over-allotment, stabilizing transactions,
syndicate-covering transactions and penalty bids in accordance with Rule 104 of
Regulation M under the Exchange Act. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate-covering
transactions involve purchases of Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriter to reclaim a selling concession from a
syndicate member when the Common Stock originally sold by such syndicate member
is purchased in a syndicate-covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate-covering transactions and
penalty bids may cause the price of the Common Stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on the NASDAQ SmallCap Market or otherwise and, if commenced, may be
discontinued at any time.
Prior to this offering, there has been no public market for the Common Stock or
Warrants and there can be no assurance that a
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<PAGE> 48
market will develop or be sustained following this offering. The initial public
offering price of the Common Stock and Warrants and the exercise price of the
Warrants were determined taking into account the prospects for the Company, an
assessment of the industry in which the Company operates, the assessment of
management, the number of shares of Common Stock and Warrants offered, the price
that purchasers of such Securities might be expected to pay given the nature of
the Company and the general condition of the securities markets at the time of
the offering. Accordingly, the offering price set forth on the cover page of
this Prospectus should not necessarily be considered an indication of the actual
value of the Company or the Common Stock or Warrants.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Mirkin & Woolf, P.A., West Palm Beach, Florida. Mirkin & Woolf,
P.A. has represented the Underwriter from time to time on other matters. Mirkin
& Woolf, P.A. shall receive, upon effectiveness of the Registration Statement, a
warrant to acquire 104,167 shares of the Company's common stock at an exercise
price of $6.00 per share. The warrant shall be exercisable at any time, in
whole or in parts, through February 2002. Certain legal matters will be passed
upon for the Underwriter by Troop Meisinger Steuber & Pasich, LLP, Los Angeles,
California.
EXPERTS
The consolidated balance sheet of the Company as of December 31, 1996 and the
consolidated statements of operations, shareholders' equity and cash flows for
the year ended December 31, 1996 and the period May 17, 1995 (inception) to
December 31, 1995 included in this Prospectus have been included herein in
reliance on the report of Templeton & Company, P.A., independent accountants,
given upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
A Registration Statement on Form SB-2 relating to the Units offered hereby has
been filed by the Company with the Securities and Exchange Commission in
Washington, D.C. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. For further information with respect to the Company and the
Units offered hereby, reference is hereby made to the Registration Statement and
to the exhibits and schedules
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<PAGE> 49
thereto. A copy of the Registration Statement may be inspected by anyone without
charge and may be obtained at prescribed rates at the Securities and Exchange
Commission at the Public Reference Section of the Commission, maintained by the
Commission at its principal office located at 450 Fifth Street N.W., Washington,
D.C. 20549 and at the Midwest Regional Office at the Commission located at 500
West Madison Street #1400, Chicago, IL 60661-2511 and at 7 World Trade Center
#1300, New York, NY 10048 and copies of all or any part thereof may be obtained
from such office after payment of the fees prescribed by the Commission.
The Securities and Exchange Commission maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The Commission's
address on the Web is http://www.sec.gov.
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<PAGE> 50
<PAGE> 51
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
Independent Auditors' Report F-2
Consolidated Balance Sheet as of December 31, 1996 F-3
Consolidated Statements of Operations for the period
May 17, 1995 (inception) to December 31, 1995 and
for the year ended December 31, 1996 F-4
Consolidated Statements of Shareholders' Equity for
the period May 17, 1995 (inception) to December 31,
1995 and for the year ended December 31, 1996 F-5
Consolidated Statements of Cash Flows for the period
May 17, 1995 (inception) to December 31, 1995 and
for the year ended December 31, 1996 F-6
Notes to Consolidated Financial Statements F-7
Consolidated Balance Sheet as of March 31, 1997
(unaudited) F-16
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996 (unaudited) F-17
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 (unaudited) F-18
Notes to Interim Consolidated Financial Statements
(unaudited) F-19
</TABLE>
F-1
<PAGE> 52
TEMPLETON & COMPANY, P.A.
Certified Public Accountants
540 Royal Palm Beach Boulevard
Royal Palm Beach, Florida 33411
--------------
(561) 798-9988
Fax (561) 798-4053
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Sforza Enterprises Inc.
We have audited the accompanying consolidated balance sheet of Sforza
Enterprises Inc. and subsidiaries as of December 31, 1996 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year ended December 31, 1996 and the period May 17, 1995 (inception) to
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sforza Enterprises Inc. and
subsidiaries as of December 31, 1996, and the results of their operations and
their cash flows for the year ended December 31, 1996 and the period May 17,
1995 (inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
TEMPLETON & COMPANY, P.A.
Royal Palm Beach, Florida
March 28, 1997, except for
Notes 2 and 9, as to which
the date is July 8, 1997
F-2
<PAGE> 53
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and cash equivalents $ 202,639
Accounts receivable 2,238
Inventories 38,661
Deferred income taxes 13,583
Other current assets 54,829
----------
Total current assets 311,950
Property and equipment, net 495,370
Other assets, net 278,831
----------
Total assets $1,086,151
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 917
Accrued expenses 84,981
Unearned revenue 61,759
Income taxes payable 15,387
Due to shareholders 63,445
Current portion of long-term debt 114,874
Current portion of obligations under
capital leases 30,089
----------
Total current liabilities 371,452
Long-term debt, net 30,014
Obligations under capital leases, net 53,959
Deferred income taxes 7,515
----------
Total liabilities 462,940
----------
Shareholders' equity:
Common stock, $.01 par value;
20,000,000 shares authorized;
1,975,000 shares issued and
outstanding 19,750
Additional paid-in capital 490,550
Retained earnings 112,911
----------
Total shareholders' equity 623,211
----------
Total liabilities and
shareholders' equity $1,086,151
==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 54
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD MAY 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net sales $2,333,530 $ -
---------- ----------
Cost and expenses:
Cost of sales 1,299,501 -
Operating expenses 881,856 12,244
Interest expense, net - 555
---------- ----------
Total cost and expenses 2,181,357 12,799
---------- ----------
Income (loss) before other income 152,173 (12,799)
Other income, net 3,051 -
---------- ----------
Income (loss) before provision for
income taxes 155,224 (12,799)
Provision for income taxes 9,319 -
---------- ----------
Net income (loss) $ 145,905 $ (12,799)
========== ==========
Earnings (net loss) per common share:
Primary $ .07 $ (.01)
========== ==========
Fully diluted $ .07 $ (.01)
========== ==========
Weighted average common shares outstanding:
Primary 2,026,328 1,986,363
========== ==========
Fully diluted 2,146,328 2,106,363
========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 55
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD MAY 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------- Paid-in Earnings
No. Shares Amount Capital (Deficit)
---------- ------ ---------- ---------
<S> <C> <C> <C> <C>
Balance, May 17, 1995
(inception) - $ - $ - $ -
Issuance of 500 shares of
common stock by Castle
Room, Inc. - - 10,000 -
Net loss for the period
May 17, 1995 to Decem-
ber 31, 1995 - - - (12,799)
--------- ------- -------- --------
Balance, December 31, 1995 - - 10,000 (12,799)
Issuance of 1,655,000
shares of common stock
in exchange for 500
shares of Castle Room,
Inc. 1,655,000 16,550 (10,000) (6,550)
Issuance of 320,000
shares of common
stock 320,000 3,200 490,550 -
Net income for the year
ended December 31, 1996 - - - 145,905
Distributions to share-
holders of Castle Room,
Inc. - - - (13,645)
--------- ------- -------- --------
Balance, December 31, 1996 1,975,000 $19,750 $490,550 $112,911
========= ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 56
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD MAY 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 145,905 $ (12,799)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 33,946 146
Deferred income taxes (6,068) -
Increase in accounts receivable (2,238) -
Increase in inventories (38,661) -
Increase in other current assets (47,435) (7,394)
Increase in accounts payable 917 -
Increase in accrued expenses 84,426 555
Increase in unearned revenue 11,759 50,000
Increase in income taxes payable 15,387 -
--------- ---------
Net cash provided by operating
activities 197,938 30,508
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (335,349) (102,843)
Increase in other assets (274,648) (4,580)
--------- ---------
Net cash used in investing activities (609,997) (107,423)
--------- ---------
Cash flows from financing activities:
Proceeds from shareholder borrowings 168,445 70,000
Repayment of notes payable,
shareholders (75,897) -
Proceeds from issuance of long-term
debt 6,242 60,000
Principal payments on long-term debt (20,457) -
Principal payments on obligations
under capital leases (6,825) -
Proceeds from issuance of common stock 493,750 10,000
Distributions to shareholders of
Castle Room, Inc. (13,645) -
--------- ---------
Net cash provided by financing activities 551,613 140,000
--------- ---------
Net increase in cash and cash equivalents 139,554 63,085
Cash and cash equivalents, beginning of
period 63,085 -
--------- ---------
Cash and cash equivalents, end of period $ 202,639 $ 63,085
========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 57
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Sforza Enterprises Inc. (Sforza) was formed in July 1996 and issued 1,680,000
shares of its common stock in exchange for all of the outstanding shares of
common stock of Castle Room, Inc. (formed May 17, 1995), Clematis Bistro
Corporation (formed April 12, 1996), and Sushi Enterprises, Inc. (formed July 3,
1996). The exchange was accounted for as a pooling of interests and,
accordingly, the accompanying consolidated financial statements include the
results of operations from the inception date of May 17, 1995.
Sforza Enterprises Inc. and subsidiaries (the Company) operate Sforza
Ristorante, an up-scale Northern Italian restaurant located in downtown West
Palm Beach, Florida, which opened for business on February 2, 1996. The Company
plans to open two new restaurants, My Martini Grille and a sushi restaurant, in
locations adjacent to Sforza Ristorante during 1997.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies used in preparing the
accompanying financial statements follows:
PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of Sforza
Enterprises Inc. and subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation.
CASH EQUIVALENTS
----------------
For purposes of the statement of cash flows, the Company considers all
temporary cash investments with maturities of three months or less, when
purchased, to be cash equivalents.
INVENTORIES
-----------
Inventories consist of various food and beverage items which are stated at
the lower of cost or market using the first-in, first-out method.
RESTAURANT START-UP COSTS
-------------------------
The Company defers certain restaurant start-up costs associated with the
opening of new restaurants (included in other current assets) and
amortizes such costs ratably over twelve months.
F-7
<PAGE> 58
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets,
which range from three to ten years. Leasehold improvements are amortized
using the straight-line method over the estimated useful lives of the
improvements or the term of the lease, whichever is shorter. Equipment
leased under capital leases is amortized over the lives of the respective
leases.
ORGANIZATION COSTS
------------------
Organization costs (included in other assets) are amortized by the
straight-line method over five years.
UNEARNED REVENUE
----------------
The Company is obligated to provide meals to individuals pursuant to an
agreement with an entity which enrolled such individuals in a restaurant
discount program. Amounts received from the entity are recorded as
unearned revenue and amortized ratably to income over the term of the
agreement.
EARNINGS (NET LOSS) PER COMMON SHARE
------------------------------------
Primary earnings (net loss) per common share is based on the average
number of common shares outstanding during each period, assuming the
effect of exercising the options (see Note 9) which have an exercise price
less than the average market price of common stock (assumed to be $5.50
per share) using the modified treasury stock method. In addition, primary
per share amounts include the dilutive effect of common shares issued for
cash consideration below the assumed average market price during the one
year period prior to July 1997.
The fully diluted earnings (net loss) per common share calculation assumes
the conversion of certain convertible debt instruments issued by the
Company subsequent to December 31, 1996 (see Note 9) into shares of
common stock.
MANAGEMENT ESTIMATES
--------------------
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
F-8
<PAGE> 59
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Operating properties:
Leasehold improvements $134,456
Equipment leased under capital
equipment lease 90,873
Furniture and fixtures 239,063
--------
464,392
Less accumulated depreciation and
amortization (33,695)
--------
430,697
Properties undergoing renovation:
Leasehold improvements in progress 64,673
--------
$495,370
========
</TABLE>
The Company capitalizes interest on qualifying expenditures in accordance with
Statement of Financial Accounting Standards Number 34. Total interest incurred
and capitalized for the period May 17, 1995 to December 31, 1995 and for the
year ended December 31, 1996 are presented as follows:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Interest incurred $23,005 $ 555
Interest capitalized 23,005 -
------- ------
Interest expense, net $ - $ 555
======= ======
</TABLE>
Depreciation and amortization of property and equipment for the year ended
December 31, 1996 amounted to $33,695. There was no depreciation or amortization
charged for the period May 17, 1995 to December 31, 1995 as assets were placed
in service in 1996. Included in other assets at December 31, 1996 is $231,801 in
deposits on pending restaurant property and equipment purchases.
F-9
<PAGE> 60
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4 - DESCRIPTION OF LEASING ARRANGEMENTS
The Company operates primarily in facilities leased from an entity partially
owned by certain of the Company's shareholders under three separate leases. The
leases have specified monthly payments over their ten-year terms and require the
Company to pay its proportionate share of common area maintenance costs and real
estate taxes. Certain of the Company's shareholders have personally guaranteed
an amount aggregating $125,000 in lieu of cash security deposits.
The Company leases certain equipment from an unrelated party under a capital
lease. In addition, the consolidated balance sheet at December 31, 1996 includes
the following regarding equipment leased under capital leases:
<TABLE>
<CAPTION>
<S> <C>
Equipment leased under capital leases $90,873
Accumulated amortization (4,991)
-------
$85,882
=======
</TABLE>
Minimum annual rentals for leases in effect at December 31, 1996 follow:
<TABLE>
<CAPTION>
Equipment
Year Ending Under Capital Operating
December 31, Lease Leases
------------ ------------- ---------
<S> <C> <C>
1997 $ 32,859 $ 58,125
1998 32,859 62,625
1999 26,694 67,125
2000 22,508 71,625
2001 - 76,125
Thereafter - 357,375
--------- --------
Total minimum rentals 114,920 $693,000
========
Less interest portion (30,872)
---------
Present value of net
minimum rentals $ 84,048
=========
</TABLE>
Total rent expense under operating leases for the year ended December 31, 1996
amounted to $80,410. There was no rent expense for the period May 17, 1995 to
December 31, 1995.
