As filed with the Securities and Exchange Commission on April 24, 1998
Registration No. 333 ____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
UNISERVICE CORPORATION
(Name of Small Business Issuer in its Charter)
FLORIDA 5812 65-0816177
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers Identification No.)
1900 GLADES ROAD, SUITE 351
BOCA RATON, FLORIDA 33431 1900 GLADES ROAD, SUITE 351
(561) 347-6398 BOCA RATON, FLORIDA 33431
(Address and Telephone Number of (Address of Principal Place of Business or
Principal Executive Offices) Intended Principal Place of Business)
DAVID MAYER
UNISERVICE CORPORATION
1900 GLADES ROAD, SUITE 351
BOCA RATON, FLORIDA 33431
(561) 347-6398
(Name, address and telephone number of agent for service)
Copies to:
CHARLES B. PEARLMAN, ESQ. DONN A. BELOFF, ESQ.
GAYLE COLEMAN, ESQ. HOLLAND & KNIGHT LLP
ATLAS, PEARLMAN, TROP & BORKSON, P.A. ONE EAST BROWARD BOULEVARD, SUITE 1300
200 EAST LAS OLAS BOULEVARD, SUITE 1900 FORT LAUDERDALE, FLORIDA 33301
FORT LAUDERDALE, FLORIDA 33301 TELEPHONE (954) 525-1000
TELEPHONE (954) 763-1200 FACSIMILE (954) 463-2030
FACSIMILE (954) 766-7800
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box: [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration 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 this form is a post-effective amendment filed pursuant to Rule 462(d) 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: [X]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED TO BE MAXIMUM MAXIMUM REGISTRATION
REGISTERED OFFERING PRICE AGGREGATE FEE
PER SECURITY OFFERING PRICE
(1)
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<S> <C> <C> <C> <C>
Class A Common Stock) 1,610,000(2) $5.00 $8,050,000 $2374.75
Warrants 1,610,000(3) $.125 $201,250 $59.37
Class A Common Stock issuable 1,610,000(4) $6.00 $9,660,000 $2849.70
upon exercise of the Warrants
Representative's Warrants 161,000(5) $0.001 $161 $.05
Class A Common Stock 161,000(6) $6.00 $966,000 $284.97
Warrants issuable upon the exercise of 161,000(7) $0.15 $24,150 $7.13
the Representative's Warrants
Class A Common Stock issuable upon 161,000(8) $7.20 $1,159,200 $341.97
the exercise of the Representative's
Warrants
TOTAL $20,060,761 $5917.94
==============================================================================================================================
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(1) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933,
as amended (the "Act").
(2) Includes 210,000 shares of Class A Voting Common Stock ("Class A Common
Stock") issuable pursuant to the Underwriter's over-allotment option
("Over-Allotment Option").
(3) Includes 210,000 Redeemable Common Stock Purchase Warrants ("Warrants")
issuable pursuant to the Over-Allotment Option.
(4) Represents shares of Class A Common Stock issuable upon exercise of the
Warrants registered hereby together with such additional indeterminate
number of shares as may be issued upon exercise of such Warrants by
reason of the anti-dilution provisions contained therein.
(5) Includes 21,000 Representative's Purchase Warrants ("Representative's
Warrants") issuable pursuant to the Over-Allotment Option.
(6) Represents shares of Class A Common Stock issuable upon exercise of the
Representative's Warrants including the Over-Allotment Option, together
with such additional indeterminate number of shares of Class A Common
Stock as may be issued upon exercise of such Representative's Warrants
by reason of the anti-dilution provisions contained therein.
(7) Represents Warrants issuable upon exercise of the Representative's
Warrants, together with such additional indeterminate number of
Warrants as may be issued by reason of the anti-dilution provisions
contained therein.
(8) Represents shares of Class A Common Stock issuable upon exercise of the
Warrants included within the Representative's Warrants, including the
Over-Allotment Warrant, together with such additional indeterminate
number of shares of Class A Common Stock as may be issued upon exercise
of such Warrants by reason of the anti-dilution provisions contained
therein.
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 Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
2
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 24, 1998
UNISERVICE CORPORATION
1,400,000 Shares of Class A Common Stock and
1,400,000 Redeemable Common Stock Purchase Warrants
Uniservice Corporation is offering ("Offering") 1,400,000 shares of Class A
Voting Common Stock, par value $.0001 ("Class A Common Stock") at $5.00 per
share and 1,400,000 Redeemable Common Stock Purchase Warrants ("Warrants") at
$.125 per Warrant. The Class A Common Stock and the Warrants are being offered
separately and not as units, and each is separately transferable. Each Warrant
entitles the holder to purchase one share of Class A Common Stock at $6.00 per
share (subject to adjustment) during the five-year period commencing on the date
of this Prospectus (the "Effective Date"). The Warrants are redeemable by
Uniservice Corporation commencing twelve (12) months following the Effective
Date for $.25 per Warrant, subject to prior exercise of the Warrant, if the
closing bid price for the Class A Common Stock has been at least $7.00 per share
for thirty (30) consecutive trading days. See "Description of Securities."
Prior to this Offering, there has been no public market for the Class A Common
Stock, the Warrants or the shares of Class A Common Stock underlying the
Warrants (collectively the "Securities") and there can be no assurances that any
market will develop or if developed, that it will be sustained. The initial
public offering prices of the Class A Common Stock and the Warrants and the
exercise price and other terms of the Warrants have been determined through
negotiations between Uniservice Corporation and Werbel-Roth Securities, Inc. the
representative ("Representative") of the Underwriters ("Underwriters") and are
not related to Uniservice Corporation's assets, book value, financial condition
or other recognized criteria value. Uniservice Corporation has applied for the
inclusion of the Class A Common Stock and the Warrants on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") SmallCap
Market under the symbols "UNICA", and "UNIW," respectively.
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN THE CLASS A COMMON STOCK AND THE WARRANTS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
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.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) UNISERVICE CORPORATION(2)
------ ------------ -------------------------
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Per share of Class A Common Stock $5.00 $.50 $4.50
Per Warrant $.125 $.0125 $.1125
Total(3) $7,175,000 $717,500 $6,457,500
================================================================================================================================
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(See next page for footnotes)
The Securities are being offered by the Underwriters on a firm commitment basis,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify this Offering without notice and to reject any order in whole
or in part. It is expected that delivery of the Class A Common Stock and the
Warrants will be made against payment therefor at the offices of the
Representative at 150 East Palmetto Park Road, Suite 510, Boca Raton, Florida
33432 on or about ____________, 1998.
WERBEL-ROTH SECURITIES, INC.
The date of this Prospectus is __________, 1998
<PAGE>
(1) Does not include additional compensation payable to the Representative
in the form of (i) a non-accountable expense allowance equal to 3% of
the gross proceeds of the Offering ($215,250 or $247,537.50 if the
Over-Allotment Option is exercised) of which $25,000 has been paid to
date; (ii) Representative's Purchase Warrants ("Representative's
Warrants") to purchase 140,000 shares of Class A Common Stock (161,000
shares if the Over-Allotment Option is exercised) and 140,000 Warrants
(161,000 Warrants if the Over-Allotment Option is exercised) for a
four-year period commencing one year from the Effective Date at an
exercise price of 120% of the initial public offering price for the
Class A Common Stock ($6.00 per share) and the Warrants ($.15 per
Warrant), subject to adjustment, and (iii) a three- year financial
consulting fee in the amount of $105,000, payable at the closing. In
addition, Uniservice Corporation has granted the Representative certain
registration rights with respect to registration of the shares of Class
A Common Stock and Warrants underlying the Representative's Warrants
and the shares of Class A Common Stock issuable upon the exercise of
the Representative's Warrants, and has agreed to indemnify the
Underwriters against certain liabilities, including liabilities arising
under the Securities Act of 1933, as amended (the "Act"). See
"Underwriting."
(2) Before deducting expenses payable by Uniservice Corporation estimated
at $342,250, not including the Representative's non-accountable expense
allowance.
(3) Uniservice Corporation has granted the Underwriters (or the
Representative, individually at its option) an option (the
"Over-Allotment Option"), exercisable within 45 days from the date of
this Prospectus, to purchase up to 210,000 additional shares of Class A
Common Stock and up to 210,000 additional Warrants at an exercise price
of $5.00 per share and $.125 per Warrant, solely to cover
over-allotments, if any. If the Over-Allotment Option is exercised in
full, the total Price to Public, Underwriting Discounts, and Proceeds
to Uniservice Corporation will be $8,251,250, $825,125, and $7,426,125,
respectively. See "Underwriting."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
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.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF UNISERVICE CORPORATION'S
CLASS A COMMON STOCK AND WARRANTS, INCLUDING STABILIZING TRANSACTIONS EFFECTED
IN ACCORDANCE WITH RULE 104 OF REGULATION M PURSUANT TO WHICH PERSONS MAY BID
FOR OR PURCHASE OF COMMON STOCK FOR THE PURPOSE OF STABILIZING ITS MARKET PRICE.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKETING MAKING TRANSACTIONS IN CLASS A COMMON
STOCK AND WARRANTS ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND MUST BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE COMPANY'S FINANCIAL
STATEMENTS (THE "FINANCIAL STATEMENTS"), INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN
THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE OVER-ALLOTMENT OPTION, THE
WARRANTS, THE REPRESENTATIVE'S WARRANTS, THE SECURITIES UNDERLYING THE
REPRESENTATIVE'S WARRANTS, OR THE ISSUANCE OF UP TO AN AGGREGATE OF 200,000
SHARES OF CLASS A COMMON STOCK RESERVED FOR ISSUANCE UNDER UNISERVICE
CORPORATION'S STOCK OPTION PLAN (SEE "MANAGEMENT--INCENTIVE AND NON-QUALIFIED
STOCK OPTIONS PLAN); (II) ASSUMES A PUBLIC OFFERING PRICE OF $5.00 PER SHARE OF
CLASS A COMMON STOCK AND $.125 PER WARRANT; AND (III) GIVES EFFECT AS OF
DECEMBER 31, 1996 TO TWO STOCK PURCHASE AGREEMENTS WHEREBY (I) INVERSIONES E.
INMOBILIARIA KYOTO LIMITADA ("KYOTO"), A CHILEAN CORPORATION, SHALL PURCHASE
1,399,900 SHARES OF THE COMPANY'S CLASS B COMMON STOCK, PAR VALUE $.0001 ("CLASS
B COMMON STOCK") AND, SIMULTANEOUSLY THEREWITH, (II) THE COMPANY SHALL PURCHASE
KYOTO'S 99.97% INTEREST IN KENTUCKY FOODS CHILE, S.A. SEE "BUSINESS-BACKGROUND"
AND "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." ALL AMOUNTS ARE IN U.S.
DOLLARS EXCEPT AS OTHERWISE SPECIFICALLY NOTED. EXCEPT AS OTHERWISE SPECIFICALLY
NOTED, UNISERVICE CORPORATION AND KENTUCKY FOODS CHILE S.A. ARE COLLECTIVELY
REFERRED TO HEREIN AS THE "COMPANY."
THE COMPANY
Uniservice Corporation ("USC") was organized in November 1997 as a
holding company to acquire a 99.97% interest in Kentucky Foods Chile, S.A. ("KyF
Chile"), a Chilean corporation incorporated in November 1986. KyF Chile
currently owns and operates, under license, 29 Kentucky Fried Chicken/registered
mark/ ("KFC/registered mark/") restaurants in Chile, the majority of which are
located in Santiago, pursuant to its International Franchise Agreement, as
amended (the "Franchise Agreement") with Kentucky Fried Chicken International
Holdings, Inc. ("KFCIH"), See "Business - Franchise Agreement with KFCIH." KyF
Chile is currently the sole KFC/registered mark/ franchisee in Chile and is the
largest KFC/registered mark/ franchisee in Central and South America. KFCIH has
no equity interest in the Company and does not warrant the results of the
operations of the Company.
The Company's strategy is to (i) develop new KFC/registered mark/
restaurants to enhance its operating leverage and increase overall margins and
profitability; (ii) achieve operating efficiencies through centralized
management and advanced management information systems; and (iii) capitalize on
KFC(R)'s strong, international brand name. The Company believes that this
strategy will enable the Company to double the number of KFC/registered mark/
restaurants it currently owns and operates by constructing between four and five
new restaurants each year for the next seven years (for a total of 60 Company
owned restaurants by 2005). The Company has allocated approximately $2,465,000
(or $616,250 per restaurant) of the proceeds from this Offering to open four new
KFC/registered mark/ restaurants during the next twelve months, which includes
initial fees due to KFCIH, construction costs, and purchase of equipment and
fixtures. See "Use of Proceeds."
The Company's offices are currently located at 1900 Glades Road, Suite
351, Boca Raton, FL 33431, and its telephone number is (561) 347-6398. Its
fiscal year end is December 31.
3
<PAGE>
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THE OFFERING
<S> <C>
Class A Common Stock Offered......................... 1,400,000 shares
Warrants Offered..................................... 1,400,000 Warrants
Shares of Class A Common Stock
Underlying Warrants.............................. 1,400,000 shares
Class A Common Stock Outstanding:
Before the Offering.............................. 30,000
After the Offering............................... 1,430,000
Class B Common Stock Outstanding
Before the Offering.............................. 1,400,000(1)
After the Offering............................... 1,400,000
Warrants Outstanding:
Before the Offering.............................. None
After the Offering............................... 1,400,000
Use of Proceeds...................................... The net proceeds of this Offering will be
approximately $5.9 million, which will be used
as follows: (1) $1,485,000 for construction of
leasehold improvements; (2) $1,331,750 for
reduction of long term debt; (3) $840,000 for
equipment for four new KFC(R)restaurants; (4)
$825,000 for payment of back royalties, which
amount includes accrued interest at 12.5% per
annum, to KFCIH; (5) $565,000 for repayment
of loans due to third parties; (6) $140,000 for
initial fees for four new KFC(R)restaurants; and
(7) $713,250 for working capital.
RISK FACTORS......................................... SEE "RISK FACTORS" COMMENCING ON PAGE 5
FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE SECURITIES.
Nasdaq Symbols
Class A Common Stock............................. UNICA
Warrants......................................... UNIW
</TABLE>
- --------------
(1) The Class B Common Stock is identical to the Class A Common Stock,
except that holders of Class B Common Stock are entitled to ten (10)
votes for each share of Class B Common Stock held. Upon sale or other
disposition, the shares of Class B Common Stock may be converted, at
the option of the holders, into shares of Class A Common Stock on a
one-share for one share basis. Upon such conversion, the super-voting
rights with respect to such shares will terminate.
4
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION PRESENTED IN THIS PROSPECTUS, THE FOLLOWING
RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING THE COMMON STOCK AND WARRANTS OFFERED HEREBY. THIS
PROSPECTUS CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
LIMITED OPERATING HISTORY; INCREASED OPERATING EXPENSES. USC was recently
organized as a holding company to acquire a 99.97% ownership interest in KyF
Chile, which currently owns and operates under license 29 Kentucky Fried Chicken
restaurants in Chile, the majority of which are located in the Santiago area.
All the revenues shown in the Financial Statements are attributable to the
operations of KyF Chile during the relevant periods. The Company has had only
limited operations since its inception on November 21, 1997, and has had no
revenue through the date hereof, although its operating company, KyF Chile, has
been in business in Chile for over 11 years. While a majority of the Company's
purchasing, inventory control and operations are and will continue to be
centralized from its executive offices in Santiago, Chile, the Company
anticipates that it will incur increased operating expenses as a result of its
strategy to open 31 additional KFC/registered mark/ restaurants by the end of
2005.
NEED FOR ADDITIONAL FINANCING. The Company believes that the net proceeds from
the Offering will be sufficient to enable it to carry out its business
objectives to open four additional KFC/registered mark/ restaurants during the
next twelve months. The Company intends to open an aggregate of 31 additional
KFC/registered mark/ restaurants over the next seven years, for a total of 60
Company-owned KFC/registered mark/ restaurants. The Company anticipates that it
will require additional financing to construct and open the additional
restaurants. There can be no assurances that the Company will be able to obtain
additional financing when required, or if additional financing is available,
such financing would be available on terms and conditions that would be
commercially feasible to the Company. Additionally, as a condition of the
Franchise Agreement, KFCIH must approve any future public financing proposed by
the Company. Moreover, additional equity financings may result in dilution to
existing shareholders.
RISKS OF EXPANSION AND DEVELOPMENT. The Company intends to open between four and
five new KFC/registered mark/ restaurants each year for the next seven years
(for a total of 60 Company-owned KFC/registered mark/ restaurants in Chile). The
Company's ability to achieve its expansion goals will depend on a number of
factors, including, among others, (1) availability of funds for expansion, (2)
hiring, training and retaining skilled management and restaurant personnel, (3)
timely development and construction of additional KFC/registered mark/
restaurants, and (4) continued compliance with the Franchise Agreement. No
assurances can be made that the Company's expansion plans will be achieved, each
new restaurant will be profitable, or unanticipated expenses, problems or
difficulties will not result in material delays in implementing its business
strategy. See "Business."
5
<PAGE>
DEPENDENCE ON THE FRANCHISE AGREEMENT WITH KFCIH. The Company's operations are
materially dependent on the terms and conditions of the Franchise Agreement. The
Franchise Agreement permits the Company to operate its restaurants using and
exploiting certain proprietary property and concepts owned or controlled by
KFCIH, including the KFC/registered mark/ brand names, trade dress and
trademarks, and proprietary recipes. The initial franchise term for each of the
Company's restaurant is ten years, with a conditional ten year renewal period.
The Company is currently in default of the Franchise Agreement for failure to
pay approximately $825,000 in royalties (which includes accrued interest of
12.5% per annum) to KFCIH. KFCIH has advised the Company, however, that so long
as the Company is in compliance with the other terms and obligations of the
Franchise Agreement and a reduction of debt note entered into between the
Company and KFCIH, KFCIH does not intent to terminate the Franchise Agreement.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources." The Company has agreed to repay all
back royalties to KFCIH no later than November 20, 1998. While the Company
believes that following payment of back royalties due to KFCIH from the proceeds
of this Offering, it will be in material compliance with the provisions of the
Franchise Agreement, there can be no assurance that it will continue to be in
compliance with its obligations thereunder, including payments of any required
initial fees for new restaurants, development fees and continuing royalties. See
"Use of Proceeds."
Additionally, as soon as practicable following the closing of this
Offering and upon the payment of back royalties due to KFCIH, the Company will
enter into a development agreement with KFCIH (the "Development Agreement"). The
Development Agreement, which terms have been agreed upon in principle, although
no definitive agreement has been entered into, will allow the Company to open
and operate between four and five new KFC/registered mark/ restaurants each year
for the next seven years, for a total of 60 KFC/registered mark/ restaurants by
the end of 2005. See "Business Franchise Agreement with KFCIH." In the event
that the Company is unable to comply with the terms and conditions of the
Franchise Agreement or the Development Agreement in the future, it will seek to
modify such agreements. There can be no assurance that KFCIH will agree to any
such modification, which failure to agree would have a material adverse impact
on the Company's operations.
Neither KFCIH nor any of its affiliates have approved or disapproved
the Common Stock or the Warrants offered hereby. The only relationship between
KFCIH and the Company is contractual; the terms of that relationship are set
forth in the Franchise Agreement. The Franchise Agreement, which permits the
Company to operate KFC/registered mark/ restaurants in certain designated
locations, may be terminated at any time if the Company is in default and is
renewable only if certain conditions are met. Neither KFCIH nor any of its
affiliates (i) owes any fiduciary duties to the Company, (ii) is responsible for
the management of the Company or any of the obligations or liabilities of the
Company nor (iii) owes any duties to any security holder of the Company. KFCIH
and its affiliates have no obligations to grant any new franchises to the
Company, other than contemplated by the Development Agreement.
CONTROL BY MANAGEMENT; KFCIH RESTRICTIONS. Prior to this Offering, Ricardo
Vilensky, the Company's Chief Executive Officer ("CEO"), President, and Chairman
of the Board of Directors owned, directly or indirectly, approximately 95.11%
and held the right to vote 99.5% of the Company's outstanding capital stock.
After this Offering, Mr. Vilensky will, directly or indirectly,
6
<PAGE>
own approximately 48.75% of the outstanding capital stock, which represents the
right to vote 90.49% of the Company's outstanding capital stock. See "Principal
Shareholders" and "Description of Securities." Holders of Class B Common Stock
(of which Mr. Vilensky currently owns or controls all outstanding shares) are
entitled to ten (10) votes for each share of Class B Common Stock held, and
directors are elected by plurality vote. Accordingly, Mr. Vilensky will control
the election of directors as well as the other affairs of the Company for the
foreseeable future. See "Management" and "Principal Shareholders."
As a condition to the Franchise Agreement, KFCIH's consent is required
for certain transfers by the Company of its equity securities or the transfer or
issuance to third parties of any Class B Common Stock owned or controlled,
directly or indirectly, by Mr. Vilensky. Additionally, Mr. Vilensky may not
terminate his relationship with, reduce his ownership interest to less than 30%
in, or reduce his voting control to 50% or less in the Company, without KFCIH's
approval. Absent KFCIH's waiver of its approval for any or all of these
requirements, the Company would be in default of its Franchise Agreement with
KFCIH. See "Business Franchise Agreement with KFCIH" and "Anti-takeover Effects
of Certain Provisions of the Company's Articles of Incorporation, Bylaws,
and the Franchise Agreement." In the event that the Company or Mr. Vilensky fail
to comply with KFCIH's policies and procedures or any provision of the Franchise
Agreement, KFCIH could, among other remedies, terminate its Franchise Agreement
with the Company.
COMPETITION. The Company is engaged in a highly competitive segment of the fast
food industry with respect to price, variety, product quality, speed of service,
convenience of location, cleanliness and upkeep. The Company may compete
directly or indirectly with many companies and franchisees, including
franchisees and company-owned stores of international fast food franchisors
including McDonalds/registered mark/ and Burger King/registered mark/ each of
which have multiple locations in Chile, a number of whom may be larger, better
capitalized, more established and have greater personnel and other resources
than the Company. Additionally, the Company encounters competition from a number
of Chilean restaurants and food service establishments, some of which offer
chicken meals, as well as other local fast food restaurants offering products
that are familiar to Chilean consumers and have achieved broad market
acceptance. See "Business - The Fast Food Restaurant Industry in Chile," and
"Competition."
RISKS OF THE RESTAURANT INDUSTRY; CHANGES IN CONSUMER PREFERENCES, ECONOMIC
CONDITIONS AND TRENDS. The Company currently operates 29 KFC/registered mark/
restaurants and is subject to the risks of the fast food restaurant industry,
which is generally affected by changes in consumer preferences, as well as
national, regional and local economic conditions and demographic trends. The
performance of individual restaurants may also be affected by factors such as
traffic patterns and type, number and location of competing restaurants, as well
as factors such as inflation, increased food, labor and employee benefit costs.
The availability of experienced management and hourly employees may also
adversely affect the fast food restaurant industry in general in Chile and the
Company's restaurants in particular.
GOVERNMENT REGULATION. The restaurant business is subject to various Chilean
national and municipal government regulations, including those relating to the
sale of food and, in the case of certain of the restaurants, the sale of beer.
While the Company has not experienced any
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<PAGE>
difficulty in obtaining necessary government approvals to date, difficulty or
failure to retain or obtain required licenses or other regulatory approvals
could have an adverse effect on the Company's current or future operations or
delay or prevent the opening of new KFC/registered mark/ restaurants. See
"Business-Government Regulations."
DEPENDENCE ON THIRD PARTY SUPPLIERS. The Company is substantially dependent upon
third parties for all of its capital equipment (including furniture, fixtures
and equipment), food products and other supplies. Pursuant to the Franchise
Agreement, all of these supplies must be of a quality, and conform to
specifications, acceptable to KFCIH. Although KFCIH has been providing
assistance to the Company in identifying sources of supply and has, to date,
approved all suppliers used by the Company, there can be no assurances that in
the future, products may not be available from these approved entities. Failure
to obtain equipment, food products and other supplies for the KFC/registered
mark/ restaurants in a timely basis could have a material adverse effect on the
Company. See "Business - Supplies and Distribution."
DEPENDENCE ON KEY PERSONNEL. The success of the Company is highly dependent upon
the continued services of Mr. Ricardo Vilensky. Although the Company currently
has an employment agreement with Mr. Vilensky, the loss of his services could
have a material adverse effect on the business of the Company. The Company
intends to obtain a $1,000,000 key man life insurance policy, of which the
Company will be the beneficiary, on the life of Mr. Vilensky, as soon as
practicable following the Effective Date. See "Management."
With the implementation of the Company's business strategy, it may
become necessary for the Company to hire additional experienced professional
individuals to meet its expanding needs. The Company intends to use certain of
its existing staff to perform a number of these duties and to participate in the
selection of new personnel, as required. While the Company believes that by
offering competitive salaries and benefit packages it will be able to solicit
and hire qualified individuals, no assurances can be made that such individuals
will accept employment with the Company or will continue to be employed by the
Company, or that qualified individuals will always be available to the Company
when needed.
TERMINATION OF LEASES UPON DEFAULT. All of the Company's restaurants are
presently located in leased space. Typically, the leases for the Company's
KFC/registered mark/ restaurants are for a period ranging from six years to 15
years and provide for one or more options to renew for at least one additional
term. Certain of the leases provide that in the event of non-payment of rent,
the landlord may terminate the lease without notice. Chilean law, however,
provides that a landlord may not evict a tenant without a court hearing,
however, the tenant is responsible for all costs related to such court hearing.
In the event that any landlord would be successful in evicting the Company
pursuant to the terms of a lease agreement, the Company would need to seek an
alternative for that location. There can be no assurances that the Company would
be successful in locating an alternative location, or if an alternative location
is found, that a lease agreement would be entered into with terms as favorable
to the Company as the current lease agreement.
DISCRETION IN USE OF PROCEEDS; ASSETS TO BE HELD OUTSIDE THE UNITED STATES. The
Company presently intends to use the net proceeds from this Offering for the
purposes set forth in "Use of Proceeds." The Company reserves the right to use
the funds obtained from this Offering for other
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<PAGE>
purposes not presently contemplated which it deems to be in the best interests
of the Company and its shareholders in order to address changed circumstances
and opportunities. As a result of the foregoing, the success of the Company will
be substantially dependent upon the discretion and judgment of management with
respect to the application and allocation of the net proceeds of the Offering.
Investors in the Securities offered hereby will be entrusting their funds to the
Company's management, upon whose judgment and discretion the investors must
depend, with only limited information concerning management's specific
intentions.
Additionally, while USC is a U.S. corporation, it is a holding company
for KyF Chile, a Chilean corporation. For the foreseeable future, substantially
all of the assets of the Company will be held or used outside the United States
(primarily in Chile), and approximately 86% of the net proceeds from this
Offering will used in Chile. See "Use of Proceeds." Enforcement by investors of
civil liabilities under the U.S. Federal securities laws may adversely be
affected by the fact that while USC is located in the U.S., its principal
subsidiary is located in Chile. The Company's current executive officers,
directors and management are residents of Chile, and substantially all of the
assets of the Company and of the executive officers, directors and management of
the Company are located outside the United States.
IMMEDIATE AND SUBSTANTIAL DILUTION. This Offering will result in immediate
dilution of approximately $1.83 per share to new investors of Class A Common
Stock, without giving effect to the exercise of the Warrants, the Over-Allotment
Option, the Representative's Warrants, or the issuance of up to an aggregate of
200,000 shares of Class A Common Stock reserved for issuance under the Company's
Stock Option Plan (the "Plan"). See "Dilution" and "Management - Incentive and
Non-Qualified Stock Option Plan."
NO DIVIDENDS ANTICIPATED TO BE PAID. While KyF Chile has previously paid
dividends to its shareholders, the Company does not anticipate paying dividends
in the foreseeable future. The future payment of dividends is directly dependent
upon future earnings of the Company, its financial requirements and other
factors to be determined by the Company's Board of Directors. For the
foreseeable future, it is anticipated that any earnings which may be generated
from the Company's operations will be used to finance the growth of the Company
and that dividends will not be paid to shareholders. Moreover, the issuance of
any dividends is subject to the Company's compliance with the Franchise
Agreement, payment of fees to KFCIH, and KFCIH's approval. See "Dividend
Policy."
DIRECTED SHARES FOR COMPANY EMPLOYEES. The Company and the Representative have
agreed that a small amount of shares (which number has not yet been determined)
of Class A Common Stock offered hereby (the "Directed Shares") will be reserved
for the Company at the initial public offering price, solely for the purpose of
being purchased by employees of the Company. In connection with the purchase of
Directed Shares by Company employees, the Company has agreed to make
non-recourse, interest free loans to its employees. To the extent that any
employee defaults on the payment of a loan obtained in connection with the
purchase of Directed Shares, there can be no assurances that the Company will be
able to collect the outstanding loan or that or that it will pursue any legal
remedies available to collect such loan.
9
<PAGE>
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. Holders of the Warrants will have the right to exercise the Warrants
to purchase shares of Class A Common Stock only if a current prospectus relating
to such shares is then in effect and only if the shares have been qualified for
sale under the securities laws of the applicable state or states. The Company
has undertaken to use its best efforts to file and keep effective a current
prospectus which will permit the purchase and sale of the Warrants and the Class
A Common Stock underlying the Warrants, but there can be no assurances that the
Company will be able to do so. Although the Company has undertaken to use its
best efforts to qualify for sale the Warrants and the shares of Class A Common
Stock underlying the Warrants in those states in which the Securities are to be
offered, no assurance can be given that such qualifications will occur. The
Warrants may lose, or be of no value, if a prospectus covering the shares
issuable upon the exercise thereof is not kept current or if such underlying
shares are not, or cannot be, registered in the applicable states. See
"Description of Securities."
REDEEMABLE WARRANTS AND IMPACT ON INVESTORS. The Warrants are subject to
redemption by the Company in certain circumstances. The Company's exercise of
this right would force a holder of the Warrants to exercise the Warrants and pay
the exercise price at a time when it may be disadvantageous for the holder to do
so, to sell the Warrants at the then current market price when the holder might
otherwise wish to hold the Warrants for possible additional appreciation, or to
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants in the event of a call for redemption. Holders who
do not exercise their Warrants prior to redemption by the Company will forfeit
their right to purchase the shares of Class A Common Stock underlying the
Warrants. The foregoing notwithstanding, the Company may not redeem the Warrants
at any time that a current registration statement under the Act is not then in
effect. Any redemption of the Warrants during the one-year period commencing on
the Effective Date shall require the written consent of the Representative. See
"Description of Securities - Warrants."
REPRESENTATIVE'S POTENTIAL INFLUENCE ON THE COMPANY AND THE MARKET. Pursuant to
the terms of the Underwriting Agreement between the Company and the
Representative, the Representative has the right to designate a member to the
Company's Board of Directors for a period of five years from the Effective Date,
such member to be reasonably acceptable to management of the Company. The
ability to designate a member to the Company's Board of Directors will provide
the Representative with a certain amount of continuing influence over the
Company's business and operations, even though such single designee will
constitute a minority of the Board of Directors.
Additionally, it is anticipated that a significant amount of the Class
A Common Stock and Warrants will be sold to customers of the Representative.
Although the Representative has advised the Company that it intends to make a
market in the Class A Common Stock and the Warrants, it will have no legal
obligation to do so. The prices and the liquidity of the Class A Common Stock
and the Warrants may be significantly affected by the degree, if any, of the
Representative's participation in the market. If it participates in the market,
the Representative may influence the market, if one develops, for the
Securities. Such market-making activity may be discontinued at any time.
Moreover, if the Representative sells the securities issuable upon the exercise
of the Representative's Warrants or acts as a warrant solicitation agent for the
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<PAGE>
Warrants, it may be required under the Securities Exchange Act of 1934, as
amended, to temporarily suspend its market-making activities. The prices and
liquidity of the Securities may be significantly affected by the degree, if any,
of the Representative's participation in such market. See "Underwriting."
POSSIBLE APPLICABILITY OF RULES RELATING TO LOW-PRICED STOCKS; POSSIBLE FAILURE
TO QUALIFY FOR NASDAQ SMALLCAP MARKET LISTING. The Securities and Exchange
Commission (the "Commission") has adopted regulations which generally define a
"penny stock" to be any equity security that has a market price (as defined) of
less than $5.00 per share, subject to certain exceptions. Upon completion of
this Offering, the shares of Class A Common Stock offered hereby may be deemed
to be "penny stocks" and thus will become subject to rules that impose
additional sales practice requirements on broker/dealers who sell such
securities to persons other than established customers and accredited investors,
unless the Class A Common Stock is listed on Nasdaq. Consequently, the "penny
stock" rules may restrict the ability of broker/dealers to sell the Securities
and may affect the ability of purchasers in this Offering to sell the Securities
in a secondary market. See "Underwriting."
Effective February 23, 1998, The Nasdaq Stock Market, Inc. adopted
certain changes to the entry and maintenance criteria for listing eligibility on
the Nasdaq SmallCap Market. In addition to increased listing criteria, new
maintenance standards require at least $2,000,000 in net tangible assets (total
assets less total liabilities and goodwill) or $500,000 in net income in two of
the last three years, a public float of at least 500,000 shares, a $1,000,000
market value of public float, a minimum bid price of $1.00 per share, at least
two market makers, at least 300 shareholders and at least two outside directors.
If the Company is or becomes unable to meet the initial or continuing listing
criteria of the Nasdaq SmallCap Market and is never traded or becomes delisted
therefrom, trading, if any, in the Class A Common Stock and Warrants would
thereafter be conducted in the over-the-counter market on the OTC Electronic
Bulletin Board. In such an event, the market price of the Class A Common Stock
and Warrants may be adversely impacted and an investor may find it difficult to
dispose of, or to obtain accurate quotations as to the market value of the Class
A Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE AND REGISTRATION RIGHTS. All of the shares of
Class A Common Stock and Class B Common Stock (collectively the "Common Stock")
held by the Company's existing shareholders immediately prior to the Effective
Date are "restricted securities", as that term is defined under the Act, and may
only be sold pursuant to a registration statement or in compliance with Rule 144
under the Act or other exemption from registration. Rule 144 provides that a
person holding restricted Class A Common Stock for a period of one year may sell
such securities during any three month period, subject to certain exceptions, in
amounts equal to the greater of one percent (1%) of the Company's outstanding
Class A Common Stock or the average weekly trading volume of the Class A Common
Stock during the four calendar weeks prior to the filing of the required Form
144. Rule 144 also permits, under certain circumstances, the sale of shares
without any quantity limitation by a person who is not an affiliate of the
Company and who has satisfied a two year holding period. Upon the sale of the
Class A Common Stock offered hereby, the Company will have 1,430,000 shares of
Class A Common Stock (1,640,000 shares of Class A Common Stock if the
Over-Allotment Option is exercised) and 1,400,000 shares of Class B Common Stock
issued and outstanding, of which
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<PAGE>
30,000 shares of Class A Common Stock and all of the shares of Class B Common
Stock are "restricted securities."
Shares of Class B Common Stock held by the Company's existing
shareholders immediately prior to the Effective Date and any other securities
issued for a period of twelve months from the Effective Date (other than those
offered hereby, including the underlying securities, the Representative's
Warrants and the underlying securities thereto), are subject to a 24-month
lock-up period. 30,000 shares of Class A Common Stock issued in connection with
a loan made to the Company by an unrelated third party in the principal amount
of $150,000 (the "Bridge Financing") are subject only to a six month lock-up
period. See "Bridge Financing." The lock-up periods begin on the Effective Date
and are subject to early termination at the sole discretion of the
Representative. The Representative does not have a general policy with respect
to the release of these shares prior to the expiration of the lock-up. See
"Underwriting." After expiration of the lock-up periods, all outstanding shares
of Class A Common Stock will be eligible for sale under Rule 144. The
availability for sale of substantial amounts of Class A Common Stock subsequent
to this Offering could adversely affect the prevailing market price of the Class
A Common Stock and could impair the Company's ability to raise additional
capital through the sale of its equity securities. See "Principal Shareholders,"
and "Shares Eligible for Future Sale."
EXERCISE OF REPRESENTATIVE'S WARRANTS. In connection with this Offering, the
Company will sell to the Representative, for nominal consideration,
Representative's Warrants to purchase 140,000 shares of Class A Common Stock and
140,000 Warrants (or 161,000 shares of Class A Common Stock and 161,000
Warrants, assuming exercise of the Over-Allotment Option). The Representative's
Warrants will be exercisable commencing twelve months after the Effective Date
for a period of four years at an exercise price of 120% of the price at which
the Class A Common Stock and Warrants are sold to the public hereunder. For the
term of the Representative's Warrants, the holders thereof will have, at nominal
cost, the opportunity to profit from a rise in the market price of the
Securities without assuming the risk of ownership, with a resulting dilution in
the interest of other security holders. As long as the Representative's Warrants
remain unexercised, the Company's ability to obtain additional capital might be
adversely affected. Moreover, the Representative may be expected to exercise the
Representative's Warrants at any time when the Company would, in all likelihood,
be able to obtain any needed capital through a new offering of its securities on
terms more favorable than those provided in the Representative's Warrants. See
"Underwriting."
The Company has agreed that, at the request of the holders of the
Representative's Warrants, under certain circumstances, it will register under
state securities laws the Representative's Warrants and/or the securities
issuable thereunder. Exercise of these registration rights could involve
substantial expense to the Company at a time when it could not afford cash
expenditures and may adversely affect the terms upon which the Company may
obtain additional funding and may adversely affect the price of the Class A
Common Stock and the Warrants. See "Underwriting."
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<PAGE>
LACK OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE; POSSIBILITY OF
VOLATILITY OF PRICES OF THE SECURITIES. Prior to this Offering, there has been
no public market for the Securities and there can be no assurances that an
active public market for the Securities will be developed or, if developed,
sustained after this Offering. The initial public offering prices of the
Securities offered hereby and the exercise price and terms of the Warrants have
been arbitrarily determined by negotiations between the Company and the
Representative and may bear no relationship to the Company's current earnings,
book value, net worth or other established valuation criteria. The factors
considered in determining the initial public offering prices included an
evaluation by management of the Company and the Representative of the history of
and prospects for the industry in which the Company competes, an assessment of
management, the prospects of the Company, its capital structure, and certain
other factors deemed relevant. See "Underwriting."