F-10
<PAGE> 61
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 5 - LONG-TERM DEBT
Long-term debt includes the following at December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Note payable, requires monthly payments of
principal and interest at prime plus 2%,
10.25% at December 31, 1996, and is due in
1998. The note is uncollateralized and
personally guaranteed by certain shareholders. $ 41,986
Note payable, requires monthly payments of
principal and interest at 12%, and is due
in 1997. The note is collateralized by
certain equipment. 3,799
Notes payable, shareholders, represents
loans from certain shareholders for working
capital purposes pursuant to uncollateralized
notes which are due in monthly installments
of principal and interest at 10% through
January 1998. Interest incurred on such notes
amounted to $13,758 for 1996. 99,103
--------
$144,888
========
</TABLE>
Principal payments due on long-term debt in each of the years subsequent to
December 31, 1996 follow:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ --------
<S> <C>
1997 $114,874
1998 30,014
--------
$144,888
========
</TABLE>
NOTE 6 - DUE TO SHAREHOLDERS
Due to shareholders represents outstanding borrowings from certain shareholders
for working capital purposes. Such borrowings are uncollateralized, non-interest
bearing, and due on demand.
F-11
<PAGE> 62
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7 - INCOME TAXES
The shareholders of Castle Room, Inc. elected for it to be treated as an S
Corporation for federal income tax purposes, whereby taxable income or loss is
apportioned among shareholders rather than taxed directly to the corporation.
Accordingly, the financial statements for the period May 17, 1995 to December
31, 1995 do not reflect a provision for income taxes.
Effective July 29, 1996, in connection with the exchange of shares between the
shareholders of Castle Room, Inc. and Sforza Enterprises, Inc. (see Note 1),
Castle Room, Inc. became a wholly-owned subsidiary of Sforza Enterprises Inc.
and no longer qualified for treatment as an S Corporation for federal income tax
purposes for periods subsequent to July 29, 1996. The Company filed a
consolidated federal income tax return for the period July 29, 1996 to December
31, 1996.
The income tax provision for the year ended December 31, 1996 consists as
follows:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- ------
<S> <C> <C> <C>
Federal $11,791 $(5,881) $5,910
State 3,596 (187) 3,409
------- ------- ------
$15,387 $(6,068) $9,319
======= ======= ======
</TABLE>
A reconciliation of the effective income tax rate with the U.S. statutory income
tax rate is presented as follows:
U.S. statutory rate 34.0%
S Corporation income of subsidiary
taxed directly to shareholders (20.2)
Surtax bracket difference (7.5)
State income tax, net of federal
benefit .8
Other (1.1)
----
Effective income tax rate 6.0%
====
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and tax carryforwards. The
following is a summary of the significant components of the Company's net
deferred tax assets and liabilities as of December 31, 1996:
F-12
<PAGE> 63
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7 - INCOME TAXES, CONTINUED
<TABLE>
<CAPTION>
Net Deferred Tax
-------------------------
Assets Liabilities
Temporary Difference/Tax Carryforward (Current) (Non-Current)
------------------------------------- --------- -------------
<S> <C> <C>
Capitalized interest per financial
statements $ - $ 8,650
Depreciation difference - (1,135)
Accrued expenses not deducted 8,004 -
Tax inventories over financial
statement amount 790 -
Tax credit carryforward 4,789 -
------- -------
$13,583 $ 7,515
======= =======
</TABLE>
NOTE 8 - SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION
Supplemental statement of cash flows information for the year ended December 31,
1996 and the period May 17, 1995 to December 31, 1995 follows:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Non-cash investing and financing
activities:
Equipment recorded under capital
leases $90,873 $ -
======= ======
Cash payments for:
Interest $22,697 $ -
======= ======
Income taxes $ - $ -
======= ======
</TABLE>
NOTE 9 - SUBSEQUENT EVENTS
PREFERRED STOCK
- ---------------
During May 1997, the Company amended its articles of incorporation to authorize
the issuance of up to 400,000 shares of preferred stock and issued 160,000
shares of Series A convertible preferred stock (the Series A shares) for
$400,000. The Series A shares have a liquidation preference of $2.50 per share
and carry a cumulative dividend of ten percent (10%) per annum. Upon the
completion of a public offering of the Company's common stock (see below),
80,000 of the Series A shares will convert into 80,000 common shares while the
other 80,000 Series A shares will be redeemed for $400,000 with proceeds from
the public offering.
F-13
<PAGE> 64
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 9 - SUBSEQUENT EVENTS, CONTINUED
MANAGEMENT AGREEMENT
- --------------------
On June 1, 1997, the Company consummated a one-year agreement with Unique
Restaurant Concepts, Inc. (URCI) for the management of its restaurants. URCI
will receive a fee equal to one percent of net sales plus twenty percent of the
net operating profit of the restaurants as defined in the agreement.
FIXED RATE PROMISSORY NOTE
- --------------------------
During February 1997, the Company borrowed $250,000 from a principal of URCI
pursuant to a fixed rate promissory note. The note is collateralized by
substantially all of the Company's assets, bears interest at 15% and is due on
demand. In addition, repayment of the note is guaranteed by certain
shareholders. On June 1, 1997, the terms of the loan were modified to convert
$125,000 of the principal balance into 40,000 shares of common stock and
establish a September 30, 1997 due date for payment of the remaining $125,000.
STOCK OPTION PLAN
- -----------------
On June 1, 1997, the Company adopted the equity incentive plan (the Plan) which
provides for the granting of options to key employees and consultants to
purchase up to 285,000 shares of the Company's common stock. No options were
granted pursuant to the Plan.
COMMON STOCK ISSUANCE
- ---------------------
Subsequent to December 31, 1996, the Company issued 25,000 shares of its common
stock for total proceeds of $31,250 ($1.25 per share).
REGISTRATION STATEMENT
- ----------------------
During July 1997, the Company expects to file a registration statement with the
Securities and Exchange Commission to offer 800,000 units (consisting of 800,000
shares of its common stock and 800,000 warrants to purchase shares of common
stock) at a price of $5.50 per unit.
FUNDING AGREEMENT
- -----------------
On July 1, 1997, the Company consummated a funding agreement with an affiliate
of URCI and four limited partnerships which have been formed or are expected to
be formed each for the purpose of owning and operating a restaurant. One of the
restaurants opened in May 1997 and the others are expected to be constructed and
opened as soon as possible thereafter.
F-14
<PAGE> 65
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 9 - SUBSEQUENT EVENTS, CONTINUED
FUNDING AGREEMENT, CONTINUED
- ----------------------------
Under the funding agreement, the Company will provide $3,000,000 of the proceeds
from its proposed initial public offering (see above) to the limited
partnerships to fund the construction and opening of the restaurants in exchange
for a 50% equity interest in each of the limited partnerships. Management of the
restaurants will be provided by URCI pursuant to separate management agreements.
The funding agreement provides for URCI to manage such restaurants as long as
the Company maintains an equity ownership interest therein.
The Company expects to account for the acquisition as a purchase and include the
accounts of the limited partnerships in its consolidated financial statements.
In addition, the Company will grant to certain URCI principals options to
purchase 150,000 shares of its common stock at an exercise price of $2.50 per
share which will be exercisable through December 31, 1999.
In the event the Company's initial public offering is not completed by September
30, 1997, the funding agreement will terminate.
F-15
<PAGE> 66
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 194,781
Accounts receivable 3,353
Inventories 89,411
Deferred income taxes 13,583
Other current assets 127,513
----------
Total current assets 428,641
Property and equipment, net 887,255
Other assets, net 187,832
----------
Total assets $1,503,728
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 125,000
Accounts payable 186,595
Accrued expenses 108,891
Unearned revenue 29,574
Due to shareholders 63,445
Current portion of long-term debt 108,695
Current portion of obligations under capital leases 23,047
----------
Total current liabilities 645,247
Long-term debt, net 141,587
Obligations under capital leases, net 59,218
Deferred income taxes 7,515
----------
Total liabilities 853,567
----------
Shareholders' equity:
Common stock, $.01 par value; 20,000,000 shares
authorized; 2,000,000 shares issued and
outstanding 20,000
Additional paid-in capital 521,550
Retained earnings 108,611
----------
Total shareholders' equity 650,161
----------
Total liabilities and shareholders' equity $1,503,728
==========
</TABLE>
See notes to interim consolidated financial statements.
F-16
<PAGE> 67
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Net sales $1,394,298 $ 363,030
---------- -----------
Cost and expenses:
Cost of sales 766,949 212,028
Operating expenses 623,601 135,817
Interest expense, net 10,248 -
---------- -----------
Total cost and expenses 1,400,798 347,845
---------- -----------
Income (loss) before other income (6,500) 15,185
Other income, net - 368
---------- -----------
Income (loss) before income tax benefit (6,500) 15,553
Income tax benefit 2,200 -
---------- -----------
Net income (loss) $ (4,300) $ 15,553
========== ===========
Earnings (net loss) per common share:
Primary $ - $ .01
========== ===========
Fully diluted $ - $ .01
========== ===========
Weighted average common shares outstanding:
Primary 2,076,136 1,986,363
========== ===========
Fully diluted 2,196,136 2,106,363
========== ===========
</TABLE>
See notes to interim consolidated financial statements.
F-17
<PAGE> 68
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,300) $ 15,553
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 30,666 2,095
Increase in accounts receivable (3,115) -
Increase in inventories (50,750) (25,371)
(Increase) decrease in other current
assets (70,684) 7,394
Increase in accounts payable 185,678 12,793
Increase (decrease) in accrued
expenses 23,910 (555)
Increase (decrease) in unearned
revenue (32,185) 17,779
Decrease in income taxes payable (15,387) -
--------- ---------
Net cash provided by operating activities 63,833 29,688
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (422,491) (148,564)
Increase (decrease) in other assets 90,939 (266)
--------- ---------
Net cash used in investing activities (331,552) (148,830)
--------- ---------
Cash flows from financing activities:
Proceeds from notes payable,
shareholders - 105,000
Other debt issuance proceeds 258,350 -
Repayment of notes payable, shareholders (21,930) -
Principal payments on long-term debt (6,026) (5,767)
Principal payments on obligations
under capital leases (1,783) -
Proceeds from issuance of common stock 31,250 -
--------- ---------
Net cash provided by financing activities 259,861 99,233
--------- ---------
Net decrease in cash and cash equivalents (7,858) (19,909)
Cash and cash equivalents, beginning of
period 202,639 63,085
--------- ---------
Cash and cash equivalents, end of period $ 194,781 $ 43,176
========= =========
Total interest paid during the period $ 4,248 $ -
========= =========
Total income taxes paid during the period $ 15,387 $ -
========= =========
</TABLE>
See notes to interim consolidated financial statements.
F-18
<PAGE> 69
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The consolidated statements as of March 31, 1997 and for the three months ended
March 31, 1997 and 1996 are unaudited; however, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements for these interim
periods have been included. The results of the interim period ended March 31,
1997 are not necessarily indicative of the results to be obtained for the full
fiscal year ending December 31, 1997.
SIGNIFICANT TRANSACTIONS
FIXED RATE PROMISSORY NOTE
- --------------------------
During February 1997, the Company borrowed $250,000 from a principal of the
Company which manages its restaurants (see below) pursuant to a fixed rate
promissory note. The note is collateralized by substantially all of the
Company's assets, bears interest at 15% and is due on demand. In addition,
repayment of the note is guaranteed by certain shareholders. On June 1, 1997,
the terms of the loan were modified to convert $125,000 of the principal balance
into 40,000 shares of common stock and establish a September 30, 1997 due date
for payment of the remaining $125,000. The portion of the loan which was
converted into shares of common stock is included in long-term debt in the
consolidated balance sheet at March 31, 1997.
COMMON STOCK ISSUANCE
- ---------------------
During January 1997, the Company issued 25,000 shares of its common stock for
total proceeds of $31,250 ($1.25 per share).
SUBSEQUENT EVENTS
PREFERRED STOCK
- ---------------
During May 1997, the Company amended its articles of incorporation to authorize
the issuance of up to 400,000 shares of preferred stock and issued 160,000
shares of Series A convertible preferred stock (the Series A shares) for
$400,000. The Series A shares have a liquidation preference of $2.50 per share
and carry a cumulative dividend of ten percent (10%) per annum. Upon the
completion of a public offering of the Company's common stock (see below),
80,000 of the Series A shares will convert into 80,000 common shares while the
other 80,000 Series A shares will be redeemed for $400,000 with proceeds from
the public offering.
F-19
<PAGE> 70
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
SUBSEQUENT EVENTS, CONTINUED
MANAGEMENT AGREEMENT
- --------------------
On June 1, 1997, the Company consummated a one-year agreement with Unique
Restaurant Concepts, Inc. (URCI) for the management of its restaurants. URCI
will receive a fee equal to one percent of net sales plus twenty percent of the
net operating profit of the restaurants as defined in the agreement.
STOCK OPTION PLAN
- -----------------
On June 1, 1997, the Company adopted the equity incentive plan (the Plan) which
provides for the granting of options to key employees and consultants to
purchase up to 285,000 shares of the Company's common stock. No options were
granted pursuant to the Plan.
REGISTRATION STATEMENT
- ----------------------
During July 1997, the Company expects to file a registration statement with the
Securities and Exchange Commission to offer 800,000 units (consisting of 800,000
shares of its common stock and 800,000 warrants to purchase shares of common
stock) at a price of $5.50 per unit.
FUNDING AGREEMENT
- -----------------
On July 1, 1997, the Company consummated a funding agreement with an affiliate
of URCI and four limited partnerships which have been formed or are expected to
be formed each for the purpose of owning and operating a restaurant. One of the
restaurants opened in May 1997 and the others are expected to be constructed and
opened as soon as possible thereafter.
Under the funding agreement, the Company will provide $3,000,000 of the proceeds
from its proposed initial public offering (see above) to the limited
partnerships to fund the construction and opening of the restaurants in exchange
for a 50% equity interest in each of the limited partnerships. Management of the
restaurants will be provided by URCI pursuant to separate management agreements.
The funding agreement provides for URCI to manage such restaurants as long as
the Company maintains an equity ownership interest therein.
The Company expects to account for the acquisition as a purchase and include the
accounts of the limited partnerships in its consolidated financial statements.
F-20
<PAGE> 71
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
SUBSEQUENT EVENTS, CONTINUED
FUNDING AGREEMENT, CONTINUED
- ----------------------------
In addition, the Company will grant to certain URCI principals options to
purchase 150,000 shares of its common stock at an exercise price of $2.50 per
share which will be exercisable through December 31, 1999.
In the event the Company's initial public offering is not completed by September
30, 1997, the funding agreement will terminate.
EARNINGS (NET LOSS) PER COMMON SHARE
Primary earnings (net loss) per common share is based on the average number of
common shares outstanding during each period, assuming the effect of exercising
options which have an exercise price less than the average market price of
common stock (assumed to be $5.50 per share) using the modified treasury stock
method. In addition, primary per share amounts include the dilutive effect of
common shares issued for cash consideration below the assumed average market
price during the one year period prior to July 1997.
The fully diluted earnings (net loss) per common share calculation assumes the
conversion of the convertible promissory note and convertible Series A shares,
issued by the Company subsequent to December 31, 1996, into shares of common
stock. The net loss for the three months ended March 31, 1997 used in the fully
diluted calculation was adjusted for interest incurred on the convertible
promissory note, net of tax benefits.
F-21
<PAGE> 72
-----------------------------------------------------
-----------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information and representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy the Units
by anyone in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making the offer is not qualified to do so,
or to any person to whom it is unlawful to make such offer or solicitation.
Under no circumstances shall the delivery of this Prospectus or any sale
pursuant to this Prospectus create any implication that the information
contained in this Prospectus is correct as of any time subsequent to the date of
this Prospectus.
----------------------
TABLE OF CONTENTS
Page
Summary..................................... 4
Risk Factors................................ 9
Use of Proceeds............................. 16
Dividend Policy............................. 17
Dilution.................................... 17
Selected Financial Data .................... 19
Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................ 21
Business.................................... 24
Management.................................. 30
Principal Shareholders...................... 34
Certain Transactions........................ 35
Description of Securities................... 37
Shares Eligible for Future Sale............. 43
Underwriting................................ 43
Legal Matters............................... 46
Experts..................................... 46
Available Information....................... 47
Index to Financial Statements............... F-1
----------------------
Until _________, 1997 (25 days after the commencement of this offering), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
-----------------------------------------------------
-----------------------------------------------------
SFORZA ENTERPRISES INC.
800,000 Shares
of Common Stock and 800,000
Redeemable Warrants
PROSPECTUS
_________, 1997
JOSEPH CHARLES & ASSOCIATES, INC.
-----------------------------------------------------
-----------------------------------------------------
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850(1) of the Florida Business Corporation Act, as amended (the
"Florida Act"), provides that, in general, a Florida corporation may indemnify
any person who was or is a party to any proceeding (other than an action by, or
in the right of, the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against liability incurred in connection with such proceeding, including any
appeal thereof, if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation and, with
respect to any criminal action or proceeding, he had no reasonable cause to
believe his conduct was unlawful.
In the case of proceedings by or in the right of the corporation, Section
607.0850(2) of the Florida Act provides that, in general, a corporation may
indemnify any person who was or is a party to any such proceeding by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation against expenses and amounts paid in settlement actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof, provided that such person acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification shall be
made in respect of any claims as to which such person is adjudged liable unless
a court of competent jurisdiction determines upon application that such person
is fairly and reasonably entitled to indemnity.
Section 607.0850 further provides that to the extent a director, officer,
employee or agent of a corporation is successful on the merits or in the defense
of any proceeding referred to in subsections (1) or (2) of Section 607.0850 or
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses actually and reasonably incurred by him in connection
therewith; that the corporation may advance such expenses; that indemnification
provided for by Section 607.0850 shall not be deemed exclusive of any other
rights to which the indemnified party may be entitled; and that the corporation
may purchase and maintain insurance on behalf of such person against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liabilities under such Section 607.0850.
Section 607.0850 of the Florida Act further provides that, in general,
indemnification or advancement of expenses shall not be made to or on behalf of
any director, officer, employee or agent if a judgment or other final
adjudication establishes that such person's actions, or omissions to act, were
material to the cause of action so adjudicated and constitute: (i) a violation
of the criminal law, unless such person had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (ii) a transaction from which
II-1
<PAGE> 74
such person derived an improper personal benefit; (iii) in the case of a
director, a circumstance under which the director has voted for or assented to
a distribution made in violation of the Florida Act or the corporation's
articles of incorporation; or (iv) willful misconduct or a conscious disregard
for the best interests of the corporation in a proceeding by or in the right of
the corporation to procure a judgment in favor or in a proceeding by or in the
right of a shareholder.
The Company's Articles of Incorporation and Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
Florida law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the Company's estimates (other than the
Commission registration fee) of the expenses in connection with the issuance and
distribution of the shares of Common Stock being registered:
Securities and Exchange Commission registration fee. . . $ 3,316
NASD filing fee . . . . . . . . . . . . . . . . . . . . 1,006
NASDAQ listing fee . . . . . . . . . . . . . . . . . . . 8,040
Printing expenses. . . . . . . . . . . . . . . . . . . . 75,000
Legal fees and expenses. . . . . . . . . . . . . . . . . 75,000
Accounting fees and expenses . . . . . . . . . . . . . . 45,000
Blue sky fees and expenses . . . . . . . . . . . . . . . 50,000
Transfer agent and registrar fees and expenses . . . . . 5,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . 12,638
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $275,000
========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since the Company's inception, the Company has sold unregistered securities in
the amounts, at the times and for the aggregate amounts of consideration listed
as follows:
In July 1996 the Company sold (i) 802,500 shares of Common Stock to Joseph C.
Visconti in consideration for the transfer by Mr. Visconti to the Company of 250
shares of the common stock of Castle Room, Inc., and (ii) 802,500 shares of
Common Stock to Dale J. Brisson in consideration for the transfer by Mr. Brisson
II-2
<PAGE> 75
to the Company of 250 shares of the common stock of Castle Room, Inc.
Between August and December 1996 the Company sold 395,000 common shares in the
aggregate to the following persons at a price of $1.25 per share, paid in cash.
<TABLE>
<CAPTION>
NAME SHARES
---- ------
<S> <C> <C>
1. Gerald J. Visconti, Jr. 107,000
2. Patrick L. Amarante 100,000
3. James M. Hall 75,000
4. Milton H. Barbarosh 20,000
5. Eric and Ann Fishman 20,000
6. Allan R. Lyons 20,000
7. Robert M. Samuels 20,000
8. Suzanne M. Trapani 19,000
9. Richard A. Rappaport 10,000
10. Robert and Abi Schmeltzer 4,000
</TABLE>
In June 1997 the Company sold 40,000 shares to Daniel S. Catalfumo at a price
of $3.125 per share.
Several of the investors listed above have acquired or sold shares of the
Company's Common Stock in private transactions in 1997.
The Securities issued by the Company in the foregoing transactions were not
registered under the Securities Act of 1933 in reliance upon exemptions
contained in Section 4(2) thereof.
ITEM 27. EXHIBITS.
* 1 Underwriting Agreement
3.1 Articles of Incorporation, as amended
3.2 Bylaws
4.1 Specimen Common Stock Certificate
* 4.2 Specimen Redeemable Warrant
* 4.3 Form of Underwriter's Option
* 4.4 Form of Warrant Agreement
4.5 Fixed Rate Promissory Note in principal amount of $250,000 dated
January 31, 1997 payable to Unique Restaurant Concepts Ltd.
* 4.6 Fixed Rate Promissory Note in principal amount of $125,000 dated
June 1, 1997 payable to Daniel S. Catalfumo
* 4.7 Promissory Note in the principal amount of $___________ dated May 18,
1995 by the Company payable to Dale J. Brisson
* 4.8 Promissory Note in the principal amount of $___________ dated May 18,
1995 by the Company payable to Joseph C. Visconti
II-3
<PAGE> 76
* 4.9 Promissory Note in the principal amount of $60,000 dated December 1,
1995 by the Company payable to First Union National Bank of Florida
* 4.10 Stock Option Agreement dated July 1, 1997 between the Company and
Unique Restaurant Concepts Ltd.
* 5 Opinion of Mirkin & Woolf, P.A.
10.1 1997 Equity Incentive Plan
*10.2 Application for registration of My Martini Grille as a servicemark
dated _____________, 1997
*10.3 Certificate of registration of Sforza Ristorante as a servicemark
*10.4 Office lease
*10.5 Sforza Ristorante lease
*10.6 My Martini Grille lease
*10.7 Planned sushi restaurant lease
*10.8 Management and Consulting Agreement
10.9 Funding Agreement
21 Subsidiaries of the Registrant
23.1 Consent of Templeton & Company, P.A.
*23.2 Consent of Mirkin & Woolf, P.A. (contained in Exhibit 5)
24 Power of Attorney of Directors (included on signature page)
*27 Financial Data Schedule
- -----------------------------
* To be filed by amendment
ITEM 28. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar value
or securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective registration
statement.
II-4
<PAGE> 77
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) To provide to the Underwriter at the Closing specified in
the underwriting agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
B. Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C. For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time the Commission declared it effective.
D. For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering of those securities.
II-5
<PAGE> 78
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in the City of West Palm
Beach, State of Florida, on the 25th day of July, 1997.
SFORZA ENTERPRISES INC.
By: /s/ Dale J. Brisson
--------------------------
Dale J. Brisson, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Dale J. Brisson and Gerald J. Visconti Jr. his true and
lawful attorney-in-fact, each acting alone, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments including post-effective amendments to
this registration statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or
their substitutes, each acting alone may lawfully do or cause to be done by
virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Dale J. Brisson President, Chief Executive July 25, 1997
- ----------------------------- Officer and Director
Dale J. Brisson
/s/ Gerald J. Visconti, Jr. Vice President, Chief July 25, 1997
- ----------------------------- Financial Officer,
Gerald J. Visconti, Jr. (Principal Accounting
Officer), Secretary
and Director
/s/ Daniel S. Catalfumo Director July 25, 1997
- -----------------------------
Daniel S. Catalfumo
/s/ Dennis R. Max Director July 25, 1997
- -----------------------------
Dennis R. Max
/s/ Burton M. Rapoport Director July 25, 1997
- -----------------------------
Burton M. Rapoport
/s/ Joseph C. Visconti Director July 25, 1997
- -----------------------------
Joseph C. Visconti
</TABLE>
II-6
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
* 1 Underwriting Agreement
3.1 Articles of Incorporation, as amended
3.2 Bylaws
4.1 Specimen Common Stock Certificate
* 4.2 Specimen Redeemable Warrant
* 4.3 Form of Underwriter's Option
* 4.4 Form of Warrant Agreement
4.5 Fixed Rate Promissory Note in principal amount of $250,000 dated
January 31, 1997 payable to Unique Restaurant Concepts Ltd.
* 4.6 Fixed Rate Promissory Note in principal amount of $125,000 dated
June 1, 1997 payable to Daniel S. Catalfumo
* 4.7 Promissory Note in the principal amount of $___________ dated May 18,
1995 by the Company payable to Dale J. Brisson
* 4.8 Promissory Note in the principal amount of $___________ dated May 18,
1995 by the Company payable to Joseph C. Visconti
* 4.9 Promissory Note in the principal amount of $60,000 dated December 1,
1995 by the Company payable to First Union National Bank of Florida
* 4.10 Stock Option Agreement dated July 1, 1997 between the Company and
Unique Restaurant Concepts Ltd.
* 5 Opinion of Mirkin & Woolf, P.A.
10.1 1997 Equity Incentive Plan
*10.2 Application for registration of My Martini Grille as a servicemark
dated _____________, 1997
*10.3 Certificate of registration of Sforza Ristorante as a servicemark
*10.4 Office lease
*10.5 Sforza Ristorante lease
*10.6 My Martini Grille lease
*10.7 Planned sushi restaurant lease
*10.8 Management and Consulting Agreement
10.9 Funding Agreement
21 Subsidiaries of the Registrant
23.1 Consent of Templeton & Company, P.A.
*23.2 Consent of Mirkin & Woolf, P.A. (contained in Exhibit 5)
24 Power of Attorney of Directors (included on signature page)
*27 Financial Data Schedule
</TABLE>
- -----------------------------
* To be filed by amendment
II-7
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
SFORZA ENTERPRISES INC.
The undersigned subscriber to these Articles of Incorporation, a
natural person competent to contract, hereby forms a corporation under the laws
of the State of Florida.
ARTICLE I. NAME; ADDRESS
The name of the Corporation shall be Sforza Enterprises Inc. The
principal place of business shall be 525 S. Flagler Drive #400, West Palm
Beach, Florida 33401.
ARTICLE II. NATURE OF BUSINESS
The Corporation may engage in or transact all lawful activities or
businesses permitted under the laws of the United States, the State of Florida,
or any other state, country, territory or nation.
ARTICLE III. CAPITAL STOCK
The total number of shares of capital stock of all classes which the
Corporation shall have authority to issue is twenty million (20,000,000) shares
of common stock, $0.01 par value per share.
ARTICLE IV. REGISTERED AGENT
The street address of the initial registered office of the Corporation
shall be c/o Mirkin & Woolf, P.A., 1700 Palm Beach Lakes Blvd. #580, West Palm
Beach, Florida 33401 and the name of the initial registered agent of the
Corporation at that address is Mark H. Mirkin, Esq.
ARTICLE V. TERM OF EXISTENCE
The Corporation shall exist perpetually.
ARTICLE VI. DIRECTORS
The Corporation shall have two (2) directors initially. The names and
addresses of the initial members of the Board of Directors are Joseph C.
Visconti, 525 S. Flagler Drive #400, West Palm Beach, Florida 33401 and Dale J.
Brisson, 223 Clematis Street, West Palm Beach, Florida 33401.