The stock market from time to time experiences significant price and
volume fluctuations that may be unrelated to the operating performance of
specific companies. The trading prices of the Securities could be subject to
wide fluctuations in response to variations in the Company's operating results,
public announcements by the Company or others, economic developments affecting
the Company or its competitors, suppliers or clients and other events or factors
which may or may not be in the Company's control.
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCES OF PREFERRED STOCK.
Certain provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") and Bylaws may be deemed to have
anti-takeover effects and may delay, defer or prevent a takeover attempt of the
Company, which include when and by whom special meetings of the Company may be
called. In addition, certain provisions of the Florida Business Corporation Act
also may have certain anti-takeover effects, including the provision that shares
acquired in excess of certain specified thresholds will not possess any voting
rights unless the voting rights are approved by a majority of a corporation's
disinterested shareholders.
Furthermore, the Board of Directors has the authority to issue up to
5,000,000 shares of the Company's preferred stock and to fix the dividend,
liquidation, conversion, redemption and other rights, preferences and
limitations of such shares without any further vote or action of the
shareholders, but subject to the approval of the Representative, for a period of
one year from the Effective Date (which shares will be subject to a lock-up
period of twenty-four months from the Effective Date). Accordingly, the Board of
Directors is empowered, without shareholder approval, to issue preferred stock
which could adversely affect the voting power or the rights of the holders of
the Company's Class A Common Stock. In the event of issuance, the preferred
stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so in
the future. See "Description of Securities."
CONSIDERATIONS RELATING TO CHILE
EFFECT OF TRADE INITIATIVES. The Chilean government has granted foreigners
greater access to its economy. As a result, the amount of foreign private
investment in Chile has significantly
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increased. As the Chilean economy continues to grow and as Chile continues to
enter into additional trade initiatives with foreign countries, the number of
foreign businesses that will open in Chile, including fast food restaurants,
will likely grow, resulting in increased competition for the Company.
INFLATION. A number of reforms have been introduced by the Chilean government
over the past 20 years to achieve macroeconomic stability and to increase
economic growth, while controlling inflation. The average annual inflation rate
in Chile, as measured by changes in the Official Consumer Price Index of the
Chilean National Institute of Statistics ("Instituto Nacional de Estadisticas"),
for 1994, 1995, 1996 and 1997 was 8.9%, 8.2%, 6.6% and 6.0%, respectively. While
Chilean inflation has not had a material adverse effect on the operations of the
Company in the past, there can be no assurance that high levels of inflation in
the future will not adversely affect the Company or the Securities offered
hereby. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
RESTRICTIONS ON REPATRIATION WITH RESPECT TO INVESTMENTS Equity investments in
Chile by persons who are not Chilean residents may be freely repatriated
starting one year after the date the funds were brought into Chile, provided
that the investment is channeled through the Formal Exchange Market ("Mercado
Cambiario Formal") pursuant to an investment contract entered into with the
Chilean government under Decree - Law No. 600 of 1974, as amended ("DL 600"),
which contract is not subject to subsequent exchange-control restrictions. Net
profits can be remitted at any time, after deduction of applicable withholding
income taxes. See "Dividend Policy." Although there have been no cases of
deviations from this rule for more than 22 years, there is no assurance that
such a deviation could not occur in the future. The Company intends to enter
into a foreign investment contract with the Chilean government which stays the
laws concerning foreign investments as of the date of the contract and permits
income to flow outside Chile. There can be no assurances that the Chilean
government will not modify these restrictions in the future in such a manner to
adversely affect the Company and its shareholders. See "Business-Foreign
Investment Laws and Regulations."
IT IS NOT POSSIBLE TO FORESEE ALL RISK FACTORS WHICH MAY AFFECT THE COMPANY.
MOREOVER, THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL SUCCESSFULLY
EFFECTUATE ITS BUSINESS PLAN. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY ANALYZE
THE RISKS AND MERITS OF AN INVESTMENT IN THE CLASS A COMMON STOCK AND THE
WARRANTS AND SHOULD TAKE INTO CONSIDERATION WHEN MAKING SUCH AN ANALYSIS, AMONG
OTHER THINGS, THE RISK FACTORS DISCUSSED ABOVE.
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USE OF PROCEEDS
The gross proceeds from the sale of the 1,400,000 shares of Class A
Common Stock and 1,400,000 Warrants offered hereby will be $7,175,000, assuming
an initial public offering price of $5.00 per share of Class A Common Stock and
$.125 per Warrant. The net proceeds will be approximately $5,900,000 after
giving effect to (i) the Representative's discounts ($717,500), (ii) a 3%
non-accountable expense allowance to the Representative ($215,250), and (iii)
offering costs and expenses of approximately $342,250, but without giving effect
to the exercise of the Over-Allotment Option. The Company intends to use the net
proceeds of this Offering, during the twelve months following the Effective
Date, approximately as follows, of which approximately $5,078,000 (approximately
86%) will be used in Chile:
<TABLE>
<CAPTION>
ANTICIPATED USE OF NET PROCEEDS APPROXIMATE AMOUNT PERCENTAGE OF PROCEEDS
- ------------------------------- ------------------ ----------------------
<S> <C> <C> <C>
Construction(1) $1,485,000 25.2%
Reduction of long term debt(2) $1,331,750 22.6%
Equipment(3) $840,000 14.2%
Payment of back royalties(4) $825,000 13.9%
Repayment of loans to third parties(5) $565,000 9.6%
Initial Fees(6) $140,000 2.4%
Working Capital(7) $713,250 12.1%
TOTAL $5,900,000 100%
</TABLE>
(1) Construction of leasehold improvements for four new KFC/registered
mark/ restaurants.
(2) Reduction of long term debt due to Banco A. Edwards, a Chilean based
bank, with maturity dates through 2005. The interest rate for this long
term debt ranges from 9.02% to 11%, based upon the Asociacion de Bancos
y Entidades Financieras (T.A.B.) rate, which represents a daily average
of the interest paid by banks on their deposits. See "Note 9 to Notes
to the Financial Statements." This long term debt was incurred as a
result of the Company's consolidation of certain of its lines of credit
and short term debt. See "Note 9 to Notes to Financial Statements."
(3) Includes computers, cooking and grill equipment, furniture and fixtures
for four new KFC/registered mark/ restaurants.
(4) Payment of back royalty fees and accrued interest of 12.5% per annum
due to KFCIH, which are subject to a Chilean withholding tax of 30%.
(5) Includes (i) $415,000 plus accrued interest of 7.8% per annum due to
Kyoto, the principal shareholder of the Company, in connection with a
loan made to KyF Chile in November 1997, which was used to reduce the
back royalties due to KFCIH, and (ii) $150,000 plus accrued interest of
8.5% per annum due to an unrelated third party. See "Certain
Relationships and Related Transactions" and "Bridge Financing."
(6) Includes amounts due to KFCIH for initial fees for four new
KFC/registered mark/ restaurants (at $35,000 per restaurant), which are
subject to a Chilean withholding tax of 20%.
(7) Includes overhead and administrative expenses, legal expenses (not in
connection with this Offering) and reserves.
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The foregoing represents the Company's best estimate of the allocation
of the net proceeds of the Offering, based upon the current status of its
operations and anticipated business plans. It is possible that the application
of funds may vary depending on numerous factors including, but not limited to,
changes in the economic climate or unanticipated complications, delay and
expenses. The Company currently estimates that the net proceeds from this
Offering will be sufficient to meet the Company's liquidity and working capital
requirements for a period of at least 12 months from the completion of this
Offering and to open four additional new KFC/registered mark/ restaurants.
However, there can be no assurance that the net proceeds of this Offering will
satisfy the Company's requirements for any particular period of time. Additional
financing may be required to implement the Company's long-term business plan.
There can be no assurance that any such additional financing will be available
when needed on terms acceptable to the Company, if at all. Any additional
proceeds realized from the exercise of the Over-Allotment Option or the Warrants
will be used for working capital. Pending use of the proceeds of this Offering,
the Company may make temporary investments in bank certificates of deposit,
interest bearing savings accounts, prime commercial paper, U.S. Government
obligations and money market funds. Any income derived from these short term
investments will be used for working capital. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation."
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DIVIDEND POLICY
USC has never paid dividends on its Class A Common Stock since its
inception in November 1997. However, KyF Chile has declared dividends in the
aggregate of $71,565, $730,648, $768,018 and $19,305 for the years 1994, 1995,
1996, and 1997 respectively, to its shareholders. Of the $730,648 declared in
1995, the total amount was reinvested in the Company as paid-in capital. Of the
$768,018 declared in 1996, $139,909 was distributed in 1996 and the balance
($628,409) was distributed in 1997, of which $324,286 of the $628,409 was
reinvested in KyF Chile. The Company currently intends to retain earnings for
use in its business and therefore does not anticipate paying dividends in the
foreseeable future. The issuance of any dividends in the future is subject to
compliance with the terms and conditions of the Franchise Agreement which
include the approval by KFCIH of the issuance of any dividends by the Company.
Upon distribution of a dividend by KyF Chile, the Company, as a foreign
non-resident shareholder of a Chilean corporation, will be subject to a 35%
percent withholding tax less a credit for any corporate taxes paid by the
Chilean corporation. However, the payment of foreign (Chilean) taxes may be
credited against U.S. federal income tax. Persons investing in Chilean
corporations have the right to be exempt from any contribution, tax or other
obligation on the net proceeds resulting from the sale of stock of such Chilean
corporation or the sale or liquidation of entities acquired with proceeds of
such investment, up to the amount of capital brought into Chile through the
investment. This is accomplished by entering into a foreign investment contract
with the Chilean government pursuant to DL 600 by which foreigners are
guaranteed to receive equal treatment access to all segments of the economy
subject to a limited number of internationally-accepted exceptions.
Additionally, non-Chilean persons investing in Chilean corporations have the
right to opt for a system of tax invariability that fixes the tax to be paid by
the non-Chilean investors at 42%. The Company will have the option to select the
fixed tax rate at 42% or the variable rate at the time of distribution of a
dividend, which is currently 35%. Potential purchasers of the Class A Common
Stock or the Warrants should consult their own tax advisors regarding the impact
of these taxes.
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DILUTION
At December 31, 1997, the Company had a net tangible book value of
$3,036,155 or approximately $2.17 per share of outstanding Class B Common Stock
(after giving effect to the Stock Purchases). "Net tangible book value" per
share represents the amount of total tangible assets of the Company less total
liabilities of the Company, divided by the number of shares of Common Stock
outstanding. After giving effect to the receipt of the estimated net proceeds
from the Company's sale of the 1,400,000 shares of Class A Common Stock offered
hereby, at an assumed initial public offering price of $5.00 per share of Class
A Common Stock (after deducting underwriting discounts and estimated Offering
expenses payable by the Company), the net tangible book value of the Company at
December 31, 1997, would have been approximately $8,879,466 or $3.17 per share
of Common Stock. This would represent an immediate increase in the net tangible
book value per share of Common Stock of $1.00 to existing shareholders and an
immediate dilution of $1.83 per share to new investors purchasing shares of
Class A Common Stock in the Offering. "Dilution" is determined by subtracting
net tangible book value per share after the Offering from the offering price to
investors.
The following table illustrates this per share dilution:
Initial offering price per share of Class A Common Stock $5.00
Net tangible book value per share of
Class B Common Stock before the Offering $2.17
Increase attributable to new investors $1.00
-----
Proforma net tangible book value after the Offering $3.17
Dilution to new investors $1.83
Percentage of dilution to new investors 37.0%
The following table summarizes the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by (i) existing shareholders of the Company at December 31, 1997
and (ii) new investors purchasing shares of Class A Common Stock in this
Offering, before deducting the underwriting discounts and estimated offering
expenses payable by the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED CONSIDERATION PAID AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
-------------------- --------------------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholders(1) 1,400,000 50.00% $3,287,902 31.96% $2.35
New Investors(2) 1,400,000 50.00% $7,000,000 68.04% $5.00
--------- ----- ---------- ----- ----
Total 2,800,000 100.00% $10,287,902 100.00% $3.67
</TABLE>
- ----------
(1) Gives effect to the Stock Purchases, but does not include 30,000 shares
of Class A Common Stock issued in March 1998 in connection with the
Bridge Financing. See "Bridge Financing."
(2) Represents 1,400,000 shares of Class A Common Stock, but does not
include (i) the sale of 1,400,000 Warrants offered hereby or (ii) the
issuance and exercise of the Representative's Warrants.
18
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1997, the
capitalization of the Company, actual and as adjusted for the issuance and sale
of the 1,400,000 shares of Class A Common Stock offered hereby (assuming an
initial public offering price of $5.00 per share of Class A Common Stock) after
deducting estimated Offering expenses and underwriting discounts and the initial
application of the proceeds therefrom.
<TABLE>
<CAPTION>
ACTUAL(1) AS ADJUSTED(1)(2)
--------- -----------------
<S> <C> <C>
Long-term Debt......................................................... $2,875,411 $1,143,678
Stockholders' equity:
Class A Common Stock ($.0001 par value)
20,000,000 shares authorized; no shares issued
and outstanding (actual) and 1,400,000 (as adjusted)(2)............. --- 140
Class B Common Stock ($.0001 par value)
2,000,000 shares authorized; 1,400,000 shares issued
and outstanding (actual) and 1,400,000 (as adjusted)(2)............. 140 140
Preferred Stock, $.0001 par value; 5,000,000 shares
authorized; no shares issued and outstanding (actual)
and as adjusted..................................................... -0- -0-
Additional paid-in capital............................................. 3,287,762 9,130,933
Retained earnings...................................................... 93,176 93,176
Cumulative translation adjustment(3)................................... (205,519) (205,519)
Total stockholders' equity............................................. 3,175,559 9,018,870
Total capitalization................................................... $6,050,970 $10,162,548
</TABLE>
- -------------------
(1) Gives effect to the Stock Purchases and excludes the issuance of (i)
1,400,000 shares of Class A Common Stock upon exercise of the Warrants,
(ii) up to 140,000 shares of Class A Common Stock issuable pursuant to
the Over-Allotment Option, (iii) up 210,000 shares of Class A Common
Stock issuable pursuant to the Representative's Warrants; (iv) up to
210,000 shares of Class A Common Stock that underlying the Warrants
contained in the Representative's Warrants (161,000 shares if the
Over-Allotment Option is exercised); and (v) up to 200,000 shares of
Class A Common Stock reserved for issuance under the Plan, of which no
shares are currently subject to the Plan. See "Underwriting,"
"Management-Incentive and Non-Qualified Stock Option Plan," and
"Description of Securities."
(2) Gives effect to the issuance of 1,400,000 shares of Class A Common
Stock and the receipt of the net proceeds therefrom. Does not give
effect to (i) the sale of 1,400,000 Warrants offered hereby and
exercise of the Over-Allotment Option or (ii) the issuance of 30,000
shares of Class A Common Stock in connection with the Bridge Financing.
See "Bridge Financing."
(3) Represents the conversion from the Chilean pesos into U.S. Dollars.
19
<PAGE>
EXCHANGE RATES
Unless otherwise specified, references herein to "U.S. dollars",
"dollars", "$", or "U.S.$" are to United States dollars and references to
"pesos" or "Ch$" are to Chilean pesos, the legal currency of Chile, and
peso-denominated monetary unit. As of December 31, 1997, the exchange rate was
one (1) U.S. dollar to 439.81 pesos. No representation is made that the peso or
U.S. dollar amounts shown in this Prospectus could have been or could be
converted into U.S. dollars or pesos, as the case may be, at such rate or at any
other rate.
Chile's Ley Organica Constitucional del Banco Central de Chile No.
18.840 ("Central Bank Act") enacted in 1989, liberalized the rules that govern
the ability to buy and sell foreign exchange. Prior to 1989, the law permitted
the purchase and sale of foreign exchange only in those cases explicitly
authorized by the Central Bank of Chile. The Central Bank Act now provides that
the Central Bank may determine that certain purchases and sales of foreign
exchange may be exercised by the banks and other entities so authorized by the
Central Bank.
The following table sets forth the annual high, low, average and
year-end observed exchange rate for U.S. dollars for each year starting in 1990
as reported by the Central Bank of Chile.
EXCHANGE RATES OF CH$ PER U.S.$
-------------------------------
YEAR LOW(1) HIGH(1) AVERAGE(2)
---- ------ ------- ----------
1990 295.40 336.86 306.42
1991 336.67 374.50 349.21
1992 343.93 382.33 362.58
1993 382.12 431.04 404.17
1994 397.87 433.69 420.18
1995 368.75 418.98 396.77
1996 402.25 424.97 412.27
1997 411.85 439.81 419.31
Source: Central Bank of Chile
- ---------------
(1) Exchange rates are the actual high and low, on a month-to-month basis
for each period.
(2) The average monthly rates during the period.
20
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data as set forth below for the years ended
December 31, 1996 and 1997 and the balance sheet data at December 31, 1996 and
1997, have been derived from the Company's Consolidated Financial Statements and
Notes thereto, which have been audited by Spear, Safer, Harmon & Co., P.A.,
independent auditors, whose report with respect thereto is included elsewhere in
this Prospectus. The following financial data should be read in conjunction with
the Consolidated Financial Statements and Notes and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere
herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1997
---------------------------------------
<S> <C> <C>
EARNINGS DATA
Revenues $11,706,398 $14,562,157
Cost of Operations 4,534,762 5,909,803
Selling and Administrative Expenses 6,698,335 7,817,129
Other Income (Expenses) 61,141 478,724
Net Income 534,442 1,313,949
Net Income per common share 0.38 0.94
Weighted average common shares outstanding 1,400,000 1,400,000
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED DECEMBER 31, 1997
DECEMBER 31, AS ADJUSTED (UNAUDITED)(1)
---------------------- --------------------------
1996 1997
<S> <C> <C> <C>
Working capital ($3,250,955) ($1,029,940) $3,081,638
Total assets 8,778,122 9,259,632 12,408,943
Total long-term liabilities 1,643,181 2,875,411 1,143,678
Total liabilities 6,478,371 6,084,073 3,390,073
Stockholders' equity 2,299,751 3,175,559 9,018,870
</TABLE>
(1) Adjusted to reflect the sale of 1,400,000 shares of Class A Common
Stock (assuming an initial public offering price of $5.00 per share of
Class A Common Stock, after deducting the underwriting discounts and
estimated offering expenses). Does not include receipt of net proceeds
from the sale of 1,400,000 Warrants offered hereby, the exercise of the
Warrants, the Representative's Warrants, or the Over-Allotment Option.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates revenues in two ways: sales of products from
restaurant locations (approximately 92% of total revenues) and sales of coupon
books (approximately 8% of total revenues). Typically, entities will receive
coupon books from the Company and give them to employees as incentives. The
coupon holders present the coupons to the individual restaurants which will
subsequently bill the employer for the food purchased by the coupon holders.
The Company incurs costs primarily for raw food and paper supplies,
which represent approximately 40% of revenues, as well as payroll and rent which
represent for 19% and 12% of total revenues, respectively.
RESULTS OF OPERATIONS
Gross revenues for the year ended December 31, 1997 increased
$2,855,759 over the year ended December 31, 1996 from $11,706,398 to
$14,562,157, an increase of approximately 24%. This increase is due to two
primary components. During 1997, the Company opened five new restaurants, which
accounted for approximately $1,440,000 of the increased revenues. In addition,
during 1997, the Company introduced a "combination" program (combination meals
including chicken, cheese turnover, french fries and soda for a fixed price)
which increased revenues by approximately $990,000, primarily during the fourth
quarter of the year.
Cost of operations for the year ended December 31, 1997 increased
$1,375,041 from $4,534,762 to $5,909,803, an increase of approximately 30%. This
increase is a corollary to the additional revenues generated during the year.
Although management continues to emphasize expense control, gross profit margins
decreased from 61% in 1996 to 59% in 1997. This was a result of initial start-up
costs for the new "combination" campaign referred to above.
Selling and administrative expenses for the year ended December 31,
1997 were $7,817,129 compared to $6,698,335 in 1996, an increase of $1,118,794
or 17%. This increase is due to the additional marketing efforts required to
introduce the "combination" program successfully, as well as the additional
costs associated with the opening of the five new restaurants such as rental
costs.
Other income (expenses) increased from $61,141 during 1996 to $478,724
for the year ended December 31, 1997. This increase of $417,583 is due to
several factors. Interest expense decreased approximately $135,000, due to the
reduction of debt during 1997. $148,000 is due to miscellaneous receivables
recorded from related parties and the balance of the increase is due to refunds
from various vendors.
22
<PAGE>
Net income for the year ended December 31, 1997 was $1,313,949 compared
to $534,442 for the year ended December 31, 1996, an increase of $779,501 or
146%. This increase is due to the successful efforts of management to introduce
the "combination" meals, along with management's continued efforts to control
costs.
LIQUIDITY AND CAPITAL RESOURCES
While the Company and its restaurants have a significant presence in
Chile and particularly in Santiago, the Company is seeking to accelerate its
growth and expand its operations not only in the Santiago area, but also in
other cities in Chile with populations of approximately 100,000 or more. The
Company's growth to date has been financed through internally generated revenues
and bank financing. In order to facilitate its proposed growth, the Company has
allocated approximately $2,465,000 from this Offering to open approximately four
new KFC/registered mark/ restaurants during the next twelve months. See "Use of
Proceeds."
At December 31, 1997, accounts receivable decreased by $211,986 to
$373,946 from $585,932 at December 31, 1996. The amount of receivables
outstanding and the number of days outstanding is attributable to the timing of
recognition of revenues as compared to the date of payment. Furthermore, during
1997, in order to provide greater financial strength to the Company, management
emphasized an acceleration of collections in an attempt to reduce short term
liabilities, in particular accounts payable. As a result of these efforts, both
accounts receivable and accounts payable have decreased substantially.
Due from related parties increased from -0- to $148,000 at December 31,
1997 as a result of various related party transactions being recorded on the
books which will be collected during 1998. This represents an increase in
earnings per share of approximately $.11 cents per share.
Due to related parties increased from -0- to $679,095 at December 31,
1997 as a result of a loan from Kyoto, the principal shareholder of the Company,
being recorded on the books of the Company. $400,000 of the loan, plus accrued
interest at an annual rate of 7.8%, shall be repaid from the proceeds of this
Offering and the remaining $279,095, plus accrued interest at an annual rate of
9%, shall be repaid from the Company's operations. See "Use of Proceeds" and
"Certain Relationships and Related Transactions."
Current obligations to banks decreased to $400,366 at December 31, 1997
from $1,160,266 at December 31, 1996, a decrease of $759,900. This decrease is
attributable to management's efforts to reduce debt as well as to decrease
working capital needs.
Other current assets decreased to $114,723 at December 31, 1997 from
$182,310 at December 31, 1996, a decrease of $67,587. This decrease is due to
the fact that although the Company has not had tax liabilities in its recent
history, it is required to make estimated payments during the year. During 1997,
the Company received approximately $60,000 in tax refunds from estimated
payments.
23
<PAGE>
The Company has not incurred Chilean income taxes in 1996 or 1997 as a
result of various Chilean government incentives designed to promote expansion
and continued development of business in the country. Tax credits for building
acquisitions, rapid acceleration of depreciation, and employee education have
resulted in the elimination of any tax liability for the Company. This tax
benefit is not anticipated to continue in the future.
The Company utilizes bank lines of credit for periodic operational
expenses. At December 31, 1997, the Company had $81,117 drawn against a line of
credit of approximately $450,000. This balance is substantially less than the
balance drawn at December 31, 1996 of approximately $783,000. Management
continues to emphasize the elimination of as much debt as possible from its
operations.
Long term obligations with banks consists of various amounts payable to
banks with maturity dates through 2005, all of which are collaterized with
personal guarantees from a stockholder of the Company and certain assets of the
Company. Interest rates on the obligations range from 9.02% to 11% APR, and are
payable in Chilean Pesos and UF. Total long term obligations with banks at
December 31, 1997 and December 31, 1996 was $1,331,733 and $601,048,
respectively. Management anticipates that the proceeds of this Offering will
eliminate all of its existing long term obligations with banks. In the future,
the Company may have to borrow additional fund for continued expansion beyond
the construction of the fours stores referred to above.
The Company's cost of capital, to the extent determinable, is TAB plus
2% (TAB is the average interest rate Chilean banks pay on deposits which varies
between 6%-8%). While each flow from the Company's current business may provide
a cushion with respect to the operating expenses to be incurred in connection
with its asset based expansion, management intends to provide separate sources
of funding for the present and proposed projects.
In August 1994, the Company entered into an agreement with Pepsico
requiring the exclusive use of Pepsi products for each KFC/registered mark/
restaurant then owned for the following five years. Additionally, the agreement
also provided that each new KFC/registered mark/ restaurant owned by the Company
would be subject to a similar agreement for a period of five years from the
opening of such restaurant. In exchange for this exclusivity agreement, the
Company received approximately $780,000, net of taxes, which is being recognized
and amortized over a five year period. For the years ended December 31, 1997 and
1996, the Company recognized $149,912 and $153,122, respectively, of the
deferred revenue. The Company intends to enter into a new agreement with Pepsico
during 1998 which shall supercede the previous agreement.
In November 1997, the Company entered into an agreement with the
Representative to offer 1,400,000 shares of Class A Common Stock and 1,400,000
Warrants to the public in an initial public offering, being made on a firm
commitment basis. Total anticipated funds being raised will be approximately
$7,175,000, of which there is expected to be approximately $5,900,000 in net
proceeds. The net proceeds will be used for the continued development of new
stores (approximately $2,465,000), the repayment of short and long term debt
($1,896,750), the
24
<PAGE>
payment of back royalties and accrued interest at 12.5% per annum due to KFCIH
(approximately $825,000), and working capital of approximately $713,250. The
Company has agreed to repay all outstanding back royalties (plus accrued
interest at 12.5%) pursuant to a reduction of debt note between the Company and
KFCIH, no later than November 20, 1998. In lieu of payment of its royalties due
to KFCIH, the Company used these funds to expand its business and for leasehold
improvements. As a result, the Company is currently in default of the Franchise
Agreement. So long as the Company is in compliance with the other terms and
obligations of the Franchise Agreement and the reduction of debt note, KFCIH has
advised the Company that it does not intend to terminate the Franchise
Agreement.
Between January and March 1998, the Company received a loan in the
amount of $150,000 from an accredited investor to be used for short-term
operations. This loan is evidenced by a promissory note bearing an interest rate
of 8.5% per year. The Company is obligated to repay this note the earlier of (i)
the closing date of this Offering, or (ii) January 1, 2000. As additional
consideration, the investor will receive 30,000 shares of Class A Common Stock.
See "Bridge Financing."
SEASONALITY
The Company generates the highest amount of sales in June, July and
December. The slowest month for sales is February, when many Chileans are on
summer vacation.
INFLATION
Over the past five years, Chile has experienced a decrease in
inflation. The Chilean economic system is based on an indexed inflation system
and therefore, no material inflation is anticipated in the immediate future. See
"Risk Factors - Considerations Relating to Chile - Inflation."
25
<PAGE>
BUSINESS
GENERAL
Uniservice Corporation ("USC") was organized in November 1997 as a
holding company to acquire a 99.97% interest in Kentucky Foods Chile, S.A. ("KyF
Chile"), a Chilean corporation incorporated in November 1986. KyF Chile
currently owns and operates, under license, 29 Kentucky Fried Chicken(R)
("KFC/registered mark/") restaurants in Chile, the majority of which are located
in Santiago, pursuant to its International Franchise Agreement, as amended (the
"Franchise Agreement") with Kentucky Fried Chicken International Holdings, Inc.
("KFCIH"), See "Business - Franchise Agreement with KFCIH." KyF Chile is
currently the sole KFC/registered mark/ franchisee in Chile and is the largest
KFC/registered mark/ franchisee in Central and South America. KFCIH has no
equity interest in the Company and does not warrant the results of the
operations of the Company.
The Company's strategy is to (i) develop new KFC/registered mark/
restaurants to enhance its operating leverage and increase overall margins and
profitability; (ii) achieve operating efficiencies through centralized
management and advanced management information systems; and (iii) capitalize on
KFC(R)'s strong, international brand name. The Company believes that this
strategy will enable the Company to double the number of KFC/registered mark/
restaurants it currently owns and operates by constructing between four and five
new restaurants each year for the next seven years (for a total of 60 Company
owned restaurants by 2005). The Company has allocated approximately $2,465,000
(or $500,000 per restaurant) of the proceeds from this Offering to open four new
KFC/registered mark/ restaurants during the next twelve months, which includes
initial fees due to KFCIH, construction costs, and purchase of equipment and
fixtures. See "Use of Proceeds."
The Company's offices are currently located at 1900 Glades Road, Suite
351, Boca Raton, FL 33431, and its telephone number is (561) 347-6398. Its
fiscal year end is December 31.
BACKGROUND
USC was organized as a Florida corporation on November 21, 1997 under
the name Uniservice Corp. and on January 5, 1998, changed its name to Uniservice
Corporation. KyF Chile was organized under the name Alimentos Merced Limitada on
November 6, 1986, as a Chilean limited partnership and on January 14, 1991, was
reorganized as a Chilean corporation and changed its name to Alimentos Merced
S.A. On October 3, 1995, that corporation changed its name to Kentucky Foods
Chile S.A.
Since its inception, the Company has been involved in fast-food
restaurants specializing in chicken products. Initially, the Company operated
its first four restaurants under the name "Papa Pollo." During the second half
of 1991, the Company changed the name of its restaurants to "Chicken Inn" and by
1993, the Company had nine restaurants. It then purchased an additional five
restaurants, and in January 1994, the Company entered into the Franchise
Agreement and converted all of its restaurants into KFC/registered mark/
restaurants.
26
<PAGE>
On the Effective Date, two stock purchase agreements shall be
simultaneously effectuated whereby (i) Kyoto shall purchase 1,399,900 shares of
Class B Common Stock for $2,200,000, and (ii) the Company shall purchase Kyoto's
99.97% in KyF Chile for $2,200,000 and KyF Chile shall then become a majority
owned (99.97%) subsidiary of the Company. See "Certain Relationships and Related
Transactions." The remaining 15 shares of KyF Chile stock will continue to be
owned by Ricardo Vilensky, individually, who is also the principal shareholder
of Kyoto (Chilean law requires that a Chilean corporation be owned by not less
than two shareholders). See "Principal Shareholders."
THE FAST FOOD RESTAURANT INDUSTRY
OVERVIEW
The fast food service industry consists of quick service restaurants
("QSRs"), full service restaurants, other commercial restaurants (including
cafeterias) and non-commercial restaurants such as those in schools and
hospitals. According to KFCIH's public reports, the QSR segment of the fast food
service industry had total sales of approximately $160 billion in 1996.
KFC/registered mark/ is the leading chain in the chicken segment of the QSR
industry.
THE FAST FOOD RESTAURANT INDUSTRY IN CHILE
With the continued economic stability in Chile and the economic growth
of its middle class, the demand for goods and services, including fast food, has
grown. Listed below is the number of restaurants for each of the major fast food
franchises located in Chile as of November 1997.
NUMBER OF MAJOR TYPES
NAME RESTAURANTS OF PRODUCTS
Lomiton/registered mark/ 46 Pork sandwiches
Doggis/registered mark/ 38 Hot dogs
KFC/registered mark/ 29 CHICKEN
Pizza Hut/registered mark/ 29 Pizza
McDonald's/registered mark/ 27 Hamburgers
Burger King/registered mark/ 21 Hamburgers
Domino's/registered mark/ 16 Pizza
Embers/registered mark/ 12 Roast beef sandwiches
Mr. Chips/registered mark/ 10 Roast beef sandwiches
Taco Bell/registered mark/ 8 Tacos and burritos
Submarine/trademark/ 8 Subs/hoagies
Mei Lin Ta/registered mark/ 8 Chinese food
Burger Inn/trademark/ 8 Hamburgers
Natural Juice/trademark/ 7 Salads and natural juices
27
<PAGE>
THE KFC/REGISTERED MARK/ RESTAURANT CONCEPT
The KFC/registered mark/ Restaurant Concept was founded in Corbin,
Kentucky by Harland D. Sanders, an early developer of the QSR business and a
pioneer of the restaurant franchise concept. He perfected his recipe for
Kentucky Fried Chicken in 1939 and signed up his first franchisee in 1952.
Today, KFC/registered mark/ restaurants have grown to approximately 10,000 units
in over 80 countries and territories.
The KFC/registered mark/ mission is based upon its "CHAMPS" philosophy
which stands for Cleanliness, Hospitality, Accuracy, Maintenance, Product, Speed
("CHAMPS"). In particular, (1) all restaurants and employees are to be clean and
hygienic, (2) all restaurants and employees will be hospitable and welcoming to
all customers, (3) all orders served will be correct and as requested by a
customer, (4) all restaurants will be well maintained, (5) all products offered
and served will be of high quality and consistent, and (6) the restaurants will
offer quality and efficient service.
Part of the KFC/registered mark/ concept is also to offer full meal
options with alternative choices, as opposed to offering only sandwiches or
burgers. These full meal options include chicken, side orders such as salads,
mashed potatoes and gravy, french fries, biscuits, rice, and cole slaw, dessert
and beverages. KFC/registered mark/ restaurants also offer options in the
preparation of chicken, including three types of fried and rotisserie chicken
entrees sold under the brand names of Original Recipe/registered mark/, Extra
Tasty Crispy/registered mark/ and Tender Roast/registered mark/, as well as
other entree items include Chunky Chicken Pot Pies/trademark/, Colonel's Crispy
Strips/registered mark/ and various chicken sandwiches. Restaurant exteriors,
decor and packaging are characterized by KFC/registered mark/'s distinctive
trade dress, including the image of Colonel Sanders and the "Bucket" of chicken.
BUSINESS STRATEGY
The Company's business strategy is as follows:
/bullet/ DEVELOP NEW KFC/REGISTERED MARK/RESTAURANTS TO ENHANCE ITS OPERATING
LEVERAGE AND INCREASE OVERALL MARGINS AND PROFITABILITY. In particular,
management believes that it will be able to continue to spread its
corporate overhead and continue to reduce its cost of operations by
centralization of management and purchasing of food and other products
in greater quantities as the number of restaurants that it owns and
operates steadily increases. Management also believes that its risks of
expansion are substantially reduced due to (i) the proven success of
the KFC/registered mark/ concept in Chile as well as the stable Chilean
economy, which has resulted in an increased middle class with
discretionary income; (ii) the predictability of development costs and
restaurant profitability; and (iii) management's extensive experience
within the KFC/registered mark/ franchise system. The Company currently
intends to open approximately 60% of its new KFC/registered mark/
restaurants in the Santiago area and the remaining 40% in metropolitan
areas in Chile with populations of approximately 100,000 or more. See
"The Company's Restaurants."
28
<PAGE>
/bullet/ ACHIEVE OPERATING EFFICIENCIES THROUGH CONTINUED CENTRALIZED MANAGEMENT
AND ADVANCED MANAGEMENT INFORMATION SYSTEMS. This enables the Company
to (i) control corporate overhead and individual restaurant costs, (ii)
capture economics of scale by utilizing its existing corporate
management structure, and (iii) continuously monitor point-of-sale data
to more efficiently manage its restaurant operations. The Company has
experienced both restaurant level and corporate level savings as a
result of its size and related bargaining power, particularly with
respect to food and paper purchasing and distribution, and restaurant
maintenance services. As the number of its restaurants increases, the
Company believes its bargaining power should continue to increase.
/bullet/ CAPITALIZE ON KFC/REGISTERED MARK/'S STRONG INTERNATIONAL BRAND NAME.
The Company believes that it realizes significant benefits from its
affiliation with KFCIH as a result of: (i) the widespread recognition
of the KFC/registered mark/ brand name and products; and (ii) the
historical availability of international marketing and promotion of
KFC/registered mark/ products.
By undertaking this Offering, management believes that it will have the
requisite capital to expand much more rapidly than if it had to rely solely on
internal cash flow or debt financing.
THE COMPANY OPERATIONS
OVERVIEW
All executive management, financing, marketing and operations support
functions are conducted centrally at the Company's Santiago Chile headquarters.
At its headquarters, the Company maintains a state-of-the-art centralized
computer system that is linked with the cash register at each KFC/registered
mark/ restaurant. Through this computer system, the Company has access to
up-to-the-minute information including, among other things, revenues, inventory
control, and the ability to monitor the progress of various promotions. The
Company intends to restrict its business to the KFC/registered mark/ brand in
Chile. Subject to compliance with the Franchise Agreement and the Development
Agreement (following execution), the Company may, however, engage in other
businesses which do not conflict with the KFC/registered mark/ brand, subject to
prior approval by KFCIH.
TRAINING
KFCIH issues detailed training manuals which cover all aspects of the
operations of KFC/registered mark/ restaurants, including food handling and
product preparation procedures, safety and quality issues, equipment
maintenance, facility standards, marketing, and accounting procedures. The
restaurant management teams are responsible for the day-to-day operation of each
unit and for ensuring compliance with operating standards.
In addition to the training manuals, the Company maintains a
comprehensive training and development program based upon the CHAMPS concept for
all of its personnel. This program emphasizes the KFC/registered mark/
system-wide operating procedures, food preparation methods and customer service
standards.
29
<PAGE>
THE COMPANY'S RESTAURANTS
KFC/registered mark/ restaurants are of distinctive design and are
generally located in high-traffic areas including shopping malls, food courts,
shopping centers, and downtown areas. The Company's KFC/registered mark/
restaurants generally consist of one of several building types with various
layouts and seating capacities. The Company believes that convenience of
location, speed of service, quality of food and price/value of food served are
the primary competitive advantages of KFC/registered mark/ restaurants.