<PAGE> 2
ARTICLE VII. INCORPORATOR
The name and address of the incorporator to these Articles of
Incorporation are Joseph C. Visconti, 525 S. Flagler Drive #400, West Palm
Beach, Florida 33401.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
on this ___ day of July, 1996.
Joseph C. Visconti
-2-
<PAGE> 3
CERTIFICATE DESIGNATING PLACE OF BUSINESS
OR DOMICILE FOR THE SERVICE OF PROCESS
WITHIN THIS STATE, NAMING AGENT UPON WHOM
PROCESS MAY BE SERVED
The following is submitted in accordance with the requirements of
Chapter 48.091, Florida Statutes:
SFORZA ENTERPRISES INC., desiring to organize under the laws of the
State of Florida with its registered office address, as indicated in the
Articles of Incorporation, as c/o Mirkin & Woolf, P.A., 1700 Palm Beach Lakes
Blvd. #580, West Palm Beach, Florida 33401, has named MARK H. MIRKIN, ESQ. as
its agent to accept service of process within this State.
ACKNOWLEDGEMENT
Having been named to accept service of process for the above-stated
Corporation at the place designated in this Certificate, I hereby accept to act
in this capacity and agree to comply with the provisions of Chapter 48.091,
F.S., relative to keeping open said office.
Mark H. Mirkin, Esq.
-3-
<PAGE> 4
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
SFORZA ENTERPRISES INC.
Pursuant to the provisions of the Florida Statutes, on May 16, 1997 all of the
directors and a majority-in-interest of the shareholders of Sforza Enterprises
Inc., a Florida corporation (the "Corporation"), adopted the following
resolutions by written consent:
RESOLVED: That the authorized capital of the
Corporation should be changed to 20,000,000
shares of common stock, $0.01 par value per
share, and 400,000 shares of preferred stock,
$0.01 par value per share.
RESOLVED: That 160,000 shares of preferred stock should
be designated as Series A Convertible
Pref-erred Stock bearing the attributes set
forth on attached Exhibit "A".
RESOLVED: That the Articles of Incorporation as filed
with the Florida State Department should be
amended to reflect the foregoing resolutions.
RESOLVED: That the President of the Corporation is
authorized to take any and all action neces-
sary in order to reflect the change in the
authorized capital of the Corporation.
No more than a majority in interest of the shareholders is re-quired either by
the Florida Statutes or the Articles of Incorporation or Bylaws of the
Corporation to effect a change in the authorized capital of the Corporation.
NOW THEREFORE, in accordance with the foregoing resolutions, Art-icle III of
the Corporation's Articles of Incorporation is amend-ed to read as follows:
ARTICLE III. CAPITAL STOCK
The total number of shares of capital stock of all classes which the
Corporation shall have authority to issue is twenty million four hundred
thousand (20,400,000) shares, of which twenty million (20,000,000) shares, one
cent ($0.01) par value per share, shall be a class designated "Common Stock",
and four hundred thousand (400,000) shares, one cent ($0.01) par value per
share, shall be of a class designated "Preferred Stock" of which one hundred
sixty thousand (160,000) shares, one cent ($0.01) par value per share, shall be
of a class designated "Series A Convertible Preferred Stock".
-4-
<PAGE> 5
The Board of Directors is authorized to determine the designations,
preferences, privileges and powers and relative, partici-pating, optional or
other special rights and qualifications, limitations or restrictions of the
above classes of capital stock.
The designations, preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of the Series A Convertible Preferred Stock shall be as
follows:
A. Series A Convertible Preferred Stock.
1. Voting. Except as may be otherwise provided by law
or by these Articles of Incorporation, the Series A Convertible Preferred Stock
shall not have voting rights.
2. Dividends. The holders of the Series A Convertib-le
Preferred Stock shall be entitled to receive, out of funds le-gally available
therefor, cumulative cash dividends and dividends payable in property at the
annual rate of ten percent (10%). Dividends on the Series A Convertible
Preferred Stock shall accrue until paid and shall be in preference to and have
priority over dividends upon the Common Stock and all other shares junior to
the Series A Convertible Preferred Stock. Dividends shall be paid upon the
earlier of conversion as described in Section 4(c) hereinbelow or redemption as
described in Section 5(a) hereinbel-ow. ("Shares junior to the Series A
Convertible Preferred Stock" shall mean shares of any class of the Corporation
if the Series A Convertible Preferred Stock has priority over such class with
respect to dividend and liquidation rights.)
3. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Series A Convertible Preferred Stock shall be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Series A Convertible Preferred Stock, to be paid an amount equal to two
dollars and fifty cents ($2.50), for each such share plus, in the case of each
share, an amount equal to all dividends, if any, accrued but unpaid thereon,
computed to the date payment thereof is made av-ailable (such aggregate amount
to be paid with respect to all shares of Series A Convertible Preferred Stock
being referred to as the "Initial Preferred Liquidation Payment"). The
remaining net assets of the Corporation shall be distributed to the holders of
Common Stock. If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Series A Convertib- le Preferred Stock shall be
insufficient to permit payment to the holders of Series A Convertible Preferred
Stock of the Initial Preferred Liquidation Payment, then the entire assets of
the Cor-poration to be so distributed shall be distributed ratably among the
holders of Series A Convertible Preferred Stock.
-5-
<PAGE> 6
4. Conversion.
(a) Automatic Upon I.P.O. Eighty thousand
(80,000) shares of Series A Convertible Preferred Stock shall convert into an
identical number of fully paid and nonassessable shares of Common Stock (the
"Conversion Ratio") if the Corporation completes a public offering of its
Common Stock requiring registration under the Securities Act of 1933, as
amended (the "'33 Act"), raising gross proceeds of at least four million
dollars ($4,000,000) (a "Substantial Public Offering").
(b) Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of written notice (which notice must be
received by the Corporation within twenty (20) days after the Corporation
provides notice to shareholders of its intent to consummate a Substantial
Public Offering on or before a certain date (the "Proposed Effective Date") and
surrender on or before the Proposed Effective Date of the certificate or
certificates for the shares of Series A Convertible Preferred Stock to be
converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, when the Substantial Public Offering is funded, to the holder,
registered in such name or names as such holder may direct, a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion of such shares of Series A Convertible Preferred Stock. To the
extent permitted by law, such conversion shall be deemed to be effective upon
the effectiveness of said registration with the Securities and Exchange
Commission.
(c) Dividends. At the time of conversion, the
Corporation shall pay in cash an amount equal to all dividends unpaid on the
shares of Series A Convertible Preferred Stock surrendered for conversion to
the date upon which such conversion is deemed to take place as provided in
subparagraph 4(b).
(d) Subdivision or Combination of Common Stock.
In case the Corporation shall at any time subdivide (by any stock split, stock
dividend or otherwise) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Ra-tio in effect immediately prior to such
subdivision shall be pro-portionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Ratio in effect immediately prior to such combination
shall be proportionately increased.
(e) Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a
-6-
<PAGE> 7
shares of Series A Convertible Preferred Stock shall thereupon have the right
to receive, upon the basis and upon the terms and conditions specified herein
and in lieu of the shares of Common Stock immediately theretofore receivable
upon the conversion of such shares of Series A Convertible Preferred Stock,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of such holder to the
end that the provisions hereof (including, without limitation, provisions for
adjustments of the Conversion Ratio) shall thereafter be applic-able, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
(f) Notice of Adjustment. Upon any adjustment of
the Conversion Ratio then and in each such case the Corporation shall give
written notice thereof, by first class mail, postage prepaid, addressed to each
holder of shares of Series A Convert-ible Preferred Stock at the address of
such holder as shown on the books of the Corporation, which notice shall state
the Conversion Ratio resulting from such adjustment, setting forth in
reasonable detail the method upon which such calculation is based.
(g) Other Notices. In case at any time:
(i) the Corporation shall declare any
divi-dend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(ii) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(iii) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or
a consolidation or merger of the Corporation with or into, or a sale of all or
substantially all its assets to, another entity or entities; or
(iv) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, addressed to each holder of any shares of Series A
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation, (y) at least twenty (20) days' prior written notice of the
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<PAGE> 8
date on which the books of the Corporation shall close or record shall be taken
for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (z) in
the case of any reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (y) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (z) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliv-erable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
(h) Stock to be Reserved. The Corporation shall
at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the conver-sion of Series A Convertible
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of Series
A Convertible Preferred Stock. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof. The Corporation will take all such action as may
be necessary to as-sure that all such shares of Common Stock may be so issued
with-out violation of any applicable law or regulation, or of any re-quirement
of any national securities exchange upon which the Com-mon Stock may be listed.
The Corporation shall not take any ac-tion which results in any adjustment of
the Conversion Ratio if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Series A Convertible
Preferred Stock would exceed the total number of shares of Common Stock then
authorized by these Articles of Incorporation.
5. Redemption.
(a) Automatic Upon I.P.O. The Corporation shall
redeem eighty thousand (80,000) shares of Series A Convertible Preferred Stock
upon completion of a Substantial Public Offering. The redemption price for
each share of Series A Convertible Preferred Stock pursuant to this paragraph
shall be five dollars ($5.00) per share plus accrued and unpaid dividends (the
"Corporate Redemption Price").
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<PAGE> 9
(b) Mechanics. At least ten (10) days prior to
the date that the Corporation must redeem shares of Series A Con-vertible
Preferred Stock pursuant to paragraph A.5(a) (the "Re-quired Redemption Date"),
written notice (the "Required Redemption Notice") shall be given by the
Corporation to each holder of record of Series A Convertible Preferred Stock
who holds shares subject to redemption by mail, postage prepaid, at each such
hol-der's address last shown on the records of the Corporation notif-ying the
notice recipient of the Corporate Redemption Price and the Required Redemption
Date. Each holder of Series A Convertib-le Preferred Stock to be redeemed
shall surrender the certificate or certificates representing such shares to the
Corporation, in the manner and at the place designated in the Required
Redemption Notice, and thereafter the purchase price for such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
cancelled and retired. From and after the close of business on the Required
Redemption Date, un-less there shall have been a default in the payment of the
Re-quired Redemption Price, all rights of holders of shares of Ser-ies A
Convertible Stock having their shares so redeemed (except the right to receive
the Corporate Redemption Price therefor) shall cease having any ownership
rights with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
(c) Ultimate Redemption. Any and all shares of
Series A Convertible Preferred Stock outstanding on January 1, 1998 shall be
redeemed by the Corporation at cost plus four per-cent (4%). The provisions
for effectuating such redemption shall be identical to those set forth in the
preceding subsection, ex-cept as to pricing.
B. Common Stock.
1. Dividends. After the requirements with respect to
the Preferred Stock have been met, the holders of the Common Stock shall be
entitled to receive, out of funds legally availab-le therefor, cash dividends
and dividends payable in property as may be declared from time to time by the
Board of Directors.
2. Liquidation. In the event of the voluntary or
in-voluntary liquidation, dissolution, distribution of assets or winding up of
the Corporation, after distribution in full to the holders of Series A
Convertible Preferred Stock of the Initial Preferred Liquidation Payment, the
holders of Common Stock shall be entitled to receive the remaining assets of
the Corporation.
3. Voting Rights. Except as may be otherwise re-quired
by law, each holder of Common Stock shall have one (1)
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<PAGE> 10
vote in respect of each share of such stock held by such holder on all matters
voted upon by the shareholders.
---------------------------------
IN WITNESS WHEREOF, the President of the Corporation has executed and submitted
this instrument this ___ day of June, 1997.
-----------------------------
Dale J. Brisson, President
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<PAGE> 11
EXHIBIT "A"
1. Voting. Except as may be otherwise provided by law
or by these Articles of Incorporation, the Series A Convert-ible Preferred
Stock shall not have voting rights.
2. Dividends. The holders of the Series A Convertib-le
Preferred Stock shall be entitled to receive, out of funds le-gally available
therefor, cumulative cash dividends and dividends payable in property at the
annual rate of ten percent (10%). Dividends on the Series A Convertible
Preferred Stock shall accrue until paid and shall be in preference to and have
priority over dividends upon the Common Stock and all other shares junior to
the Series A Convertible Preferred Stock. Dividends shall be paid upon the
earlier of conversion as described in Section 4(c) hereinbelow or redemption as
described in Section 5(a) hereinbel-ow. ("Shares junior to the Series A
Convertible Preferred Stock" shall mean shares of any class of the Corporation
if the Series A Convertible Preferred Stock has priority over such class with
respect to dividend and liquidation rights.)
3. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Series A Convertible Preferred Stock shall be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Series A Convertible Preferred Stock, to be paid an amount equal to two
dollars and fifty cents ($2.50), for each such share plus, in the case of each
share, an amount equal to all dividends, if any, accrued but unpaid thereon,
computed to the date payment thereof is made av-ailable (such aggregate amount
to be paid with respect to all shares of Series A Convertible Preferred Stock
being referred to as the "Initial Preferred Liquidation Payment"). The
remaining net assets of the Corporation shall be distributed to the holders of
Common Stock. If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Series A Convertib-le Preferred Stock shall be
insufficient to permit payment to the holders of Series A Convertible Preferred
Stock of the Initial Preferred Liquidation Payment, then the entire assets of
the Cor-poration to be so distributed shall be distributed ratably among the
holders of Series A Convertible Preferred Stock.
4. Conversion.
(a) Automatic Upon I.P.O. Eighty thousand
(80,000) shares of Series A Convertible Preferred Stock shall convert into an
identical number of fully paid and nonassessable shares of Common Stock (the
"Conversion Ratio") if the Corporation completes a public offering of its
Common Stock requiring registration under the Securities Act of 1933, as
amended (the "'33 Act"), raising gross proceeds of at least four million
dollars ($4,000,000) (a "Substantial Public Offering").
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<PAGE> 12
(b) Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of written notice (which no-tice must be
received by the Corporation within twenty (20) days after the Corporation
provides notice to shareholders of its in-tent to consummate a Substantial
Public Offering on or before a certain date (the "Proposed Effective Date") and
surrender on or before the Proposed Effective Date of the certificate or
certificates for the shares of Series A Convertible Preferred Stock to be
converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, when the Substantial Public Offering is funded, to the holder,
registered in such name or names as such holder may direct, a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion of such shares of Series A Convertible Preferred Stock. To the
extent permitted by law, such conversion shall be deemed to be effective upon
the effectiveness of said registration with the Securities and Exchange
Commission.