The Company opened its first five KFC/registered mark/ restaurants in
1994, and an additional eight, seven and five restaurants during 1995, 1996 and
1997, respectively. The Company currently has 29 restaurants, of which 15 are in
malls and shopping centers, 11 are in store fronts (in line), and three are free
standing. Twenty-six of its 29 restaurants are open seven days a week, typically
from 10:00 a.m. to midnight. Currently, the Company does not accept credit
cards, although it may elect to do so in the future. All free standing
restaurants also offer drive-through windows. Home delivery is available at
no-charge from eight of its restaurants.
During the next 12 months, the Company expects to open four new
KFC/registered mark/ restaurants, one of which will be free standing, two of
which will be located in a shopping center, and one of which will be in-line.
The Company anticipates that two of the restaurants will be located in Santiago,
one will be located in the northern region of Chile and one in the coastal
region of Chile. The Company anticipates that of the remaining 27 planned new
restaurants, 18 will be in-line and 9 will be free standing. The Company intends
to open 14 new restaurants in the Santiago metropolitan area, five in the
Southern region of Chile, five in the coastal region of Chile, and three in the
northern region of Chile. In the future, the Company may also seek to enter into
franchise agreements with other KFCIH affiliated restaurants (including Pizza
Hut/registered mark/ and Taco Bell/registered mark/ restaurants).
All of the Company's KFC/registered mark/ restaurants offer a full line
of KFC/registered mark/ products, including chicken pieces, chicken sandwiches,
a variety of side items including cole slaw, mashed potatoes, salads and corn,
and dessert. In addition to a full-line of soft drinks, 17 of the Company's
current restaurants are licensed to sell beer (the drinking age in Chile is 18).
QUALITY ASSURANCE
The Company's operations are focused on achieving a high level of
customer satisfaction, with speed, accuracy and quality of service closely
monitored. The Company's senior management and restaurant management staff are
principally responsible for ensuring compliance with the Company's and KFCIH's
operating procedures. The Company and KFCIH have uniform operating standards and
specifications relating to the quality, preparation and selection of menu items,
maintenance and cleanliness of the premises and employee conduct. Detailed
reports from the Company's own management information system and surveys
conducted by the Company or KFCIH are tabulated and distributed to management on
a regular basis to help maintain
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<PAGE>
compliance. In addition to customer satisfaction, these reports track comparable
sales and customer counts, labor and food costs, inventory levels, waste losses
and cash balances.
The Company and its management closely supervise the operation of all
of its restaurants to help ensure that standards and policies are followed and
that product quality, customer service and cleanliness of the restaurants are
maintained. Management also conducts unscheduled inspections of its restaurants
to ensure quality.
The KFC/registered mark/ restaurants are also subject to standards set
by Chilean, provincial and local governmental laws and regulations. These
standards include food preparation rules regarding, among other things, minimum
cooking times and temperatures, sanitation and cleanliness. In addition,
KFC/registered mark/ has set maximum time standards for holding unsold prepared
food in order to maintain freshness of its products.
SUPPLIES AND DISTRIBUTION
Pursuant to the Franchise Agreement, the Company is required to buy
food supplies, ingredients, seasonings, and equipment only from approved
suppliers who are required to meet or exceed system standards designed to ensure
product quality, safety and consistency. The Company purchases KFC/registered
mark/'s pre-packaged seasoning which contain KFC/registered mark/'s proprietary
recipes directly from KFCIH's principal U.S. supplier.
From time to time, the Company may inspect the facilities of its
suppliers and request samples for testing and other quality control monitoring.
Many of these suppliers, such as poultry producers, are also subject to Chilean
government inspection. In addition, representatives of the Company's quality
assurance department visit restaurants from time to time to ensure that food is
properly stored, handled and prepared in accordance with prescribed standards
and specifications, as well as to provide training in food safety and sanitation
measures to the restaurant operators. The quality assurance department is also
responsible for remaining current on issues related to food safety, and
interacting with regulatory agencies as may be required or desirable on these
matters.
The Company purchases much of its products by means of centralized
buying in order to obtain the best prices. As the number of the Company's
restaurants increase, the Company believes that its bargaining power to purchase
goods at the best prices and on favorable terms should also increase. The
Company purchases its supplies and foodstuffs from vendors on favorable terms
and conditions (including quantity discounts) and all suppliers used by the
Company have been approved by KFCIH, as a condition of the Franchise Agreement.
The Company believes there are a number of vendors who can supply the Company
with adequate quantities of products and that the loss of any one supplier would
not have a material impact on the Company's operations.
Additionally, to ensure the wholesomeness of all food products,
suppliers are required to meet or exceed strict quality control standards.
Competitive bids, long-term contracts and
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<PAGE>
long-term vendor relationships have been used to ensure availability of
products. The Company has not experienced any significant continuous shortages
of supplies. Prices paid for these supplies may be subject to fluctuation. When
prices increase, the Company may be able to pass on such increases to its
customers, although there is no assurance this can be done in the future. In
particular, the quality assurance departments of KFCIH help ensure that the
systems' restaurants provide high quality, wholesome food products in clean and
safe environments.
PERSONNEL
The Company and KFCIH believe that high quality, customer-focused
restaurant management is critical to long-term success. Generally, each of the
Company's restaurants has one restaurant general manager, two supervisors and
teams of workers. KFC/registered mark/'s restaurant management structure varies
by unit size. Each restaurant usually has between 10 and 35 hourly employees,
most of whom work part-time. The Company pays an hourly wage of $1.60 per hour,
the average hourly wage in Chile. Overtime is paid (one and one half time
minimum wage, or $2.40 per hour) to any employee that works more than 48 hours
weekly. However, Chilean law only permits employees to work a maximum of two
extra hours daily. Overtime (of two times minimum wage, or $3.20 per hour) is
paid on Sundays and holidays. Restaurant general managers receive base salaries,
as well as incentive bonuses, based upon that KFC/registered mark/ restaurant's
productivity and profitability.
The Company believes that it will not be necessary to increase the
number of management or support staff at its centralized offices in Santiago as
a result of the opening of additional restaurants.
MARKETING, ADVERTISING AND PROMOTION
The Company believes that one of the major advantages of being a
KFC/registered mark/ franchisee is the marketing support and international brand
name promotion by KFCIH and its franchisees. Each year, the Company typically
introduces different types of promotions, either in conjunction with KFCIH or
independently, including, among others, (1) value-type combination meals, (2)
new products, (3) kids meals, (4) coupons, and (5) promotion of new
KFC/registered mark/ restaurants.
A portion of its marketing and advertising plan includes participating
in certain of KFCIH's internationally licensed promotions, for which it pays a
fee to KFCIH pursuant to the Franchise Agreement, which may include giveaways
for children. During 1998, the Company anticipates taking part in promotions for
"Godzilla" (a film to open during 1998), "The Simpsons" television characters
and "Chicky/Camelot Quest," (a new logo/character to be identified with
KFC/registered mark/ restaurants). The Company also advertises on cable
television and radio.
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FRANCHISE AGREEMENT WITH KFCIH
The Franchise Agreement permits the Company to use, among other things,
KFCIH's proprietary trade names, trademarks, service marks, recipes, and trade
dress. The Company is also required to sell and promote only KFC/registered
mark/ approved products.
Under the Franchise Agreement, at all times, Mr. Vilensky must retain
voting control of KyF Chile and USC. As result, the Company has created two
classes of common stock--Class A Common Stock and Class B Common Stock--which
are identical except that holders of Class B Common Stock are entitled to ten
votes for each one share held (all of which shares of Class B Common Stock are
owned or controlled by Mr. Vilensky). See "Description of Securities."
Additionally, Mr. Vilensky must retain at all times a minimum of 30% ownership
of the Company, provided that so long as any proceeds received are not used to
start a new company, he may sell up to the lesser of (a) 10% of the outstanding
amount of capital stock of the Company or (b) such amount so that Mr. Vilensky's
ownership interest will not be below 30%. As a condition of the Franchise
Agreement, KFCIH must also approve any transaction where Mr. Vilensky intends to
retain less than a 30% interest in the Company.
As a condition of the Franchise Agreement, the Company is also required
to have a "designated operator", which is the person that oversees the
management of the day-to-day operations of the Company's restaurants. Currently,
the designated operator is Mr. Vilensky. In the event Mr. Vilensky is unwilling
to serve as the designated operator or becomes disabled or deceased, management
or Mr. Vilensky's heirs will propose a new designated operator, who will be
subject to approval by KFCIH. KFCIH has indicated that it prefers if the
designated operator also controls the ownership of the Company. In the event
that KFCIH determines that the proposed designated operator is not capable of
performing the necessary duties and obligations, Mr. Vilensky or his heirs are
required to use their best efforts to sell their interest in the Company within
six months thereafter. In the event that no sale is completed within the six
month period, KFCIH thereafter has the option to purchase Mr. Vilensky's
interest, or the interest of Mr. Vilensky's heirs, in the Company for a market
value determined by three appraisers. There can be no assurance that the Company
will be in a position to meet the criteria required by KFCIH in the event Mr.
Vilensky is unable or unwilling to continue as the designated operator and/or
controls less than a 30% ownership interest in the Company.
The initial franchise term for each restaurant is ten years, which
expires between December 31, 2003 and December 31, 2007, depending on when the
particular restaurant was opened. The initial franchise term is renewable for
additional ten year periods, provided that, among other things, (i) the renewal
is permitted by local law, (ii) the Company has corrected any default under the
Franchise Agreement and has not been in material default within the 24 months
preceding the renewal request; (iii) the Company complies with annual
performance criteria; (iv) the Company requests renewal within 12 to 18 months
prior to the expiration of the initial term; (v) the Company agrees to make
capital improvements to conform with KFCIH's then current
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<PAGE>
standards and completes the improvements, as agreed; (vi) the Company agrees to
relocate any restaurants KFCIH determines cannot be renovated to meet the then
current standards; (vii) the Company executes a new franchise agreement if the
current form has been modified; (viii) the Company is current in all
obligations, monetary or otherwise, to KFCIH; and (ix) the Company pay a renewal
fee as agreed upon with KFCIH.
The monthly royalty fees for each KFC/registered mark/ restaurant owned
by the Company is 5% of net revenues. Pursuant to Franchise Agreement, KFCIH's
approval is required for the development of any new KFC/registered mark/
restaurants by the Company and KFCIH's consent to such renewals, acquisitions or
development may be withheld in KFCIH's sole discretion.
The Company has agreed, with KFCIH's consent, to construct, develop,
open and operate 34 additional new KFC/registered mark/ restaurants during the
next seven years, for a total of 60 restaurants to be owned and operated by the
Company by the end of 2005. Three of the new KFC restaurants have been developed
as of the Effective Date with KFCIH's approval. Royalty rates for first new
KFC/registered mark/ restaurant will be 5% and for the additional 30 new
KFC/registered mark/ restaurants will be 6%. Initial fees will be $35,000 per
restaurant, except for (i) the first four new KFC/registered mark/ restaurants,
which require no initial fees, and (ii) non-traditional stores (relocateable
structures such as kiosks, carts, and mobile units and are typically located in
airports, schools, universities, offices, hospitals and retail outlets), which
will have initial fees of $17,500. Additionally, development right fees of
$10,000 per unit to develop the 34 new restaurants will be paid in equal
installments over six years beginning on the first anniversary of the effective
date of the Development Agreement (which terms have been agreed upon in
principle and which will be executed as soon as practicable following payment to
KFCIH of back royalties, which shall be paid from the proceeds of this
Offering), and then continuing on the following five anniversaries thereafter.
See "Use of Proceeds." Non-traditional stores will not count toward the
development schedule obligations.
The royalty rate for all restaurants will decrease to, and be
maintained for 10 years, at 5% following the opening of the 60th restaurant if
(i) the 31 remaining new KFC/registered mark/ restaurants are opened in
accordance with the development schedule and (ii) there are no defaults under
the Development Agreement, the Franchise Agreement, or any related agreements.
Following such ten year period, royalties for all KFC/registered mark/
restaurants owned by the Company will convert to the then current KFC/registered
mark/ royalty rate for international franchises, which is currently 6%. The then
current standard form of KFC/registered mark/ international franchise agreement
will be executed for all KFC/registered mark/ restaurants subject to the
Development Agreement.
COMPETITION
The overall food service industry and the QSR segment are intensely
competitive with respect to food quality, price, service, convenience,
restaurant location and concept. The restaurant business is often affected by
changes in consumer tastes; national, regional or local
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<PAGE>
economic conditions; demographic trends; traffic patterns; the type,
number and location of competing restaurants; and disposable purchasing power.
The Company competes within each market with international and regional chains
as well as locally-owned restaurants, not only for customers, but also for
management and hourly personnel and suitable real estate sites. Typically,
international chains such as McDonalds/registered mark/ and Burger
King/registered mark/ compete with one another and do not serve a variety of
chicken products, while the Company's actual competitors are fast food
restaurants that offer similar menus which include chicken. Certain of these
companies may have greater financing, personnel, technical and other resources
than the Company. There can be no assurance that the Company will be able to
compete successfully with these companies. See "Risk Factors - Competition."
GOVERNMENT REGULATION
The Company is subject to various Chilean national, provincial, and
municipal laws affecting its business. Each of the Company's restaurants must
comply with various licensing requirements and regulations of governmental
authorities, including health, sanitation, safety and fire agencies in the
region and municipality in which the restaurant is located. To date, the Company
has obtained all necessary licenses and approvals.
A small portion of the Company's sales are attributable to the sale of
beer. A license is required from the provincial governing authority for each
restaurant that sells beer and regulations governing the sale of beer relate to
many aspects of restaurant operations, including the minimum age (18) of patrons
to purchase beer.
The Company is also subject to Chilean national minimum wage laws
governing such matters as overtime and working conditions. Since the bulk of the
Company's employees are paid on an hourly basis at rates related to the minimum
wage, increases in the minimum wage could significantly increase the Company's
labor costs. The Company has not to date been materially adversely affected by
such laws. Furthermore, the Company's business is subject to the full range of
governmental regulation and supervision generally applicable to companies
engaged in business in Chile, including labor laws, social security laws, public
health, environmental laws, securities laws and anti-trust laws.
FOREIGN CORRUPT PRACTICES ACT.
Substantially all of the Company's operations are transacted in South
America. To the extent that the Company conducts operations and sells its
products outside the U.S., the Company is subject to the Foreign Corrupt
Practices Act which makes it unlawful for any issuer to pay or offer to pay, any
money or anything of value to any foreign official, foreign political party or
official thereof or any candidate for foreign political office ("Foreign
Officials") or any person with knowledge that all or a portion of such money or
thing of value will be offered, given, or promised, directly or indirectly, to
any Foreign Official.
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<PAGE>
The Company has not made any offers, payments, promises to pay, or
authorization of any money or anything of value to any Foreign Official and has
implemented a policy to be followed by its officers, directors, employees and
anyone acting on its behalf, that no such payments can and will be made. The
Company has made all employees cognizant of the need for compliance with the
Foreign Corrupt Practices Act and any violation of the Company policy will
result in dismissal. Further, the Company conducts periodic reviews of this
policy with all employees to ensure full compliance.
FOREIGN INVESTMENT LAWS AND REGULATIONS
The Chilean Constitution establishes that any Chilean or foreigner may
freely develop any activity in Chile so long as the activity in Chile so long as
the activity does not contravene existing laws dealing with public morals,
public safety or national security and follows the laws that regulate such
activity. It also establishes the principle of non-discrimination, thus
guaranteeing foreign investors equal protection under Chilean law. Additionally,
Chilean law prohibits any discretionary acts by the Chilean government or other
entities against the rights of persons or property in derogation of this
principle. Foreign investors may transfer capital and net profits abroad. There
are no exchange control regulations which restrict the repatriation of the
investment or earnings except that the remittance of capital may take place
starting a year after the date the funds were brought into the country, but net
profits can be remitted at any time, after deduction of applicable withholding
income taxes. Therefore, equity investments in Chile by persons who are not
Chilean residents follow the same rules as investments made by Chilean citizens.
These principles are the basis for the DL 600. See "Dividend Policy."
Based on DL 600, the foreign investor and the government sign a legally-binding
investment contract which may only be modified by mutual consent. The contract
sets forth the current tax and foreign exchange laws as each relates to the
specific investments by that investor in Chile. Thus, the investor is protected
against any subsequent changes in the law which could adversely affect the
investor or his investments in Chile. Although the Chilean Government has been
successful in keeping this principle in place for the last 23 years, there can
be no assurances that a breach by the Government will not occur in the future or
that it would not adversely affect the rights of the Company to do business in
Chile. Moreover, while there has been no precedent that political changes had
determined changes in these rules, no assurances can be made that such changes
will not occur in the future. The Company intends to enter into an investment
contract with the Government of Chile on or around the closing of this Offering.
EMPLOYEES
As of January 31, 1998, the Company employed 856 employees, of which 45
were full-time salaried employees in administration, 88 were full-time salaried
employees in supervisory and management positions and 723 were full-time and
part-time hourly employees who were employed in food preparation and serving.
Substantially all of the Company's management and employees who reside in Chile
speak Spanish and its senior management team in Chile also
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<PAGE>
communicates in English. None of the Company's employees are covered by a
collective bargaining agreement. The Company believes that the dedication of its
employees is critical to its success, and that its relations with its employees
are good.
PROPERTIES
All of the Company's restaurants are presently located in leased space.
The leases for the Company's KFC/registered mark/ restaurants are for a period
ranging from six years to 15 years and provide for one or more options to renew
for at least one additional term. The leases generally specify a fixed annual
rent with fixed increases. Generally, the leases are net leases which require
the Company to pay all or a portion of the cost of taxes, maintenance and
utilities. Certain of the leases provide that in the event of non-payment of
rent, the lessor may terminate the lease without notice. Chilean law, however,
provides that a landlord may not evict a tenant without a court hearing,
however, the tenant is responsible for all costs related to such court hearing.
See "Risk Factors" - Termination of Leases upon Default."
The Company leases approximately 380 square meters of executive offices
in Santiago, Chile from Imobiliaria KilKil S.A., an affiliate of the Company, at
a rate of $9,050 per month, plus common area maintenance and general expenses of
$1,100 per month. The lease is for ten years, commencing May 1, 1997. See
"Certain Relationships and Related Transactions."
Upon the Effective Date, the Company will enter into a two year lease
with Andean Engineering & Finance Corp. for its corporate U.S. offices in Boca
Raton, Florida, which lease may be renewed for an additional two year term.
David Mayer, a Director of USC, is the sole shareholder, officer and director of
AEFC. The annual lease amount will be $10,000 annually, payable quarterly, which
includes all telephone and facsimile, secretarial and other expenses. These
terms were negotiated on an arm's length basis and such terms are competitive
with current lease terms for similar arrangements in the South Florida area. See
"Certain Relationships and Related Transactions."
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding the
resolution of which, the management of the Company believes, would have a
material adverse effect on the Company's results of operations or financial
condition, nor to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF UNISERVICE CORPORATION
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Ricardo Vilensky(1) 42 Chief Executive Officer, President, Chairman
of the Board of Directors
Mauricio Aguirre(2) 34 Chief Financial Officer, Vice President of
Finance and Administration, Director
Juan Carlos Cerda(2) 42 Director
Avram Fritch(2) 40 Director
David Mayer(1) 56 Director, Assistant Secretary
Sergio Vivanco(2) 45 Director
</TABLE>
- -------------
(1) Has served in his position since the Company's inception in November
1997.
(2) Will commence serving in his position upon the Effective Date.
RICARDO VILENSKY has served as the Chief Executive Officer, President and
Chairman of USC since its inception in November 1997 and as the CEO, President
and Chairman of Kentucky Foods Chile, S.A. since its inception in 1986. From
July 1991 to the present, Mr. Vilensky has served as the Chairman and owns a 50%
interest in Ann Arbor Foods, S.A., which owns 15 Domino's pizza franchises in
Chile. See "Certain Relationships and Related Transactions." From June 1991 to
September 1996, Mr. Vilensky was the general manager of Comercial Submarine
Chile Limitada, which owns 10 submarine and hoagie restaurants in Chile. See
"Certain Relationships and Related Transactions." From August 1988 to September
1995, he was a Director of Cafe Santos, S.A., which owned and operated six full
service restaurants in Chile. From 1982 to 1994, Mr. Vilensky was the general
manager and legal representative for "El Vegetariano," a vegetarian restaurant
in Santiago, Chile. Mr. Vilensky is also the principal shareholder and general
manager of Kyoto, the principal shareholder of the Company. See "Certain
Relationships and Related Transactions."
MAURICIO AGUIRRE will commence serving as USC's Chief Financial Officer, Vice
President of Finance and Administration and a Director of USC on the Effective
Date. He has served as Vice President of Administration and Finance of KyF Chile
S.A. since September 1994 and as a Director of KyF Chile since October 1995.
From 1989 to September 1994, Mr. Aguirre was the Controller and a Vice-President
of Lan Chile, the national airline of Chile. Mr. Aguirre is a commercial
engineer, a public accountant and auditor.
JUAN CARLOS CERDA will commence serving as a Director of USC as of the Effective
Date. He has served as a member of the Board of Directors of KyF Chile since May
1996. Since June 1994, Mr. Cerda has been a partner with the law firm of Estudio
Juridico Figueroa and Valenzuela Abogados in Chile as a tax consultant. Since
March 1994, Mr. Cerda has been a
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<PAGE>
professor of Planification and Tributary Management at the University of
Santiago. From 1991 through May 1994, he was a tax advisor to the Arauco
Enterprise Group in Chile.
AVRAM FRITCH will commence serving as a Director of USC as of the Effective
Date. Mr. Fritch is the founder of and has served as General Director of General
Security Chile, S.A., a residential and commercial security and alarm company
located in Santiago, Chile, since 1991. Mr. Fritch is a mechanical engineer and
was a captain in the Defense Force of Israel.
DAVID MAYER has served as a Director and Assistant Secretary of USC since its
inception in November 1997 and has entered into a ten (10) year consulting
agreement with the Company. Since July 1997, Mr. Mayer has served as the
President of Andean Engineering and Finance Corp. See "Certain Relationships and
Related Transactions." Since May 1997, Mr. Mayer has also served as a member of
the Board of Directors of Gay Entertainment Television (Nasdaq SmallCap: "GETU",
"GETC", "GETW"). From January 1992 to March 1996, Mr. Mayer was a consultant to
Premier Artists Services, Inc., Corporate Entertainment Productions, Inc. and
Alliance Entertainment, Inc., companies where he assisted in the implementation
of their respective business plans, as well as in connection with mergers and
acquisitions.
SERGIO VIVANCO shall commence serving as a member of USC's Board of Directors on
the Effective Date. Mr. Vivanco has been a member of the Board of Directors of
KyF Chile since 1991 and is a member of the Board of Directors of Inversiones
Huillimapu S.A., an affiliate of Kyoto. See "Principal Shareholders." Mr.
Vivanco has been an attorney since 1979 and has served as general counsel since
1986 to Kyoto and to KyF Chile. Mr. Vivanco is a partner in the law firm of
Abud, Vivanco and Vergara in Santiago, Chile, which serves as the Company's
legal counsel in Chile.
DIRECTORS AND EXECUTIVE OFFICERS OF KYF CHILE
The directors and executive officers of KyF Chile are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Ricardo Vilensky(1) 42 Chief Executive Officer, President, Chairman
of the Board, Director
Mauricio Aguirre(1) 34 Chief Financial Officer, Vice President of
Finance and Administration, Director
Juan Carlos Cerda(1) 42 Director
Fernando Abud 47 Director
Sergio Vivanco(1) 45 Director
</TABLE>
- ------------
(1) See "Directors and Executive Officers of USC."
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<PAGE>
FERNANDO ABUD has been a partner with the law firm of Abud, Vivanco y
Vergara Abogados since March 1995, which firm also include Sergio Vivanco, a
Director of KyF Chile and of USC. Between 1977 and 1993, Mr. Abud was a partner
with the law firm of Abud y Cia, Abogados. Between 1977 and 1993, he was an
attorney for the Copper Chilean Commission, where he served as the legal
subdirector from 1978 to 1986 and from 1986 to 1993, as Secretary General. Mr.
Abud's law firm is the Company's legal counsel in Chile.
ELECTION OF DIRECTORS
Each Director of USC is elected at the annual meeting of shareholders
and holds office until the next annual meeting of shareholders, or until his or
her successor is elected and qualified. The Bylaws permit the Board of Directors
to fill any vacancy and such director may serve until the next annual meeting of
shareholders or until his successor is elected and qualified.
USC has agreed that for a period of five years after the Effective
Date, if requested by the Representative, it will use its best efforts to cause
one individual designated by the Representative to be elected to USC's Board of
Directors, which individual may be a director, officer, employee or affiliate of
the Representative. Alternatively, the Representative may designate a person to
attend meetings of USC's Board of Directors as an observer for five years
following the Effective Date.
DIRECTORS' COMPENSATION
Upon the Effective Date, USC's non-employee Directors, David Mayer,
Avram Fritch, and Carlos Cerda, will receive $200 plus expenses, for attendance
at each meeting of the Board of Directors, as well as reimbursement of
reasonable out-of-pocket expenses incurred in connection with their attendance
at the meetings. The Company intends to purchase directors and officers
insurance as soon as practicable to the extent that it is available and cost
effective to do so.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee will be established upon the Effective Date and
will consist of Juan Carlos Cerda, Sergio Vivanco, and Avram Fritch. The Audit
Committee will review the work of the audit staff and direct reports covering
such work to be prepared. The Audit Committee will oversee the Company's
continuous audit program to protect against improper and unsound practices and
to furnish adequate protection for all of its assets and records. The Audit
Committee also will act as liaison to the Company's independent certified public
accountants, and will conduct such audit work as is necessary and will receive
written reports, supplemented by such oral reports as it deems necessary, from
the Company's independent certified public accountants.
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The Compensation and Stock Option Committee will be established upon
the Effective Date and will consist of Messrs. Vivanco, Fritch, Cerda, and
Mayer. The Compensation and Stock Option Committee will make recommendations
with respect to compensation of senior officers and granting of stock options
and stock awards.
The Nominating Committee will be established upon the Effective Date
and will consist of Messrs. Vilensky, Fritch, Cerda, and Mayer. The Nominating
Committee will make recommendations with respect to qualified individuals to
become members of the Company's Board of Directors.
Of the six members of the Board of Directors, Messrs. Cerda, Fritch,
and Mayer are non- employee directors. However, Mr. Mayer has entered into a
consulting agreement with the Company. See "Certain Relationships and Related
Transactions."
APPOINTMENT OF OFFICERS
Officers are elected annually by the Board of Directors and their terms
of office are, except to the extent governed by employment contracts, at the
discretion of the Board. The officers of the Company devote full time to the
business of the Company.
EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS
The following table sets forth compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and each executive officer whose
compensation exceeded $100,000 for the year ended December 31, 1997. The Company
did not grant any stock options, restricted stock awards or stock appreciation
rights or make any long-term incentive plan payments during 1997.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) COMPENSATION($)
- --------------------------- ---- --------- --------- ---------------
<S> <C> <C> <C> <C>
Ricardo Vilensky, CEO, 1997 $85,868 -0- 19,305(2)
President and Chairman 1996 -0- -0- $109,629(2)
1995 -0- -0- -0-
Mauricio Aguirre, CFO 1997 $62,850(3) -0- 27,150(4)
1996 $60,000(3) -0- $28,500(5)
1995 $55,000(3) $3,000 $24,500(6)
</TABLE>
- ---------
(1) This table is based solely upon compensation received from KyF Chile.
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<PAGE>
(2) Represents dividends paid to Kyoto. Mr. Vilensky is the principal
shareholder of Kyoto. See "Certain Relationships and Related
Transactions."
(3) Includes "ISAPRE" payments described under "Employment
Agreements-ISAPRE."
(4) Includes $10,000 for automobile expenses including maintenance and
insurance, $8,500 for school expenses for Mr. Aguirre's children,
$3,000 entertainment allowance, and $5,650 for travel expenses.
(5) Includes $10,000 vacation allowance, $13,350 for non-reimbursable
expenses, and $5,000 for medical reimbursements.
(6) Includes $9,500 for non-reimbursable expenses, $10,000 vacation
allowance and $5,000 for medical reimbursements.
EMPLOYMENT AGREEMENTS
RICARDO VILENSKY, CHIEF EXECUTIVE OFFICER, PRESIDENT AND CHAIRMAN. The
Company will enter into a written three-year employment agreement with Mr.
Vilensky, which shall commence upon the Effective Date. Pursuant to the terms
and conditions of his employment agreement, Mr. Vilensky shall receive an
initial annual base salary of $80,000, annual bonuses of up to $100,000, as
determined by the Company's Board of Directors, including a vacation bonus of
$20,000, and other annual compensation of $90,000, which includes (i) $15,000
for school expenses for Mr. Vilensky's children, (ii) $10,000 for entertainment,
(iii) $20,000 for travel, (iv) $20,000 for medical reimbursement, and (v)
$28,000 for automobile expenses including cost of vehicle, maintenance and
insurance. Mr. Vilensky shall be reimbursed for his ordinary and necessary
business expenses including fees for membership in one business or social club,
up to a maximum of $5,000 per year, and in other clubs and organizations as the
Company and Mr. Vilensky shall mutually agree are necessary and appropriate.
MAURICIO AGUIRRE, CHIEF FINANCIAL OFFICER. The Company will enter into
a written one year employment agreement with Mauricio Aguirre, which shall
commence upon the Effective Date. Pursuant to the terms and conditions of his
employment agreement, Mr. Aguirre shall receive an initial annual base salary of
$60,000, bonuses of up to $30,000 per year, as determined by the Company's Board
of Directors, and other annual compensation of $20,000, which includes (i)
$10,000 for medical reimbursement and (ii) $10,000 for automobile expenses.
Prior to the Effective Date, Mr. Aguirre entered into a written employment
agreement with KyF Chile, which employment agreement will terminate upon the
effective date of the written employment agreement with the Company described
herein.
ISAPRE. Messrs. Vilensky and Aguirre are also entitled to receive
certain social security benefits pursuant to Chilean law. The Social Security
laws in Chile were established as a private system that requires all companies
to retain approximately 20% of the gross salaries of its employees, up to a
maximum of $1,892.80 per year, which is used to pay both Administrators of
Pension Funds Companies ("AFP") and Institutions of Previsional Health
("ISAPRE").
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The allocation of this 20% to each service is approximately as follows:
(a) 10% to the AFP: This amount is deposited in an individual
interest-bearing account of each employee to cover their retirement. In
Chile, the age of retirement is 60 for women and 65 for men.
(b) 3% to the AFP: This amount covers any partial or permanent
disability and, in the case of death, will provide a monthly amount to
the deceased's spouse. The amount paid corresponds to 70% of an
employee's average salary, based upon the last 10 years of the
employee's life.
(c) 7% to the ISAPRE: This amount covers medical fees, hospitalization
and clinical examinations. This percentage may be voluntarily increased
by the employee according to the employee's contractual agreement with
the employee's ISAPRE. In many instances it may be necessary to pay
additional costs for health care.
Additionally, Chilean law requires the payment of one month salary (up
to a maximum of approximately $2,839.20) for each year (or portion thereof in
excess of six months worked in the last year), worked by the employee when he is
dismissed without cause, subject to a maximum of eleven months (up to a maximum
of $1,892.80 per month, or an aggregate of $20,820.80). When the employee
terminates his or her employment, no compensation is legally required.
STOCK OPTIONS
During fiscal year 1997, there were no option or SAR grants to any
persons, including any of the Company's executive officers or directors.
INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
On January 5, 1998, the Board of Directors and a majority of USC's
shareholders adopted the Company's Stock Option Plan (the "Plan"). The purpose
of the Plan is to increase the employees', advisors', consultants', and
directors' proprietary interest in USC and KyF Chile, to align more closely
their interests with the interests of USC's shareholders, and to enable the
Company to attract and retain the services of experienced and highly qualified
employees and directors. USC has reserved an aggregate of 200,000 shares of
Class A Common Stock under the Plan.
The Company's Board of Directors, or a committee thereof, administers
and interprets the Plan and is authorized to grant options thereunder to all
eligible employees of the Company, including officers and directors (whether or
not employees) of the Company. The Plan provides for the granting of "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code),
non-statutory stock options and "reload options." Options may be granted under
the Plan on such terms and at such prices as determined by the Board, or a
committee thereof, except that
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in the case of an incentive stock option granted to a 10% shareholder, the per
share exercise price will not be less than 110% of such fair market value. The
aggregate fair market value of the shares covered by incentive stock options
granted under the Plan that become exercisable by a grantee for the first time
in any calendar year is subject to a $100,000 limit.
The exercise price for any option under the Plan may be paid in cash,
in shares of Class A Common Stock or such other consideration that is acceptable
to the Board of Directors or the committee thereof. If the exercise price is
paid in whole or in part in Class A Common Stock, such exercise may result in
the issuance of additional options, known as "reload options," for the same
number of shares of Class A Common Stock surrendered upon the exercise of the
underlying option. The reload option would be generally subject to the same
provisions and restrictions set forth in the Plan with respect to the underlying
option except as varied by the Board of Directors or the committee thereof. A
reload option enables the optionee to ultimately own the same number of shares
as the optionee would have owned if the optionee had exercised all options for
cash.
Options granted under the Plan will be exercisable after the period or
periods specified in the option agreement. Options granted under the Plan are
not exercisable after the expiration of five years from the date of grant and
are not transferable other than by will or by the laws of descent and
distribution. The Plan also authorizes the Company to make loans to optionees to
enable them to exercise their options.
As of the Effective Date, no options have been granted pursuant to the
Plan and no options may be granted without the express written consent of the
Representative for a period of one year following the Effective Date.
Furthermore, to the extent that any options granted within the first year are
exercised, the underlying shares of Class A Common Stock will be subject to a 24
month lock-up period commencing on the Effective Date.
OPTION EXERCISES AND HOLDINGS
To date, the Company has not issued any options or SARs to any persons
and thus, during fiscal year 1997, no options or SARs were exercised or
unexercised during fiscal year 1997.
DIRECTED SHARES FOR COMPANY EMPLOYEES
The Company and the Representative have agreed that a small amount of
shares (which number has not yet been determined) of Class A Common Stock
offered hereby (the "Directed Shares") will be reserved for the Company at the
initial public offering price, solely for the purpose of being purchased by
employees of the Company. In connection with the purchase of Directed Shares by
Company employees, the Company has agreed to make non-recourse, interest free
loans to its employees. To the extent that any employee defaults on the payment
of a loan obtained in connection with the purchase of Directed Shares, there can
be no assurances that the Company will be able to collect the outstanding loan
or that it will pursue any legal remedies available to collect such loan.
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INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Florida Business Corporation Act ("Corporation Act") permits the
indemnification of directors, employees, officers and agents of Florida
corporations. However, the provisions of the Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. USC's Articles of Incorporation and
Bylaws provide that USC shall indemnify its directors and officers to the
fullest extent permitted by the Corporation Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling USC pursuant to the foregoing provisions, USC
has been informed that, in the opinion of the Commission, such indemnification
is against public policy as expressed in the Act and is therefore unenforceable.
LIMITATION OF LIABILITY
Under Florida law, USC's directors are protected against personal
liability for monetary damages from breaches of their duty of care. As a result,
USC's directors will not be liable in an action by USC or a shareholder for
monetary damages alleging negligence or gross negligence in the performance of
their duties. In such actions, they remain liable for monetary damages for
willful misconduct, conscious disregard of the best interest of USC, and for
transactions from which a director derives an improper personal benefit.
Directors also remain liable under another provision of Florida law which makes
directors personally liable for unlawful distributions and which expressly sets
forth a negligence standard with respect to such liability. The liability of
USC's directors under federal or applicable state securities laws is also
unaffected.
While USC's directors have protection from awards of monetary damages
for breaches of fiduciary duty, that does not eliminate their fiduciary duty.
Equitable remedies, such as an injunction or rescission based upon a director's
breach of fiduciary duty, are still available.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On the Effective Date, two stock purchase agreements shall be
simultaneously effectuated whereby (i) Kyoto shall purchase 1,399,900 shares of
Class B Common Stock for $2,200,000, and (ii) the Company shall purchase Kyoto's
99.97% in KyF Chile for $2,200,000 and KyF Chile shall then become a majority
owned (99.97%) subsidiary of the Company. The remaining 15 shares of KyF Chile
stock will continue to be owned by Ricardo Vilensky, individually, who is also
the principal shareholder of Kyoto (Chilean law requires that a Chilean
corporation be owned by not less than two shareholders). The current
shareholders of KyF Chile are Kyoto (99.97%) and Ricardo Vilensky (.03%). Mr.
Vilensky will retain his .03% interest (15 shares) in KyF Chile in order to
comply with Chilean law which requires that there be, at all times, no less than
two shareholders. Kyoto is a Chilean limited partnership whose partners are
Inversiones Huillimapu S.A. ("IHSA") (99%) and Ricardo Vilensky (1%), who is
also its general manager. The shareholders of IHSA are Ricardo Vilensky (90%)
and Compania Administradora de
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Restaurantes Limitada ("CARL") (10%). The partners of CARL are Kyoto (98%) and
Mr. Vilensky (2%). The general manager of CARL is Mr. Vilensky.
In May 1991, KyF Chile agreed to guaranty certain liabilities of Kyoto
that are due to Leasing Andino S.A. in connection with certain lease obligations
for office space. As of the Effective Date, the Company estimates that the
current remaining obligations of Kyoto under the lease is approximately
$147,000.
In August 1992, KyF Chile agreed to guaranty all liabilities of
Comercial Submanne Chile Limitada ("Submanne") that are due to Leasing Banestado
in connection with certain lease obligations. As of the Effective Date, the
Company estimates that the current remaining obligations of Submanne are
approximately $83,000.
Mr. Vilensky owns a 50% interest in Ann Arbor Foods S.A. ("Ann Arbor"),
which owns fifteen (15) Domino's Pizza restaurants in Chile. Within 18 months
from the Effective Date, Mr. Vilensky has agreed to resign as an officer and
director in Ann Arbor and to divest himself of all interest in these franchises.