(c) Dividends. At the time of conversion, the
Corporation shall pay in cash an amount equal to all dividends unpaid on the
shares of Series A Convertible Preferred Stock surrendered for conversion to
the date upon which such conversion is deemed to take place as provided in
subparagraph 4(b).
(d) Subdivision or Combination of Common Stock.
In case the Corporation shall at any time subdivide (by any stock split, stock
dividend or otherwise) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Ra-tio in effect immediately prior to such
subdivision shall be pro-portionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Ratio in effect immediately prior to such combination
shall be proportionately increased.
(e) Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a shares of Series A Convertible Preferred Stock shall thereupon have
the right to receive, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore receivable upon the conversion of such shares of Series A
Convertible Preferred Stock, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such Common Stock
immediately theretofore receivable upon such conversion had such reorganization
or reclassification not taken place, and in any such case appropriate
provisions shall be made with respect
A-2
<PAGE> 13
to the rights and interests of such holder to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Conversion Ratio) shall thereafter be applic-able, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
(f) Notice of Adjustment. Upon any adjustment of
the Conversion Ratio then and in each such case the Corporation shall give
written notice thereof, by first class mail, postage prepaid, addressed to each
holder of shares of Series A Convert-ible Preferred Stock at the address of
such holder as shown on the books of the Corporation, which notice shall state
the Conversion Ratio resulting from such adjustment, setting forth in
reasonable detail the method upon which such calculation is based.
(g) Other Notices. In case at any time:
(i) the Corporation shall declare any
divi-dend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(ii) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(iii) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or
a consolidation or merger of the Corporation with or into, or a sale of all or
substantially all its assets to, another entity or entities; or
(iv) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, addressed to each holder of any shares of Series A
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corpora-tion, (y) at least twenty (20) days' prior written notice of the
date on which the books of the Corporation shall close or record shall be taken
for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (z) in
the case of any reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (y) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of
A-3
<PAGE> 14
Common Stock shall be entitled thereto and such notice in accordance with the
foregoing clause (z) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliv-erable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
(h) Stock to be Reserved. The Corporation shall
at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the conver-sion of Series A Convertible
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of Series
A Convertible Preferred Stock. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof. The Corporation will take all such action as may
be necessary to as-sure that all such shares of Common Stock may be so issued
with-out violation of any applicable law or regulation, or of any re-quirement
of any national securities exchange upon which the Com-mon Stock may be listed.
The Corporation shall not take any ac-tion which results in any adjustment of
the Conversion Ratio if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Series A Convertible
Preferred Stock would exceed the total number of shares of Common Stock then
authorized by these Articles of Incorporation.
5. Redemption.
(a) Automatic Upon I.P.O. The Corporation shall
redeem eighty thousand (80,000) shares of Series A Convertible Preferred Stock
upon completion of a Substantial Public Offering. The redemption price for
each share of Series A Convertible Preferred Stock pursuant to this paragraph
shall be five dollars ($5.00) per share plus accrued and unpaid dividends (the
"Corpor-ate Redemption Price").
(b) Mechanics. At least ten (10) days prior to
the date that the Corporation must redeem shares of Series A Convertible
Preferred Stock pursuant to paragraph A.5(a) (the "Re-quired Redemption Date"),
written notice (the "Required Redemption Notice") shall be given by the
Corporation to each holder of record of Series A Convertible Preferred Stock
who holds shares subject to redemption by mail, postage prepaid, at each such
hol-der's address last shown on the records of the Corporation notif-ying the
notice recipient of the Corporate Redemption Price and the Required Redemption
Date. Each holder of Series A Converti-ble Preferred Stock to be redeemed
shall surrender the certificate or certificates representing such shares to the
Corporation, in the manner and at the place designated in the Required Redemp-
A-4
<PAGE> 15
tion Notice, and thereafter the purchase price for such shares shall be payable
to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
cancelled and retired. From and after the close of business on the Required
Redemption Date, un-less there shall have been a default in the payment of the
Re-quired Redemption Price, all rights of holders of shares of Ser-ies A
Convertible Stock having their shares so redeemed (except the right to receive
the Corporate Redemption Price therefor) shall cease having any ownership
rights with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
(c) Ultimate Redemption. Any and all shares of
Series A Convertible Preferred Stock outstanding on January 1, 1998 shall be
redeemed by the Corporation at cost plus four per-cent (4%). The provisions
for effectuating such redemption shall be identical to those set forth in the
preceding subsection, ex-cept as to pricing.
A-5
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SFORZA ENTERPRISES INC.
ADOPTED
JULY __, 1996
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I. OFFICES
<TABLE>
<S> <C> <C>
1.01 Principal and Business Offices . . . . . . . . . . . 1
1.02 Registered Office . . . . . . . . . . . . . . . . . . 1
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting . . . . . . . . . . . . . . . . . . . 1
2.02 Special Meeting . . . . . . . . . . . . . . . . . . . 1
2.03 Place of Meeting . . . . . . . . . . . . . . . . . . 1
2.04 Notice of Meeting . . . . . . . . . . . . . . . . . . 2
2.05 Closing of Transfer Books or Fixing
of Record Date . . . . . . . . . . . . . . . . . . 2
2.06 Voting Records . . . . . . . . . . . . . . . . . . . 2
2.07 Quorum . . . . . . . . . . . . . . . . . . . . . . . 3
2.08 Conduct of Meeting . . . . . . . . . . . . . . . . . 3
2.09 Proxies . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Voting of Shares . . . . . . . . . . . . . . . . . . 4
2.11 Voting of Shares by Certain Holders . . . . . . . . . 4
(a) Other Corporations . . . . . . . . . . . . . 4
(b) Legal Representatives and Fiduciaries . . . 4
(c) Receiver . . . . . . . . . . . . . . . . . . 4
(d) Pledgees . . . . . . . . . . . . . . . . . . 4
(e) Subsidiaries . . . . . . . . . . . . . . . . 4
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Numbers . . . . . . . . . . . . . 5
3.02 Tenure and Qualifications . . . . . . . . . . . . . . 5
3.03 Regular Meetings . . . . . . . . . . . . . . . . . . 5
3.04 Special Meetings . . . . . . . . . . . . . . . . . . 5
3.05 Notice of Meetings . . . . . . . . . . . . . . . . . 5
3.06 Quorum . . . . . . . . . . . . . . . . . . . . . . . 6
3.07 Manner of Acting . . . . . . . . . . . . . . . . . . 6
3.08 Conduct of Meetings . . . . . . . . . . . . . . . . . 6
3.09 Vacancies . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Compensation . . . . . . . . . . . . . . . . . . . . 6
3.11 Presumption of Assent . . . . . . . . . . . . . . . . 7
3.12 Committees . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV. OFFICERS
4.01 Number . . . . . . . . . . . . . . . . . . . . . . . 7
4.02 Election and Term of Office . . . . . . . . . . . . . 8
4.03 Removal . . . . . . . . . . . . . . . . . . . . . . . 8
4.04 Vacancies . . . . . . . . . . . . . . . . . . . . . . 8
4.05 President . . . . . . . . . . . . . . . . . . . . . . 8
4.06 Vice Presidents . . . . . . . . . . . . . . . . . . . 9
4.07 Secretary . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (Cont.)
ARTICLES IV. OFFICERS
<TABLE>
<S> <C> <C>
4.08 Treasurer . . . . . . . . . . . . . . . . . . . . . . 9
4.09 Assistant Secretaries and Assistant Treasurers . . .10
4.10 Other Assistants and Acting Officers . . . . . . . .10
4.11 Salaries . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01 Contracts . . . . . . . . . . . . . . . . . . . . . .10
5.02 Loans . . . . . . . . . . . . . . . . . . . . . . . .11
5.03 Checks, Drafts, etc. . . . . . . . . . . . . . . . .11
5.04 Deposits . . . . . . . . . . . . . . . . . . . . . .11
5.05 Voting of Securities Owned by this Corporation . . .11
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01 Certificate for Shares . . . . . . . . . . . . . . .12
6.02 Facsimile Signatures and Seal . . . . . . . . . . . .12
6.03 Transfer of Shares . . . . . . . . . . . . . . . . .12
6.04 Restrictions on Transfer . . . . . . . . . . . . . .12
6.05 Lost, Destroyed or Stolen Certificates . . . . . . .12
6.06 Consideration for Shares . . . . . . . . . . . . . .13
6.07 Stock Regulations . . . . . . . . . . . . . . . . . .13
</TABLE>
ARTICLE VII. WAIVER OF NOTICE
ARTICLE VIII. CONSENT WITHOUT A MEETING
ARTICLE IX. INDEMNIFICATION
ARTICLE X. SEAL
ARTICLE XI. FISCAL YEAR
ARTICLE XII. AMENDMENTS
<TABLE>
<S> <C> <C>
12.01 By Shareholders . . . . . . . . . . . . . . . . . . .14
12.02 By Directors . . . . . . . . . . . . . . . . . . . .14
12.03 Implied Amendments . . . . . . . . . . . . . . . . .14
</TABLE>
ii
<PAGE> 4
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may
have such principal and other business offices, either within or outside the
State of Florida, as the Board of Directors may designate or as the business of
the corporation may require from time to time.
1.02. Registered Office. The registered office of the
corporation required by the Florida Business Corporation Act to be maintained
in the State of Florida may be, but need not be, identical with the principal
office in the State of Florida. The address of the registered office may be
changed from time to time by the Board of Directors or, if within the county,
by the regis-tered agent. The business office of the registered agent of the
corporation shall be identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders
shall be held on the last Wednesday of April in each year at 9:00 o'clock a.m.,
or at such other time and date as may be fixed by or under the authority of the
Board of Directors, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday in the State of Florida,
such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein, or fixed
as herein provided, for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as convenient.
2.02. Special Meeting. Special meetings of the
share-holders, for any purpose or purposes, unless otherwise prescribed by
statute, may be called by the President or the Board of Direc-tors or by the
person designated in the written request of the holders of not less than
one-tenth of all shares of the corporation entitled to vote at the meeting.
2.03. Place of Meeting. The Board of Directors may designate
any place either within or outside the State of Florida as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may des-ignate any place, whether within or outside the State of
Florida, as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall
be the principal business office of the corporation in the State of Florida or
such other suitable place in the county of such principal office as may be
designated by the per-son calling such meeting, but any meeting may be
adjourned to reconvene at any place designated by vote of a majority of the
shares represented thereat.
<PAGE> 5
2.04. Notice of Meeting. Written notice stating the place,
day and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) days (unless a longer period is required by law) nor more than thirty (30)
days before the date of the meeting, either personally or by mail, by or at the
direction of the President, the Secretary, or the person(s) calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the corporation, with postage thereon
pre-paid.
2.05. Closing of Transfer Book or Fixing of Record Date. For
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or any adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, thirty (30) days. If the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of sharehol-ders, such date in any case to be
not more than thirty (30) days and, in case of a meeting of shareholders, not
less than ten (10) days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If the stock
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the close of
business on the date on which notice of the meeting is mailed or on the date on
which the reso-lution of the Board of Directors declaring such dividend is
adop-ted, as the case may be, shall be the record date for such deter-mination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall be applied to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the sta-ted period of closing has expired.
2.06. Voting Records. In the event the corporation issues
its stock to more than six (6) shareholders Section 607.0901 of the Florida
Business Corporation Act dealing with af-filiated transactions and
control-share acquisitions shall apply.
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<PAGE> 6
2.07. Quorum. Except as otherwise provided in the articles
of incorporation, a majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quor-um at a meeting of shareholders but
in no event shall a quorum consist of less than one-third of the shares
entitled to vote at the meeting. When a specified item of business is required
to be voted on by a class or series of stock, a majority of the shares of such
class or series shall constitute a quorum for the transaction of such item of
business by that class or series. If a quorum is present, the affirmative vote
of the majority of the shares represented at the meeting and entitled to vote
on the subject matter shall be the act of the shareholders unless the vote of a
greater number or voting by classes is required by the Florida Business
Corporation Act or the articles of incorporation. If less than a quorum is
represented at a meeting, a maj-ority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The shareholders present at a duly organ-ized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.08. Conduct of Meetings. The President, or in the
President's absence, a Vice President in the order provided under Section 4.06,
and in their absence, any person chosen by the shareholders present shall call
the meeting of the shareholders to order and shall act as chairman of the
meeting, and the Secre-tary shall act as secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
2.09. Proxies. At all meetings of shareholders, a
shareholder entitled to vote may vote in person or by proxy appointed in
writing by the shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary before or at the time of the meeting.
Unless otherwise provided in the proxy or Section 607.101 of the Florida
Business Corporation Act, a proxy may be revoked at any time before it is
voted, either by written notice filed with the Secretary or the acting
secretary of the meeting or by oral notice given by the sharehol-der to the
presiding officer during the meeting. The presence of a shareholder who has
filed a proxy shall not of itself consti- tute a revocation. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. The Board of Directors shall have the power and
authority to make rules as to the validity and sufficiency of proxies.
2.10. Voting of Shares. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a
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<PAGE> 7
meeting of shareholders, except to the extent that the voting rights of the
shares of any class or classes are enlarged, limi-ted or denied by the articles
of incorporation.
2.11. Voting of Shares by Certain Holders.
(a) Other Corporations. Shares standing in the name of an-other
corporation, domestic or foreign, may be voted either in person or by proxy by
the president of such corporation or any other officer appointed by such
president. A proxy executed by any principal officer of such other corporation
or assistant thereto shall be conclusive evidence of the signer's authority to
act, in the absence of express notice to this corporation, given in writing to
the Secretary of this corporation, of the designation of some other person by
the Board of Directors or the bylaws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by an
administrator, executor, guardian, conservator or assignee for creditors may be
voted by such person, either in person or by proxy. Shares standing in the
name of a trustee may be voted by him or her, either in person or by proxy, but
no trustee shall be entitled to vote shares held by him or her without a
transfer of such shares into his or her name. Shares standing in the name of a
fiduciary may be voted by him or her, either in person or by proxy. A proxy
executed by a fiduciary shall be conclusive evi-dence of the signer's authority
to act in the absence of express notice given in writing to the Secretary that
such manner of vot-ing is prohibited or otherwise directed by the document
creating the fiduciary relationship.
(c) Receiver. Shares standing in the name of a receiver may be
voted by such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into his or her name
if authority to do so is contained in an appropriate court order pursuant to
which such receiver was appointed.
(d) Pledgees. A shareholder whose shares are pledged shall be
entitled to vote such shares in person or by proxy, until the shares have been
transferred into the name of the pledgee, and thereafter the pledgee or his or
her nominee shall be entitled to vote the shares so transferred.
(e) Subsidiaries. Neither shares of the corporation's stock owned
by another corporation, the majority of the voting stock of which is owned or
controlled by it, nor shares of its own stock held by another corporation in a
fiduciary capacity shall be voted, directly or indirectly, at any meeting; and
such shares shall not be counted in determining the total number of outstanding
shares at any given time.
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<PAGE> 8
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. The business and affairs of
the corporation shall be managed by its Board of Dir-ectors. The number of
directors of the corporation initially shall be a minimum of one (1) but may be
increased to not more than nine (9) without amendment. The number of directors
may be increased or decreased from time to time by amendment to this Section
adopted by the shareholders or the Board of Directors but no decrease shall
have the effect of shortening the term of an incumbent director.
3.02. Tenure and Qualifications. Each director shall hold
office until the next annual meeting of shareholders and un-til the director's
successor shall have been elected, or until his or her prior death, resignation
or removal. Any director or the entire Board of Directors may be removed from
office, with or without cause, by affirmative vote of a majority of the
outstanding shares entitled to vote for the election of such director, or the
Board of Directors. A director may resign at any time by filing a written
resignation with the Secretary of the corporation. Directors need not be
residents of the State of Florida or shareholders of the corporation.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held, without other notice than this bylaw, immediately
after the annual meeting of shareholders, and each adjourned session thereof.
The place of such regular meeting shall be the same as the place of the meeting
of shareholders which precedes it, or such other suitable place as may be
announced at such meeting of shareholders. The Board of Directors may provide,
by resolution, the time and place, either within or outside the State of
Florida, for the holding of additional regu-lar meetings without other notice
than such resolution.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
directors. The persons calling any special meeting of the Board of Directors
may fix any place, either within or outside the State of Florida, as the place
for holding any special meeting of the Board of Directors called by them, and
if no other place is fixed the place of meeting shall be the principal business
office of the corporation in the State of Florida. Special meetings may be
held by means of a telephone conference circuit and connecting to such circuit
shall constitute presence at such meeting.
3.05. Notice of Meetings. Notice of each meeting of the
Board of Directors (unless otherwise provided in or pursuant to Section 3.03)
shall be given by written notice delivered per-sonally or mailed or given by
telephone or telegram to each dir-ector at his or her business or home address
or at such other ad-
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<PAGE> 9
dress as such director shall have designated in writing filed with the
Secretary, in each case not less than 48 hours prior thereto. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with post-age thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company; if by telephone, at the time the call is completed. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting and objects thereat to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
3.06. Quorum. A majority of the number of directors as
provided in Section 3.01 shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but a majority of the
directors present (though less than such quorum) may adjourn the meeting from
time to time without further notice.
3.07. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the act of a greater number is required by the
Florida Business Corporation Act, the corporation's articles of incorporation
or these bylaws.
3.08. Conduct of Meetings. The President, and in the
President's absence, a Vice President in the order provided under Section 4.06,
and in their absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall chair the meeting. The
Secretary of the corporation shall act as secretary of all meetings of the
Board of Directors, but in the absence of the Secretary, the presiding of-ficer
may appoint any assistant secretary or any director or oth-er person present to
act as secretary of the meeting.
3.09. Vacancies. Any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, may be filled until the next succeeding an-nual election by the
affirmative vote of a majority of the direc-tors then in office, though less
than a quorum of the Board of Directors, provided that in case of a vacancy
created by removal of a director(s), the shareholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.
3.10. Compensation. The Board of Directors, by affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all directors for services to the corporation as directors, officers or
otherwise, and the
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<PAGE> 10
manner and time of payment thereof, or may delegate such author-ity to an
appropriate committee. The Board of Directors also shall have authority to
provide for or to delegate authority to an appropriate committee to provide for
reasonable pensions, dis-ability or death benefits, and other benefits or
payments, to directors, officers and employees and to their estates, families,
dependents or beneficiaries on account of prior services rendered by such
directors, officers and employees to the corporation.
3.11. Presumption of Assent. A director who is pre-sent at a
meeting of the Board of Directors or a committee thereof of which he is a
member at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting be-fore the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
3.12. Committees. The Board of Directors, by resolution
adopted by the affirmative vote of a majority of the number of directors as
provided in Section 3.01, may designate one or more committees, each committee
to consist of three or more dir-ectors elected by the Board of Directors, which
to the extent provided in said resolution as initially adopted, and as
thereafter supplemented or amended by further resolution adopted by a like
vote, shall have and may exercise, when the Board of Direc-tors is not in
session, the powers of the Board of Directors in the management of the business
and affairs of the corporation, except action in respect to dividends to
shareholders, election of the principal officers or the filling of vacancies on
the Board of Directors or committees created pursuant to this Section. The
Board of Directors may elect one or more of its mem-bers as alternate members
of any such committee who may take the place of any absent member or members at
any meeting of such com-mittee, upon request by the President or upon request
by the chairman of such meeting. Each such committee shall fix its own rules
governing the conduct of its activities and shall make such reports to the
Board of Directors of its activities as the Board of Directors may request.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers shall be a Pres-ident,
one or more Vice Presidents (the number and designations to be determined by
the Board of Directors), a Secretary and a Treasurer, each of whom shall be
elected by the Board of Direc-tors; the Board of Directors may elect a chairman
who if so elec-ted shall be a principal officer. Any two or more offices may
be held by the same person. The Board of Directors may designate
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<PAGE> 11
one of the Vice Presidents as the Executive Vice President. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors or the President.
4.02. Election and Term of Office. The officers to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Dir-ectors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected or until his prior death, resignation or remov-al.
4.03. Removal. Any officer or agent may be removed by the
Board of Directors whenever in its judgment the best interests of the
corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointment shall not of itself create contract rights.
4.04. Vacancies. A vacancy in any principal office because
of death, resignation, removal, disqualification or oth-erwise, shall be filled
by the Board of Directors for the unexpired portion of the term.
4.05. President. The President shall be the principal
executive officer and, subject to the control of the Board of Directors, shall
in general supervise and control all of the bus-iness and affairs of the
corporation. He or she shall preside at all meetings of the shareholders and
of the Board of Directors. The President shall have authority, subject to such
rules as may be prescribed by the Board of Directors, to appoint such agents
and employees of the corporation as he or she shall deem neces-sary, to
prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the discretion of the
President. The President shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock
certificates, contracts, leases, reports and all other documents or instruments
necessary or proper to be executed in the course of the corporation's regular
business, or which shall be authorized by resolution of the Board of Directors;
and, except as otherwise provided by law or the Board of Directors, the
President may authorize any Vice President or other officer or agent of the
corporation to sign, execute and acknowledge such documents or instruments in
his or her place and stead. In general he shall perform all du-ties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
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<PAGE> 12
4.06. Vice Presidents. In the absence of the President, or
in the event of the President's death, inability or re-fusal to act, or in the
event for any reason it shall be impracticable for the President to act
personally, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the Board of
Directors, or in the absence of any designation, then in the order of their
el-ection) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or Assistant
Secretary, certificates for shares of the corporation, and shall perform such
other duties and have such authority as from time to time may be delegated or
assigned to him or her by the President or the Board of Direc-tors. The
execution of any instrument of the corporation by any Vice President shall be
conclusive evidence, as to third parties, of the Vice President's authority to
act in the stead of the President.
4.07. Secretary. The Secretary shall: (a) keep the minutes
of the meetings of the shareholders and of the Board of Directors in one or
more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation, if any,
and see that the seal of the corporation, if any, is affixed to all documents
which are authorized to be executed on behalf of the corporation under its
seal; (d) keep or arrange for the keeping of a register of the post office
address of each shareholder which shall be furnished to the Secretary by such
shareholder; (e) sign with the President, or a Vice President, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and exercise
such authority as from time to time may be delegated or assigned to him or her
by the President or by the Board of Directors.
4.08. Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and secur-ities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation
from any source whatsoev-er, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositaries as shall be
selected in accordance with the provisions of Section 5.04; and (c) in general
perform all of the duties incident to the office of Treasurer and have such
other duties and exercise such other authority as from time to time may be
delegated or assigned to him or her by the President or by the Board of
Directors.
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<PAGE> 13
4.09. Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors or President from time to time authorizes. The Assistant
Secretaries may sign with the President or a Vice President certificates for
shares of the cor-poration the issuance of which shall have been authorized by
a resolution of the Board of Directors. The Assistant Secretaries and
Assistant Treasurers, in general, shall perform such duties and have such
authority as from time to time shall be delegated or assigned to them by the
Secretary or the Treasurer, respectively, or by the President or the Board of
Directors.
4.10. Other Assistants and Acting Officers. The Board of
Directors and the President shall have the power to appoint any person to act
as assistant to any officer, or as agent for the corporation in the officer's
stead, or to perform the duties of such officer whenever for any reason it is
impracticable for such officer to act personally, and such assistant or acting
of-ficer or other agent so appointed by the Board of Directors or President
shall have the power to perform all the duties of the office to which that
person is so appointed to be assistant, or as to which he or she is so
appointed to act, except as such pow-er may be otherwise defined or restricted
by the Board of Direc-tors or President.
4.11. Salaries. Salaries may be paid to the principal
officers of the corporation at the discretion of the Board of Directors, and if
so paid, shall be fixed from time to time by the Board of Directors or by a
duly authorized committee thereof, and no officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a
director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the corporation, and
such authorization may be general or confined to specific instances. No
contract or other transaction between the corporation and one or more of its
directors or any other corporation, firm, association or entity in which one or
more of its directors are directors or officers or are financially interested,
shall be either void or voidable because of such relationship or interest or
because such director or direc-tors are present at the meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
contract or transaction or because the votes of the interested director(s) are
counted for such purpose, if (1) the fact of such relationship or interest is
disclosed or known to the Board of Directors or committee which authorizes,
approves or ratifies the contract or transaction by a vote or consent
sufficient for the
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<PAGE> 14
purpose without counting the votes or consents of such interested directors; or
(2) the fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or (3) the contract or
transaction is fair and reasonable to the corporation. Common or interested
direc-tors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or a committee thereof which authorizes, approves or
ratifies such contract or transaction.
5.02. Loans. No indebtedness for borrowed money shall be
contracted on behalf of the corporation and no evidences of such indebtedness
shall be issued in its name unless authorized by or under the authority of a
resolution of the Board of Direc-tors. Such authorization may be general or
confined to specific instances.
5.03. Checks, Drafts, etc. All checks, drafts or oth-er
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer(s),
employee(s) or agents of the corporation and in such manner as shall from time
to time be determined by or under the authority of a resolution of the Board of
Direc-tors.
5.04. Deposits. All funds of the corporation not oth-erwise
employed shall be deposited from time to time to the cre-dit of the corporation
in such banks, trust companies or other depositaries as may be selected by or
under the authority of a resolution of the Board of Directors.
5.05. Voting of Securities Owned by this Corporation.
Subject always to the specific directions of the Board of Direc-tors, (a) any
shares or other securities issued by any other corporation and owned or
controlled by this corporation may be voted at any meeting of security holders
of such other corporation by the President of this corporation if he or she is
present, or in the President's absence, by any Vice President of this
corporation who may be present, and (b) whenever, in the judgment of the
President, or in the President's absence, of any Vice President, it is
desir-able for this corporation to execute a proxy or written consent with
respect to any shares or other securities issued by any other corporation and
owned by this corporation, such proxy or consent shall be executed in the name
of this corporation by the President or one of the Vice Presidents of this
corporation, without necessi-ty of any authorization by the Board of Directors,
affixation of corporate seal or countersignature or attestation by another
offi-cer. Any person or persons designated in the manner above stated as the
proxy or proxies of this corporation shall have full right, power and authority
to vote the shares or other securities issued by such other corporation and
owned by this corporation the same as such shares or other securities might be
voted by this corporation.
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<PAGE> 15
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFERS
6.01. Certificate for Shares. Certificates representing
shares of the corporation shall be in such form, consistent with law, as shall
be determined by the Board of Directors. Such certificates shall be signed by
the President. All certificates for shares shall be consecutively numbered or
otherwise identi-fied. The name and address of the person to whom the shares
rep-resented thereby are issued, with the number of shares and the date of
issue, shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except as provided
in Section 6.05.
6.02. Facsimile Signatures and Seal. The seal of the
corporation, if the corporation has elected to have a seal, on any certificates
for shares may be a facsimile. The signature of the President upon a
certificate may be a facsimile if the cert-ificate is manually signed on behalf
of a transfer agent or a registrar, other than the corporation itself or an
employee of the corporation.
6.03. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer, the corporation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications and otherwise to have and exercise all the rights and
powers of an owner. Where a certificate for shares is presented to the
corporation with a request to register for transfer, the corporation shall not
be liable to the owner, or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the corporation had no duty to inquire into
adverse claims or has discharged any such duty. The corporation may require
rea-sonable assurance that said endorsements are genuine and effective and in
compliance with such other regulations as may be pre-scribed by or under the
authority of the Board of Directors.
6.04. Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
6.05. Lost, Destroyed or Stolen Certificates. Where the
owner claims that his or her certificate for shares has been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if the
owner (a) so requests before the corporation has notice that such shares have
been acquired by a bona fide purchaser, and (b) if required by the corporation,
files with the corporation a sufficient indemnity bond, and (c)
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<PAGE> 16
satisfies such other reasonable requirements as may be prescribed by or under
the authority of the Board of Directors.