On October 3, 1997, the Company entered into a loan agreement with
Kyoto whereby Kyoto loaned the Company the principal sum of $279,095, at an
interest rate of 9% per annum. The proceeds from this loan were used for working
capital. On November 6, 1997, the Company entered into a loan agreement with
Kyoto whereby Kyoto lent the Company the principal sum of $400,000 at an
interest rate of 7.8% per annum. These funds were used to reduce the amount of
back royalties due to KFCIH. The Company has agreed to repay the $400,000 loan
(plus accrued interest) from the proceeds of this Offering. The remaining loan
in the principal amount of $279,095 (plus accrued interest) shall be repaid from
the Company's operations.
On April 30, 1997, KyF Chile sold its office facility in Santiago,
Chile to Imobiliaria KilKil S.A. ("IKK"), whose shareholders include IHSA (98%)
and Mr. Vilensky (2%). In consideration for the payment price of $577,574, KyF
Chile issued to IKK a promissory note (the "Note") for the total amount due, and
in turn, KyF Chile transferred the Note to its principal shareholder, Kyoto. Of
the total amount due, $303,191 was paid in the form of dividends to Kyoto for
1996 and $274,383 has been used to satisfy a loan obligation due by KyF Chile to
Kyoto in connection with the remodelling of two of the Company's KFC/registered
mark/ restaurants. On May 1, 1997, KyF Chile entered into a ten year lease
agreement with IKK, at a rate of $9,050 per month, plus common area maintenance
and general expenses of $1,100 per month. See "Business - Properties."
Upon the Effective Date, the Company will enter into a two year lease,
which lease may be renewed for an additional term of two years, with AEFC to use
a portion of AEFC's facilities in Boca Raton, Florida, for the Company's
corporate U.S. offices. David Mayer, a Director of USC, is the sole shareholder,
officer and director of AEFC. The annual lease amount will be $10,000 payable
quarterly or as otherwise agreed upon between the parties. These terms were
negotiated on an arm's length basis and such terms are competitive with the
going rates.
Upon the Effective Date, the Company will also enter into a one year
agreement with AEFC to provide certain services to the Company including acting
as the U.S. liaison for the
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Company. In consideration for these services, AEFC will receive $20,000
annually, payable in quarterly installments.
As of the Effective Date, KyF Chile will enter into a ten year
agreement with David Mayer, a Director of USC, whereby Mr. Mayer shall perform
certain services for the Company, including advising in the preparation and
implementation of the Company's business plan, research, evaluation and
negotiations with strategic partners and alternative sources of credit and
financial opportunities, assisting in conducting market surveys, assisting in
shareholder and investor relations, assisting in the preparation of reports to
shareholders and investors, and acting as the U.S. liaison to KFCIH and to U.S.
vendors. In consideration for these services, Mr. Mayer receives an annual fee
of approximately $35,000.00, or as otherwise agreed upon by the parties
commencing as of the Effective Date.
BRIDGE FINANCING
Between January and March 1998, the Company received loans in the
aggregate amount of $150,000 from an unrelated third party accredited investor.
This loan is evidenced by promissory notes bearing interest at 8-1/2% per year.
The Company is obligated to repay this loan on the earlier of (i) the closing of
this Offering or (ii) January 1, 2000. As additional consideration, the investor
received and aggregate of 30,000 of Class A Common Stock.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the Common
Stock beneficially owned at April 24, 1998 (i) by each person who is known by
USC to own beneficially 5% or more of the Common Stock; (ii) by each of USC's
executive officers and directors; and (iii) by all executive officers and
directors of USC as a group. Unless otherwise set forth, the mailing addresses
for the individuals named below is Carmencita #23, Office 102, Santiago, Chile.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK OWNERSHIP VOTING
BENEFICIALLY OWNED PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF BEFORE AND AFTER BEFORE AFTER BEFORE AFTER
BENEFICIAL OWNER OFFERING OFFERING OFFERING(1)(2) OFFERING OFFERING(1)(2)
- ---------------- -------- -------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C>
Ricardo Vilensky 1,400,000(3)(4) 97.9% 49.5%(5) 99.8% 90.7%
Mauricio Aguirre -0- -0- -0- -0- -0-
Juan Carlos Cerda -0- -0- -0- -0- -0-
Avram Fritch -0- -0- -0- -0- -0-
David Mayer(6) -0- -0- -0- -0- -0-
Sergio Vivanco -0- -0- -0- -0- -0-
All executive officers and directors
as a group (6 persons) 1,400,000(7) 97.9% 49.5% 99.8% 90.7%
Inversiones e Inmobiliaria
Kyoto Limitada(7) 1,399,900(8) 97.9% 49.5% 99.8% 90.7%
</TABLE>
- --------------------
(1) Assumes no exercise of the Over-Allotment Option. See "Underwriting."
(2) Does not give effect to the issuance or exercise of Warrants offered
hereby.
(3) Includes 1,399,900 shares of Class B Common Stock issued to Kyoto in
connection with the Stock Purchases. See Note 1 to "Notes to Financial
Statements." Kyoto is owned and controlled by Mr. Vilensky. See
"Certain Relationships and Related Transactions." The remaining 100
shares of Class B Common Stock were issued to Mr. Vilensky as founders
shares.
(4) Represents 1,400,000 shares of Class B Common Stock that have 10 votes
for each share of Class B Common Stock held. See "Description of
Securities."
(5) While the shares held by Mr. Vilensky, directly or indirectly,
will represent 49.5% of the outstanding Common Stock issued, they will
represent an approximately 90.7% voting interest in the Company, since
holders of Class B Common Stock are entitled to 10 votes for each share
of Class B Common Stock held.
(6) Mr. Mayer's address is 1900 Glades Road, Suite 351, Boca Raton, Florida
33301.
(7) Includes 1,399,900 shares of Class B Common Stock issued to Kyoto in
connection with the Stock Purchases. Kyoto is owned and controlled by
Mr. Vilensky. See "Certain Relationships and Related Transactions."
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(8) Represents 1,399,900 shares of Class B Common Stock that have 10 votes
for each share of Class B Common Stock held.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is currently authorized to issue up to 30,000,000 shares of
Common Stock, of which 20,000,000 shares are designated as Class A Common Stock
and 2,000,000 shares are designated as Class B Common Stock. As of the Effective
Date, there were (i) 30,000 shares of Class A Common Stock outstanding, and (ii)
1,400,000 shares of Class B Common Stock outstanding. The Company has also
reserved up to an aggregate of 200,000 shares of Class A Common Stock pursuant
to its Plan, under which options may be issued by the Company subject to the
approval of the Representative (for a period of twelve months from the Effective
Date, and to the extent any granted options are exercised, the underlying shares
of Class A Common Stock shall be subject to a 24-month lock-up period from the
Effective Date).
Upon liquidation, dissolution or winding up of the Company, after
payment of creditors and holders of any senior securities of the Company,
including preferred stock, as applicable, the assets of the Company will be
divided pro rata on a per share basis among the holders of the shares of Common
Stock. The Common Stock has no preemptive or other subscription rights, and
there are no conversion rights or redemption or sinking fund provisions with
respect to such shares. All outstanding shares of Common Stock are, and the
shares of Class A Common Stock offered hereby will be, upon completion of this
Offering, fully paid and non-assessable.
Subject to (i) the dividend rights of the holders of any other class of
common stock or preferred stock, if applicable, and (ii) as a condition of the
Franchise Agreement, the approval of KFCIH, holders of shares of Common Stock
are entitled to share, on a ratable basis, such dividends as may be declared by
the Board of Directors out of funds legally available therefor. USC has never
paid dividends on any class of Common Stock since its inception in November
1997. However, KyF Chile has previously paid dividends to its shareholders. See
"Dividend Policy" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Holders of shares of Class A Common Stock are entitled to one vote per
share on all matters to be voted on by the shareholders. Holders of shares of
Class B Common Stock are entitled to ten (10) votes per for each share of Class
B Common Stock on all matters to be voted on by the shareholders. Neither
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<PAGE>
holders of Class A Common Stock nor Class B Common Stock have cumulative voting
rights. Accordingly, the holders of more than 50% of the voting rights for the
election of directors can elect all of the directors if they choose to do so,
and in such event, the holders of the remaining shares will not be able to elect
any directors. Following this Offering, management will have the ability to vote
1,400,000 shares of Class B Common Stock or approximately 90.7% of the votes of
the Company, without giving effect to the exercise of the Over-Allotment Option
or the Representative's Warrants. The Bylaws of the Company require that only a
majority of the issued and outstanding voting shares of Common Stock need be
represented to constitute a quorum and to transact business at a shareholders'
meeting.
Subject to the approval of the Representative (for the first 24 months
following the Effective Date) and KFCIH, as a condition of the Franchise
Agreement, holders of Class B Common Stock have the right to (1) transfer or
sell shares of Class B Common Stock, and/or (2) convert shares of Class B Common
Stock into shares of Class A Common Stock on a "one share for one share" basis,
provided that any shares so converted (but not sold or transferred) will only be
entitled to one vote per share. Any persons acquiring shares of Class B Common
Stock in a private transaction, either by means of a transfer or sale, shall be
entitled to ten votes for each one share of Class B Common Stock held. See
"Business-Franchise Agreement with KFCIH" and "Underwriting." Each certificate
representing shares of Class B Common Stock contains a legend setting for the
restrictions imposed by the Representative and KFCIH. See "Class A Voting Common
Stock."
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000,000
shares, par value $.0001, of the Company's preferred stock and to fix the
dividend, liquidation, conversion, redemption and other rights, preferences and
limitations of such shares without any further vote or action of the
shareholders, but subject to the approval of the Representative for a period of
one (1) year from the Effective Date (but which shares shall be subject to a
lock-up period of twenty-four months from the Effective Date).
WARRANTS
The Warrants will be issued in registered form pursuant to an agreement
dated as of the Effective Date (the "Warrant Agreement"), between the Company
and American Stock Transfer and Trust Company as Warrant Agent. The following
discussion of certain terms and provisions of the Warrants is qualified in its
entirety by reference to the Warrant Agreement. A form of the certificate
representing the Warrants which form a part of the Warrant Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part.
Each of the Warrants entitles the registered holder to purchase one
share of Class A Common Stock. The Warrants are exercisable at a price of $6.00
(which exercise price has been arbitrarily determined by the Company and the
Representative) subject to certain adjustments. The Warrants are entitled to the
benefit of adjustments in their exercise prices and in the number
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of shares of Class A Common Stock or other securities deliverable upon the
exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.
The Warrants may be exercised, in whole or in part, for a period of
five (5) years from the Effective Date, unless such period is extended by the
Company. After the expiration date, Warrant holders shall have no further
rights.
Warrant holders do not have any voting or any other rights as
shareholders of the Company. The Warrants will not be redeemable for a period of
twelve (12) months following the Effective Date, at which time the Warrants may
be redeemed by the Company for $0.25 per Warrant on not less than thirty (30)
days prior written notice, subject to exercise by the Warrant holder, if the
closing bid price for the Class A Common Stock has been at least $7.00 per share
for thirty (30) consecutive trading days. If the Company exercises its right to
redeem Warrants, such Warrants may still be exercised by the holder thereof
until the close of business on the day immediately preceding the date fixed for
redemption. If any Warrant called for redemption is not exercised by such time,
it will cease to be exercisable, and the holder thereof will be entitled only to
the redemption price. The foregoing notwithstanding, the Company may not redeem
the Warrants at any time that a current registration statement under the Act
covering the shares of Class A Common Stock issuable upon exercise of the
Warrants is not then in effect. Additionally, the issuance of such shares to the
holder must be registered, qualified or exempt under the laws of the state in
which the holder resides. If required, the Company will file a new registration
statement with the Commission with respect to the securities underlying the
Warrants prior to the exercise of such Warrants and will deliver a prospectus
with respect to such securities to all holders thereof as required by Section
10(a)(3) of the Act. See "Risk Factors - Necessity to Maintain Current
Prospectus" and "State Blue Sky Registration Required to Exercise Warrants."
CERTAIN FLORIDA LEGISLATION
Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The provisions of Florida corporate law relating to
control share acquisitions (the "Florida Control Share Act") generally provide
that shares acquired in excess of certain specified thresholds will not possess
any voting rights unless such voting rights are approved by a majority of a
corporation's disinterested shareholders. The provisions of the Florida Control
Share Act apply to the Company. The provisions of Florida corporate law relating
to affiliated transactions (the "Florida Affiliated Transactions Act") generally
require super majority approval by disinterested shareholders of certain
specified transactions between a public corporation and holders of more than 10%
of the outstanding voting shares of the corporation (or their affiliates). The
provisions of the Florida Affiliated Transactions Act do not apply to the
Company because it has opted out of such act. The Company's Articles of
Incorporation and Bylaws also authorize the Company to indemnify the Company's
directors, officers, employees and agents. See "Management-Indemnification of
Officers and Directors." In addition, the Articles of Incorporation and Florida
law presently limit the personal liability of corporate directors for monetary
damages, except where the directors (i) breach their fiduciary duties and (ii)
such breach constitutes or includes certain violations of criminal law, a
transaction
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from which the directors derived an improper personal benefit, certain unlawful
distributions or certain other reckless, wanton or willful acts or misconduct.
See "Management-Limitation of Liability."
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
INCORPORATION, BYLAWS, AND THE FRANCHISE AGREEMENT.
Certain provisions of the Articles of Incorporation and Bylaws of USC
and the Franchise Agreement described below may delay, defer or prevent a tender
offer or takeover attempt, including attempts that might result in a premium
being paid over the market price for the shares held by shareholders. Such
provisions could result in the Company being less attractive to a potential
acquiror or in shareholders receiving less for their shares in the event of a
take-over attempt.
CLASS B COMMON STOCK.
Holders of Class B Common Stock are entitled to ten (10) votes for each
share of Class B Common Stock held. Upon the Effective Date, Ricardo Vilensky
will own or control, directly or indirectly, approximately 49.5% of the Common
Stock and will have the right to cast 90.7% of the votes. The Class B Common
Stock could be utilized under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
PREFERRED SHARES
The Board of Directors is empowered, without shareholder approval, to
issue preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or the rights of the
holders of Common Stock. In the event of issuance, the preferred stock could be
utilized under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future. See "Description of
Securities - Preferred Stock"
SPECIAL MEETING OF SHAREHOLDERS.
The Articles of Incorporation and Bylaws of USC provide that special
meetings of shareholders of the Company may be called only by a majority of the
Board of Directors, the Company's Chief Executive Officer or holders of not less
than ten percent (10%) of the Company's outstanding voting stock.
FRANCHISE AGREEMENT
Pursuant to the Franchise Agreement, KFCIH's consent is required for
certain transfers or issuances by the Company of its equity securities or the
transfer or issuance to third parties of any Class B Common Stock owned or
controlled, directly or indirectly, by Mr. Vilensky. Additionally, transfers
that result in a change of control of the Company in connection with a
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public tender offer require KFCIH's consent. If KFCIH's consent is not obtained
in connection with any such transactions including in connection with a public
offering, KFCIH could terminate its Franchise Agreement with the Company, which
would have a material adverse effect on the Company's financial condition and
results of operations. See "Business-Franchise Agreement with KFCIH."
Pursuant to the Franchise Agreement, unless KFCIH approves otherwise,
at all times Mr. Vilensky must maintain a majority voting interest and a 30%
ownership interest in the Company. Any transactions which reduce Mr. Vilensky's
ownership interest without KFCIH's approval could terminate the Franchise
Agreement and the Development Agreement, including the Company's right to use
the KFC/registered mark/ concept. See "Risk Factors - Control by Management;
KFCIH Restrictions" and "Business - Franchise Agreement with KFCIH."
TRANSFER AGENT AND REGISTRAR
The transfer agent, warrant agent, and registrar for the Class A Common
Stock and the Warrants is American Securities Transfer & Trust, Inc., 1825
Lawrence Street, Suite 444, Denver, Colorado 80202-1817 (303) 298-5370.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company will have 1,430,000
shares of Class A Common Stock outstanding (1,640,000 shares if the
Over-Allotment Option is exercised in full but without giving effect to the
exercise of the Warrants) and 1,400,000 shares of Class B Common Stock
outstanding, of which 30,000 shares of Class A Common Stock and all of the Class
B Common Stock outstanding are "restricted securities" as such term is defined
under the Act.
The 1,400,000 shares of Class A Common Stock sold in this Offering
(1,610,000 shares if the Over-Allotment Option is exercised in full) will be
freely tradeable without restriction or further registration under the Act,
except for any shares purchased by an "affiliate" of the Company (in general, a
person who has a control relationship with the Company), which shares will be
subject to the resale limitations of Rule 144 under the Act. An additional
1,400,000 shares of Class A Common Stock have been registered (1,610,000 shares
if the Over-Allotment Option is exercised in full) and reserved for issuance
upon exercise of the Warrants.
In general, Rule 144 promulgated under the Act permits a shareholder of
the Company who has beneficially owned restricted shares of any class of Common
Stock for at least one year to sell without registration, within a three-month
period, such number of shares not exceeding the greater of one percent of the
then outstanding shares of any class of Common Stock or, generally, the average
weekly trading volume during the four calendar weeks preceding the sale,
assuming compliance by the Company with certain reporting requirements of Rule
144. Furthermore, if the restricted shares of any class of Common Stock is held
for at least two years by a person not
53
<PAGE>
affiliated with the Company (in general, a person who is not an executive
officer, director or principal shareholder of the Company during the three month
period prior to resale), such restricted shares can be sold without any volume
limitation. Since the Company was not organized until November 21, 1997, the
30,000 shares of Class A Common Stock issued on March 12, 1998, will not be
eligible to be resold until March 11, 1999, subject to the lock-up provisions
described below. Any sales of shares pursuant to Rule 144 may have a depressive
effect on the price of the Class A Common Stock.
Notwithstanding the foregoing, all of the holders of Common Stock prior
to the closing of this Offering (including Kyoto, who will purchase 1,399,900
shares of Class B Common Stock of USC as of the Effective Date) have agreed not
to, directly or indirectly, offer to sell, contract to sell, sell, transfer,
assign, encumber, grant an option to purchase or otherwise dispose of any
beneficial interest in such securities for a period of 24 months from the date
hereof (with the exception of 30,000 shares of Class A Common Stock issued in
connection with the Bridge Financing, which are subject only to a six month
lock-up period), without the prior written consent of the Representative.
Additionally, holders of any securities issued by the Company for a period of
twelve months from the Effective Date (other than those Securities offered
hereby, the Representative's Warrants and the underlying securities thereto)
will also be subject to a 24- month lock-up period from the date of issuance.
See "Bridge Financing." An appropriate legend referring to these restrictions
will be marked on the face of the certificates representing all such securities.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representative, Werbel-Roth Securities,
Inc., have severally agreed to purchase from the Company and the Company has
agreed to sell to the such Underwriters, the respective number of shares of
Class A Common Stock and Warrants set forth opposite their respective names at
the initial public offering price, less the underwriting discounts set forth on
the cover page of this Prospectus:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES NUMBER OF WARRANTS
------------ ---------------- ------------------
<S> <C> <C>
Werbel-Roth Securities, Inc.
TOTAL 1,400,000 1,400,000
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock and the Warrants are subject to approval of certain legal matters by
counsel to the Underwriter and to certain other conditions precedent. The
Underwriters are obligated to purchase all shares of Common Stock and the
Warrants hereby (other than those covered by the Over-Allotment Option described
below), if any such shares are purchased.
54
<PAGE>
The Company has been advised by the Representative of the Underwriters
that the Underwriters propose initially to offer the shares of Common Stock and
Warrants to the public at the offering price set forth on the cover page of this
Prospectus and through members of the National Association of Securities
Dealers, Inc. ("NASD"), and may allow a concession, not in excess of $___ per
share of Class A Common Stock and $______ per Warrant, in their discretion, to
certain domestic dealers who are members of the NASD and which domestic dealers
agree to sell the Securities in conformity with the NASD Conduct Rules. The
initial public offering price and concessions will not be changed by the
Representative until after the Offering has been completed.
At the closing of the sale of the Securities being offered hereby, the
Company will sell to the Representative, the Representative's Warrants, for
nominal consideration, entitling the Representative to purchase an aggregate of
140,000 shares of Class A Common Stock and 140,000 warrants, similar but not
identical to the Warrants. The Representative's Warrants shall be
non-exercisable and non-transferable (other than a transfer to affiliates of the
Representative or members of the selling group) for a period of twelve months
following the Effective Date. The Representative's Warrants and the underlying
securities shall contain anti-dilution provisions and shall not be redeemable.
The Representative's Warrants will be exercisable for a period of four years
commencing one year following the Effective Date and, if the Representative's
Warrants are not exercised during such period, they shall, by their own terms,
automatically expire. The exercise price of each Representative Warrant shall be
$6.00 per share of Class A Common Stock, $.15 per warrant, and $7.20 per share
of Class A Common Stock for each share underlying the warrant, which are 120% of
the public offering price of the Class A Common Stock, the Warrants and the
shares of Class A Common Stock underlying the Warrants, respectively. In
addition, the Company has granted to the Representative a single demand
registration right and unlimited piggy back registration rights with respect to
the Class A Common Stock and the Warrants underlying the Representative's
Warrants for a period commencing at the beginning of the second year and
concluding at the end of the fifth year following the Effective Date.
In addition to the above, the Company has granted to the Representative
an option exercisable for 45 days from the Effective Date, to purchase up to an
additional 210,000 shares of Class A Common Stock and an additional 210,000
Warrants at the initial public offering price, less the underwriting discount
set forth on the cover page of this Prospectus (the "Over-Allotment Option").
The Underwriters (or the Representative individually at its option) may exercise
this option solely to cover over-allotments in the sale of the Securities being
offered by this Prospectus.
Prior to this Offering, there has been no public market for the
Securities and there can be no assurances that an active public market for the
Securities will be developed or, if developed, sustained after this Offering.
The initial public offering price of the Class A Common Stock offered hereby and
the exercise price and terms of the Warrants has been arbitrarily determined by
negotiations between the Company and the Representative and may bear no
relationship to the Company's current earnings, book value, net worth or other
established valuation criteria. The
55
<PAGE>
factors considered in determining the initial public offering prices included an
evaluation by management of the Company and the Representative of the history of
and prospects for the industry in which the Company competes, an assessment of
management, the prospects of the Company, its capital structure, and certain
other factors deemed relevant. The initial public offering prices do not
necessarily bear any relationship to the Company's assets, book value, earnings
or other established criterion of value. Such prices are subject to change as a
result of market conditions and other factors, and no assurance can be given
that a public market for the shares of Class A Common Stock and/or Warrants will
develop after the close of the public offering, or if a public market in fact
develops, that such public market will be sustained, or that the shares of Class
A Common Stock and/or Warrants can be resold at any time at the initial public
offering prices or any other prices. See "Risk Factors."
The Company has agreed to pay the Underwriters a commission of ten
percent (10%) of the gross proceeds of this Offering ("Underwriting Discount"),
including the gross proceeds from the sale of the Over-Allotment Option, if
exercised. The Company has also agreed to reimburse the Representative on a
non-accountable basis for their expenses in the amount of three (3%) of the
gross proceeds of this Offering, including proceeds from any Securities
purchased pursuant to the Over-Allotment Option. The Representative's expenses
in excess of the non-accountable expense allowance will be paid by the
Representative. To the extent that the expenses of the Representative are less
than the amount of the non-accountable expense allowance received, such excess
shall be deemed to be additional compensation to the Representative.
The Company has agreed to engage the Representative as a consultant for
a period of three (3) years from the closing of this Offering, at a fee of
$105,000, all of which is payable to the Representative on the Effective Date.
The Company has agreed to indemnify the Underwriters against any costs
or liabilities incurred by the Representative by reasons of misstatements or
omissions to state material facts in connection with statements made in the
Registration Statement or the Prospectus. The Representative has, in turn agreed
to indemnify the Company against any liabilities by reason of misstatements or
omissions to state material facts in connection with the statements made in the
Prospectus, based on information relating to the Representative and furnished in
writing by the Representative. To the extent that this indemnification may
purport to provide exculpation from possible liabilities arising from the
federal securities laws, in the opinion of the Commission, such indemnification
is contrary to public policy and therefore unenforceable.
Shares of Common Stock held by the Company's existing shareholders
immediately prior to the Effective Date and any other securities issued for a
period of twelve months from the Effective Date (other than those offered
hereby, including the underlying securities, the Representative's Warrants and
the underlying securities thereto), are subject to a 24-month lockup period
(with the exception of 30,000 shares of Class A Common Stock issued in
connection with a Bridge Financing in the principal amount of $150,000, which
are subject only to a six month lock-up period. See "Bridge Financing"). The
lock-up periods begin on the later of (i) the date of issuance or (ii) the
Effective Date, and are subject to early termination at the sole discretion
56
<PAGE>
of the Representative. An appropriate legend referring to these restrictions
will be marked on the face of the certificates representing all such securities.
Moreover, for a period of twelve months from the Effective Date, the Company
will not sell or otherwise dispose of any Securities without the prior written
consent of the Representative.
The Representative of the Underwriters shall have the right to
designate a member of the Board of Directors, or at the Representative's option,
to designate one individual to attend the meetings of the Company's Board of
Directors for a period of five years after the Effective Date. In addition, for
a period of three years, the Representative shall have a right of first refusal
to sell the Company's securities in a public or private offering.
The foregoing is a summary of the principal terms of the agreement
described above and does not purport to be complete. Reference is made to the
Underwriting Agreement which is filed as an exhibit to the Registration
Statement. See "Additional Information."
LEGAL MATTERS
Legal matters in connection with the Class A Common Stock and the
Warrants being offered hereby will be passed upon for the Company by Atlas,
Pearlman, Trop & Borkson, P.A., Fort Lauderdale, Florida. The Company is being
represented as to matters of Chilean law by the law firm of Abud, Vivanco and
Vergara. Certain legal matters will be passed upon for the Underwriters by
Holland and Knight LLP.
EXPERTS
The balance sheets of USC and its subsidiary, KyF Chile, as of December
31, 1997 and 1996, and the related statements of income, stockholders' equity
and cash flows for the years then ended, included in this Prospectus have been
so included in reliance upon the report of Spear, Safer, Harmon & Co., P.A.,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement in
Washington, D.C., on Form SB-2 under the Act, with respect to the securities
being offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement and the exhibits thereto. For further
information about the Company and the Securities offered hereby, reference is
made to the Registration Statement and to the exhibits filed as a part thereof.
The statements contained in this Prospectus as to the contents of any contract
or other document identified as exhibits in this Prospectus are not necessarily
complete, and in each instance, reference is made to a copy of such contract or
document filed as an exhibit to the Registration Statement, each statement being
qualified in any and all respects by such reference. The Registration Statement,
including exhibits, may be inspected without charge at the principal reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C.
57
<PAGE>
20549; at its Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and at its Midwest Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and copies of such materials
can be obtained from the Public Reference Section of the Commission at its
principal office in Washington, D.C. set forth above upon payment of prescribed
fees. Additionally, the Commission maintains a Web sit that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission and the address of such site is
(http://www.sec.gov).
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may from time to time deem appropriate or as may be required by law.
58
<PAGE>
UNISERVICE CORPORATION
INDEX TO SUPPLEMENT CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report F-2
Supplemental Consolidated Balance Sheets as of
December 31, 1997 and 1996 F-3 - F-4
Supplemental Consolidated Statements of Income for
the Years Ended December 1997 and 1996 F-5
Supplemental Consolidated Statements of
Stockholders' Equity for the Years Ended December 31,
1997 and 1996 F-6
Supplemental Consolidated Statements of Cash Flows
for the Years Ended December 31, 1997 and 1996 F-7 - F-8
Notes to Supplemental Consolidated Financial
Statements F-9 - F-22
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Uniservice Corporation
Boca Raton, Florida
We have audited the accompanying supplemental consolidated balance sheets of
Uniservice Corporation (the "Company") as of December 31, 1997 and 1996, and the
related supplemental consolidated statements of income, stockholders' equity and
cash flows for the years then ended. These supplemental consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental consolidated
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 audits to obtain
reasonable assurance about whether the supplemental consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the supplemental
consolidated 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.
The supplemental consolidated financial statements give retroactive effect to
the tax free exchange of shares between the Company and Inversiones e
Inmobiliaria Kyoto, S.A., which will be effectuated at the time of the closing
of a public offering of the Company's stock, which has been accounted for as a
pooling of interests as described in Note 1 to the supplemental consolidated
financial statements. Generally accepted accounting principles prescribe giving
effect to a consummated business combination accounted for by the pooling of
interests method in financial statements that do not include the date of
consummation as if the business combination occurred for the periods presented.
In addition, they will become the historical consolidated financial statements
of the Company after financial statements covering the date of consummation of
the business are issued.
In our opinion, the supplemental consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Uniservice Corporation as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles applicable after financial statements
are issued for a period which includes the date of consummation of the business
combination.
Miami, Florida
February 4, 1998
F-2
<PAGE>
UNISERVICE CORPORATION
Supplemental Consolidated Balance Sheets
December 31, 1997 and 1996
A S S E T S
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 647,549 $ 142,775
Accounts receivable, net 373,946 585,932
Due from related party (Note 14) 148,000 -
Other receivables (Note 2) 115,195 137,788
Inventory 515,563 307,056
Income taxes receivable (Note 3) 145,435 228,374
Offering costs 118,311 -
Other current assets (Note 4) 114,723 182,310
--------------- ---------------
Total Current Assets 2,178,722 1,584,235
--------------- ---------------
Property and Equipment, net (Note 5) 6,468,247 6,661,711
--------------- ---------------
Other Assets:
Intangibles, net (Note 6) 139,404 138,937
Deposits (Note 7) 473,259 393,239
--------------- ---------------
Total Other Assets 612,663 532,176
--------------- ---------------
$ 9,259,632 $ 8,778,122
=============== ===============
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-3
<PAGE>
UNISERVICE CORPORATION
Supplemental Consolidated Balance Sheets (Continued)
December 31, 1997 and 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
--------------- -----------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,300,659 $ 1,506,725
Obligations with banks: (Note 9)
Lines-of-credit 81,117 782,788
Current portion 319,249 377,478
Notes payable (Note 10) 70,206 657,152
Sales tax and withholdings 163,761 125,921
Accrued expenses and other current liabilities (Note 8) 843,988 701,944
Current portion of capital lease obligations (Note 11) 190,347 287,443
Deferred revenue (Note 12) 239,335 395,739
--------------- -------------
Total Current Liabilities 3,208,662 4,835,190
--------------- -------------
Long-Term Liabilities:
Obligations with banks, excluding current portion (Note 9) 1,331,733 601,048
Due to related party (Note 15) 679,095 -
Capital lease obligations, excluding current portion (Note 11) 864,583 1,042,133
--------------- -------------
Total Long-Term Liabilities 2,875,411 1,643,181
--------------- ------------
Stockholders' Equity: (Note 13)
Class A common stock, $.0001 par value; 20,000,000 shares
authorized; no shares issued and outstanding - -
Class B common stock, $.0001 par value; 2,000,000 shares
authorized; 1,400,000 shares issued and outstanding
at December 31, 1997 and 1996 140 140
Preferred stock, $.0001 par value; 5,000,000 shares
authorized; no shares issued and outstanding - -
Additional paid-in capital 3,287,762 2,963,476
Retained earnings (deficit) 93,176 (574,520)
Cumulative translation adjustment (205,519) (89,345)
--------------- --------------
Total Stockholders' Equity 3,175,559 2,299,751
--------------- ------------
$ 9,259,632 $ 8,778,122
=============== ===========
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-4
<PAGE>
UNISERVICE CORPORATION
Supplemental Consolidated Statements of Income
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
Revenues $ 14,562,157 $ 11,706,398
Cost of Operations 5,909,803 4,534,762
--------------- --------------
Gross Profit 8,652,354 7,171,636
--------------- --------------
Selling and Administrative Expenses:
Payroll and employee benefits 2,776,949 2,483,571
Occupancy 1,708,515 1,425,190
Other selling and administrative 3,331,665 2,789,574
--------------- --------------
7,817,129 6,698,335
--------------- --------------
Income from Operations 835,225 473,301
Other Income (Expenses):
Other, net (Note 14) 759,770 477,081
Interest expense (281,046) (415,940)
---------------- --------------
478,724 61,141
--------------- --------------
Net Income $ 1,313,949 $ 534,442
=============== ==============
Net Income Per Common Share $ 0.94 $ 0.38
=============== ==============
Weighted Average Common Shares Outstanding 1,400,000 1,400,000
=============== ==============
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-5
<PAGE>
UNISERVICE CORPORATION
Supplemental Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1996 and 1997
<TABLE>
<CAPTION>
CLASS B ADDITIONAL RETAINED CUMULATIVE TOTAL
COMMON PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) ADJUSTMENT EQUITY
------------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 140 $2,963,476 $ (969,053) $ 4,765 $ 1,999,328
Net income - - 534,442 - 534,442
Dividends to stockholders - - (139,909) - (139,909)
Translation adjustment - - - (94,110) (94,110)
------------ ---------- ----------- ----------- ------------
Balance at December 31, 1996 140 2,963,476 (574,520) (89,345) 2,299,751
Dividends reinvested - 324,286 (324,286) - -
Net income - - 1,313,949 - 1,313,949
Dividends to stockholders - - (321,967) - (321,967)
Translation adjustment - - - (116,174) (116,174)
------------ ---------- ----------- ------------- ------------
Balance at December 31, 1997 $ 140 $3,287,762 $ 93,176 $ (205,519) $ 3,175,559
============ ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-6
<PAGE>
UNISERVICE CORPORATION
Supplemental Consolidated Statements of Cash Flows
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,313,949 $ 534,442
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 715,555 546,775
Deferred income taxes (1,156) 1,587
Loss on sale of building 7,852 -
Translation adjustment (116,174) (94,110)
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net 211,986 (279,741)
Other receivables 22,593 (23,797)
Inventory (208,507) 324,601
Income taxes receivable 82,939 (160,900)
Offering costs (118,311) -
Other current assets 68,743 148,095
Intangibles (4,199) (3,329)
Deposits (80,020) (33,808)
Increase (decrease) in:
Accounts payable (206,066) (236,154)
Sales tax and withholdings 37,840 (10,092)
Accrued expenses and other current liabilities 142,044 296,953
Deferred revenue (156,404) (172,553)
--------------- --------------
Net Cash Provided by Operating Activities 1,712,664 837,969
--------------- --------------
Cash Flows from Investing Activities:
Acquisition of property and equipment (448,507) (783,240)
--------------- --------------
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-7
<PAGE>
UNISERVICE CORPORATION
Supplemental Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Cash Flows from Financing Activities:
Net proceeds (repayment) of note payable to banks $ (586,946) $ 196,286
Dividends paid (321,967) (139,909)
Net proceeds (repayment) of lines-of-credit (701,671) 415,894
Net proceeds from related parties 531,095 -
Payments on capital lease obligations (352,350) (278,614)
Net proceeds (repayment) of long-term debt 672,456 (299,419)
------------- -------------
Net Cash Used in Financing Activities (759,383) (105,762)
-------------- -------------
Increase (Decrease) in Cash and Cash Equivalents 504,774 (51,033)
Cash and Cash Equivalents - Beginning of Year 142,775 193,808
------------- -------------
Cash and Cash Equivalents - End of Year $ 647,549 $ 142,775
============= =============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $ 274,371 $ 415,940
Supplemental Disclosure of Non-Cash Financing Activities:
Dividends reinvested 324,286 -
Note received in exchange for sale of building 568,545 -
Acquisition of property and equipment subject
to capital lease 77,704 1,190,010
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-8
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements
Years Ended December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Uniservice Corporation, (the "Company"), is a Florida
corporation incorporated in November 1997 as a holding company to
acquire Inversiones e Inmobiliaria Kyoto, S.A.'s ("Kyoto") 99.97%
interest in Kentucky Foods Chile, S.A. ("KyF Chile" collectively, the
"Company"). KyF Chile is in the fast food service business and
presently operates 29 restaurants in the Santiago, Chile area pursuant
to its international franchise agreement with Kentucky Fried Chicken
International Holdings, Inc. ("KFCIH"), then a subsidiary of Pepsico,
Inc. ("Pepsico") and currently an affiliate of Tricon Global
Restaurants, Inc. ("Tricon").
BASIS OF PRESENTATION - Subsequent to December 31, 1997, the Company
agreed to acquire 100% of Kyoto's interest in KyF Chile in exchange for
1,399,900 shares of Class B common stock which will be effective as of
the closing of the initial public offering of the Company's stock. In
order to comply with Chilean law and the requirements of the Central
Bank of Chile for foreign investments, two stock purchase agreements
will be effectuated at the time of the closing of the initial public
offering of the Company's stock whereby (i) Kyoto shall purchase
1,399,900 shares of Class B common stock for $2.2 million, and, (ii)
the Company shall purchase Kyoto's 99.97% in Kentucky Foods Chile, S.A.
for $2.2 million and Kyf Chile shall then become a majority owned
(99.97%) subsidiary of the Company. The substance of this transaction
is an exchange of shares between the Company and Kyoto which is
accounted for by the pooling of interests. Generally accepted
accounting principles prescribe giving effect to a consummated business
combination accounted for by the pooling of interests method in
financial statements that do not include the date of consummation as if
the business combination occurred for the periods presented.
Accordingly, the supplemental consolidated financial statements for all
periods presented have been prepared assuming the acquisition by the
Company took place on January 1, 1996, that the Company was
incorporated on that date, and the exchange of shares was effectuated
at that time.
These financial statements will become the historical consolidated
financial statements of the Company after financial statements covering
the date of consummation of the business combination are issued.
FUNCTIONAL CURRENCY - The financial statements have been translated in
accordance with the provisions set forth in Statement of Financial
Accounting Standards No. 52, from Chilean pesos (the functional
currency) into US dollars (the reporting currency).