6.06. Consideration for Shares. The shares of the
corporation may be issued for such consideration as shall be fixed from time to
time by the Board of Directors, provided that any shares having a par value
shall not be issued for a consider-ation less than the par value thereof. The
consideration to be paid for shares may be paid in whole or in part, in money,
in other property, tangible or intangible, or in labor or services actually
performed for the corporation. When payment of the con-sideration for which
shares are to be issued shall have been re-ceived by the corporation, such
shares shall be deemed to be ful-ly paid and nonassessable by the corporation.
No certificate shall be issued for any share until such share is fully paid.
6.07. Stock Regulations. The Board of Directors shall have
the power and authority to make all such rules and regulations not inconsistent
with the statutes of the State of Florida as it may deem expedient concerning
the issue, transfer and reg-istration of certificates representing shares of
the corporation.
ARTICLE VII. WAIVER OF NOTICE
Whenever any notice is required to be given under the
provisions of the Florida Business Corporation Act or under corresponding
provisions of the corporation's articles of incorporation or bylaws, a waiver
thereof in writing, signed at any time, whether before or after the time of the
meeting, by the person or persons entitled to such notice, shall be deemed
equivalent to the giving of such notice. Such waiver by a shareholder in
res-pect of any matter of which notice is required under any provis-ion of the
Florida Business Corporation Act shall contain the same information as would
have been required to be included in such notice under any applicable
provisions of said Law, except that the time and place of meeting need not be
stated.
ARTICLE VIII. CONSENT WITHOUT A MEETING
Any action required by the articles of incorporation or these
bylaws or any provisions of the Florida Business Corporation Act to be taken at
a meeting or any other action which may be taken at a meeting may be taken
without a meeting if a consent in writing setting forth the action so taken
shall be signed by the requisite number of shareholders or directors under law
or all of the members of a committee thereof entitled to vote with respect to
the subject matter thereof and such consent shall have the same force and
effect as a vote.
ARTICLE IX. INDEMNIFICATION
The corporation shall indemnify all directors and officers to
the fullest extent now or hereafter permitted by the
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<PAGE> 17
Florida Statues. This bylaw shall not limit the rights of such persons or
other persons to indemnification as provided or per-mitted as a matter of law,
under the Florida Statutes or other-wise.
ARTICLE X. SEAL
The Board of Directors may provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of the
corporation and the state of incorporation and the words "Corporate Seal."
ARTICLE XI. FISCAL YEAR
Except as the Board of Directors may otherwise deter-mine, the
fiscal year of the corporation shall be the year ending on the last day of
December of each year.
ARTICLE XII. AMENDMENTS
12.01. By Shareholders. These bylaws may be altered, amended
or repealed and new bylaws may be adopted by the share-holders by affirmative
vote of not less than a majority of the shares present or represented at an
annual or special meeting of the shareholders at which a quorum is in
attendance.
12.02. By Directors. These bylaws may also be al-tered,
amended or repealed and new bylaws may be adopted by the Board of Directors by
affirmative vote of a majority of the num-ber of directors present at any
meeting at which a quorum is in attendance; but no bylaw adopted by the
shareholders shall be am-ended or repealed by the Board of Directors if the
bylaw so adop-ted so provides.
12.03. Implied Amendments. Any action taken or auth-orized
by the shareholders or by the Board of Directors which would be inconsistent
with the bylaws then in effect but is taken or authorized by affirmative vote
of not less than the number of shares or the number of directors required to
amend the bylaws so that the bylaws would be consistent with such action, shall
be given the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as is necessary to permit the specific
action so taken or authorized.
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<PAGE> 1
EXHIBIT 4.1
CERTIFICATE NO.
<TABLE>
Caption
From whom transferred Received Certificate No.
-------------
<S> <C> <C>
For Shares -------------------------------------------- for Shares
------------------------------- Dated 19 -------------------------
Issued to -------------------------- ----------- on 19
------------------------------- No. Original No. of Original No. of Shares ---------------------------- -------
Dated 19 Certificate Shares Transferred -------------------------------------
---------------------------- ---- -------------------------------------------- -------------------------------------
</TABLE>
NO. Organized Under the Laws of
The State of Florida
SFORZA ENTERPRISES INC.
20,000,000 SHARES COMMON STOCK $0.01 PAR VALUE
THIS CERTIFIES THAT SPECIMEN
------------------------------------------------------------
is hereby issued fully paid
---------------------------------------------------
and non-assessable Shares of the Capital Stock of the above named Corporation
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this day of A.D.19
-------------- ----------------------- ------------------
- ----------------------------------- ---------------------------------------
SECRETARY PRESIDENT
<PAGE> 2
For Value Received hereby sell, assign and transfer unto
--------------------
Shares
- --------------------------------------------------------------------
represented by the within Certificate and do hereby irrevocably constitute and
appoint Attorney to transfer the said
-----------------------------------
Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated 19
-------------------------- ---------
In presence of
- ------------------------------- ------------------------------
<PAGE> 1
EXHIBIT 4.5
FIXED RATE
PROMISSORY NOTE
January 31, 1997 $250,000.00
SFORZA ENTERPRISES INC., a Florida corporation (the "Company"), and its
subsidiaries, Castle Room, Inc., Clematis Bistro Corporation and Sushi
Enterprises, Inc., all Florida corporations (collectively, the "Makers"), hereby
jointly and severally promise to pay to the order of UNIQUE RESTAURANT CONCEPTS
LTD., a Florida limited partnership (the "Holder"), the principal sum of two
hundred fifty thousand dollars ($250,000.00) together with interest thereon
calculated from the date hereof in accordance with the provisions of this Fixed
Rate Convertible Promissory Note (the "Note").
1. Payment of Principal. Subject to the provisions of paragraph 4, the
Makers shall pay the principal amount to the Holder on February 28, 1997.
2. Payment of Interest. Interest shall accrue at the rate of fifteen percent
(15%) compounded annually on the unpaid principal amount outstanding from time
to time. The Makers shall pay to the Holder all accrued interest in full on the
date on which the principal payment is paid.
3. Default. From and after the date upon which the pay- ment of principal
becomes due hereunder, interest shall be payab- le on such sum from time to time
remaining unpaid at the maximum legal rate permitted by law in lieu of the rate
hereinbefore specified, on demand.
4. Non-Assertion of Defenses. The Company and the Holder have entered into a
letter of intent of even date herewith pursuant to which they agreed in
principle to a series of transactions including the Holder's purchase of shares
of preferred stock of the Company. The Makers hereby acknowledge that no legally
binding documents have been executed and delivered by the parties hereto with
respect to such transactions and the Makers hereby agree that they will not
raise as a defense to the payment of amounts owed on this Note on its maturity
date or thereafter that the Holder and the Company failed to agree upon
definitive legal documentation with respect to such transactions for any reason
whatsoever.
5. Security. This Note is secured by the collateral pledged by the Makers
pursuant to the Security Agreement of even date between the Makers and the
Holder.
6. Waivers. The Makers and all others who are, or may be- come, liable for
the payment of any sum due under the terms of this Note waive presentment,
protest and demand, and notice of
<PAGE> 2
protest, demand and dishonor, and nonpayment of this Note, and agree that the
Holder shall have the right, without notice, to deal in any way at any time with
any party hereto, or to grant an extension or extensions of time for payment of
any of said indebtedness or any other indulgences or forbearances whatsoever
without in any way affecting the liability of any other party liable for the
payment of this Note.
7. Costs of Collection. The Makers agree to pay all costs of collection,
including reasonable attorneys' and paralegals' fees (inclusive of any appellate
and administrative proceedings), regardless of whether or not suit is brought,
in the event that any sum to be paid hereunder us not paid when due.
8. Amendment. Except as otherwise expressly provided herein, the provisions
of the Note may be amended and the Makers may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Makers have obtained the written consent of the Holder; provided that no such
action shall change (a) the rate at which or the manner in which interest
accrues on the Note or the times at which such interest becomes payable, or (b)
any provision relating to the scheduled payment of principal on the Note.
9. Cancellation. After all principal and accrued interest at any time owed
on this Note has been paid in full or upon full conversion of this Note, this
Note shall be surrendered to the Makers for cancellation and shall not be
reissued.
10. Place of Payment. Payments of principal and interest are to be delivered
to the Holder at the address set forth below for the Holder or to such other
address or to the attention of such other person as specified by prior written
notice to the Makers.
11. Governing Law; Venue. This Note has been made, executed and delivered by
the Makers in the State of Florida. This Note shall be governed as to validity,
interpretation, construction, effect and all other respects by the laws and
decisions of the State of Florida. In the event the Holder determines it
necessary to institute suit to collect on this Note, the action shall be
maintained by the Holder in Palm Beach County, Florida.
IN WITNESS WHEREOF, the Makers have executed and delivered this Note as of
the date first above written.
SFORZA ENTERPRISES INC.
By:
Dale J. Brisson, President
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<PAGE> 3
CASTLE ROOM, INC.
By:
Dale J. Brisson, President
CLEMATIS BISTRO CORPORATION
By:
Dale J. Brisson, President
SUSHI ENTERPRISES, INC.
By:
Dale J. Brisson, President
Holder: Unique Restaurant Concepts, Ltd.
Address: 490 E. Palmetto Park Rd. #110
Boca Raton, FL 33432
GUARANTEE
FOR VALUE RECEIVED and intending to be legally bound, the under-
signed jointly and severally guarantee payment of the within Note
and all extensions or renewals thereof.
------------------------------
JOSEPH C. VISCONTI
------------------------------
DALE J. BRISSON
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<PAGE> 1
EXHIBIT 10.1
SFORZA ENTERPRISES INC.
EQUITY INCENTIVE PLAN
Section 1. Purpose
The purpose of the Sforza Enterprises Inc. Equity Incentive Plan (the "Plan") is
to attract and retain key employees and consultants, to provide an incentive for
them to achieve long-range performance goals and to enable them to participate
in the long-term growth of the Company.
Section 2. Definitions
"Affiliate" means any business entity in which the Company owns directly or
indirectly 50% or more of the total combined voting power or has a significant
financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock, Stock Unit or Other Stock-Based Award awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any successor to such Code.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan.
"Common Stock" or "Stock" means the Common Stock, $0.01 par value,
of the Company.
"Company" means Sforza Enterprises Inc., a Florida corporation.
"Designated Beneficiary" means the beneficiary designated by a Participant, in a
manner determined by the Committee, to receive amounts due or exercise rights of
the Participant in the event of the Participant's death. In the absence of an
effective designation by a Participant, "Designated Beneficiary" shall mean the
Participant's estate.
"Effective Date" means June 1, 1997.
"Fair Market Value" means, with respect to Common Stock or any other property,
the fair market value of such property as determined by the Committee in good
faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
<PAGE> 2
"Nonstatutory Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 that is not intended to be an Incentive
Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Other Stock-Based Award" means an Award, other than an Option, Stock
Appreciation Right, Performance Share, Restricted Stock or Stock Unit, having a
Common Stock element and awarded to a Participant under Section 11.
"Participant" means a person selected by the Committee to receive an Award under
the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
"Performance Shares" means shares of Common Stock, which may be earned by the
achievement of performance goals, awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time during which an Award may be
forfeited to the Company pursuant to the terms and conditions of such Award.
"Restricted Stock" means shares of Common Stock subject to forfeiture awarded to
a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in value
of shares of Common Stock over the exercise price awarded to a Participant under
Section 7.
"Stock Unit" means an award of Common Stock or units that are valued in whole or
in part by reference to, or otherwise based on, the value of Common Stock,
awarded to a Participant under Section 10.
Section 3. Administration
The Plan shall be administered by the Committee. The Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive of-
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<PAGE> 3
ficers of the Company the power to make Awards to Participants who are not
Reporting Persons and all determinations under the Plan with respect thereto,
provided that the Committee shall fix the maximum amount of such Awards for the
group and a maximum for any one Participant.
Section 4. Eligibility
All employees and, in the case of Awards other than Incentive Stock Option,
consultants of the Company or any Affiliate capable of contributing
significantly to the successful performance of the Company, other than a person
who has irrevocably elected not to be eligible, are eligible to be Participants
in the Plan. Incentive Stock Options may be awarded only to persons eligible to
receive such Options under the Code.
Section 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 20,000 shares of Common Stock per Participant in each
calendar year during any part of which the Plan is effective in respect of a
maximum of 10% of the total shares of Common Stock outstanding on the first day
of such year increased by the number of shares available for Awards in any
previous year that were not awarded under the Plan. If any Award in respect of
shares of Common Stock expires or is terminated unexercised or is forfeited
without the Participant having had the benefits of ownership (other than voting
rights), the shares subject to such Award, to the extent of such expiration,
termination or forfeiture, shall again be available for award under the Plan.
Common Stock issued through the assumption or substitution of outstanding grants
from an acquired company shall not reduce the shares available for awards under
the Plan. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares.
(b) Notwithstanding any other provision of the Plan, no more than
285,000 shares of Common Stock shall be cumulatively available for the award of
Incentive Stock Options; provided that, to the extent an Incentive Stock Option
expires or is terminated, unexercised or is forfeited for any reason, the shares
that were subject to such option may again be awarded as Incentive Stock
Options.
(c) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits
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<PAGE> 4
intended to be made available under the Plan, then the Committee (subject, in
the case of Incentive Stock Options, to any limitation required under the Code)
shall equitably adjust any or all of (i) the number and kind of shares in
respect of which Awards may be made under the Plan, (i) the number and kind of
shares subject to outstanding Awards, and (iii) the award, exercise or
conversion price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect to
an outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.
Section 6. Stock Options
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder, and no Incentive Stock Option may be granted hereunder more than 10
years after the Effective Date.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award with respect to Incentive Stock
Options. Nonstatutory Stock Options may be granted at such prices as the
Committee may determine.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of Common Stock owned by the optionee, including Restricted Stock, valued
at their Fair Market Value on the date of delivery, or such other lawful
consideration as the Committee may determine.