REVENUE RECOGNITION - Revenue is recognized at the point of sale of
goods to its customers on a daily basis.
CASH AND CASH EQUIVALENTS - Cash equivalents consist of highly liquid
investments, which are readily convertible into cash and have
maturities of three months or less.
F-9
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTS RECEIVABLE - In Chile, it is customary to offer various sorts
of coupons and coupon books to other corporations who provide meal
services to their employees, as well as, for bonuses to its customers.
The Company bills the various corporations, on a monthly basis, for
coupons redeemed and recognizes income, accordingly. Approximately 8%
of revenues generated were due from these coupon books. Included in
accounts receivable are amounts due from the various corporations in
connection to coupon redemptions. Historically, the Company has had
very few non-remittance on its billings. As a result, the Company has
provided an allowance for doubtful accounts of $2,209 and $-0- as of
December 31, 1997 and 1996, respectively.
INVENTORY - Inventory consists primarily of fresh chicken, produce and
restaurant supplies and are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
OFFERING COSTS - Offering costs represent legal, accounting, and
underwriting fees incurred in connection with a registration statement
to be part of a public offering of the Company's shares (see Note 17).
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation is provided on a straight-line method based on the
estimated useful life of the asset ranging from three to ten years.
INCOME TAXES - In February 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 109 ("SFAS
109"), Accounting for Income Taxes SFAS 109 requires a change from the
deferred method of accounting for income taxes prescribed by APB
Opinion 11, to the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS 109, deferred tax
assets and liabilities are recognized for the future income tax assets
and liabilities are recognized for the future income tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes
the enactment date.
FOREIGN OPERATIONS - As the Company operates exclusively in Chile, one
must be aware of the potential for both economic and political change
in the business environment, different than that of the United States.
The success of the Company depends on the success of the Chilean
operations and a stable economic and political environment.
F-10
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EARNINGS PER COMMON SHARE - Earnings per common share are based on the
weighted average number of shares outstanding of 1,400,000 for the
years ended December 31, 1997 and 1996, giving effect to common stock
equivalents, none of which existed in the aforementioned periods.
RECENT PRONOUNCEMENTS - The Financial Accounting Standards Board (FASB)
has issued the following statements which are to be applied
prospectively, #130 - Reporting Comprehensive Income, #131 Disclosures
About Segments of an Enterprise and Related Information and #132 -
Employer's Disclosures About Pensions and Other Retirement Benefits.
Once effective, none of these pronouncements are expected to have a
material impact on the financial statements of the Company.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2 - OTHER RECEIVABLES
Other receivables consist of the following at December 31:
1997 1996
----------- -----------
Advances to vendors $ 53,024 $ 28,945
Advance payments for custom duties 23,622 23,678
Travel and other sundry advances 32,289 49,226
Other 6,260 35,939
----------- -----------
$ 115,195 $ 137,788
=========== ===========
F-11
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 3 - INCOME TAXES
In Chile, the Company is subject to income taxes at a statutory rate of
15% of taxable income, as defined. For the years ended December 31,
1997 and 1996, the Company had no taxable income, due to various
credits and incentives provided by the government of Chile. Therefore,
no provision for income taxes were made. These government credits and
incentives are not anticipated to continue in the future with the
continued strong earnings previously reported and expected in the
future. In addition, the Company made estimated income tax payments
during those years and is due a refund.
The following is a reconciliation of the statutory tax rates:
Years Ended December 31,
--------------------------------
1997 1996
----------- ----------
Statutory tax rate 15 % 15 %
Credits and incentives from government (15) (15)
------- ------
Effective tax rate 0 % 0 %
======= ======
As mentioned above, while the Company has incurred no income taxes for
the years ended December 31, 1997 and 1996, it has made monthly
estimated tax payments which coupled with the aforementioned credits
has yielded income tax recoverables. Following are the components of
the income tax receivable balances at December 31:
1997 1996
------------- -------------
Balance at beginning of year $ 228,374 $ 220,634
Payments of estimated income taxes 125,941 163,767
Credit for fixed asset purchases - 32,753
Credit for educational expenses 16,576 20,705
Refunds received (228,374) (220,634)
Other, net 2,918 11,149
------------- -------------
$ 145,435 $ 228,374
============= =============
The Company was not liable for U.S. income taxes for the years ended
December 31, 1997 and December 31, 1996, because all earnings were
generated by the Chilean subsidiary and no earnings were repatriated to
the Company for these reporting periods. Therefore, no deferred tax
assets or liabilities are attributable to these years other than those
reported by the subsidiary in its regional operations.
F-12
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 4 - OTHER CURRENT ASSETS
Other current assets consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
<S> <C> <C>
Deferred income taxes $ 34,584 $ 35,740
Prepaid expenses 75,363 81,538
Prepaid taxes other than income - 60,581
Other 4,776 4,451
----------- -----------
$ 114,723 $ 182,310
=========== ===========
</TABLE>
Deferred income taxes is due to a deferred tax asset. Deferred tax
assets and liabilities are determined based on temporary differences
between the financial carrying amounts and tax bases of assets and
liabilities, principally depreciation, using enacted tax rates in
effect.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, consists of the following:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Furniture and fixtures $ 4,592,757 $ 3,698,163
Office equipment and machinery 1,832,859 1,842,381
Capital leases 1,838,450 1,819,622
Buildings - 506,007
Land - 62,538
Other 184,598 47,153
Construction in progress 45,559 -
--------------- ---------------
8,494,223 7,975,864
Less accumulated depreciation
and amortization (2,025,976) (1,314,153)
--------------- ---------------
$ 6,468,247 $ 6,661,711
=============== ===============
</TABLE>
Depreciation and amortization expense was $711,823 and $546,775 for the
years ended December 31, 1997 and 1996, respectively.
F-13
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 6 - INTANGIBLES
Intangibles consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Goodwill $ 115,207 $ 112,003
Trademarks, licenses and other 27,929 26,934
------------ ------------
143,136 138,937
Less accumulated amortization (3,732) -
------------ -----------
$ 139,404 $ 138,937
============ ============
</TABLE>
Intangibles are being amortized using the straight-line method.
Goodwill is being amortized over a period of 40 years and trademarks,
licenses and other are being amortized over a period of 17 years.
Amortization commenced during 1997.
NOTE 7 - DEPOSITS
KyF Chile conducts its operations in leased facilities which require
security deposits based on the square footage, location, and term of
the lease (see Note 11). The balance of the security deposits at
December 31, 1997 and 1996 amounted to $473,259 and $393,239,
respectively.
NOTE 8 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following at
December 31:
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Franchise fees payable (*) $ 793,793 $ 518,547
Other 27,407 34,505
Accrued salaries and other employee benefits 22,788 148,892
----------- ------------
$ 843,988 $ 701,944
=========== ============
</TABLE>
(*) See Note 16 for details on franchise fees.
F-14
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 9 - OBLIGATIONS WITH BANKS
Obligations with banks consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Loans payable to banks for lines-of-credit with monthly, semiannual and
annual maturity dates and interest rates ranging from 9.02% to 11%
APR.; fully collateralized by a personal guarantee from a stockholder
and certain assets of the Company. The unused portion of the
line-of-credit as of December 31, 1997 approximates $374,000. Currency:
Chilean Pesos and UF $ 81,117 $ 782,788
=========== ===========
1997 1996
------------ -------------
Long-term debt consists of the following:
Notes payable to banks with maturity
dates through 2005 and fully collater-
ralized by a personal guarantee from
a stockholder and certain assets of the
Company. Interest rates ranging from
9.02% to 11% APR. Currency:
Chilean Pesos and UF $ 1,650,982 $ 978,526
Less: Current portion (319,249) (377,478)
----------- -----------
$ 1,331,733 $ 601,048
=========== ===========
</TABLE>
Interest rates on all of these flexible rate loans are based on the
Asociacion de Bancos y Entidades Financieras, (T.A.B.) rate, which
represents a daily average of the interest paid by banks on its
deposits. The rate is then adjusted upwards approximately 1.5% for the
banks profit, and then an additional 1.0%-1.7% reflecting the
individual risk of the bank on the individual loan. There are no
covenants or restrictions imposed on the aforementioned obligations
with any of the banks involved.
F-15
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 9 - OBLIGATIONS WITH BANKS (Continued)
The weighted average interest rate was 7.9% and 10.8% for the years
ended December 31, 1997 and 1996, respectively.
The UF is an indexed unit of account expressed in pesos and adjusted
according to inflation (CPI).
Future maturities of long-term debt are as follows:
YEAR ENDING
DECEMBER 31,
------------
1998 $ 319,249
1999 293,509
2000 293,466
2001 192,505
2002 144,412
Thereafter 407,841
-------------
$ 1,650,982
=============
NOTE 10 - NOTES PAYABLE
Notes payable consists of various short-term unsecured loans with local
banks bearing interest at rates ranging from 9.0% to 11.0% per annum.
NOTE 11 - CAPITAL LEASE OBLIGATIONS
KyF Chile leases various equipment under capital leases. The capital
leases in effect as of December 31, 1997, are scheduled to expire
between the years 1998 and 2009. At the expiration of the lease terms,
KyF Chile may exercise options to purchase the equipment at a bargain
purchase price. Amortization is computed by the straight-line method
and has been included in depreciation. As of December 31, 1997 and
1996, the gross amount of assets recorded under capital leases totaled
$1,838,450 and $1,819,622, respectively. Accumulated amortization
related to those assets totaled $163,379 and $86,745 as of December 31,
1997 and 1996, respectively.
F-16
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 11 - CAPITAL LEASE OBLIGATIONS (Continued)
The following is a schedule of future minimum lease payments:
YEAR ENDING
DECEMBER 31,
------------
1998 $ 190,347
1999 112,708
2000 36,243
2001 84,864
2002 91,004
Thereafter 539,764
-------------
1,054,930
Current portion (190,347)
Long-term portion $ 864,583
=============
NOTE 12 - DEFERRED REVENUE
In August 1994, KyF Chile entered into an agreement with Pepsico
requiring the exclusive use of Pepsi products for the following five
years. In exchange for this exclusivity agreement, KyF Chile received
approximately $780,000, net of taxes, which is being recognized and
amortized over that five year period. For the years ended December 31,
1997 and 1996, KyF Chile recognized $149,912 and $153,122,
respectively, of the deferred revenue.
NOTE 13 - STOCKHOLDERS' EQUITY
The Company is currently authorized to issue 20,000,000 shares of Class
A common stock, 2,000,000 shares of Class B common stock and 8,000,000
shares of undesignated common stock at a par value of $.0001 per share.
As part of its anticipated initial public offering, the Company will
sell approximately 1,400,000 shares of Class A common stock and
1,400,000 warrants to the public. This would increase the outstanding
shares of Class A common stock to 1,430,000 for a total outstanding
shares of 2,830,000, without giving effect to the exercise of the
warrants.
F-17
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 14 - OTHER INCOME (EXPENSES)
Included in other, net, is the recognition of approximately $150,000 of
deferred revenue from the Pepsico exclusivity agreement (see Note 12),
$148,000 from related parties and approximately $353,000 of refunds
from vendors.
NOTE 15 - RELATED PARTY TRANSACTIONS
During 1996, KyF Chile relocated its Corporate headquarters by
acquiring new office facilities in Santiago, Chile at a cost of
approximately $568,000.
In April 1997, KyF Chile sold the new office facilities to a third
party, whose 2% shareholder is the owner of KyF Chile. In consideration
for the approximate price of $568,000, KyF Chile issued a promissory
note for the total amount due which was later transferred to Kyoto as
part of various loans due Kyoto from KyF Chile. In May 1997, KyF Chile
entered into a ten year lease agreement with the purchaser at a monthly
rate of $9,050 plus common area maintenance and general expenses of
$1,100 per month.
In addition, the Company received advances for $679,095 from Kyoto
bearing interest rates of 7.8% and 9% per annum. There are no stated
repayment terms.
During 1997 and 1996, the Company declared dividends with the intent of
eliminating related party receivables. Total dividends declared were
$321,967 and $139,909, respectively.
NOTE 16 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS
KyF Chile conducts its operations in facilities which are leased under
terms ranging from six to 15 years expiring between the years 2006 and
2012. Most leases provide for one or more options to renew for at least
one additional term. In addition to a minimum monthly base rent, some
of the leases provide for additional rents which are calculated on a
percentage of gross sales over a base sales amount.
F-18
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 16 - COMMITMENTS AND CONTINGENCIES (Continued)
Future minimum obligations over the primary terms of KyF Chile's
long-term leases as of December 31, 1997 are as follows:
YEAR ENDING
DECEMBER 31,
------------
1998 $ 1,491,091
1999 1,512,087
2000 1,555,154
2001 1,263,208
2002 1,010,886
Thereafter 5,337,400
---------------
Total Minimum Lease Payments Required $ 12,169,826
===============
FRANCHISE AGREEMENT
KyF Chile entered into a franchise agreement with KFCIH to use the
trademark, service mark and trade name Kentucky Fried Chicken.
Under the franchise agreement, at all times, Ricardo Vilensky, the
Company's CEO, President, and Chairman, is to retain voting control of
KyF Chile and a minimum of 30% ownership of the Company. Provided that
any proceeds received are not used to start a new company, Mr. Vilensky
may sell up to the lesser of (a) 10% of the outstanding capital stock
of the Company or (b) such amount so that Mr. Vilensky's ownership
interest will not be below 30% of the outstanding capital stock.
However, to the extent that Mr. Vilensky wants to retain less than a
30% interest in the Company, KFCIH must approve.
As a condition of the franchise agreement, the Company is also required
to have a "designated operator", which is the person that oversees the
management of the day-to-day operations of the Company's restaurants.
Currently, the designated operator is Mr. Vilensky. There can be no
assurance that the Company will be in a position to meet the criteria
required by KFCIH in the event Mr. Vilensky is unable or unwilling to
continue as the designated operator and/or control not less than a 30%
ownership interest in the Company.
F-19
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 16 - COMMITMENTS AND CONTINGENCIES (Continued)
The initial franchise term for each restaurant is ten years, which
expires between December 31, 2003 and December 31, 2007, depending on
when the particular restaurant was opened. The initial franchise term
is renewable for additional ten year periods, provided that, among
other things, (i) the renewal is permitted by local law; (ii) the
Company has corrected and default under the agreement and has not been
in material default within the 24 months preceding the renewal request;
(iii) the Company complies with annual performance criteria; (iv) the
Company requests renewal within 12 to 18 months prior to the expiration
of the initial term; (v) the Company agrees to make capital
improvements to conform with KFCIH's then current standards and
completes the improvements, as agreed; (iv) the Company agrees to
relocate any restaurants KFCIH determines cannot be renovated to meet
the then current standards; (vii) the Company executes a new franchise
agreement if the current form has been modified; (viii) the Company is
current in all obligations, monetary or otherwise, to KFCIH; and (ix)
the Company pay a renewal fee as agreed upon with KFCIII.
Pursuant to current KFCIH policies and procedures, KFCIH's approval is
required for the development of any new KyF restaurants by the Company
and KFCIH's consent to such renewals, acquisitions or development may
be withheld in KFCIH's sole discretion.
The Company has agreed, with KFCIH's consent, to construct, develop,
open and operate four additional new KyF restaurants during the next
seven years, for a total of 60 restaurants to be owned and operated by
the Company by the end of 2005. Royalty rates for the first new KyF
restaurant will be 5% and for the additional 30 new KyF restaurants
will be 6%. Initial franchise fees will be $35,000 per restaurant,
except for (i) the first four new KFC restaurants, which require no
initial franchise fees, and (ii) non-traditional stores (relocateable
structures such as kiosks, carts, and mobile units and are typically
located in airports, schools, universities, offices, hospitals and
retail outlets), which will have initial franchise fees of $17,500.
Additionally, development right fees of $10,000 per restaurant to
develop 34 locations will be paid in equal installments over six years
beginning on the first anniversary of the effective date of the
development agreement, and then continuing on the following five
anniversaries thereafter.
The agreement requires a monthly franchise fee of 5% of revenues, as
defined, subject to a monthly minimum which may be set and updated by
KFCIH from time to time. The agreement also requires the Company to
contribute annually for advertising and promotions not less than 5% of
its annual revenues, as defined. Franchise fees totaled approximately
$728,000 and $503,000 for the years ended December 31, 1997 and 1996,
respectively, of which approximately $794,000 and $519,000 remain
unpaid as of December 31, 1997 and 1996, respectively, and is included
in accrued expenses and other current liabilities in the accompanying
supplemental consolidated balance sheets. As a result, the Company is
currently in default of the franchise agreement. So long as the Company
is in compliance with the other terms and obligations of the franchise
agreement, KFCIH has advised the Company that it does not intend to
terminate the franchise agreement.
F-20
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 17 - OTHER MATTERS
In November 1997, the Company entered into an agreement with an
underwriter to offer 1,400,000 shares of Class A common stock and
1,400,000 redeemable common stock purchase warrants to the public in an
initial public offering, being made on a firm commitment basis. Each of
the warrants entitles the registered holder to purchase one share of
Class A common stock. Total anticipated funds being raised will be
approximately $7,175,000. The net proceeds will be used for the
continued development of new stores (approximately $2,465,000), payment
of franchise fees for approximately $825,000 (including interest), the
repayment of $1,331,750 in long term debt, $565,000 for repayment of
loans due to third parties, and working capital of approximately
$713,250.
NOTE 18 - SUBSEQUENT EVENT
BRIDGE LOAN - Subsequent to December 31, 1997, the Company entered into
a bridge loan in the amount of $150,000 with an investor to be used for
short-term operations. This loan is evidenced by a promissory note
bearing an interest rate of 8.5% per year. The Company is obligated to
repay this note the earlier of (i) the closing date of the
aforementioned initial public offering, or (ii) January 1, 2000. As
additional consideration, the investor received 30,000 shares of Class
A common stock.
RENT AGREEMENT - Subsequent to December 31, 1997, the Company entered
into a two year lease agreement with an affiliate of one of the
Company's Directors for the rental space of its Florida office at an
annual payment of $10,000.
CONSULTING AGREEMENT - Subsequent to December 31, 1997, the Company
entered into a ten year agreement with of one of the Directors at an
annual compensation of $35,000 which shall commence as of the effective
date of the Company's initial public offering in consideration for
certain financial, advisory and consulting services.
In addition, the Company entered into a one year agreement with an
affiliate of one of the Company's Directors to perform certain services
including acting as the U.S. liaison for the Company at an annual
payment of $20,000.
EMPLOYMENT AGREEMENTS - Subsequent to December 31, 1997, the Company
entered into a three year employment agreement with the Company's
President and Chief Financial Officer. Pursuant to the terms and
conditions of the employment agreements, the President shall receive an
initial annual base salary of $80,000 and the Chief Financial Officer
shall receive an initial annual base salary of $60,000. In addition to
the base salaries, they are entitled to receive various incentives and
other compensation amounting to $190,000 and $50,000 for the President
and Chief Financial Officer, respectively.
F-21
<PAGE>
UNISERVICE CORPORATION
Notes to Supplemental Consolidated Financial Statements (Continued)
NOTE 18 - SUBSEQUENT EVENT (Continued)
STOCK OPTION PLAN - On January 5, 1998, the Board of Directors of the
Company and a majority of the Company's shareholders adopted a Stock
Option Plan (the "Plan"). The Company will reserve a small amount of
shares (not yet determined) of Class A common stock for issuance under
this Plan. No options have been issued under the Plan.
F-22
<PAGE>
<TABLE>
<S> <C>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY UNISERVICE CORPORATION
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE 1,400,000 SHARES OF
DELIVERY OF THIS PROSPEC TUS NOR ANY SALE MADE HEREUNDER SHALL, IN ANY CLASS A COMMON STOCK
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY 1,400,000 REDEEMABLE
DATE SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER COMMON STOCK
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY PURCHASE WARRANTS
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. -----------------
--------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................... 3
Risk Factors................................ 5
Use of Proceeds ............................ 15
Dividend Policy............................. 17
Dilution.................................... 18
Capitalization.............................. 19
Exchange Rates.............................. 20
Selected Financial Data..................... 21
Management's Discussion and
Analysis of Financial Condition
Results of Operations.................... 22
Business.................................... 26
Management.................................. 38 ----------------
Certain Relationships and Related Transactions 45
Bridge Financing............................ 47
Principal Shareholders...................... 48
Description of Securities................... 49 PROSPECTUS
Shares Eligible for
Future Sale............................... 53
Underwriting................................ 54
Legal Matters............................... 57 ----------------
Experts .................................... 57
Additional Information...................... 57
Index to Financial
Statements................................ F-1 WERBEL-ROTH SECURITIES, INC.
</TABLE>
--------------------
UNTIL _________, 199___ (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANS ACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act ("Corporation Act") permits the
indemnification of directors, employees, officers and agents of Florida
corporation. The Company's Articles of Incorporation and Bylaws provides that
the Company shall indemnify to the fullest extent permitted by the Corporation
Act any person whom it may indemnify thereunder.
The provisions of Florida law that authorize indemnification do not
eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of nonmonetary relief will
remain available. In addition, each director will continue to be subject to
liability for (a) violations of criminal laws, unless the director has
reasonable cause to believe that his or her conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (b) deriving an improper
personal benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or conscious disregard for the best
interests of the Company in a proceeding by or in the right of the Company to
procure a judgment in its favor or in a proceeding by or in the right of a
shareholder. The statute does not affect a director's responsibilities under any
other law, such as the federal securities laws.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he or she 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 or her conduct was unlawful.
Pursuant to the terms of the Underwriting Agreement, the directors and
officers of the Company also are indemnified against certain civil liabilities
that they may incur under the Act.
Insofar as indemnification for liabilities arising under the Act, may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Commission, such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
discounts expected to be incurred in connection with the Offering described in
this Registration Statement. All amounts are estimated except the Registration
Fee, NASD Fee and the underwriters' non-accountable expense allowance.
<TABLE>
<S> <C>
Securities and Exchange Commission/Registration fee and other documents*........................... $5,917.94
NASD filing fee*................................................................................... 2,506.00
NASDAQ filing fee*.................................................................................
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Printing and engraving expenses*...................................................................
Accounting fees and expenses*......................................................................
Legal fees and expenses*...........................................................................
Blue Sky fees and expenses*........................................................................
Representative's non-accountable expense allowance.................................................
Transfer Agent fees and expenses ..................................................................
Miscellaneous .....................................................................................________
Total ............................................................................................$
</TABLE>
*Estimated
All of the above expenses of this Offering will be paid by the Company.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On November 21, 1997, the Company issued 100 shares of Class B Common
Stock to Mr. Vilensky, the President, Chief Executive Officer and Chairman of
the Board of USC and KyF Chile for par value, as promotional shares. The
issuance of the shares of Class A Common Stock were exempt from registration
pursuant to Section 4(2) of the Act.
Between January and March 1998, one unrelated, accredited investor
loaned the Company $150,000 (at an interest rate of 8-1/2% per year). As
consideration for this loan, the investor received 30,000 shares of Class A
Common Stock. The investor had access to, or was otherwise provided with,
information, including financial, concerning the Company. The issuance of the
shares of Class A Common Stock were exempt from registration pursuant to Section
4(2) of the Act.
As of the Effective Date, Inversiones e Inmobiliaria Kyoto Limitada
("Kyoto"), a Chilean limited partnership that is controlled by Mr. Vilensky and
whose partners are also controlled by Mr. Vilensky will purchase 1,399,900
shares of Company Stock for $2.2 million. The shareholders of Kyoto were
provided with, or otherwise had access to, information, including financial,
concerning the Company. Accordingly, the issuances of the shares of the shares
of Class B Common Stock to Kyoto will be exempt from registration pursuant to
Section 4(2) of the Act.
II-2
<PAGE>
ITEM 27. EXHIBITS.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
1.1 Form of Underwriting Agreement(1)
1.2 Form of Agreement Among Underwriters(1)
1.3 Form of Selling Group Agreement(1)
1.3(a) Selected Dealers Agreement(1)
2.1 Stock Purchase Agreement between Kyoto and the Company for the
purchase of Class B Common Stock(2)
2.2 Stock Purchase Agreement between the Company and Kyoto for the
purchase of shares of Kentucky Foods Chile S.A. Stock(2)
3.1(a) Company's Amended and Restated Articles of Incorporation(2)
3.1(b) Articles of Amendment to Amended and Restated Articles of
Incorporation(2)
3.2 Company's Bylaws(2)
4.1 Form of Warrant Agreement together with the form of Warrant
Certificate(2)
4.2 Form of Representative's Warrant Agreement together with the
form of Representative's Purchase Warrant Certificate(1)
4.2(a) Form of Registration Rights Agreement(1)
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.(2)
10.1 Stock Option Plan(2)
10.2 Master Franchise Agreement between Kentucky Foods Chile, S.A.
and Kentucky Fried Chicken International Holdings, Inc., as
amended(2).
10.3 Loan Agreement between Kentucky Foods Chile, S.A. and
Inversiones e Inmobiliaria Kyoto Limitada dated October 3,
1997(2)
10.4 Loan Agreement between Kentucky Foods Chile, S.A. and
Inversiones e Inmobiliaria Kyoto Limitada dated November 6,
1997(2)
10.5 Bridge Loan Documents(2)
10.6 Form of Employment Agreement between the Company and Ricardo
Vilensky(2)
10.7 Form of Employment Agreement between the Company and Mauricio
Aguirre(2)
10.8 Lease Agreement between KyF Chile and Imobiliaria Kilkil
S.A.(2)
10.9 Recognition of Debt Note(2)
21 Subsidiaries of Registrant(2)
23.1 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (to be
included in its opinion filed as Exhibit 5.1)(2)
23.2 Consent of Spear, Safer, Harmon & Co. P.C.(2)
27 Financial Data Schedule(2)
- --------------------
(1) To be filed by amendment
(2) Filed herewith
II-3
<PAGE>
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
it will file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i include any prospectus required by section 10(a)(3) of the
Act;
(ii reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and
(iii include any additional or changed material information on
the plan of distribution;
(iv for determining liability under the Act, it will treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering.
(v it will file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
Offering.
(vi it will provide to the Underwriter at the closing of this
Offering 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 liability 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) The undersigned registrant hereby undertakes that:
(i For 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
II-4
<PAGE>
497(h) under the Act shall be deemed to be part of this registration statement
as of the time it was declared effective.
(ii 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 thereof.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing the Registration Statement on Form
SB-2 and authorizes this Registration Statement to be signed on its behalf by
the undersigned, in the City of Ft. Lauderdale, State of Florida, on this
24th day of April, 1998.
UNISERVICE CORPORATION
By: /S/ RICARDO VILENSKY
-----------------------
Ricardo Vilensky
President and
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement was signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/S/RICARDO VILENSKY President and Chief April 24, 1998
- ------------------- Executive Officer and
Ricardo Vilensky Director (Principal
Executive Officer)
/S/MAURICIO AGUIRRE Chief Financial Officer April 24, 1998
- -------------------- (Principal Financial and
Mauricio Aguirre Accounting Officer)
and Director
/S/JUAN CARLOS CERDA Director April 24, 1998
- --------------------
Juan Carlos Cerda
/S/DAVID MAYER Director April 24, 1998
- --------------------
David Mayer
/S/SERGIO VIVANCO Director April 24, 1998
- -----------------
Sergio Vivanco
/S/AVRAM FRITCH Director April 24, 1998
- ---------------
Avram Fritch
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Stock Purchase Agreement between Kyoto and the Company for the
purchase of Class B Common Stock
2.2 Stock Purchase Agreement between the Company and Kyoto for the
purchase of shares of Kentucky Foods Chile S.A. Stock
3.1(a) Company's Amended and Restated Articles of Incorporation
3.1(b) Articles of Amendment to Amended and Restated Articles of
Incorporation
3.2 Company's Bylaws
4.1 Form of Warrant Agreement together with the form of Warrant
Certificate
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
10.1 Stock Option Plan
10.2 Master Franchise Agreement between Kentucky Foods Chile, S.A.
and Kentucky Fried Chicken International Holdings, Inc., as
amended.
10.3 Loan Agreement between Kentucky Foods Chile, S.A. and
Inversiones e Inmobiliaria Kyoto Limitada dated October 3,
1997
10.4 Loan Agreement between Kentucky Foods Chile, S.A. and
Inversiones e Inmobiliaria Kyoto Limitada dated November 6,
1997
10.5 Bridge Loan Documents
10.6 Form of Employment Agreement between the Company and Ricardo
Vilensky
10.7 Form of Employment Agreement between the Company and Mauricio
Aguirre
10.8 Lease Agreement between KyF Chile and Imobiliaria Kilkil
S.A.
10.9 Recognition of Debt Note
21 Subsidiaries of Registrant
23.1 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (to be
included in its opinion filed as Exhibit 5.1)
23.2 Consent of Spear, Safer, Harmon & Co. P.C.
27 Financial Data Schedule
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Uniservice Agreement") is entered
into by and among UNISERVICE CORPORATION, a Florida corporation ("Uniservice"),
INVERSIONES E INMOBILIARIA KYOTO LIMITADA, a Chilean limited partnership which
is controlled, directly or indirectly by Ricardo Vilensky, an individual
currently residing in Santiago, Chile (collectively "Kyoto") and Kentucky Foods
Chile S.A. ("KyF Chile") as of the ____ day of _____, 1998, but which Uniservice
Agreement shall be effective as of the effective date of the registration
statement on Form SB-2 as followed by Uniservice with the Securities and
Exchange Commission ("Effective Date"). (Uniservice, Kyoto, and KyF Chile
sometimes individually referred to as "Party" and collectively as "Parties").
RECITALS
A. Uniservice is a corporation duly organized and existing under the
laws of the State of Florida and located in Palm Beach County, Florida, having
been incorporated November 21, 1997 and having authorized capital stock
consisting of thirty million (30,000,000) shares of Common Stock par value
$.0001, of which Twenty Million (20,000,000) shares are designated as Class A
Voting Common Stock and Two Million (2,000,000) shares are designated as Class B
Voting Common Stock ("Class B Common Stock")
B. Kyoto wishes to purchase 1,399,900 shares of Class B Common Stock
for $2.2 million, pursuant to the terms and conditions of this Uniservice
Agreement.
C. The laws of the State of Florida and the Country of Chile permit
Kyoto to purchase the shares of Class B Common Stock for $2.2 million, subject
to the terms and conditions set forth in this Uniservice Agreement.
D. Contemporaneously with the execution of this Uniservice Agreement,
Uniservice shall enter into a stock purchase agreement ("Kyoto Agreement") with
Kyoto and KyF Chile whereby as of the Effective Date, Uniservice shall purchase
54,216 shares of KyF Chile which are owned by Kyoto ("Kyoto Shares") for $2.2
million, which Kyoto Agreement shall be in substantially the same form as this
Uniservice Agreement, and which Kyoto Agreement is attached hereto as Exhibit A.
E. The Parties acknowledge and agree that the sole purpose for entering
into the Uniservice Agreement and the Kyoto Agreement in this manner is to
comply with the rules and regulations governing foreign investments in Chile, as
promulgated by the Central Bank of Chile and but for these requirements, the
Parties would have entered into a share exchange agreement whereby Uniservice
would have exchanged 1,399,900 shares of Class B Common Stock for 54,216 Kyoto
Shares. It is the Parties' intention
<PAGE>
that the Uniservice Agreement and the Kyoto Agreement be effective
contemporaneously as of the Effective Date.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, as of the "Effective Date," as
hereinafter defined, it is agreed that Uniservice shall purchase the shares of
Class B Common Stock for $2.2 million, subject to the terms and conditions set
forth and the mode of carrying it into effect are and shall be as follows:
1. RECITALS. The above recitals are true, correct and are herein
incorporated by reference.
2. PURCHASE OF SHARES.
a. Uniservice hereby agrees to transfer to Kyoto at the
closing referred to in Section 3 below the 1,399,900 shares of Class B Common
Stock for $2.2 million, and Uniservice agrees to deliver to Kyoto a certificate
representing the 1,399,900 shares of Class B Common Stock. All certificates to
be delivered at the closing by the parties hereto shall be in negotiable form,
subject to any lock-up agreements and other restrictions pursuant to Federal and
state securities laws and contractual agreements with certain persons and
Uniservice's representative of the underwriters, including but not limited to,
Rule 144 of the Securities Act of 1933, as amended or as applicable.
b. Notwithstanding anything else to the contrary contained
herein, contemporaneously with the closing contemplated herein, Uniservice, KyF
Chile, and Kyoto shall enter into the Kyoto Agreement.
3. CLOSING DATE. The "Closing Date" shall be the effective date of
Uniservice's registration statement on Form SB-2 filed with the Securities and
Exchange Commission.
4. REPRESENTATIONS OF UNISERVICE. Uniservice hereby represents and
warrants that:
(a) Uniservice is validly organized, existing and in good
standing under the laws of the State of Florida. Upon information and belief,
there are no outstanding options, contracts, calls, commitments or demands of
any character relating to the authorized but unissued stock of Uniservice.
(b) The shares of Class B Common Stock to be sold at the
closing are validly issued, fully paid and non-assessable.
(c) Except as otherwise previously disclosed to Kyoto by
Uniservice, there has been no material adverse change in the condition of
Uniservice since the date
2
<PAGE>
of the financial statements previously provided to Kyoto. To the best of
Uniservice's knowledge, the only changes in the financial condition of
Uniservice since said date are those arising from the normal and regular conduct
of the business of Uniservice.
(d) Except as otherwise previously disclosed to Kyoto by
Uniservice, to the best of Uniservice's knowledge, there is no litigation,
governmental proceeding or investigation threatened or in prospect against
Uniservice or relating to any of the interest to be transferred hereunder which
could materially affect Kyoto.
(e) Except as otherwise previously disclosed to Kyoto by
Uniservice, to the best of Uniservice's knowledge, Uniservice has no bonus,
deferred compensation, profit-sharing, pension or retirement arrangements,
whether or not legally binding, nor is it presently paying any pension, deferred
compensation or retirement allowance which has not otherwise been disclosed to
Kyoto.
(f) The statements made and information given to Kyoto
concerning UniService and the transactions covered by this Agreement are true
and accurate and no material fact has been withheld from Kyoto.
(g) Uniservice has no knowledge of any developments or
threatened developments of a nature that would be materially adverse to the
business of Uniservice.
(h) Subject to the lock-up requirements previously discussed
to Kyoto and as set forth in the Registration Statement, the shares of Class B
Common Stock to be transferred by Uniservice to Kyoto hereunder are free and
clear of all voting trusts, agreements, arrangements, encumbrances, liens,
claims, equities and liabilities of every nature and Uniservice is conveying
clear and unencumbered title thereto to Kyoto.
(i) There are no agreements to which Uniservice is a party nor
does Uniservice know of any other agreements that in any way materially restrict
or impinge upon the business of Uniservice or the benefit of which Uniservice
requires or presently has in its business.
5. REPRESENTATIONS OF KYOTO. Kyoto hereby makes the following
representations and warranties to Uniservice, each of which is true as of the
date hereof and will be true as of the Closing Date with the same effect as
though such representations and warranties had been made on the Closing Date:
(a) Kyoto is a corporation duly organized and existing under
and by virtue of the laws of the Country of Chile, and is in good standing under
the laws thereof.
(b) The execution and delivery of this Agreement by Kyoto and
the performance by Kyoto of its covenants and undertakings hereunder have been
duly authorized by all requisite corporate action, and Kyoto has the corporate
power and
3
<PAGE>
authority to enter into this Agreement and to perform the covenants and
undertakings to be performed by it hereunder.
(c) Neither the execution nor the delivery of this Agreement,
nor the consummation of the transaction herein contemplated, nor compliance with
the terms hereof, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Articles of Incorporation or the Bylaws of
Uniservice as amended, or any agreement or instrument to which Kyoto is now a
party.
(d) Kyoto is acquiring Uniservice's stock for its own account
and for investment and not with the view to the distribution or resale of any
thereof.
6. INVESTMENT PURPOSE. Kyoto represents that it is acquiring the shares
of Uniservice Common Stock to be delivered at the closing solely for investment
and not for distribution or resale.
7. NOTICES. Any notice or communication necessary or desirable
hereunder shall be considered sufficient and delivery thereof shall be deemed
complete if delivered in person or mailed by registered mail on the part of
Uniservice to:
Uniservice Corporation
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
and to Kyoto and Ricardo Vilensky, as follows:
Inversiones e Inmobiliaria Kyoto Limitada
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
Attn: Ricardo Vilensky
and to KyF Chile as follows:
Kentucky Foods Chile S.A.
Carmencita #23, Office 1002
Santiago, Chile
Attn: Ricardo Vilensky
or to such other address as either party may hereafter specify in writing as his
or its own address to the other party.
4
<PAGE>
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection herewith.
9. SEVERABILITY. Kyoto and Uniservice hereby agree and affirm that none
of the above provisions is dependent on the validity of any other provision and
invalidity as to any provision or any part thereof shall not affect any other
provision.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida. Venue shall be Palm Beach County, Florida.
11. COUNTERPART. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
UNISERVICE CORPORATION
By: ____________________________________
KYOTO:
INVERSIONES E INMOBILIARIA
KYOTO LIMITADA
By: _____________________________________
_________________________________________
RICARDO VILENSKY
KENTUCKY FOODS CHILE S.A.
By: _____________________________________
_________________________________________
RICARDO VILENSKY, PRESIDENT
5
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Kyoto Agreement") is entered into
by and among UNISERVICE CORPORATION, a Florida corporation ("Uniservice"),
INVERSIONES E INMOBILIARIA KYOTO LIMITADA, a Chilean limited partnership which
is controlled, directly or indirectly by Ricardo Vilensky, an individual
currently residing in Santiago, Chile (collectively "Kyoto") and which owns
54,216 shares (or 99.7% percent) of Kentucky Foods Chile, S.A., a Chilean
corporation ("KyF Chile"), and KyF Chile, as of the ____ day of _____, 1998, but
which Kyoto Agreement shall be effective as of the effective date of the
Registration Statement on Form SB-2 ("Registration Statement"), as filed by
Uniservice with the Securities and Exchange Commission ("Effective Date").
(Uniservice, Kyoto, and KyF Chile sometimes individually referred to as "Party"
and collectively as "Parties").
RECITALS
A. Uniservice is a corporation duly organized and existing under the
laws of the State of Florida and located in Palm Beach County, Florida, having
been incorporated November 21, 1997 and having authorized capital stock
consisting of thirty million (30,000,000) shares of Common Stock par value
$.0001, of which Twenty Million (20,000,000) shares are designated as Class A
Voting Common Stock and Two Million (2,000,000) shares are designated as Class B
Voting Common Stock.
B. Kyoto is the present owner of 54,216 shares ("Kyoto Shares") of KyF
Chile, out of 54,231 issued shares representing a 99.97% interest in KyF Chile.
C. The laws of the State of Florida and the Country of Chile permit
Uniservice to purchase the Kyoto Shares for $2.2 million, subject to the terms
and conditions set forth in this Kyoto Agreement.
D. Contemporaneously with the execution of this Kyoto Agreement,
Uniservice shall enter into a stock purchase agreement with KyF Chile whereby as
of the Effective Date, KyF Chile shall purchase 1,399,900 shares of Uniservice
Class B Common Stock, par value $.0001 ("Class B Common Stock") for $2.2 million
("Uniservice Agreement"), which Uniservice Agreement shall be in substantially
the same form as this Kyoto Agreement, and which Uniservice Agreement is
attached hereto as Exhibit A.
E. The Parties acknowledge and agree that the sole purpose for entering
into the Kyoto Agreement and the Uniservice Agreement in this manner is to
comply with the rules and regulations governing foreign investments in Chile, as
promulgated by the Central Bank of Chile and but for these requirements, the
Parties would have entered into a share exchange agreement whereby Uniservice
would have exchanged 1,399,900 shares of Class B Common Stock for 54,216 Kyoto
Shares. It is the Parties' intention
<PAGE>
that the Kyoto Agreement and the Uniservice Agreement be effective
contemporaneously as of the Effective Date.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, as of the "Effective Date," as
hereinafter defined, it is agreed that Uniservice shall purchase the Kyoto
Shares for $2.2 million, subject to the terms and conditions set forth and the
mode of carrying it into effect are and shall be as follows:
1. RECITALS. The above recitals are true, correct and are herein
incorporated by reference.
2. PURCHASE OF SHARES.
a. Kyoto hereby agrees to transfer to Uniservice at the
closing referred to in Section 3 below the Kyoto Shares, which represents a
99.97% interest in KyF Chile, for $2.2 million, and Kyoto agrees to deliver to
Uniservice a certificate representing the 54,216 Kyoto Shares. All certificates
to be delivered at the closing by the parties hereto shall be in negotiable
form, subject to any lock-up agreements and other restrictions pursuant to
Federal and state securities laws and contractual agreements with certain
persons and Uniservice's representative of the underwriters, including but not
limited to, Rule 144 of the Securities Act of 1933, as amended or as applicable.
b. Notwithstanding anything else to the contrary contained
herein, contemporaneously with the closing contemplated herein, Uniservice and
KyF shall enter into the Uniservice Agreement.
3. CLOSING DATE. The "Closing Date" shall be the effective date of
Uniservice's registration statement on Form SB-2 filed with the Securities and
Exchange Commission.
4. REPRESENTATIONS OF KYOTO. Kyoto hereby represents and warrants
that:
(a) KFC Chile is validly organized, existing and in good
standing under the laws of the Country of Chile. Upon information and belief,
there are no outstanding options, contracts, calls, commitments or demands of
any character relating to the authorized but unissued stock of KFC Chile.
(b) The Kyoto Shares to be sold at the closing are validly
issued, fully paid and non-assessable.
(c) Except as otherwise previously disclosed to Uniservice by
Kyoto, there has been no material adverse change in the condition of KFC Chile
since the date of the financial statements previously provided to Uniservice. To
the best of Kyoto's
2
<PAGE>
knowledge, the only changes in the financial condition of KFC Chile since said
date are those arising from the normal and regular conduct of the business of
KFC Chile.
(d) Except as otherwise previously disclosed to Uniservice by
Kyoto, to the best of Kyoto's knowledge, there is no litigation, governmental
proceeding or investigation threatened or in prospect against KFC Chile or
relating to any of the interest to be transferred hereunder which could
materially affect Uniservice.
(e) Except as otherwise previously disclosed to Uniservice by
Kyoto, to the best of Kyoto's knowledge, KFC Chile has no bonus, deferred
compensation, profit-sharing, pension or retirement arrangements, whether or not
legally binding, nor is it presently paying any pension, deferred compensation
or retirement allowance which has not otherwise been disclosed to Uniservice.
(f) The statements made and information given to Uniservice
concerning KFC Chile and the transactions covered by this Agreement are true and
accurate and no material fact has been withheld from Uniservice.
(g) Kyoto has no knowledge of any developments or threatened
developments of a nature that would be materially adverse to the business of KFC
Chile.
(h) The Kyoto Shares to be transferred by Kyoto to Uniservice
hereunder are free and clear of all voting trusts, agreements, arrangements,
encumbrances, liens, claims, equities and liabilities of every nature and Kyoto
is conveying clear and unencumbered title thereto to Uniservice.
(i) There are no agreements to which Kyoto is a party nor does
Kyoto know of any other agreements that in any way materially restrict or
impinge upon the business of KFC Chile or the benefit of which KFC Chile
requires or presently has in its business.
5. REPRESENTATIONS OF UNISERVICE. Uniservice hereby makes the following
representations and warranties to Kyoto, each of which is true as of the date
hereof and will be true as of the Closing Date with the same effect as though
such representations and warranties had been made on the Closing Date:
(a) Uniservice is a corporation duly organized and existing
under and by virtue of the laws of the State of Florida, and is in good standing
under the laws thereof.
(b) The execution and delivery of this Agreement by Uniservice
and the performance by Uniservice of its covenants and undertakings hereunder
have been duly authorized by all requisite corporate action, and Uniservice has
the corporate power and
3
<PAGE>
authority to enter into this Agreement and to perform the covenants and
undertakings to be performed by it hereunder.
(c) Neither the execution nor the delivery of this Agreement,
nor the consummation of the transaction herein contemplated, nor compliance with
the terms hereof, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Articles of Incorporation or the Bylaws of
Uniservice as amended, or any agreement or instrument to which Uniservice is now
a party.
(d) Uniservice is acquiring Kyoto's stock for its own account
and for investment and not with the view to the distribution or resale of any
thereof.
6. INVESTMENT PURPOSE. Kyoto represents that it is acquiring the shares
of Uniservice Class B Common Stock to be delivered at the closing solely for
investment and not for distribution or resale.
7. NOTICES. Any notice or communication necessary or desirable
hereunder shall be considered sufficient and delivery thereof shall be deemed
complete if delivered in person or mailed by registered mail on the part of
Uniservice to:
Uniservice Corporation
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
and to Kyoto and Ricardo Vilensky, as follows:
Inversiones e Inmobiliaria Kyoto Limitada
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
Attn: Ricardo Vilensky
and to KyF Chile as follows:
Kentucky Foods Chile S.A.
Carmencita #23, Office 1002
Santiago, Chile
Attn: Ricardo Vilensky
or to such other address as either party may hereafter specify in writing as his
or its own address to the other party.
4
<PAGE>
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection herewith.
9. SEVERABILITY. Kyoto and Uniservice hereby agree and affirm that none
of the above provisions is dependent on the validity of any other provision and
invalidity as to any provision or any part thereof shall not affect any other
provision.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida. Venue shall be Palm Beach County, Florida.
11. COUNTERPART. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
UNISERVICE CORPORATION
By: ____________________________________
KYOTO:
INVERSIONES E INMOBILIARIA
KYOTO LIMITADA
By: _____________________________________
_________________________________________
RICARDO VILENSKY
EXHIBIT 3.1(a)
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
UNISERVICE CORP.
The undersigned, being all the Board of Directors and Shareholders of
UNISERVICE CORP. (hereinafter the "Corporation"), a Florida corporation, do
hereby certify and set forth:
1. The name of the corporation is UNISERVICE CORP.
2. The Articles of Incorporation of the Corporation were filed on
November 21, 1997 with the Florida Department of State.
3. The Articles of Incorporation are amended, as authorized by The
Florida Business Corporation Act, (i) to increase the authorized number of
shares which the corporation shall have authority to issue 3,000,000 shares of
Common Stock, $.0001 par value, to 30,000,000 shares of Common Stock, par value
$.0001 per share; (ii) to authorize to issue 5,000,000 shares of Preferred
Stock, par value $.0001; and (iii) to expressly not be subject to Section
607.0902 of the Florida Business Corporation Act.
4. The Articles of Incorporation are amended to change the name of the
Corporation to Uniservice Corporation.
5. The Amended and Restated Articles of Incorporation were adopted by
the Sole Shareholder and the Board of Directors on December 1, 1997. To effect
the foregoing, the text of the Articles of Incorporation is hereby restated and
amended as herein set forth in full:
ARTICLE I.
CORPORATE NAME
The name of this Corporation shall be: UNISERVICE CORPORATION
ARTICLE II.
PRINCIPAL OFFICE AND MAILING ADDRESS
The principal office and mailing address of the Corporation is c/o
Andean Development Corporation, One Lincoln Place, 1900 Glades Road, Suite 351,
Boca Raton, Florida 33431.
<PAGE>
ARTICLE III.
NATURE OF CORPORATE BUSINESS AND POWERS
The general nature of the business to be transacted by this Corporation
shall be to engage in any and all lawful business permitted under the laws of
the United States and the State of Florida.
ARTICLE IV.
CAPITAL STOCK
The maximum number of shares that this Corporation shall be authorized
to issue and have outstanding at any one time shall be (i) thirty million
(30,000,000) shares of common stock, par value $.0001 per share, of which
10,000,000 shares have been designated as Class A Common Stock and 2,000,000
shares have been designated as Class B Common Stock, and (ii) five million
(5,000,000) shares of Preferred Stock having a par value of $.0001 per share.
The Class A Common Stock shall be designated as follows:
1. DESIGNATION AND NUMBER OF SHARES. The Class A Common Stock shall be
designated "Class A Common Stock" of a par value of $.0001 each, and the number
of shares constituting the Class A Common Stock shall be 10,000,000 shares.
2. VOTING RIGHTS. Holders of Class A Common Stock shall be entitled to
one (1) vote for each share of Class A Common Stock held.
3. DIVIDENDS. Holders of Class A Common Stock shall be entitled to
dividends as shall be designated by the Company's Board of Directors from time
to time.
The Class B Common Stock shall be designated as follows:
1. DESIGNATION AND NUMBER OF SHARES. The Class B Common Stock shall be
designated "Class B Common Stock" of a par value of $.0001 each, and the number
of shares constituting the Class B Common Stock shall be 2,000,000 shares.
2. VOTING RIGHTS. Holders of Class B Common Stock shall be entitled to
ten (10) votes for each share of Class B Common Stock held.
3. DIVIDENDS. Holders of Class B Common Stock shall be entitled to
dividends as shall be designated by the Company's Board of Directors from time
to time.
4. CONVERSION. Holders of Class B Common Stock may convert any shares
of Class B Common Stock held by any of them into shares of Class A Common Stock,
PROVIDED THAT upon conversion, the voting rights of such converted shares shall
be on
2
<PAGE>
a one vote for one share basis; AND PROVIDED THAT such Class A Common Stock are
unencumbered or are not subject to any escrow agreement or otherwise.
5. SALE OR TRANSFER OF CLASS B COMMON STOCK. Holders of Class B Common
Stock may sell or transfer any or all of their shares of Class B Common Stock to
any party, who will have the same rights, privileges, and restrictions, if
applicable, of any other holder of Class B Common Stock.
Classes and series of the Common Stock and Preferred Stock may be
created and issued from time to time, with such designations, preferences,
conversion rights, cumulative, relative, participating, optional or other
rights, including voting rights, qualifications, limitations or restrictions
thereof as shall be stated and expressed in the resolution or resolutions
providing for the creation and issuance of such classes of Common Stock as
adopted by the Board of Directors.
ARTICLE V.
TERM OF EXISTENCE
This Corporation shall have perpetual existence.
ARTICLE VI.
REGISTERED AGENT AND
INITIAL REGISTERED OFFICE IN FLORIDA
The Registered Agent and the street address of the initial Registered
Office of this Corporation in the State of Florida shall be:
Charles B. Pearlman
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard. Suite 1900
Fort Lauderdale, Florida 33301
ARTICLE VII.
BOARD OF DIRECTORS
This Corporation shall have two (2) Directors initially.
ARTICLE VIII.
INCORPORATOR
The name and address of the person signing these Articles of
Incorporation as the Incorporator is Charles B. Pearlman, c/o Atlas, Pearlman,
Trop & Borkson, P.A., 200 East Las Olas Boulevard, Suite 1900, Fort Lauderdale,
Florida 33301.
3
<PAGE>
ARTICLE IX.
INDEMNIFICATION
This Corporation may indemnify any director, officer, employee or agent
of the Corporation to the fullest extent permitted by Florida law.
ARTICLE X.
AFFILIATED TRANSACTIONS
This Corporation expressly elects not to be governed by Section
607.0901 of the Florida Business Corporation Act, as amended from time to time,
relating to affiliated transactions.
ARTICLE XI.
CONTROL SHARE ACQUISITIONS
This Corporation expressly elects to be governed by Section 607.0902 of
the Florida Business Corporation Act, as amended from time to time, relating to
control share acquisitions.
This Amendment to the Articles of Incorporation, which supersedes the
original Articles of Incorporation of the Corporation, was authorized by the
unanimous written consent of the Board of Directors followed by the unanimous
written consent of the shareholders of the corporation.
4
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Articles of Incorporation
of Uniservice Corp., a Florida corporation, has been executed this 24th day of
December, 1997.
/S/ RICARDO VILENSKY
------------------------------
Ricardo Vilensky, Sole Officer
Director and Sole Shareholder
/S/ DAVID MAYER
------------------------------
David Mayer, Director
5
EXHIBIT 3.1(b)
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
UNISERVICE CORPORATION
Pursuant to Section 607.1006 of the Business Corporation Act of the
State of Florida, the undersigned President of Uniservice Corporation (the
"Corporation"), a corporation organized and existing under and by virtue of the
Business Corporation Act of the State of Florida, bearing document number
P97000099628, does hereby certify:
First: That in accordance with the Written Consent of the Board of
Directors and Majority Shareholder of the Class A Common Stock of the
Corporation dated April 20, 1998, pursuant to Section 607.0821 and Section
607.0704 of the Florida Business Corporation Act, all the directors and
shareholders of said Corporation approved the amendment to the Corporation's
Amended and Restated Articles of Incorporation as follows:
Article IV of the Corporation's Articles of Incorporation shall be
deleted in its entirety and substituted by the following:
ARTICLE IV
CAPITAL STOCK
The maximum number of shares that this Corporation shall be authorized
to issue and have outstanding at any one time shall be (i) thirty million
(30,000,000) shares of common stock, par value $.0001 per share, of which
20,000,000 shares have been designated as Class A Common Stock and 2,000,000
shares have been designated as Class B Common Stock, and (ii) five million
(5,000,000) shares of Preferred Stock having a par value of $.0001 per share.
The Class A Common Stock shall be designated as follows:
1. DESIGNATION AND NUMBER OF SHARES. The Class A Common Stock shall be
designated as "Class A Common Stock" with a par value of $.0001 each, and the
number of shares constituting the Class A Common Stock shall be 20,000,000
shares.
2. VOTING RIGHTS. Holders of Class A Common Stock shall be entitled to
one (1) vote for each share of Class A Common Stock held.
3. DIVIDENDS. Holders of Class A Common Stock shall be entitled to
dividends as shall be designated by the Company's Board of Directors from time
to time.
<PAGE>
The Class B Common Stock shall be designated as follows:
1. DESIGNATION AND NUMBER OF SHARES. The Class B Common Stock shall be
designated "Class B Common Stock" with a par value of $.0001 each, and the
number of shares constituting the Class B Common Stock shall be 2,000,000
shares.
2. VOTING RIGHTS. Holders of Class B Common Stock shall be entitled to
ten (10) votes for each share of Class B Common Stock held.
3. DIVIDENDS. Holders of Class B Common Stock shall be entitled to
dividends as shall be designated by the Company's Board of Directors from time
to time.
4. CONVERSION. Holders of Class B Common Stock may convert any shares
of Class B Common Stock held by any of them into shares of Class A Common Stock,
PROVIDED THAT upon conversion, the voting rights of such converted shares shall
be on a one vote for one share basis; AND PROVIDED THAT such Class A Common
Stock are unencumbered or are not subject to any escrow agreement or otherwise.
5. SALE OR TRANSFER OF CLASS B COMMON STOCK. Holders of Class B Common
Stock may sell or transfer any or all of their shares of Class B Common Stock to
any party, who will have the same rights, privileges, and restrictions, if
applicable, of any other holder of Class B Common Stock.
Classes and series of the Common Stock and Preferred Stock may be
created and issued from time to time, with such designations, preferences,
conversion rights, cumulative, relative, participating, optional or other
rights, including voting rights, qualifications, limitations or restrictions
thereof as shall be stated and expressed in the resolution or resolutions
providing for the creation and issuance of such classes of Common Stock as
adopted by the Board of Directors.
The foregoing amendment was adopted by the Board of Directors and Sole
Shareholder of the Class A Common Stock of the Corporation pursuant to Section
607.0821 and Section 607.0704 of the Florida Business Corporation Act;
therefore, the number of votes cast by the Shareholders of the Corporation for
the amendment to the Corporation's Articles of Incorporation was sufficient for
approval.
IN WITNESS WHEREOF, the undersigned being the President of this
Corporation has executed these Articles of Amendment to the Amended and Restated
Articles of Incorporation as of the 20th day of April, 1998.
/S/ RICARDO VILENSKY
---------------------------
Ricardo Vilensky, President
EXHIBIT 3.2
BYLAWS
OF
UNISERVICE CORPORATION
a Florida corporation
<PAGE>
INDEX
PAGE
----
ARTICLE I
OFFICES
Section 1.01 PRINCIPAL OFFICE.......................... 1
Section 1.02 REGISTERED OFFICE......................... 1
Section 1.03 OTHER OFFICES............................. 1
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01 ANNUAL MEETING............................ 1
Section 2.02 SPECIAL MEETINGS.......................... 2
Section 2.03 SHAREHOLDERS' LIST FOR MEETING............ 2
Section 2.04 RECORD DATE............................... 3
Section 2.05 NOTICE OF MEETINGS AND ADJOURNMENT........ 3
Section 2.06 WAIVER OF NOTICE.......................... 4
ARTICLE III
SHAREHOLDER VOTING
Section 3.01 VOTING GROUP DEFINED...................... 5
Section 3.02 QUORUM AND VOTING REQUIREMENTS FOR
VOTING GROUPS............................ 5
Section 3.03 ACTION BY SINGLE AND MULTIPLE VOTING
GROUPS................................... 6
Section 3.04 SHAREHOLDER QUORUM AND VOTING; GREATER
OR LESSER VOTING REQUIREMENTS............ 5
Section 3.05 VOTING FOR DIRECTORS; CUMULATIVE VOTING... 6
<PAGE>
Section 3.06 VOTING ENTITLEMENT OF SHARES.............. 7
Section 3.07 PROXIES................................... 8
Section 3.08 SHARES HELD BY NOMINEES................... 9
Section 3.09 CORPORATION'S ACCEPTANCE OF VOTES......... 10
Section 3.10 ACTION BY SHAREHOLDERS WITHOUT MEETING.... 11
Section 3.11 FREQUENCY OF SOLICITATIONS FOR ACTION
BY SHAREHOLDERS WITHOUT A MEETING......... 14
ARTICLE IV
BOARD OF DIRECTORS AND OFFICERS
Section 4.01 QUALIFICATIONS OF DIRECTORS.............. 15
Section 4.02 NUMBER OF DIRECTORS...................... 15
Section 4.03 TERMS OF DIRECTORS GENERALLY............. 15
Section 4.04 STAGGERED TERMS FOR DIRECTORS............ 16
Section 4.05 VACANCY ON BOARD......................... 16
Section 4.06 COMPENSATION OF DIRECTORS................ 16
Section 4.07 MEETINGS................................. 16
Section 4.08 ACTION BY DIRECTORS WITHOUT A MEETING.... 17
Section 4.09 NOTICE OF MEETINGS....................... 17
Section 4.10 WAIVER OF NOTICE......................... 17
Section 4.11 QUORUM AND VOTING........................ 18
Section 4.12 POWERS OF THE DIRECTORS.................. 18
Section 4.13 COMMITTEES............................... 18
Section 4.14 LOANS TO OFFICERS, DIRECTORS AND
EMPLOYEES; GUARANTY OF OBLIGATIONS...... 19
Section 4.15 REQUIRED OFFICERS........................ 20
Section 4.16 DUTIES OF OFFICERS....................... 20
<PAGE>
Section 4.17 RESIGNATION AND REMOVAL OF OFFICERS...... 20
Section 4.18 CONTRACT RIGHTS OF OFFICERS.............. 20
Section 4.19 GENERAL STANDARDS FOR DIRECTORS.......... 21
Section 4.20 DIRECTOR CONFLICTS OF INTEREST........... 21
Section 4.21 RESIGNATION OF DIRECTORS................. 22
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 5.01 DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS............................... 23
ARTICLE VI
OFFICE AND AGENT
Section 6.01 REGISTERED OFFICE AND REGISTERED
AGENT................................... 28
Section 6.02 CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT; RESIGNATION OF REGISTERED AGENT.. 28
ARTICLE VII
SHARES, OPTION, DIVIDENDS AND DISTRIBUTIONS
Section 7.01 AUTHORIZED SHARES........................ 29
Section 7.02 TERMS OF CLASS OR SERIES DETERMINED
BY BOARD OF DIRECTORS................... 30
Section 7.03 ISSUED AND OUTSTANDING SHARES............ 30
Section 7.04 ISSUANCE OF SHARES....................... 31
Section 7.05 FORM AND CONTENT OF CERTIFICATES......... 31
Section 7.06 SHARES WITHOUT CERTIFICATES.............. 32
Section 7.07 RESTRICTION ON TRANSFER OF SHARES
AND OTHER SECURITIES.................... 33
<PAGE>
Section 7.08 SHAREHOLDER'S PRE-EMPTIVE RIGHTS......... 33
Section 7.09 CORPORATION'S ACQUISITION OF ITS
OWN SHARES.............................. 33
Section 7.10 SHARE OPTIONS............................ 33
Section 7.11 TERMS AND CONDITIONS OF STOCK RIGHTS
AND OPTIONS............................. 34
Section 7.12 SHARE DIVIDENDS.......................... 34
Section 7.13 DISTRIBUTION TO SHAREHOLDERS............. 35
ARTICLE VIII
AMENDMENT OF ARTICLES AND BYLAWS
Section 8.01 AUTHORITY TO AMEND THE ARTICLES OF
INCORPORATION........................... 36
Section 8.02 AMENDMENT BY BOARD OF DIRECTORS.......... 37
Section 8.03 AMENDMENT OF BYLAWS BY BOARD OF
DIRECTORS............................... 37
Section 8.04 BYLAW INCREASING QUORUM OR VOTING
REQUIREMENTS FOR DIRECTORS.............. 37
ARTICLE IX
RECORDS AND REPORT
Section 9.01 CORPORATE RECORDS........................ 38
Section 9.02 FINANCIAL STATEMENTS FOR SHAREHOLDERS.... 39
Section 9.03 OTHER REPORTS TO SHAREHOLDERS............ 40
Section 9.04 ANNUAL REPORT FOR DEPARTMENT OF STATE.... 40
ARTICLE X
MISCELLANEOUS
Section 10.01 DEFINITION OF THE "ACT".................. 41
Section 10.02 APPLICATION OF FLORIDA LAW............... 41
<PAGE>
Section 10.03 FISCAL YEAR.............................. 41
Section 10.04 CONFLICTS WITH ARTICLES OF
INCORPORATION........................... 41
<PAGE>
ARTICLE I
OFFICES
Section 1.01. PRINCIPAL OFFICE.
The principal office of the corporation in the State of Florida shall
be established at such places as the board of directors from time to time
determine.
Section 1.02. REGISTERED OFFICE.
The registered office of the corporation in the State of Florida shall
be at the office of its registered agent as stated in the articles of
incorporation or as the board of directors shall from time to time determine.
Section 1.03. OTHER OFFICES.
The corporation may have additional offices at such other places,
either within or without the State of Florida, as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. ANNUAL MEETING.
(1) The corporation shall hold a meeting of shareholders annually, for
the election of directors and for the transaction of any proper business, at a
time stated in or fixed in accordance with a resolution of the board of
directors.
(2) Annual shareholders' meeting may be held in or out of the State of
Florida at a place stated in or fixed in accordance with a resolution by the
board of directors or, when not inconsistent with the board of directors'
resolution stated in the notice of the annual meeting. If no place is stated in
or fixed in accordance with these bylaws, or stated in the notice of the annual
meeting , annual meetings shall be held at the corporation's principal office.
(3) The failure to hold the annual meeting at the time stated in or
fixed in accordance with these bylaws or pursuant to the Act does not affect the
validity of any corporate action and shall not work a forfeiture of or
dissolution of the corporation.
<PAGE>
Section 2.02. SPECIAL MEETING.
(1) The corporation shall hold a special meeting of shareholders:
(a) On call of a majority of its board of directors or the
person or persons authorized to do so by the board of directors; or
(b) By the Chief Executive Officer of the Corporation;
(c) If the holders of not less than 10% of all votes entitled
to be cast on any issue proposed to be considered at the proposed special
meeting sign, date and deliver to the corporation's secretary one or more
written demands for the meeting describing the purpose or purposes for which it
is to be held.
(2) Special shareholders' meetings may be held in or out of the State
of Florida at a place stated in or fixed in accordance with a resolution of the
board of directors, or, when not inconsistent with the board of directors'
resolution, in the notice of the special meeting. If no place is stated in or
fixed in accordance with these bylaws or in the notice of the special meeting,
special meetings shall be held at the corporation's principal office.
(3) Only business within the purpose or purposes described in the
special meeting notice may be conducted at a special shareholders' meeting.
Section 2.03. SHAREHOLDERS' LIST FOR MEETING.
(1) After fixing a record date for a meeting, a corporation
entitled to notice of a shareholders' meeting, in accordance with the Florida
Business Corporation Act (the "Act"), or arranged by voting group, with the
address of, and the number and class and series, if any, of shares held by,
each.
(2) The shareholders' list must be available for inspection by any
shareholder for a period of ten days prior to the meeting or such shorter time
as exists between the record date and the meeting and continuing through the
meeting at the corporation's principal office, at a place identified in the
meeting notice in the city where the meeting will be held, or at the office of
the corporation's transfer agent or registrar. A shareholder or his agent or
attorney is entitled on written demand to inspect the list (subject to the
requirements of Section 607.1602(3) of the Act), during regular business hours
and at his expense, during the period it is available for inspection.
<PAGE>
(3) The corporation shall make the shareholders' list available at the
meeting, and any shareholder or his agent or attorney is entitled to inspect the
list at any time during the meeting or any adjournment.
Section 2.04. RECORD DATE.
(1) The board of directors may set a record date for purposes of
determining the shareholders entitled to notice of and to vote at a
shareholders' meeting; however, in no event may a record date fixed by the board
of directors be a date preceding the date upon which the resolution fixing the
record date is adopted.
(2) Unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to demand a special meeting is the date
the first shareholder delivers his demand to the corporation. In the event that
the board of directors sets the record date for a special meeting of
shareholders, it shall not be a date preceding the date upon which the
corporation receives the first demand from a shareholder requesting a special
meeting.
(3) If no prior action is required by the board of directors pursuant
to the Act, and, unless otherwise fixed by the board of directors, the record
date for determining shareholders entitled to take action without a meeting is
the date the first signed written consent is delivered to the corporation under
Section 607.0704 of the Act. If prior action is required by the board of
directors pursuant to the Act, the record date for determining shareholders
entitled to take action without a meeting is at the close of business on the day
on which the board of directors adopts the resolution taking such prior action.
(4) Unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting is the close of business on the day before the
first notice of such annual or special shareholders' meeting is delivered to
shareholders.
(5) A record date may not be more than 70 days before the meeting or
action requiring a determination of shareholders.
(6) A determination of shareholders entitled to notice of or to vote at
a shareholders' meeting is effective for any adjournment of the meeting unless
the board of directors fixes a new record date, which it must do if the meeting
is adjourned to a date more than 120 days after the date fixed for the original
meeting.
Section 2.05. NOTICE OF MEETINGS AND ADJOURNMENT.
(1) The corporation shall notify shareholders of the date, time and
place of each annual and special shareholders' meeting no
<PAGE>
fewer than 10 or more than 60 days before the meeting date. Unless the Act
requires otherwise, the corporation is required to give notice only to
shareholders entitled to vote at the meeting. Notice shall be given in the
manner provided in Section 607.0141 of the Act, by or at the direction of the
president, the secretary, of the officer or persons calling the meeting. If the
notice is mailed at least 30 days before the date of the meeting, it may be done
by a class of United States mail other than first class. Notwithstanding Section
607.0141, if mailed, such notice shall be deemed to be delivered when deposited
in the United Statement mail addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
(2) Unless the Act or the articles of incorporation requires otherwise,
notice of an annual meeting need not include a description of the purpose or
purposes for which the meeting is called.
(3) Notice of a special meeting must include a description of the
purpose or purposes for which the meeting is called.
(4) If an annual or special shareholders meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
or place if the new date, time or place is announced at the meeting before
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If
a new record date is or must be fixed under Section 607.0707 of the Act,
however, notice of the adjourned meeting must be given under this section to
persons who are shareholders as of the new record date who are entitled to
notice of the meeting.
(5) Notwithstanding the foregoing, no notice of a shareholders' meeting
need be given if: (a) an annual report and proxy statements for two consecutive
annual meetings o(pound) shareholders, or (b) all, and at least two checks in
payment of dividends or interest on securities during a 12-month period, have
been sent by first-class United States mail, addressed to the shareholder at his
address as it appears on the share transfer books of the corporation, and
returned undeliverable. The obligation of the corporation to give notice of a
shareholders' meeting to any such shareholder shall be reinstated once the
corporation has received a new address for such shareholder for entry on its
share transfer books.
Section 2.06. WAIVER OF NOTICE.
(1) A shareholder may waive any notice required by the Act, the
articles of incorporation, or bylaws before or after the date and time stated in
the notice. The waiver must be in writing, be signed by the shareholder entitled
to the notice, and be delivered to the corporation for inclusion in the minutes
or filing with the
<PAGE>
corporate records. Neither the business to be transacted at nor the purpose of
any regular or special meeting of the shareholders need be specified in any
written waiver of notice.
(2) A shareholder's attendance at a meeting: (a) Waives objection to
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; or (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when it
is presented.
ARTICLE III
SHAREHOLDER VOTING
Section 3.01. VOTING GROUP DEFINED.
A "voting group" means all shares of one or more classes or series that
under the articles of incorporation or the Act are entitled to vote and be
counted together collectively on a matter at a meeting of shareholders. All
shares entitled by the articles of incorporation or the Act to vote generally on
the matter are for that purpose a single voting group.
Section 3.02. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS.
(1) Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Act provides otherwise,
a majority of the votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter.
(2) Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
(3) If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
articles of incorporation or the Act requires a greater number of affirmative
votes.
Section 3.03. ACTION BY SINGLE AND MULTIPLE VOTING GROUPS.
(1) If the articles of incorporation or the Act provides for voting by
a single voting group on a matter, action on that matter
<PAGE>
is taken when voted upon by that voting group as provided in Section 3.02 of
these bylaws.
(2) If the articles of incorporation or the Act provides for voting by
two or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately as provided in
Section 3.02 of these bylaws. Action may be taken by one voting group on a
matter even though no action is taken by another voting group entitled to vote
on the matter.
Section 3.04. SHAREHOLDER QUORUM AND VOTING GREATER OR LESSER VOTING
REQUIREMENTS.
(1) A majority of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of shareholders. 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.
(2) An amendment to the articles of incorporation that changes the
quorum to a greater or lesser quorum or voting requirement must meet the same
quorum requirement and be adopted by the same vote required to take action under
the quorum and voting requirements then in effect or proposed to be adopted,
whichever is greater.
(3) If a quorum exists, action on a matter, other than the election of
directors, is approved if the votes cast by the holders of the shares
represented at the meeting and entitled to vote on the subject matter favoring
the action exceed the votes cast opposing the action, unless a greater number of
affirmative votes or voting by classes is required by the Act or the articles of
incorporation.
(4) After a quorum has been established at a shareholders~ meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof.
Section 3.05. VOTING FOR DIRECTORS: NO CUMULATIVE VOTING.
(1) Directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
(2) Each shareholder who is entitled to vote at an election of
directors has the right to vote the number of shares owned by him for as many
persons as there are directors to be elected and for whose election he has a
right to vote. Shareholders do not have a right to cumulate their votes for
directors.
<PAGE>
Section 3.06. VOTING ENTITLEMENT OF SHARES.
(1) Unless the articles of incorporation or the Act provides otherwise,
each outstanding share, regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of shareholders. Only shares are
entitled to vote.
(2) The shares of a corporation are not entitled to vote if they are
owned, directly or indirectly, by a second corporation, domestic or foreign, and
the first corporation owns, directly or indirectly, a majority of shares
entitled to vote for directors of the second corporation.
(3) This section does not limit the power of the corporation to vote
any shares, including its own shares, held by it in a fiduciary capacity.
(4) Redeemable shares are not entitled to vote on any matter, and shall
not be deemed to be outstanding, after notice of redemption is mailed to the
holders thereof and a sum sufficient to redeem such shares has been deposited
with a bank, trust company, or other financial institution upon an irrevocable
obligation to pay the holders the redemption price upon surrender of the shares.
(5) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the bylaws of the
corporate shareholder may prescribe or, in the absence of any applicable
provision, by such person as the board of directors of the corporate shareholder
may designate. In the absence of any such designation or in case of conflicting
designation by the corporate shareholder, the chairman of the board, the
president, any vice president, the secretary, and the treasurer of the corporate
shareholder, in that order, shall be presumed to be fully authorized to vote
such shares.
(6) Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name or the name of his nominee.
(7) Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by him without the transfer thereof into his name.
(8) If a share or shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary
<PAGE>
relationship respecting the same shares, unless the secretary of the corporation
is given notice to the contrary and is furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
then acts with respect to voting have the following effect:
(a) If only one votes, in person or in proxy, his act binds
all;
(b) If more than one vote, in person or by proxy, the act of
the majority so voting binds all;
(c) If more than one vote, in person or by proxy, but the vote
is evenly split on any particular matter, each faction is entitled to vote the
share or shares in question proportionally;
(d) If the instrument or order so filed shows that any such
tenancy is held in unequal interest, a majority or a vote evenly split for
purposes of this subsection shall be a majority or a vote evenly split in
interest;
(e) The principles of this subsection shall apply, insofar as
possible, to execution of proxies, waivers, consents, or objections and for the
purpose of ascertaining the presence of a quorum;
(f) Subject to Section 3.08 of these bylaws, nothing herein
contained shall prevent trustees or other fiduciaries holding shares registered
in the name of a nominee from causing such shares to be voted by such nominee as
the trustee or other fiduciary may direct. Such nominee may vote shares as
directed by a trustee or their fiduciary without the necessity of transferring
the shares to the name of the trustee or other fiduciary.
Section 3.07. PROXIES.
(1) A shareholder, other person entitled to vote on behalf of a
shareholder pursuant to Section 3.06 of these bylaws, or attorney in fact may
vote the shareholder's shares in person or by proxy.
(2) A shareholder may appoint a proxy to vote or otherwise act for him
by signing an appointment form, either personally or by his attorney in fact. An
executed telegram or cablegram appearing to have been transmitted by such
person, or a photographic, photostatic, or equivalent reproduction of an
appointment form, is a sufficient appointment form.
(3) An appointment of a proxy is effective when received by the
secretary or other officer or agent authorized to tabulate votes. An appointment
is valid for up to 11 months unless a longer period is expressly provided in the
appointment form.
<PAGE>
(4) The death or incapacity of the shareholder appointing a proxy does
not affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
(5) An appointment of a proxy is revocable by the shareholder unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest. Appointments coupled with an interest
include the appointment of: (a) a pledgee; (b) a person who purchased or agreed
to purchase the shares; (c) a creditor of the corporation who extended credit to
the corporation under terms requiring the appointment; (d) an employee of the
corporation whose employment contract requires the appointment; or (e) a party
to a voting agreement created in accordance with the Act.
(6) An appointment made irrevocable under this section becomes
revocable when the interest with which it is coupled is extinguished and, in a
case provided for in Subsection 5(c) or 5(d), the proxy becomes revocable three
years after the date of the proxy or at the end of the period, if any, specified
herein, whichever is less, unless the period of irrevocability is renewed from
time to time by the execution of a new irrevocable proxy as provided in this
section. This does not affect the duration of a proxy under subsection (3).
(7) A transferee for value of shares subject to an irrevocable
appointment may revoke the appointment if he did not know of its existence when
he acquired the shares and the existence of the irrevocable appointment was not
noted conspicuously on the certificate representing the shares or on the
information statement for shares without certificates.
(8) Subject to Section 3.09 of these bylaws and to any express
limitation on the proxy's authority appearing on the face of the appointment
form, a corporation is entitled to accept the proxy's vote or other action as
that of the shareholder making the appointment.
(9) If an appointment form expressly provides, any proxy holder may
appoint, in writing, a substitute to act in his place.
Section 3.08. SHARES HELD BY NOMINEES.
(1) The corporation may establish a procedure by which the beneficial
owner of shares that are registered in the name of a nominee is recognized by
the corporation as the shareholder. The extent of this recognition may be
determined in the procedure.