(e) The Committee may provide that, subject to such conditions as it
considers appropriate, upon the delivery of shares to the Company in payment of
an Option, the participant automatically be awarded an Option for up to the
number of shares so delivered.
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<PAGE> 5
Section 7. Stock Appreciation Rights
(a) Subject to the provisions of the Plan, the Committee may award SARs
in tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs granted in
tandem with Options shall have an exercise price not less than the exercise
price of the related Option. SARs granted alone and unrelated to an Option may
be granted at such exercise prices as the Committee may determine.
(b) An SAR related to an Option that can only be exercised during
limited periods following a change in control of the Company may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the change in control or paid
during the 30 day period immediately preceding the occurrence of the change in
control in any transaction reported in the stock market in which the Common
Stock is normally traded.
Section 8. Performance Shares
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares is to
be determined on the date the Committee determines that the Performance Shares
have been earned.
(b) The Committee shall establish performance goals for each Cycle, for
the purpose of determining the extent to which Performance Shares awarded for
such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares that have been earned
on the basis of performance in relation to the established performance goals.
The payment values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment
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<PAGE> 6
values will be settled in whole or in part in cash or other property, including
Common Stock or Awards.
Section 9. Restricted Stock
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and, unless otherwise determined by the Committee, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such certificates
to the Participant or if the Participant has died, to the Participant's
Designated Beneficiary.
Section 10. Stock Units
(a) Subject to the provisions of the Plan, the Committee may award
Stock Units subject to such terms, restrictions, conditions, performance
criteria, vesting requirements and payment rules as the Committee shall
determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit
Award shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
Section 11. Other Stock-Based Awards
(a) Subject to the provisions of the Plan, the Committee may make other
awards of Common Stock and other awards that are valued in whole or in part by
reference to, or are otherwise based on, Common Stock, including without
limitation convertible preferred stock, convertible debentures, exchangeable
securities and Common Stock awards or options. Other Stock-Based Awards may be
granted either alone or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan.
(b) The Committee may establish performance goals, which may be based
on performance goals related to book value, subsidiary performance or such other
criteria as the Committee may determine, Restricted Periods, Performance Cycles,
conversion prices
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<PAGE> 7
(provided that no conversion price shall be less than 100% of the Fair Market
Value of the Common Stock on the date of award of any Other Stock-Based Award),
maturities and security, if any, for any Other Stock-Based Award. Other
Stock-Based Awards may be sold to Participants at the face value thereof or any
discount therefrom or awarded for no consideration or such minimum consideration
as may be required by applicable law.
Section 12. General Provisions Applicable to Awards
(a) Reporting Person Limitations. Notwithstanding any other provision
of the Plan, to the extent required to qualify for the exemption provided by
Rule 16b-3 under the Securities Exchange Act of 1934 and any successor
provision, Awards made to a Reporting Person shall not be transferable by such
person other than by will or the laws of descent and distribution or pursuant to
a qualified domestic relations order, as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
(b) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(c) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(d) Settlement. The Committee shall determine whether Awards are
settled in whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Committee may permit a Participant to
defer all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.
(e) Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
(f) Termination of Employment. The Committee shall determine the
effect on an Award of the disability, death, retirement
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<PAGE> 8
or other termination of employment of a Participant and the extent to which, and
the period during which, the Participant's legal representative, guardian or
Designated Beneficiary may receive payment of an Award or exercise rights
thereunder.
(g) Change in Control. In order to preserve a Participant's rights
under an Award in the event of a change in control of the Company, the Committee
in its discretion may, at the time an Award is made or at any time thereafter,
take one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise or realization of the Award, (ii)
provide for the purchase of the Award upon the Participant's request for an
amount of cash or other property that could have been received upon the exercise
or realization of the Award had the Award been currently exercisable or payable,
(iii) adjust the terms of the Award in a manner determined by the Committee to
reflect the change in control, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable and in the best interests of the Company.
(h) Loans. The Committee may authorize the making of loans or cash
payments to Participants in connection with any Award under the Plan, which
loans may be secured by any security, including Common Stock, underlying or
related to such Award (provided that such Loan shall not exceed the Fair Market
Value of the security subject to such Award), and which may be forgiven upon
such terms and conditions as the Committee may establish at the time of such
loan or at any time thereafter.
(i) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(j) Amendment of Award. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
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<PAGE> 9
Section 13. Miscellaneous
(a) No Right to Employment. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving
a Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan except as expressly provided in the applicable Award.
(b) No Rights as a Shareholder. Subject to the provisions of the
Applicable Award, no Participant or Designated Beneficiary shall have any rights
as a shareholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. Subject to the approval of the shareholders
of the Company, the Plan shall be effective on the Effective Date. Prior to
such approval, Awards may be made under the Plan expressly subject to such
approval.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, subject to any shareholder approval
that the Board determines to be necessary or advisable.
(e) Governing Law. The provisions of the Plan shall be
governed by and interpreted in accordance with the laws of Florida.
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<PAGE> 1
EXHIBIT 10.9
FUNDING AGREEMENT
FUNDING AGREEMENT made this ___ day of July, 1997 by and among SFORZA
ENTERPRISES INC., a Florida corporation ("SEI"), MAX'S BEACH GRILL, LTD., a
Florida limited partnership ("Beach Place"), UNIQUE BRICKELL LTD., a Florida
limited partnership ("Las Olas"), UNIQUE WESTON LTD., a Florida limited
partnership ("Weston"), DENNIS MAX, UNIQUE RESTAURANT CONCEPTS, INC., a Florida
corporation ("URCI"), and UNIQUE RESTAURANT CONCEPTS, LTD., a Florida limited
partnership ("URCL").
RECITALS:
A. SEI is in the process of registering shares of its common stock with the
Securities and Exchange Commission (the "S.E.C.") for purposes of effecting an
initial public offering (the "I.P.O.") to raise at least four million dollars
($4,000,000).
B. Each of Beach Place, Las Olas and Weston owns a restaurant that replicates
the Max's Grille concept originated by the Max's Grille in Mizner Park, Boca
Raton, Florida and which is named Max's Grille (or a derivative thereof). Beach
Place's restaurant has recently opened and the other two are being developed.
The principals of such companies are actively searching for another site for a
fourth new restaurant, also to replicate the Max's Grille concept, ownership of
which shall reside in a distinct entity. (Beach Place, Las Olas, Weston and such
distinct entity are sometimes collectively referred to herein as the "Grille
Companies".)
C. SEI has agreed to devote two million dollars ($2,000,000) of the I.P.O.
proceeds to fund the construction expenses incurred by the Grille Companies in
exchange for a fifty percent (50%) equity interest in each of the Grille
Companies, in accordance with the following.
NOW, THEREFORE, based on the foregoing and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. As soon as possible following the execution hereof, the Grille Companies
shall deliver to SEI subscription agreements in form reasonably satisfactory to
SEI's counsel describing the subscription by SEI for a fifty percent (50%)
equity interest in each of the Grille Companies with protection against
dilution. To enable SEI to conduct due diligence with respect to such
subscriptions, the Grille Companies shall simultaneously furnish SEI's counsel
with copies of their Articles of Limited Partnership and Agreements of Limited
Partnership, and the Articles of Incorporation, Bylaws, Subscription Agreements,
issued stock certificates, and minutes of meetings of directors and shareholders
and written consents in lieu thereof of their respective corporate general
partners, and other items requested by such counsel.
<PAGE> 2
SEI's counsel shall expeditiously review the documentation and work diligently
to reach agreement on all issues arising thereunder so that a closing may occur.
Once two million dollars ($2,000,000) in net proceeds of the I.P.O. have been
delivered to SEI, SEI shall establish an escrow account and deposit such sum
therein earmarked as the Grille Companies Construction Fund. A closing then
shall be set for a mutually convenient time to take place at the office of SEI's
counsel in West Palm Beach, Florida at which the Grille Companies Construction
Fund shall be exchanged for certificates evidencing the above-described equity
interests. At such closing and for so long thereafter as Max and his designees
comprise a majority of the Board of Directors of SEI as contemplated by Section
2 below, designees of SEI who are acceptable to the Grille Companies shall be
appointed to serve on each of the Grille Companies' corporate general partners'
Boards of Directors such that such designees represent the majority of directors
in each case. SEI shall relinquish control of the Grille Companies' Board of
Directors immediately following any event which results in Max and his designees
no longer comprising a majority of SEI's Board of Directors.
2. At the closing referenced above, the directors of SEI shall appoint such
designees of Max who are reasonably acceptable to them to the SEI Board of
Directors such that such designees represent the majority of directors of SEI.
Joseph C. Visconti, Dale J. Brisson and Gerald J. Visconti, by execution of the
attached Joinder, shall agree to vote their shares of the capital stock of SEI
and to take such other action as required to accomplish the foregoing.
3. The Grille Companies agree to use the subscription funds to cover the
expenses of construction and opening of their Max's Grille restaurants. The
parties recognize that construction and opening expenses will vary for each
restaurant as will the timing of incurrence and therefore the Grille Companies
agree that they shall appoint and entrust Max to disburse the subscription funds
in the manner he deems most equitable and in the collective best interests of
the Grille Companies.
4. URCI shall manage each of the Grille Companies for so long as SEI owns an
equity interest therein for a fee less than that historically charged by URCI
for management, calculated to cover the additional administrative expenses
incurred by URCI.
5. In the event the I.P.O. has not resulted in net proceeds to SEI of at least
two million dollars ($2,000,000) by September 30, 1997 thereby enabling funding
of the Grille Companies Construction Fund, this Agreement shall terminate
without further action.
6. SEI shall grant URCL an option exercisable through December 31, 1999 to
purchase one hundred fifty thousand (150,000) shares of SEI common stock for an
exercise price of two dollars and fif-
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<PAGE> 3
ty cents ($2.50) per share. Said option shall be evidenced by a Stock Option
Agreement containing incidental registration rights in the form attached hereto.
7. In the event that the Grille Companies, Max, URCL or URCI willfully fails or
refuses to comply with its respective obligations hereunder and as a result
thereof SEI must amend its registration statement as filed to delete this
transaction therefrom, then such parties, jointly and severally, shall reimburse
SEI, as liquidated damages, for SEI's extraordinary legal, accounting, printing,
underwriting and filing fees incurred in the I.P.O. as a result of such action
or inaction. All such parties agree that such liquidated damages would be just
compensation for such action and/or inaction.
8. Neither Max, URCI or URCL (the "URC Parties") shall be obligated actively to
participate in SEI's I.P.O. activities, except that (a) the URC Parties shall
promptly provide information reasonably requested by SEI for inclusion in the
registration statement, which information need not include financial data except
as required by the S.E.C. with respect to the Grille Companies and, to the
extent accounting or other expenses are incurred in connection therewith, same
shall be paid for by SEI, and (b) Max shall make a presentation regarding the
Max's Grille concept and expansion plans for same at a dinner meeting at Max's
Grille in Boca Raton to be sponsored by SEI after the registration statement is
filed and to which only securities brokers and dealers, not investors, shall be
invited.
9. This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof and supersedes any conflicting prior or
contemporaneous agreements. This Agreement may not be orally modified and no
modification of any provision hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be enforced.
10. The parties hereto acknowledge that following the closing described in
Section 1 above, it would be impossible to determine the amount of damage that
would result from the breach by any of them of the provisions of this Agreement
and that the remedy at law for breach of any of such provisions would likely be
inadequate and accordingly agree that the non-breaching parties shall, in
addition to any other rights or remedies they may have, be entitled to seek such
equitable and injunctive relief as may be available from any court of competent
jurisdiction to compel specific performance of or restrain any of the other
parties from violating any of such provisions. In connection with any action or
proceeding for injunctive relief, each of the parties hereto hereby waives the
claim or defense that a remedy at law alone is adequate and agrees to the
maximum extent permitted by law to have each provision of this Agreement
specifically enforced against it, without the necessity of posting bond or other
security
-3-
<PAGE> 4
against it, and consents to the entry of injunctive relief against it enjoining
or restraining any breach or threatened breach of this Agreement.
11. All expenses incurred by any party in enforcing its rights hereunder in
litigation or preparatory thereto shall be paid by the breaching parties, which
shall be jointly and severally responsible therefor.
12. Each of the parties hereto is sophisticated and has had the opportunity to
be represented by counsel in the negotiation and preparation hereof.
Accordingly, each party hereto acknowledges that presumptions relating to the
interpretation of contractual provisions against the drafter thereof are not
applicable to this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date
first above written.
SFORZA ENTERPRISES INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
MAX'S BEACH GRILL, LTD. by
Max's Beach Grill, Inc., its
general partner
By:
----------------------------
Name:
-----------------------
Title:
----------------------
UNIQUE BRICKELL LTD., by Uni-
que Brickell, Inc., its gener-
al partner
By:
----------------------------
Name:
-----------------------
Title:
----------------------
UNIQUE WESTON LTD., by Unique
Weston, Inc., its general
partner
By:
----------------------------
Name:
-----------------------
Title:
----------------------
-4-
<PAGE> 5
-------------------------------
DENNIS MAX
UNIQUE RESTAURANT CONCEPTS,
LTD., by Unique Restaurants,
Inc., its general partner
By:
----------------------------
Name:
-----------------------
Title:
----------------------
UNIQUE RESTAURANT CONCEPTS,
INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
-5-
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Castle Room, Inc.
Clematis Bistro Corporation
Sushi Enterprises, Inc.
<PAGE> 1
EXHIBIT 23.1
Templeton & Company, P.A.
Certified Public Accountants
540 Royal Palm Beach Boulevard
Royal Palm Beach, Florida 33411
--------------------
(561) 798-9988
Fax (561) 798-4053
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Sforza Enterprises Inc.
We consent to the inclusion in this registration statement on Form SB-2 of our
report dated March 28, 1997, except for notes 2 and 9, as to which the date is
July 8, 1997, on audits of the consolidated financial statements of Sforza
Enterprises, Inc. and subsidiaries. We also consent to the reference to our
firm under the caption "Experts."
/s/ Templeton & Company, P.A.
-----------------------------
Templeton & Company, P.A.
Royal Palm Beach Florida
July 22, 1997