<PAGE>
(2) The procedure may set forth (a) the types of nominees to which it
applies; (b) the rights or privileges that the corporation recognizes in a
beneficial owner; (c) the manner in which the procedure is selected by the
nominee; (d) the information that must be provided when the procedure is
selected; (e) the period for which selection of the procedure is effective; and
(f) other aspects of the rights and duties created.
Section 3.09. CORPORATION'S ACCEPTANCE OF VOTES.
(1) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation if acting in good
faith is entitled to accept the vote, consent waiver, or proxy appointment and
give it effect as the act of the shareholder.
(2) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation if acting in
good faith is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if: (a) the
shareholder is an entity and the name signed purports to be that of an officer
or agent of the entity; (b) the name signed purports to be that of an
administrator, executor, guardian, personal representative, or conservator
representing the shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation has been presented with respect
to the vote, consent, waiver, or proxy appointment; (c) the name signed purports
to be that of a receiver, trustee in bankruptcy, or assignee for the benefit of
creditors of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver, or proxy appointment; (d) the name signed purports to be
that of a pledgee, beneficial owner, or attorney in fact of the shareholder and,
if the corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented with
respect to the vote, consent, waiver, or proxy appointment; or (e) two or more
persons are the shareholder as covenants or fiduciaries and the name signed
purports to be the name of at least one of the co-owners and the person signing
appears to be acting on behalf of all the co-owners.
(3) The corporation is entitled to reject a vote, consent, waiver, or
proxy appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
(4) The corporation and its officer or agent who accepts or rejects a
vote, consent, waiver, or proxy appointment in good faith and in accordance with
the standards of this section are not liable
<PAGE>
in damages to the shareholder for the consequences of the
acceptance or rejection.
(5) Corporate action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this section is valid unless a court
of competent jurisdiction determines otherwise.
Section 3.10. ACTION BY SHAREHOLDERS WITHOUT MEETING.
(1) ACTION BY WRITTEN CONSENT. Any action which is required to be or
may be taken at any annual or special meeting of the shareholders of the
corporation may be taken without a meeting, without prior notice and without a
vote, if written consents which set forth the specific corporate action (the
"Corporate Action") to be taken have been signed by the holders of outstanding
shares of common stock which possess not less than the minimum number of votes
necessary to authorize or take such Corporate Action at an annual or special
meeting of shareholders at which all outstanding shares of common stock are
represented and the other requirements contained herein and in the corporation's
articles of incorporation and Florida law are complied with.
(2) DETERMINATION OF RECORD DATE FOR ACTION BY WRITTEN CONSENT. In
order to inform the corporation's shareholders and the investing public in
advance that a record date for action by written consent will occur and in order
that the corporation may determine the shareholders entitled to consent to
Corporate Action in writing without a meeting, the Board of Directors may fix a
record date for such action, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 10 business days after
the date upon which the resolution fixing such record date is adopted by the
Board of Directors. Any Soliciting Party (as defined herein) who seeks to have
the shareholders authorize or take a Corporate Action by written consent must
advise the corporation by written notice (the "Solicitation Notice") delivered
to the Secretary of the corporation (the "Secretary"), which must be delivered
by certified mail, overnight courier or hand delivery, of the proposed Corporate
Action for which written consents will be sought and request that the Board of
Directors fix a record date. The record date for determining shareholders
entitled to consent to the Corporate Action in writing shall be fixed by the
Board of Directors by resolution within 10 business days after the date of
delivery of the Solicitation Notice. If the Board of Directors does not fix a
record date within the 10 business day-period after the date of delivery of the
Solicitation Notice, and no prior action by the Board of Directors is required
by Florida law, the corporation's articles of incorporation or these bylaws, the
record date shall be the first date on which a valid signed consent setting
forth the Corporate Action is delivered to the corporation in accordance with
<PAGE>
Florida law, the corporation's articles of incorporation and these bylaws. If
the Board of Directors does not fix a record date within the 10 business
day-period after the date of delivery of the Solicitation Notice and prior
action by the Board of Directors is required by Florida law, the corporation's
articles of incorporation or these bylaws, the record date shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.
(3) DURATION AND REVOCATION OF CONSENTS. Consents to a Corporate Action
shall only be valid during the period ending 60 days after the date the first
valid signed consent regarding the proposed Corporate Action is delivered to the
corporation in accordance with Florida law, the corporation's articles of
incorporation and these bylaws. Consents may be revoked by written notice to (i)
the Secretary or (ii) any other officer or agent of the corporation having
custody of the book in which proceedings of meetings of shareholders are
recorded.
(4) RETENTION AND DUTIES OF INSPECTOR. Within 15 business days after
receipt of a Solicitation Notice, the Secretary shall engage a
nationally-recognized independent inspector of elections (the "Inspector") to
perform a review of any consents and revocations related to such Solicitation
Notice. The Inspector shall review all such consents and revocations, determine
whether the requisite number of valid and unrevoked consents has been obtained
to authorize or take the Corporate Action specified in the consents, and certify
such determination for entry in the records of the corporation. All costs of
retaining the Inspector shall be borne by the party which is soliciting
consents. For the purpose of permitting the Inspector to perform such review, no
action by written consent without a meeting shall be effective until such date
as the Inspector certifies to the corporation that the consents delivered to the
corporation in accordance with this Section 3.10 represent at least the minimum
number of votes that would be necessary to take the Corporate Action by written
consent.
(5) PROCEDURES FOR COUNTING AND CHALLENGING CONSENTS. All consents and
revocations shall be delivered to the Inspector upon receipt by the corporation
or its other designated agents. When such consents and revocations are received,
the Inspector shall review the consents and revocations and shall maintain a
count of the number of valid and unrevoked consents. As soon as practicable
after the end of the 60-day period provided for in paragraph (c), the Inspector
shall issue a preliminary report to the corporation and the Soliciting Party
stating:
(a) The number of valid and unrevoked consents;
(b) The number of valid revocations;
(c) The number of invalid consents;
(d) The number of invalid revocations; and
<PAGE>
(e) Based on a preliminary count, whether the requisite number
of valid and unrevoked consents has been obtained to
authorize or take the Corporate Action specified in the
consents.
Unless the corporation and the Soliciting Party shall agree to a
shorter or longer period, the corporation and the Soliciting Party shall each
have 48 hours to review the consents and revocations and to advise the Inspector
and the other party in writing whether they will challenge any of the
determinations set forth in the Inspector's preliminary report. Any such written
notice must describe with specificity the particular determinations set forth in
the preliminary report that are being challenged. Both the corporation and the
Soliciting Party may challenge any aspect of any of the consents or revocations.
If no written notice of a challenge to the preliminary report is received by the
Inspector within 48 hours after the issuance of the preliminary report, the
preliminary report of the Inspector shall become its final report.
If the corporation or the Soliciting Party or both deliver timely
written notice of a challenge to the preliminary report, the Inspector shall
hold a meeting as promptly as possible to allow the challenging party or parties
to present its or their challenges to any consents and/or revocations. The
Inspector shall adopt such reasonable procedures to be used at such meeting as
it deems necessary in its sole discretion. Representatives and counsel of the
corporation and the Soliciting Party may be present at such meeting. In such
meeting each challenging party (if there are two) and its counsel will be given
an opportunity to present documentation to support its position. The other party
will be given an opportunity to respond to a challenging party's presentation if
it so desires. A transcript of the meeting shall be recorded by a certified
court reporter and will be available for inspection by all parties. Following
completion of this meeting and a review of its results, the Inspector shall as
promptly as possible issue its final report to the corporation and the
Soliciting Party containing its final determinations plus any changes in the
preliminary totals as a result of any challenges and a certification of whether
the requisite number of valid and unrevoked consents was obtained to authorize
or take the Corporate Action specified in the consents. Nothing contained in
this paragraph shall in any way be construed to suggest or imply that the
corporation or any shareholder shall not be entitled to contest the validity of
any consent or revocation thereof or to take any other action (including,
without limitation, the commencement, prosecution or defense of any litigation
with respect thereto).
For purposes of determining the identity of the party which is
soliciting written consents, and to ensure that the limitations contained in
this Section are complied with, "Soliciting Party" shall include (x) any person
who directly or indirectly is the beneficial owner (within the meaning of Rule
13d-3 promulgated
<PAGE>
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
shares of common stock of the corporation and who delivers a Solicitation Notice
to the corporation or on whose behalf a Solicitation Notice is delivered to the
corporation by the record holder of such shares, (y) any corporation,
partnership or other business entity which such person and/or his affiliates
control (as both terms are defined in Rule 12b-2 promulgated under the Exchange
Act), and (z) any group (within the meaning of Section 13(d)(3) of the Exchange
Act) of which such person is a member.
(6) NOTICE OF RESULT. Notice of any Corporate Action taken without a
meeting shall be given to those shareholders who have not consented in writing
to such Corporate Action or who were not entitled to vote on the Corporate
Action within five business days after the date on which such Corporate Action
becomes effective.
(7) AMENDMENT, REPEAL, ALTERATION OR MODIFICATION. This Section 3.10 of
the corporation's bylaws shall not be amended, repealed, altered or modified
until three years after its effective date, except by a vote or consent of
shareholders representing a majority of the then-issued and outstanding shares
entitled to vote thereon; provided, however, that this Section 3.10 of the
corporation's bylaws may be amended, repealed, altered or modified by the Board
of Directors when and to the extent that, in the written opinion of counsel, a
statutory amendment or judicial decision represents a material change in Florida
law relative to the subject matter hereof and the amendment, repeal, alteration
or modification is meant solely to conform with such change of law.
Section 3.11. FREQUENCY OF SOLICITATIONS FOR ACTION BY SHAREHOLDERS WITHOUT A
MEETING.
Notwithstanding any other provision of these bylaws or Florida law, a
Soliciting Party may only solicit (as such term is defined for purposes of
Section 14(a) of the Exchange Act and the regulations thereunder) written
consents from shareholders for any Corporate Action one time during each fiscal
year of the corporation. The corporation shall not (a) provide a shareholder
list or any other shareholder information to a Soliciting Party, (b) set a
record date pursuant to a Solicitation Notice (and no record date shall be set
in accordance with the next to last sentence of Section 3.10(2) of these
bylaws), or (c) have any obligation to mail any materials for or on behalf of
such Soliciting Party for any consent solicitation made by such Soliciting Party
which has already solicited written consents regarding the same or substantially
similar Corporate Action(s) (as determined by the Board of Directors in its
reasonable discretion) within the corporation's then-current fiscal year;
provided, however, that a Soliciting Party may solicit written consents twice in
such fiscal year if the corporation has not conducted an annual meeting of
shareholders within 16 months prior to the date that the Soliciting Party
delivers its Solicitation Notice for the second
<PAGE>
consent solicitation. For purposes of this Section 3.11, all parties contained
in the definition of "Soliciting Party" in Section 3.10(5) of these bylaws shall
be considered to be the same Soliciting Party for purposes of determining
whether a consent solicitation can be made during the fiscal year.
ARTICLE IV
BOARD OF DIRECTORS AND OFFICERS
Section 4.01. QUALIFICATIONS OF DIRECTORS.
Directors must be natural persons who are 18 years of age or older but
need not be residents of the State of Florida or shareholders of the
corporation.
Section 4.02. NUMBER OF DIRECTORS.
(1) The board of directors shall consist of not less than one nor more
than 15 individuals.
(2) The number of directors may be increased or decreased from time to
time by amendment to these bylaws by a majority of the directors or by a vote of
67% of the shares entitled to vote. If the terms of the directors are staggered
under Section 4.04 of these bylaws, any increase or decrease in the number of
directors shall be allocated proportionately among the classes. Any decrease in
the number of directors shall not prematurely shorten the term of any incumbent
director.
(3) Directors are elected at the first annual shareholders~ meeting and
at each annual meeting thereafter unless their terms are staggered under Section
4.04 of these bylaws.
Section 4.03. TERMS OF DIRECTORS GENERALLY.
(1) The terms of the initial directors of the corporation expire at the
first shareholders' meeting at which directors are elected.
(2) The terms of all other directors expire at the next annual
shareholders' meeting following their election unless their terms are staggered
under Section 4.04 of these bylaws.
(3) A decrease in the number of directors does not shorten an incumbent
director's term.
(4) The term of a director elected to fill a vacancy expires at the
next shareholders' meeting at which directors are elected.
<PAGE>
(5) Despite the expiration of a director's term, the director shall
continue to serve until that director's successor is elected and qualified or
until there is a decrease in the number of directors.
Section 4.04. STAGGERED TERMS FOR DIRECTORS.
The directors of the corporation may, by the articles of incorporation,
or by amendment to these bylaws adopted by a vote of the directors, be divided
into one, two or three classes with the number of directors in each class being
as nearly equal as possible; the term of office of those of the first class to
expire at the annual meeting next ensuing; of the second class one year
thereafter; at the third class two years thereafter; and at each annual election
held after such classification and election, directors shall be chosen for a
full term, as the case may be, to succeed those whose terms expire. If the
directors have staggered terms, then any increase or decrease in the number of
directors shall be so apportioned among the classes as to make all classes as
nearly equal in number as possible.
Section 4.05. VACANCY ON BOARD.
(1) Whenever a vacancy occurs on a board of directors, including a
vacancy resulting from an increase in the number of directors, it may be filled
by the affirmative vote of a majority of the remaining directors.
(2) A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
(3) A director chosen as a result of this Section 4.06 or Section 4.02
shall hold such office until the next election of the class for which such
director has been chosen and until their successors shall be elected and
qualified.
Section 4.06. COMPENSATION OF DIRECTORS.
The board of directors may fix the compensation of directors.
Section 4.07. MEETINGS.
(1) The board of directors may hold regular or special meetings in or
out of the State of Florida.
(2) A majority of the directors present, whether or not a quorum
exists, may adjourn any meeting of the board of directors to another time and
place. Notice of any such adjourned meeting shall be given to the directors who
were not present at the time of the adjournment and, unless the time and place
of the adjourned meeting
<PAGE>
are announced at the time of the adjournment, to the other directors.
(3) Meetings of the board of directors may be called by the chairman of
the board or by the president.
(4) The board of directors may permit any or all directors to
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director participating in a
meeting by this means is deemed to be present in person at the meeting.
Section 4.08. ACTION BY DIRECTORS WITHOUT A MEETING.
(1) Action required or permitted by the Act to be taken at a board of
directors' meeting or committee meeting may be taken without a meeting if the
action is taken by all members of the board or of the committee. The action must
be evidenced by one or more written consents describing the action taken and
signed by each director or committee member.
(2) Action taken under this section is effective when the last director
signs the consent, unless the consent specifies a different effective date.
(3) A consent signed under this section has the effect of a meeting
vote and may be described as such in any document.
Section 4.09. NOTICE OF MEETINGS.
Regular and special meetings of the board of directors may be held
without notice of the date, time, place, or purpose of the meeting.
Section 4.10. WAIVER OF NOTICE.
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting or promptly upon
arrival at the meeting, any objection to the transaction of business because the
meeting is not lawfully called or convened.
<PAGE>
Section 4.11. QUORUM AND VOTING.
(1) A quorum of a board of directors consists of a majority of the
number of directors prescribed by the articles of incorporation or these bylaws.
(2) If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the board of directors.
(3) A director of the corporation who is present at a meeting of the
board of directors or a committee of the board of directors when corporate
action is taken is deemed to have assented to the action taken unless:
(a) He objects at the beginning of the meeting (or promptly
upon his arrival) to holding it or transacting specified business at the
meeting; or
(b) He votes against or abstains from the action taken.
Section 4.12. POWERS OF THE DIRECTORS. In furtherance, and not in limitation of
the powers conferred to the Directors by statute, the Board of directors is
expressly authorized as follows:
(1) To make and alter the Bylaws of this corporation.
(2) To authorize and to cause to be executed mortgages and liens upon
the real and personal property of the corporation.
(3) To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose, or to abolish any
such reserve in the manner in which it was created.
(4) From time to time to determine whether and to what extent, at what
time and place, and under what conditions and regulations the accounts and books
of this corporation, or any of them, shall be open to inspection of any
stockholder; and no stockholder shall have any right to inspect any account,
book, or document of this corporation except as conferred by statute or by the
bylaws or as authorized by a resolution of the stockholders or board of
directors.
Section 4.13. COMMITTEES.
(1) The board of directors, by resolution adopted by a majority of the
full board of directors, may designate from among its members an executive
committee and one or more other committees each of which, to the extent provided
in such resolution and by these bylaws, shall have and may exercise all the
authority of the
<PAGE>
board of directors, except that no such committee shall have the
authority to:
(a) Approve or recommend to shareholders actions or proposals
required by the Act to be approved by shareholders.
(b) Fill vacancies on the board of directors or any committee
thereof.
(c) Adopt, amend, or repeal these bylaws.
(d) Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the board of directors.
(e) Authorize or approve the issuance or sale or contract for
the sale of shares, or determine the designation and relative rights,
preferences, and limitations of a voting group except that the board of
directors may authorize a committee (or a senior executive officer of the
corporation) to do so within limits specifically prescribed by the board of
directors.
(2) The sections of these bylaws which govern meetings, notice and
waiver of notice, and quorum and voting requirements of the board of directors
apply to committees and their members as well.
(3) Each committee must have two or more members who serve at the
pleasure of the board of directors. The board, by resolution adopted in
accordance herewith, may designate one or more directors as alternate members of
any such committee who may act in the place and stead of any absent member or
members at any meeting of such committee.
(4) Neither the designation of any such committee, the delegation
thereto of authority, nor action by such committee pursuant to such authority
shall alone constitute compliance by any member of the board of directors not a
member of the committee in question with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
Section 4.14. LOANS TO OFFICERS. DIRECTORS, AND EMPLOYEES; GUARANTY OF
OBLIGATIONS.
The corporation may lend money to, guaranty any obligation of, or
otherwise assist any officer, director, or employee of the corporation or of a
subsidiary, whenever, in the judgment of the board of directors, such loan,
guaranty, or assistance may reasonably be expected to benefit the corporation.
The loan, guaranty, or other assistance may be with or without interest and
<PAGE>
may be unsecured or secured in such manner as the board of directors shall
approve, including, without limitation, a pledge of shares of stock of the
corporation. Nothing in this section shall be deemed to deny, limit, or restrict
the powers of guaranty or warranty of any corporation at common law or under any
statute. Loans, guaranties, or other types of assistance are subject to section
4.20.
Section 4.15. REQUIRED OFFICERS.
(1) The corporation shall have such officers as the board of
directors may appoint from time
(2) A duly appointed officer may appoint one or more assistant
officers.
(3) The board of directors shall delegate to one of the officers
responsibility for preparing minutes of the directors' and shareholders'
meetings and for authenticating records of the corporation.
(4) The same individual may simultaneously hold more than one office in
the corporation.
Section 4.16. DUTIES OF OFFICERS.
Each officer has the authority and shall perform the duties set forth
in a resolution or resolutions of the board of directors or by direction of any
officer authorized by the board of directors to prescribe the duties of other
officers.
Section 4.17. RESIGNATION AND REMOVAL OF OFFICERS.
(1) An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date and the corporation accepts the future effective date, the board of
directors may fill the pending vacancy before the effective date if the board of
directors provides that the successor does not take office until the effective
date.
(2) The board of directors may remove any officer at any time with or
without cause. Any assistant officer, if appointed by another officer, may
likewise be removed by the board of directors or by the officer which appointed
him in accordance with these bylaws.
Section 4.18. CONTRACT RIGHTS OF OFFICERS.
The appointment of an officer does not itself create contract rights.
<PAGE>
Section 4.19. GENERAL STANDARDS FOR DIRECTORS.
(1) A director shall discharge his duties as a director, including his
duties as a member of a committee:
(a) In good faith;
(b) With the care an ordinarily prudent person in a like
position would exercise under similar circumstances; and
(c) In a manner he reasonably believes to be in the best
interests of the corporation.
(2) In discharging his duties, a director is entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom
the director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to
matters the director reasonably believes are within the persons' professional or
expert competence; or
(c) A committee of the board of directors of which he is not a
member if the director reasonably believes the committee
(3) In discharging his duties, a director may consider such factors as
the director deems relevant, including the long-term prospects and interests of
the corporation and its shareholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the corporation
or its subsidiaries, the communities and society in which the corporation or its
subsidiaries operate, and the economy of the state and the nation.
(4) A director is not acting in good faith if he has knowledge
concerning the matter in question that makes reliance otherwise permitted by
subsection (2) unwarranted.
(5) A director is not liable for any action taken as a director, or any
failure to take any action, if he performed the duties of his office in
compliance with this section.
Section 4.20. DIRECTOR CONFLICTS OF INTEREST.
No contract or other transaction between a corporation and one or more
interested directors shall be either void or voidable because of such
relationship or interest, because such director or directors are present at the
meeting of the board of directors or
<PAGE>
a committee thereof which authorizes, approves or ratifies such contract or
transaction, or because his or their votes 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 transactions by a vote or consent sufficient for the purpose WITHOUT
counting the votes or consents of such interested directors;
(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 as to the
corporation at the time it is authorized by the board, a committee or the
shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at the meeting of the board of directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
For the purpose of paragraph (2) above, a conflict of interest
transaction is authorized, approved or ratified if it receives the vote of a
majority of the shares entitled to be counted under this subsection. Shares
owned by or voted under the control of a director who has a relationship or
interest in the conflict of interest transaction may not be counted in a vote of
shareholders to determine whether to authorize, approve or ratify a conflict of
interest transaction under paragraph (2). The vote of those shares, however, is
counted in determining whether the transaction is approved under other sections
of the Act. A majority of the shares, whether or not present, that are entitled
to be counted in a vote on the transaction under this subsection constitutes a
quorum for the purpose of taking action under this section.
Section 4.21. RESIGNATION OF DIRECTORS.
A director may resign at any time by delivering written notice to the
board of directors or its chairman or to the corporation.
A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date, the board of directors may fill the pending vacancy before the
effective date if the board of directors provides that the successor does not
take office until the effective date.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 5.01. DIRECTORS. OFFICERS. EMPLOYEES AND AGENTS.
(1) The corporation shall indemnify any director or executive officer
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
or executive officer of the corporation 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. The
termination of any proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the director or executive officer did not act in good faith and
in a manner which he reasonably believed to be in, or not opposed to, the best
interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) The corporation shall have power to 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 an 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. The
termination of any proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(3) The corporation shall indemnify any person, who was or is a party
to any proceeding by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or executive
officer of the corporation, against expenses and amounts paid in settlement not
exceeding, in the judgment of the board of directors, the estimated expense of
litigating the proceeding to conclusion, actually and reasonably
<PAGE>
incurred in connection with the defense or settlement of such proceeding,
including any appeal thereof. Such indemnification shall be authorized if such
director or executive officer 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 under this subsection in respect of
any claim, issue, or matter as to which such director or executive officer shall
have been adjudged to be liable unless, and only to the extent that, the court
in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such director or
executive officer is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(4) The corporation shall have power to indemnify any person, who was
or is a party to any proceeding by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he is or was an 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 expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof. Such indemnification shall be
authorized if 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 under this subsection in respect of
any claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(5) To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsections (1) or (2), or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses actually and
reasonably incurred by him in connection therewith.
(6) Any indemnification under subsections (1), (2), (3) and (4) unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has
<PAGE>
met the applicable standard of conduct set forth in subsections (1)
or (2), (3) and (4). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable,
by majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two or
more directors not at the time parties to the proceeding;
(c) By independent legal counsel:
(1) Selected by the board of directors prescribed
in paragraph (a) or the committee prescribed in paragraph (b); or
(2) If a quorum of the directors cannot be obtained
for paragraph (a) and the committee cannot be designed under paragraph (b),
selected by majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) By the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
(7) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (6)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(8) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he is ultimately found not to
be entitled to indemnification by the corporation pursuant to this section.
Expenses incurred by other employees and agents may be paid in advance upon such
terms or conditions that the board of directors deems appropriate.
(9) The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and the corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
<PAGE>
However, 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 his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director,
officer, employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee,
or agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of Section 607.0834 under the Act are applicable; or
(d) 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 its favor or in a proceeding by or in the
right of a shareholder.
(10) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(11) Notwithstanding the failure of the corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting the
proceeding, to the circuit court, or to another court of competent jurisdiction.
On receipt of an application, the court, after giving any notice that it
considers necessary, may order indemnification and advancement of expenses,
including expenses incurred in seeking court-ordered indemnification or
advancement of expenses, if it determines that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (5), in which case the court shall
also order the corporation to pay that person reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by
<PAGE>
virtue of the exercise by the corporation of its power pursuant to
subsection (9); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such person met
the standard of conduct set forth in subsection (1), subsection (2), subsection
(3), subsection (4) or subsection (9).
(12) For purposes of this section, the term "corporation~ includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(13) For purposes of this section:
(a) The term "other enterprises" includes employee benefit
plans;
(b) The term "expenses" includes counsel fees, including those
for appeal;
(c) The term "liability" includes obligations to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation~
includes any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties relating to an
employee benefit plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the
corporation describes the actions of a person who acts in good faith and in a
manner he reasonably believes to be in the best
<PAGE>
interests of the participants and beneficiaries of an employee benefit plan.
(14) The corporation shall have power to purchase and maintain
insurance on behalf of any person who 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 any liability
asserted against him and 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 liability under the provisions of this section.
ARTICLE VI
OFFICE AND AGENT
Section 6.01. REGISTERED OFFICE AND REGISTERED AGENT.
(1) The corporation shall have and continuously maintain in the State
of Florida:
(a) A registered office which may be the same as its place of
business; and
(b) A registered agent, who, may be either:
(1) An individual who resides in the State of Florida
whose business office is identical with such registered office; or
(2) Another corporation or not-for-profit corporation
as defined in Chapter 617 of the Act, authorized to transact business or conduct
its affairs in the State of Florida, having a business office identical with the
registered office; or
(3) A foreign corporation or not-for-profit foreign
corporation authorized pursuant to Chapter 607 or Chapter 617 of the Act to
transact business or conduct its affairs in the State of Florida, having a
business office identical with the registered office.
Section 6.02. CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT: RESIGNATION OF
REGISTERED AGENT.
(1) The corporation may change its registered office or its registered
agent upon filing with the Department of State of the State of Florida a
statement of change setting forth:
(a) The name of the corporation;
<PAGE>
(b) The street address of its current registered office;
(c) If the current registered office is to be changed, the
street address of the new registered office;
(d) The name of its current registered agent;
(e) If its current registered agent is to be changed, the name
of the new registered agent and the new agent's written consent (either on the
statement or attached to it) to the appointment;
(f) That the street address of its registered office and the
street address of the business office of its registered agent, as changed, will
be identical;
(g) That such change was authorized by resolution duly adopted
by its board of directors or by an officer of the corporation so authorized by
the board of directors.
ARTICLE VII
SHARES, OPTIONS, DIVIDENDS AND DISTRIBUTIONS
Section 7.01. AUTHORIZED SHARES.
(1) The articles of incorporation prescribe the classes of shares and
the number of shares of each class that the corporation is authorized to issue,
as well as a distinguishing designation for each class, and prior to the
issuance of shares of a class the preferences, limitations, and relative rights
of that class must be described in the articles of incorporation.
(2) The articles of incorporation must authorize:
(a) One or more classes of shares that together have unlimited
voting rights, and
(b) One or more classes of shares (which may be the same class
or classes as those with voting rights) that together are entitled to receive
the net assets of the corporation upon dissolution.
(3) The articles of incorporation may authorize one or more classes of
shares that have special, conditional, or limited voting rights, or no rights,
or no right to vote, except to the extent prohibited by the Act;
(a) Are redeemable or convertible as specified in the articles
of incorporation;
<PAGE>
(b) Entitle the holders to distributions calculated in any
manner, including dividends that may be cumulative, non-cumulative, or partially
cumulative;
(c) Have preference over any other class of shares with
respect to distributions, including dividends and distributions upon the
dissolution of the corporation.
(4) Shares which are entitled to preference in the distribution of
dividends or assets shall not be designated as common shares. Shares which are
not entitled to preference in the distribution of dividends or assets shall be
common shares and shall not be designated as preferred shares.
Section 7.02. TERMS OF CLASS OR SERIES DETERMINED BY BOARD OF DIRECTORS.
(1) If the articles of incorporation so provide, the board of directors
may determine, in whole or part, the preferences, limitations, and relative
rights (within the limits set forth in Section 7.01) of:
(a) Any class of shares before the issuance of any shares of
that class, or
(b) One or more series within a class before the issuance of
any shares of that series.
(2) Each series of a class must be given a distinguishing designation.
(3) All shares of a series must have preferences, limitations, and
relative rights identical with those of other shares of the same series and,
except to the extent otherwise provided in the description of the series, of
those of other series of the same class.
(4) Before issuing any shares of a class or series created under this
section, the corporation must deliver to the Department of State of the State of
Florida for filing articles of amendment, which are effective without
shareholder action, in accordance with Section 607.0602 of the Act.
Section 7.03. ISSUED AND OUTSTANDING SHARES.
(1) A corporation may issue the number of shares of each class or
series authorized by the articles of incorporation. Shares that are issued are
outstanding shares until they are reacquired, redeemed, converted, or canceled.
<PAGE>
(2) The reacquisition, redemption, or conversion of outstanding shares
is subject to the limitations of subsection (3) and to Section 607.06401 of the
Act.
(3) At all times that shares of the corporation are outstanding, one or
more shares that together have unlimited voting rights and one or more shares
that together are entitled to receive the net assets of the corporation upon
dissolution must be outstanding.
Section 7.04. ISSUANCE OF SHARES.
(1) The board of directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed, promises
to perform services evidenced by a written contract, or other securities of the
corporation.
(2) Before the corporation issues shares, the board of directors must
determine that the consideration received or to be received for shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and non-assessable. When it
cannot be determined that outstanding shares are fully paid and non-assessable,
there shall be a conclusive presumption that such shares are fully paid and
non-assessable if the board of directors makes a good faith determination that
there is no substantial evidence that the full consideration for such shares has
not been paid.
(3) When the corporation receives the consideration for which the board
of directors authorized the issuance of shares, the shares issued therefor are
fully paid and non-assessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
(4) The corporation may place in escrow shares issued for a contract
for future services or benefits or a promissory note, or make other arrangements
to restrict the transfer of the shares, and may credit distributions in respect
of the shares against their purchase price, until the services are performed,
the note is paid, or the benefits received. If the services are not performed,
the shares escrowed or restricted and the distributions credited may be canceled
in whole or part.
Section 7.05. FORM AND CONTENT OF CERTIFICATES.
(1) Shares may but need not be represented by certificates. Unless the
Act or another statute expressly provides otherwise, the
<PAGE>
rights and obligations of shareholders are identical whether or not their shares
are represented by certificates.
(2) At a minimum, each share certificate must state on its face:
(a) The name of the issuing corporation and that the
corporation is organized under the laws of the State of Florida;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the
series, if any, the certificate represents.
(3) If the shares being issued are of different classes of shares or
different series within a class, the designations, relative rights, preferences,
and limitations applicable to each class and the variations in rights,
preferences, and limitations determined for each series (and the authority of
the board of directors to determine variations for future series) must be
summarized on the front or back of each certificate. Alternatively, each
certificate may state conspicuously on its front or back that the corporation
will furnish the shareholder a full statement of this information on request and
without charge.
(4) Each share certificate:
(a) Must be signed (either manually or in facsimile) by an
officer or officers designated by the board of directors, and
(b) May bear the corporate seal or its facsimile.
(5) If the person who signed (either manually or in facsimile) a share
certificate no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
(6) Nothing in this section may be construed to invalidate any share
certificate validly issued and outstanding under the Act on July 1, 1990.
Section 7.06. SHARES WITHOUT CERTIFICATES.
(1) The board of directors of the corporation may authorize the issue
of some or all of the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
(2) Within a reasonable time after the issue or transfer of shares
without certificates, the corporation shall send the shareholder a written
statement of the information required on certificates by the Act.
<PAGE>
Section 7.07. RESTRICTION ON TRANSFER OF SHARES AND OTHER SECURITIES.
(1) The articles of incorporation, these bylaws, an agreement among
shareholders, or an agreement between shareholders and the corporation may
impose restrictions on the transfer or registration of transfer of shares of the
corporation. A restriction does not affect shares issued before the restriction
was adopted unless the holders of such shares are parties to the restriction
agreement or voted in favor of the restriction.
(2) A restriction on the transfer or registration of transfer of shares
is valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this section, and effected in compliance with the
provisions of the Act, including having a proper purpose as referred to in the
Act.
Section 7.08. SHAREHOLDER'S PRE-EMPTIVE RIGHTS.
The shareholders of the corporation do not have a pre-emptive right to
acquire the corporation's unissued shares.
Section 7.09. CORPORATION'S ACQUISITION OF ITS OWN SHARES.
(1) The corporation may acquire its own shares, and, unless otherwise
provided in the articles of incorporation or except as provided in subsection
(4), shares so acquired constitute authorized but unissued shares of the same
class but undesignated as to series.
(2) If the articles of incorporation prohibit the reissue of acquired
shares, the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the articles of incorporation.
(3) Articles of amendment may be adopted by the board of directors
without shareholder action, shall be delivered to the Department of State of the
State of Florida for filing, and shall set forth the information required by
Section 607.0631 of the Act.
(4) Shares of the corporation in existence on June 30, 1990, which are
treasury shares under Section 607.004(18), Florida Statutes (1987), shall be
issued, but not outstanding, until canceled or disposed of by the corporation.
Section 7.10. SHARE OPTIONS.
(1) Unless the articles of incorporation provide otherwise, the
corporation may issue rights, options, or warrants for the purchase of shares of
the corporation. The board of directors shall determine the terms upon which the
rights, options, or warrants are
<PAGE>
issued, their form and content, and the consideration for which the shares are
to be issued.
(2) The terms and conditions of stock rights and options which are
created and issued by the corporation, or its successor, and which entitle the
holders thereof to purchase from the corporation shares of any class or classes,
whether authorized by unissued shares, treasury shares, or shares to be
purchased or acquired by the corporation, may include, without limitation,
restrictions, or conditions that preclude or limit the exercise, transfer,
receipt, or holding of such rights or options by any person or persons,
including any person or persons owning or offering to acquire a specified number
or percentage of the outstanding common shares or other securities of the
corporation, or any transferee or transferees of any such person or persons, or
that invalidate or void such rights or options held by any such person or
persons or any such transferee or transferees.
Section 7.11. TERMS AND CONDITIONS OF STOCK RIGHTS AND OPTIONS.
The terms and conditions of the stock rights and options which are
created and issued by the corporation [or its successor], and which entitle the
holders thereof to purchase from the corporation shares of any class or classes,
whether authorized but unissued shares, treasury shares, or shares to be
purchased or acquired by the corporation, may include, without limitation,
restrictions or conditions that preclude or limit the exercise, transfer,
receipt or holding of such rights or options by any person or persons, including
any person or persons owning or offering to acquire a specified number or
percentage of the outstanding common shares or other securities of the
corporation, or any transferee or transferees of any such person or persons, or
that invalidate or void such rights or options held by any such person or
persons or any such transferee or transferees.
Section 7.12. SHARE DIVIDENDS.
(1) Shares may be issued pro rata and without consideration to the
corporation's shareholders or to the shareholders of one or more classes or
series. An issuance of shares under this subsection is a share dividend.
(2) Shares of one class or series may not be issued as a share dividend
in respect of shares of another class or series unless:
(a) The articles of incorporation so authorize,
(b) A majority of the votes entitled to be cast by the class
or series to be issued approves the issue, or
<PAGE>
(c) There are no outstanding shares of the class or series to
be issued.
(3) If the board of directors does not fix the record date for
determining shareholders entitled to a share dividend, it is the date of the
board of directors authorizes the share dividend.
Section 7.13. DISTRIBUTIONS TO SHAREHOLDERS.
(1) The board of directors may authorize and the corporation may make
distributions to its shareholders subject to restriction by the articles of
incorporation and the limitations in subsection (3).
(2) If the board of directors does not fix the record date for
determining shareholders entitled to a distribution (other than one involving a
purchase, redemption, or other acquisition of the corporation's shares), it is
the date the board of directors authorizes the distribution.
(3) No distribution may be made if, after giving it effect:
(a) The corporation would not be able to pay its debts as they
become due in the usual course of business; or
(b) The corporation's total assets would be less than the sum
of its total liabilities plus (unless the articles of incorporation permit
otherwise) the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
(4) The board of directors may base a determination that a distribution
is not prohibited under subsection (3) either on financial statements prepared
on the basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. In the case of any distribution based upon such a valuation, each
such distribution shall be identified as a distribution based upon a current
valuation of assets, and the amount per share paid on the basis of such
valuation shall be disclosed to the shareholders concurrent with their receipt
of the distribution.
(5) Except as provided in subsection (7), the effect of a distribution
under subsection (3) is measured;
(a) In the case of distribution by purchase, redemption, or
other acquisition of the corporation's shares, as of the earlier of:
<PAGE>
1. The date money or other property is transferred
or debt incurred by the corporation, or
2. The date the shareholder ceases to be a
shareholder with respect to the acquired shares;
(b) In the case of any other distribution of indebtedness, as
of the date the indebtedness is distributed;
(c) In all other cases, as of:
1. The date the distribution is authorized if the
payment occurs within 120 days after the date of authorization, or
2. The date the payment is made if it occurs more
than 120 days after the date of authorization.
(6) A corporation's indebtedness to a shareholder incurred by reason of
a distribution made in accordance with this section is at parity with the
corporation's indebtedness to its general, unsecured creditors except to the
extent subordinated by agreement.
(7) Indebtedness of the corporation, including indebtedness issued as a
distribution, is not considered a liability for purposes of determinations under
subsection (3) if its terms provide that payment of principal and interest are
made only if and to the extent that payment of a distribution to shareholders
could then be made under this section. If the indebtedness is issued as a
distribution, each payment of principal or interest is treated as a
distribution, the effect of which is measured on the date the payment is
actually made.
ARTICLE VIII
AMENDMENT OF ARTICLES AND BYLAWS
Section 8.01. AUTHORITY TO AMEND THE ARTICLES OF INCORPORATION.
(1) The corporation may amend its articles of incorporation at any time
to add or change a provision that is required or permitted in the articles of
incorporation or to delete a provision not required in the articles of
incorporation. Whether a provision is required or permitted in the articles of
incorporation is determined as of the effective date of the amendment.
(2) A shareholder of the corporation does not have a vested property
right resulting from any provision in the articles of incorporation, including
provisions relating to management, control, capital structure, dividend
entitlement, or purpose or duration of the corporation.
<PAGE>
Section 8.02. AMENDMENT BY BOARD OF DIRECTORS.
The corporation's board of directors may adopt one or more amendments
to the corporation's articles of incorporation without shareholder action:
(1) To extend the duration of the corporation if it was incorporated at
a time when limited duration was required by law;
(2) To delete the names and addresses of the initial directors;
(3) To delete the name and address of the initial registered agent or
registered office, if a statement of change is on file with the Department of
State of the State of Florida;
(4) To delete any other information contained in the articles of
incorporation that is solely of historical interest;
(5) To change each issued and unissued authorized share of an
outstanding class into a greater number of whole shares if the corporation has
only shares of that class outstanding;
(6) To delete the authorization for a class or series of shares
authorized pursuant to Section 607.0602 of the Act, if no shares of such class
or series have been issued;
(7) To change the corporate name by substituting the word
"corporation," "incorporated," or "company," or the abbreviation "corp.," Inc.,"
or Co.," for a similar word or abbreviation in the name, or by adding, deleting,
or changing a geographical attribution for the name; or
(8) To make any other change expressly permitted by the Act to be made
without shareholder action.
Section 8.03. AMENDMENT OF BYLAWS BY BOARD OF DIRECTORS.
The corporation's board of directors may amend or repeal the
corporation's bylaws unless the Act reserves the power to amend a particular
bylaw provision exclusively to the shareholders.
Section 8.04. BYLAW INCREASING QUORUM OR VOTING REQUIREMENTS FOR
DIRECTORS.
(1) A bylaw that fixes a greater quorum or voting requirement for the
board of directors may be amended or repealed:
(a) If originally adopted by the shareholders, only by the
shareholders;
<PAGE>
(b) If originally adopted by the board of directors, either by
the shareholders or by the board of directors.
(2) A bylaw adopted or amended by the shareholders that fixes a greater
quorum or voting requirement for the board of directors may provide that it may
be amended or repealed only by a specified vote of either the shareholders or
the board of directors.
(3) Action by the board of directors under paragraph (l)(b) to adopt or
amend a bylaw that changes the quorum or voting requirement for the board of
directors must meet the same quorum requirement and be adopted by the same vote
required to take action under the quorum and voting requirement then in effect
or proposed to be adopted, whichever is greater.
ARTICLE IX
RECORDS AND REPORTS
Section 9.01. CORPORATE RECORDS.
(1) The corporation shall keep as permanent records minutes of all
meetings of its shareholders and board of directors, a record of all actions
taken by the shareholders or board of directors without a meeting, and a record
of all actions taken by a committee of the board of directors in place of the
board of directors on behalf of the corporation.
(2) The corporation shall maintain accurate accounting records.
(3) The corporation or its agent shall maintain a record of its
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(4) The corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
(5) The corporation shall keep a copy of the following records:
(a) Its articles or restated articles of incorporation and all
amendments to them currently in effect;
(b) Its bylaws or restated bylaws and all amendments to them
currently in effect;
<PAGE>
(c) Resolutions adopted by the board of directors creating one
or more classes or series of shares and finding their relative rights,
preferences, and limitations, if shares issued pursuant to those resolutions are
outstanding;
(d) The minutes of all shareholders' meetings and records of
all action taken by shareholders without a meeting for the past three years;
(e) Written communications to all shareholders generally or
all shareholders of a class or series within the past three years, including the
financial statements furnished for the past three years;
(f) A list of the names and business street addresses of its
current directors and off
(g) Its most recent annual report delivered to the Department
of State of the State of Florida.
Section 9.02. FINANCIAL STATEMENTS FOR SHAREHOLDERS.
(1) Unless modified by resolution of the shareholders within 120 days
of the close of each fiscal year, the corporation shall furnish its shareholders
annual financial statements which may be consolidated or combined statements of
the corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal year, an income statement
for that year, and a statement of cash flows for that year. If financial
statements are prepared for the corporation on the basis of generally-accepted
accounting principles, the annual financial statements must also be prepared on
that basis.
(2) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(a) Stating his reasonable belief whether the statements were
prepared on the basis of generally-accepted accounting principles and, if not,
describing the basis of preparation; and
(b) Describing any respects in which the statements were not
prepared on a basis of accounting consistent with the statements prepared for
the preceding year.
(3) The corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the corporation
to prepare its financial statements, if for reasons beyond the corporation's
control, it is unable to prepare its financial statements within
<PAGE>
the prescribed period. Thereafter, on written request from a shareholder who was
not mailed the statements, the corporation shall mail him the latest annual
financial statements.
Section 9.03. OTHER REPORTS TO SHAREHOLDERS.
(1) If the corporation indemnifies or advances expenses to any
director, officer, employee or agent otherwise than by court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained by
the corporation, the corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time such meeting is held, which
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
(2) If the corporation issues or authorizes the issuance of shares for
promises to render services in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting.
Section 9.04. ANNUAL REPORT FOR DEPARTMENT OF STATE.
(1) The corporation shall deliver to the Department of State of the
State of Florida for filing a sworn annual report on such forms as the
Department of State of the State of Florida prescribes that sets forth the
information prescribed by section 607.1622 of the Act.
(2) Proof to the satisfaction of the Department of State of the State
of Florida on or before July 1 of each calendar year that such report was
deposited in the United States mail in a sealed envelope, properly addressed
with postage prepaid, shall be deemed in compliance with this requirement.
(3) Each report shall be executed by the corporation by an officer or
director or, if the corporation is in the hands of a receiver or trustee, shall
be executed on behalf of the corporation by such receiver or trustee, and the
signing thereof shall have the same legal effect as if made under oath, without
the necessity of appending such oath thereto.
(4) Information in the annual report must be current as of the date the
annual report is executed on behalf of the corporation.
<PAGE>
(5) Any corporation failing to file an annual report which complies
with the requirements of this section shall not be permitted to maintain or
defend any action in any court of this state until such report is filed and all
fees and taxes due under the Act are paid and shall be subject to dissolution or
cancellation of its certificate of authority to do business as provided in the
Act.
ARTICLE X
MISCELLANEOUS
Section 10.01. DEFINITION OF THE "ACT."
All references contained herein to the "Act" or to sections of the
"Act" shall be deemed to be in reference to the Florida Business Corporation
Act.
Section 10.02. APPLICATION OF FLORIDA LAW.
Whenever any provision of these bylaws is inconsistent with any
provision of the Florida Business Corporation Act, Statutes 607, as they may be
amended from time to time, then in such instance Florida law shall prevail.
Section 10.03. FISCAL YEAR.
The fiscal year of the corporation shall be determined by resolution of
the board of directors.
Section 10.04. CONFLICTS WITH ARTICLES OF INCORPORATION.
In the event that any provision contained in these bylaws conflicts
with any provision of the corporation's articles of incorporation, as amended
from time to time, the provisions of the articles of incorporation shall prevail
and be given full force and effect, to the full extent permissible under the
Act.
Section 10.05. PARTIAL INVALIDITY.
If any provision of these bylaws shall, for any reason, be held by a
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of these bylaws, and these bylaws shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
EXHIBIT 4.1
[FORM OF FACE OF WARRANT CERTIFICATE]
No.___ ____ Warrants
VOID AFTER ___, 200__
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
UNISERVICE CORPORATION
This certifies that FOR VALUE RECEIVED, ____________________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Common Stock Redeemable Warrants ("Warrants") specified above. Each Warrant
represented hereby entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and the Warrant
Agreement of even date herewith (the "Warrant Agreement"), one fully paid and
nonassessable share of Common Stock, par value $.0001 per share ("Common
Stock"), of UNISERVICE CORPORATION , a Florida corporation (the "Company") at
any time commencing _______________, 199__, and expiring on the Expiration Date
(as hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse side hereof duly executed,
at the corporate office of American Securities Transfer & Trust Company, Inc.,
as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment
of $6.00 per share (subject to adjustment) (the "Purchase Price") in the lawful
money of the United States of America in cash or by official bank or certified
check made payable to the Company. No fractional shares of Common Stock will be
issued.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement by and among the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (Florida Time) on
_______, 200__, or such earlier date as the Warrants shall be redeemed. If such
date shall in the State of Florida be a holiday or a day on which banks are
authorized to close, then the Expiration Date shall mean 5:00 p.m. (Florida
time) the next following day which in the State of Florida is not a holiday or a
day on which banks are authorized to be closed.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Warrants represented hereby unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
securities is effective. The Company has covenanted and agreed that it will file
a registration statement and will use its best efforts to cause the same to
become effective and to keep such
<PAGE>
registration statement current while any of the Warrants are outstanding. The
Warrants represented hereby shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment, with the appropriate transfer fee
per certificate in addition to any tax or other governmental charge imposed in
connection therewith, for registration of transfer of this Warrant Certificate
at such office, a new Warrant Certificate or Warrant Certificates representing
an equal aggregate number of Warrants will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
The Warrants represented hereby may be redeemed at the option of the
Company, commencing twelve (12) months following the effective date of the
Company's registration statement on Form SB-2 filed with the Securities and
Exchange Commission at a redemption price of $.25 per Warrant, upon thirty (30)
days' prior written notice, if (i) the average closing price of the Common
Stock, as reported by the principal exchange on which the Common Stock is
traded, the NASDAQ Small Cap Market or the National Quotation Bureau,
Incorporated, as the case may be, equals or exceeds $7.00 per share for any
thirty (30) consecutive trading days ending within thirty (30) days prior to the
date of the notice of redemption. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to the Warrants
represented hereby except to receive the $.25 per Warrant upon surrender of this
Warrant Certificate. Upon thirty (30) days' prior written notice to all holders
of the Warrants and subject to the consent of the Company's lead underwriter or
representative, the Company shall have the right to reduce the exercise price
and/or extend the term of the Warrants in compliance with the requirements of
Rule 13e-4 to the extent applicable.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Florida.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
UNISERVICE CORPORATION
Dated__________________, 199__ By:_________________________________
Name:_______________________________
Title:______________________________
[corporate seal]
Countersigned:
AMERICAN SECURITIES TRANSFER & TRUST COMPANY, INC.
as Warrant Agent
By:___________________________
Authorized Officer
3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
____________________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
[please print or type name and address]
and be delivered to
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated: ____________________ X_________________________________
Signature
__________________________________
__________________________________
Address
_________________________________
Taxpayer Identification Number
<PAGE>
_________________________________
Signature Guaranteed
_________________________________
THE SIGNATURE TO THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
MEMBER OF THE MEDALLION STAMP PROGRAM.
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _________________hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF TRANSFEREE
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
[please print or type name and address]
___________of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints ____________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.
Dated: ____________________ X_________________________________
Signature
__________________________________
__________________________________
Address
_________________________________
Taxpayer Identification Number
_________________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A MEMBER OF THE
MEDALLION STAMP PROGRAM.
EXHIBIT 5.1
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
April 24, 1998
Uniservice Corporation
2900 Glades Road, Suite 351
Boca Raton, Florida 33434
RE: REGISTRATION STATEMENT ON FORM SB-2; UNISERVICE
CORPORATION (THE "COMPANY").
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by the
Company of 1,400,000 shares of Class A Common Stock, $.0001 par value ("Class A
Common Stock"), and 1,400,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") to purchase share of Class A Common Stock at $6.00 per share to be
sold by the Company.
In connection therewith, we have examined and relied upon original,
certified, conformed, photostat or other copies of (i) the Amended and Restated
Articles of Incorporation, as amended, and Bylaws of the Company; (ii)
resolutions of the Board of Directors of the Company authorizing the offering
and the issuance of the Common Stock, the Warrants, and the shares of Common
Stock underlying the Warrants, and related matters; (iii) the Registration
Statement and the exhibits thereto; and (iv) such other matters of law as we
have deemed necessary for the expression of the opinion herein contained. In all
such examinations, we have assumed the genuineness of all signatures on original
documents, and the conformity to originals or certified documents of all copies
submitted to us as conformed, photostat or other copies. In passing upon certain
corporate records and documents of the Company, we have necessarily assumed the
correctness and completeness of the statements made or included therein by the
Company, and we express no opinion thereon. As to the various questions of fact
material to this opinion, we have relied, to the extent we deemed reasonably
appropriate, upon representations or certificates of officers or directors of
the Company and upon documents, records and instruments furnished to us by the
Company, without independently checking or
<PAGE>
Uniservice Corporation
April 24, 1998
Page 2
verifying the accuracy of such documents, records and instruments.
Based upon the foregoing, we are of the opinion that the Common Stock,
the Warrants, and the shares of Common Stock underlying the Warrants have been
duly and validly authorized.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to use our name under the caption "Legal Matters" in
the prospectus comprising part of the Registration Statement. In giving such
consent, we do not thereby admit that we are included in with the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations promulgated thereunder.
Sincerely,
/S/ ATLAS, PEARLMAN, TROP & BORKSON, P.A.
-----------------------------------------
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
EXHIBIT 10.1
UNISERVICE CORPORATION
-----------------------------
1998 STOCK OPTION PLAN
-----------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of the
UNISERVICE CORPORATION, a Florida corporation ("UC/the Company") and each
"Subsidiary," as hereinafter defined, of UC (UC and Subsidiary collectively
referred to as the "Company"), by providing an additional incentive to attract
and retain qualified and competent persons who are key employees of the Company,
and upon whose efforts and judgment the success of the Company is largely
dependent, through the encouragement of stock ownership in the Company, by such
persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the stock option committee
appointed by the Board pursuant to Section 13 hereof or, if not appointed, the
Board.
(c) "Common Stock" shall mean the Company's Common Stock, par
value $0.0001 per share.
(d) "Director" shall mean a member of the Board.
(e) "Disinterested Person" shall mean a Director who is not,
during the one year prior to his or her service as an administrator of this
Plan, or during such service, granted or awarded equity securities pursuant to
this Plan or any other plan of the Company or any of its affiliates, except
that:
(i) participation in a formula plan meeting the
conditions in paragraph (c)(2)(ii) of Rule 16b-3 promulgated under the
Securities Exchange Act shall not disqualify a Director from being a
Disinterested Person;
(ii) participation in an ongoing securities
acquisition plan meeting the conditions in paragraph (d)(2)(i) of Rule 16b-3
promulgated under the Securities Exchange Act shall not disqualify a Director
from being a Disinterested Person; and
(iii) an election to receive an annual retainer fee
in either cash or an equivalent amount of securities, or partly in cash and
partly in securities, shall not disqualify a Director from being a Disinterested
Person.
<PAGE>
(f) "Fair Market Value" of a Share on any date of reference
shall be the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date, unless the Committee, in its sole
discretion, shall determine otherwise in a fair and uniform manner. For the
purpose of determining Fair Market Value, the "Closing Price" of the Common
Stock on any business day shall be (i) if the Common Stock is listed or admitted
for trading on any United States national securities exchange, or if actual
transactions are otherwise reported on a consolidated transaction reporting
system, the last reported sale price of Common Stock on such exchange or
reporting system, as reported in any newspaper of general circulation, (ii) if
the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the mean between
the closing high bid and low asked quotations for such day of Common Stock on
such system, or (iii) if neither clause (i) or (ii) is applicable, the mean
between the high bid and low asked quotations for the Common Stock as reported
by the National Quotation Bureau, Incorporated if at least two securities
dealers have inserted both bid and asked quotations for Common Stock on at least
five of the ten preceding days.
(g) "Incentive Stock Option" or "ISO" shall mean an incentive
stock option as defined in Section 422 of the Internal Revenue Code.
(h) "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(i) "Non-Statutory Stock Option" or "NSO" shall mean an Option
which is not an Incentive Stock Option.
(j) "Officer" shall mean the Company's president, principal
financial officer, principal accounting officer and any other person who the
Company identifies as an "executive officer" for purposes of reports or proxy
materials filed by the Company pursuant to the Securities Exchange Act.
(k) "Option" (when capitalized) shall mean any option granted
under this Plan.
(l) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(m) "Plan" shall mean this Stock Option Plan for the Company.
(n) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(o) "Share(s)" shall mean a share or shares of the Common
Stock.
2
<PAGE>
(p) "Subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time the Option is granted, each of the corporations other than the last
corporation in the unbroken chain owns 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
3. SHARES AND OPTIONS. The Company may grant to Optionees from time to
time Options to purchase an aggregate of up to Two Hundred Thousand (200,000)
Shares from Shares held in the Company's treasury or from authorized and
unissued Shares. If any Option granted under the Plan shall terminate, expire or
be canceled or surrendered as to any Shares, new Options may thereafter be
granted covering such Shares. An Option granted hereunder shall be either an
Incentive Stock Option or a Non-Statutory Stock Option as determined by the
Committee at the time of grant of such Option and shall clearly state whether it
is an Incentive Stock Option or Non-Statutory Stock Option. All Incentive Stock
Options shall be granted within 10 years from the effective date of this Plan.
4. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options only to the
extent that the aggregate fair market value (determined at the time the Option
is granted) of the Shares, with respect to which Options meeting the
requirements of the Internal Revenue Code Section 422(b) are exercisable for the
first time by any individual during any calendar year (under all plans of the
Company), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that
may contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all regular
employees of the Company, including employees who are also Directors or
Officers. Any person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of eligibility to receive any Option under this Plan
shall not be eligible to receive any Option under this Plan for the duration of
such waiver.
(b) In granting Options, the Committee may take into
consideration the contribution the person has made to the success of the Company
and such other factors as the Committee shall determine. The Committee shall
also have the authority to consult with and receive recommendations from
officers and other personnel of the Company with regard to these matters. The
Committee may, from time to time, in granting Options under the Plan, prescribe
such other terms and conditions concerning such Options as it deems appropriate,
including, without limitation, (i) prescribing the date or dates on which the
Option becomes exercisable, (ii) providing that the Option rights accrue or
become exercisable in installments over a period of years, or upon the
attainment of stated goals or both, or (iii) relating an Option to the continued
employment of the Optionee for a specified period of time, provided that such
terms and conditions are not more favorable to an Optionee than those expressly
permitted herein.
3
<PAGE>
(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company. Neither the Plan nor any Option
granted under the Plan shall confer upon any person any right to employment or
continuance of employment by the Company.
(d) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, Options may not be granted to a
Director or Officer unless the grant of such Options is authorized by, and all
of the terms of such Options are determined by, a Committee that is appointed in
accordance with Section 14 of this Plan and all of whose members are
Disinterested Persons.
6. OPTION PRICE. The option price per Share of any Option shall be any
price determined by the Committee but shall not be less than the par value per
Share; provided, however, that in no event shall the option price per Share of
any Incentive Stock Option be less than the Fair Market Value of the Shares
underlying such Option on the date such Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee, in its sole discretion, have been made
for the Optionee's payment to the Company of the amount that is necessary for
the Company employing the Optionee to withhold in accordance with applicable
Federal or state tax withholding requirements. Unless further limited by the
Committee in any Option, the option price of any Shares purchased shall be paid
in cash, by certified or official bank check, by money order, with Shares or by
a combination of the above; provided further, however, that the Committee, in
its sole discretion, may accept a personal check in full or partial payment of
any Shares. If the exercise price is paid in whole or in part with Shares, the
value of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company, in its sole discretion, may, on an individual
basis or pursuant to a general program established by the Committee in
connection with this Plan, lend money to an Optionee to exercise all or a
portion of an Option granted hereunder. If the exercise price is paid in whole
or in part with the Optionee's promissory note, such note shall (i) provide for
full recourse to the maker, (ii) be collateralized by the pledge of the Shares
that the Optionee purchases upon exercise of such Option, (iii) bear interest at
a rate no less than the rate of interest payable by the Company to its principal
lender, and (iv) contain such other terms as the Committee, in its sole
discretion, shall require. No Optionee shall be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to such person(s) under the terms of this Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 11 hereof.
4
<PAGE>
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 8.
(a) The expiration date of an Option shall be determined by
the Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date of grant of the
Option.
(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable:
(i) if there occurs any transaction (which shall
include a series of transactions occurring within 60 days or occurring pursuant
to a plan), that has the result that shareholders of the Company immediately
before such transaction cease to own at least 51% of the voting stock of the
Company or of any entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;
(ii) if the shareholders of the Company shall approve
a plan of merger, consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(iii) if the shareholders of the Company shall
approve a plan for the sale, lease, exchange or other disposition of all or
substantially all the property and assets of the Company (unless such plan is
subsequently abandoned).
(c) The Committee may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
(d) Options granted to Officers and Directors shall not be
exercisable until the expiration of a period of at least six months following
the date of grant.
9. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the
Optionee's employment is terminated or, in the case of a Non-Statutory Stock
Option, and unless the Committee shall otherwise determine in writing, in its
sole discretion, the date on which the Optionee's employment is terminated, in
either case for any reason other than by reason of (A) Cause, which, solely for
purposes of this Plan, shall mean the termination of the Optionee's employment
5
<PAGE>
by reason of the Optionee's wilful misconduct or gross negligence, (B) a mental
or physical disability as determined by a medical doctor satisfactory to the
Committee, or (C) death;
(ii) immediately upon the termination of the
Optionee's employment for Cause;
(iii) one year after the date on which the Optionee's
employment is terminated by reason of a mental or physical disability (within
the meaning of Internal Revenue Code Section 22(e)) as determined by a medical
doctor satisfactory to the Committee; or
(iv) (A) 12 months after the date of termination of
the Optionee's employment by reason of death of the employee, or (B) three
months after the date on which the Optionee shall die if such death shall occur
during the one-year period specified in Subsection 9(a)(iii) hereof.
(b) The Committee, in its sole discretion, may, by giving
written notice ("Cancellation Notice") cancel, effective upon the date of the
consummation of any corporate transaction described in Subsections 8(b)(ii) or
(iii) hereof, any Option that remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
approval of such corporate transaction.
10. RELOAD OPTIONS. The Committee may provide for the grant to any
Optionee of additional Options upon the exercise of Options ("Reload Options"),
including the exercise of Reload Options, through the delivery of Shares;
provided, however, that (i) the Reload Options may be granted only with respect
to the same number of Shares as were surrendered to exercise the Options, (ii)
the exercise price of the Reload Options will be the Fair Market Value on the
date of grant of the Reload Options, (iii) with respect to Optionees who are
subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act, the Reload Option may not be exercised after the date the Options
with respect to which such Reload Options were granted expire or terminate and
(iv) the provisions contained in this Section may not be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder.
11. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
6
<PAGE>
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan, so that the same
percentage of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate price.
(b) Subject to the specific terms of any Option, the Committee
may change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsections 8(b)(ii) or (iii) hereof.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to the number of or
exercise price of Shares then subject to outstanding Options granted under the
Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
12. TRANSFERABILITY OF OPTIONS. Each Option shall provide that such
Option shall not be transferable by the Optionee otherwise than by will or the
laws of descent and distribution, and each Option shall be exercisable during
the Optionee's lifetime only by the Optionee.
13. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
7
<PAGE>
(i) a representation and warranty by the Optionee to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to be bound
by any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed by the
Committee to be applicable to the issuance of the Shares and are endorsed upon
the Share certificates.
14. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, which
shall consist of not less than two Directors, each of whom shall be
Disinterested Persons to the extent required by Section 5(d) hereof. The
Committee shall have all of the powers of the Board with respect to the Plan.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board and any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The Committee's
determinations and its interpretation and construction of any provision of the
Plan shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of the
members of the Committee.
15. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly or indirectly (through attribution under
Section 424(d) of the Internal Revenue Code) at the date of grant, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or of its subsidiary [as defined in Section 424 of the
Internal Revenue Code] at the date of grant) unless the option price of such
Option is at least 110% of the Fair Market Value of the Shares subject to such
Option on the date the Option is granted, and such Option by its terms is not
exercisable after the expiration of five years from the date such Option is
granted.
16. INTERPRETATION.
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under Section 422 of the Internal Revenue Code. If any provision of the
Plan should be held invalid for the granting of Incentive Stock Options or
illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan.
8
<PAGE>
(b) This Plan shall be governed by the laws of the State of
Florida.
(c) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
17. AMENDMENT AND DISCONTINUATION OF THE PLAN. Either the Board or the
Committee may from time to time amend the Plan or any Option; provided, however,
that, except to the extent provided in Section 11, no such amendment may,
without approval by the shareholders of the Company, (a) materially increase the
benefits accruing to participants under the Plan, (b) materially increase the
number of securities which may be issued under the Plan, or (c) materially
modify the requirements as to eligibility for participation in the Plan; and
provided further, that, except to the extent provided in Section 9, no amendment
or suspension of the Plan or any Option issued hereunder shall substantially
impair any Option previously granted to any Optionee without the consent of such
Optionee.
18. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan
is the date on which the Board and the shareholders of the Company have adopted
this Plan, which is January 5, 1998, and the Plan shall terminate on the 10th
anniversary year of the effective date.
UNISERVICE CORPORATION
By:/S/ RICARDO VILENSKY
---------------------------
Ricardo Vilensky, CEO
9
<PAGE>
[NSO GRANT FORM]
UNISERVICE CORPORATION
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
Date: __________
__________
__________
__________
Dear __________:
The Board of Directors of Uniservice Corporation (the "Corporation") is
pleased to award you an Option pursuant to the provisions of the 1998 Stock
Option Plan (the "Plan"). This letter will describe the Option granted to you.
Attached to this letter is a copy of the Plan. The terms of the Plan also set
forth provisions governing the Option granted to you. Therefore, in addition to
reading this letter you should also read the Plan. Your signature on this letter
is an acknowledgement to us that you have read and under-stand the Plan and that
you agree to abide by its terms. All terms not defined in this letter shall have
the same meaning as in the Plan.
1. TYPE OF OPTION. You are granted an NSO. Please see in particular
Section 11 of the Plan.
2. RIGHTS AND PRIVILEGES. Subject to the conditions hereinafter set
forth, we grant you the right to purchase __________ shares of Stock at
$__________ per share, the current fair market value of a share of Stock. The
right to purchase the shares of Stock accrues in __________ installments over
the time periods described below:
The right to acquire __________ shares accrues on __________.
The right to acquire __________ shares accrues on __________.
3. TIME OF EXERCISE. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. METHOD OF EXERCISE. The Options shall be exercised by written
notice to the Chief Financial Officer at the Corporation's principal place of
business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
<PAGE>
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. TERMINATION OF OPTION. To the extent not exercised, the Option
shall terminate upon the first to occur of the following dates:
(a) __________, 199_, being __________ years from the date of
grant pursuant to the provisions of Section 2 of this Agreement; or
(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan, if such employment termination occurs by reason of your death or by
reason of your permanent disability (as defined above).
6. SECURITIES LAWS.
The Option and the shares of Stock underlying the Option have
not been registered under the Securities Act of 1933, as amended (the "Act").
The Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. BINDING EFFECT. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
2
<PAGE>
8. DATE OF GRANT. The Option shall be treated as having been granted
to you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
President
AGREED AND ACCEPTED:
_________________________
3
<PAGE>
Date: ________________
UNISERVICE CORPORATION
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
_______________
_______________
_______________
Dear _______________:
The Board of Directors of Uniservice Corporation (the "Corporation") is
pleased to award you an Option pursuant to the provisions of the 1998 Stock
Option Plan (the "Plan"). This letter will describe the Option granted to you.
Attached to this letter is a copy of the Plan. The terms of the Plan also set
forth provisions governing the Option granted to you. Therefore, in addition to
reading this letter you should also read the Plan. Your signature on this letter
is an acknowledgement to us that you have read and under-stand the Plan and that
you agree to abide by its terms. All terms not defined in this letter shall have
the same meaning as in the Plan.
1. TYPE OF OPTION. You are granted an ISO. Please see in particular
Section 11 of the Plan.
2. RIGHTS AND PRIVILEGES. Subject to the conditions hereinafter set
forth, we grant you the right to purchase __________ shares of Stock at
$__________ per share, the current fair market value of a share of Stock. The
right to purchase the shares of Stock accrues in __________ installments over
the time periods described below:
The right to acquire __________ shares accrues on __________.
The right to acquire __________ shares accrues on __________.
The right to acquire __________ shares accrues on __________.
The right to acquire __________ shares accrues on __________.
The right to acquire __________ shares accrues on __________.
The right to acquire __________ shares accrues on __________.
<PAGE>
3. TIME OF EXERCISE. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. METHOD OF EXERCISE. The Options shall be exercised by written
notice to the Chief Financial Officer at the Corporation's principal place of
business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. TERMINATION OF OPTION. To the extent not exercised, the Option
shall terminate upon the first to occur of the following dates:
(a) _____________, 199___, being __________ years from the
date of grant pursuant to the provisions of Section 2 of this Agreement; or
(b) The expiration of thirty (30) days following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan, if such employment termination occurs by reason of your death or by
reason of your permanent disability (as defined above).
6. SECURITIES LAWS.
The Option and the shares of Stock underlying the Option have
not been registered under the Securities Act of 1933, as amended (the "Act").
The Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
2
<PAGE>
7. BINDING EFFECT. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. DATE OF GRANT. The Option shall be treated as having been granted
to you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
President
AGREED AND ACCEPTED:
_________________________
3
<PAGE>
[NSO GRANT FORM
WITH RELOAD OPTIONS]
UNISERVICE CORPORATION
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
Date: __________
__________
__________
__________
Dear __________:
The Board of Directors of Uniservice Corporation (the "Corporation") is
pleased to award you an Option pursuant to the provisions of the 1998 Stock
Option Plan (the "Plan"). This letter will describe the Option granted to you.
Attached to this letter is a copy of the Plan. The terms of the Plan also set
forth provisions governing the Option granted to you. Therefore, in addition to
reading this letter you should also read the Plan. Your signature on this letter
is an acknowledgement to us that you have read and under-stand the Plan and that
you agree to abide by its terms. All terms not defined in this letter shall have
the same meaning as in the Plan.
1. TYPE OF OPTION. You are granted an NSO. Please see in particular
Section 11 of the Plan.
2. RIGHTS AND PRIVILEGES.
(a) Subject to the conditions hereinafter set forth, we grant
you the right to purchase __________ shares of Stock at $__________ per share,
the current fair market value of a share of Stock. The right to purchase the
shares of Stock accrues in __________ installments over the time periods
described below:
The right to acquire __________ shares accrues on __________.
The right to acquire __________ shares accrues on __________.
(b) In addition to the Option granted hereby (the "Underlying
Option"), the Corporation will grant you a reload option (the "Reload Option")
as hereinafter provided. A
<PAGE>
Reload Option is hereby granted to you if you acquire shares of Stock pursuant
to the exercise of the Underlying Option and pay for such shares of Stock with
shares of Common Stock already owned by you (the "Tendered Shares"). The Reload
Option grants you the right to purchase shares of Stock equal in number to the
number of Tendered Shares. The date on which the Tendered Shares are tendered to
the Corporation in full or partial payment of the purchase price for the shares
of Stock acquired pursuant to the exercise of the Underlying Option is the
Reload Grant Date. The exercise price of the Reload Option is the fair market
value of the Tendered Shares on the Reload Grant Date. The fair market value of
the Tendered Shares shall be the low bid price per share of the Corporation's
Common Stock on the Reload Grant Date. The Reload Option shall vest equally over
a period of __________ (___) years, commencing on the first anniversary of the
Reload Grant Date, and on each anniversary of the Reload Grant Date thereafter;
however, no Reload Option shall vest in any calendar year if it would allow you
to purchase for the first time in that calendar year shares of Stock with a fair
market value in excess of $100,000, taking into account ISOs previously granted
to you. The Reload Option shall expire on the earlier of (i) __________ (___)
years from the Reload Grant Date, or (ii) in accordance with Paragraph 5(b), or
(iii) in accordance with Paragraph 5(c) as set forth herein. If vesting of the
Reload Option is deferred, then the Reload Option shall vest in the next
calendar year, subject, however, to the deferral of vesting previously provided.
Except as provided herein the Reload Option is subject to all of the other terms
and provisions of this Agreement governing Options.
3. TIME OF EXERCISE. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. METHOD OF EXERCISE. The Options shall be exercised by written
notice to the Chief Financial Officer at the Corporation's principal place of
business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. TERMINATION OF OPTION. To the extent not exercised, the Option
shall terminate upon the first to occur of the following dates:
(a) __________, 199_, being __________ years from the date of
grant pursuant to the provisions of Section 2 of this Agreement; or
(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
2
<PAGE>
(c) The expiration of 12 months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan, if such employment termination occurs by reason of your death or by
reason of your permanent disability (as defined above).
6. SECURITIES LAWS.
The Option and the shares of Stock underlying the Option have
not been registered under the Securities Act of 1933, as amended (the "Act").
The Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. BINDING EFFECT. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. DATE OF GRANT. The Option shall be treated as having been granted
to you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
President
AGREED AND ACCEPTED:
_________________________
3
EXHIBIT 10.2
KENTUCKY FRIED CHICKEN
INTERNATIONAL FRANCHISE AGREEMENT
THIS AGREEMENT made this 1st day of January, 1994 ("Commencement Date")
by and between Kentucky Fried Chicken International Holdings, Inc., a Delaware,
U.S.A. corporation ("KFC"), and Alimentos Merced S.A., a corporation of Chile
with principal place of business at Huerfanos 725, 5th Floor, Santiago (the
"FRANCHISEE").
WITNESSETH:
WHEREAS, KFC and it predecessors over the course of more than four
decades have originated and developed a substantial dynamic system for
elaboration, preparation, cooking and merchandising of specially selected
chicken and other food products of quality using specialized equipment and
methods of marketing including but not limited to formulae, techniques,
training, dress, design, services, procedures, premises, menus, advertising, and
materials pursuant to trade secrets, standards and specifications (hereinafter
referred to as "the Kentucky Fried Chicken System" or "System"); and
WHEREAS, KFC owns valuable good will and enjoys a special and very high
reputation in the field of the quick service restaurant industry, with respect
to its valuable trademark, service mark and trade name Kentucky Fried Chicken in
addition to various trademarks, service marks, trade names, slogans, designs,
insignias, emblems, symbols, package designs, distinctive building designs and
other architectural features, logos and other proprietary identifying
characteristics identifying and distinguishing or used or to be used in
connection with its products, business and System (hereafter collectively
referred to as the "Trademarks"); and
WHEREAS, FRANCHISEE considers that access to elements of technology and
technical assistance and support of the Kentucky Fried Chicken System can enable
local enterprises and individuals to develop activities, jobs, and opportunities
in food service and related industries and desires to use the Trademarks and the
Kentucky Fried Chicken System in the business of operating a quick service
restaurant (the "Business") at the location specified in Exhibit A (the
"Outlet"); and
WHEREAS, FRANCHISEE understands the need and its responsibilities to
perform substantial obligations including strict adherence to KFC's present and
future requirements regarding menu items, equipment, advertising, facilities and
future improvements and enhancements to the Outlet that may be required under
the Kentucky Fried Chicken System; and
<PAGE>
WHEREAS, FRANCHISEE acknowledges that the success of the Business in
connection with the limited rights granted herein involves substantial risks and
depends significantly on the FRANCHISEE's abilities, participation, involvement,
and control of the daily affairs of the Business.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises herein recorded and contained and for other good and
valuable consideration, receipt and sufficiency of which is hereby acknowledged,
and intending to be legally bound hereby, the parties do hereby agree as
follows:
1. LICENSE GRANTED
1.1 KFC grants to FRANCHISEE for a period of ten (10) years
from the Commencement Date hereof (the "Outlet Term"), a license, without the
right to sublicense, to use the Trademarks solely in direct connection with the
operation of the Business, in accordance with and subject to the limitations of
this Agreement.
1.2 KFC shall renew this license granted herein at the
expiration of the Outlet Term for a supplemental term of ten (10) years ("Outlet
Renewal Term") provided that the following conditions are met:
(a) Such renewal is permitted by local law.
(b) FRANCHISEE has corrected any default under this
Agreement and has not been in default in any material manner within twenty-four
(24) months preceding the renewal request and complies with such annual
performance criteria implemented in the System during the Outlet Term.
(c) FRANCHISEE makes the renewal request not more
than eighteen (18) or less than twelve (12) months prior to the expiration of
the Outlet Term.
(d) FRANCHISEE agrees to make such capital
expenditures as may be required to renovate, modernize and enhance the Outlet
and its signs and equipment to conform with KFC's then current standards and
completes such renovation within the time agreed with KFC.
(e) If KFC determines that renovation and
modernization of the outlet is not practical or advisable to meet its then
current standards, FRANCHISEE agrees to undertake KFC's relocation procedure for
the Outlet.
(f) FRANCHISEE executes a new Kentucky Fried Chicken
International Franchise Agreement if the current form has been modified for new
franchisees or renewals, including then current fees and contributions.
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(g) FRANCHISEE is current in all monetary obligations
or other obligations to KFC and its subsidiaries and affiliates.
(h) FRANCHISEE pays KFC a renewal fee in the amount
of Three Thousand United States Dollars (US$3,000) or such greater amount as
required for renewals in the form of agreement then used for new franchisees.
1.3 The license granted to FRANCHISEE under this Agreement is
non-exclusive and gives FRANCHISEE the right to establish the Outlet at only the
specific location set forth in Exhibit A, and no exclusive, protected or other
territorial right in the contiguous space, area or market of such Outlet or
otherwise is granted or to be inferred. FRANCHISEE shall conduct the Business
only at the Outlet. The license does not include the right to operate, sell or
deliver at or from any other location. Upon reasonable advance notice, KFC may
approve catering and special event sales conducted in strict accordance with the
procedures it establishes.
1.4 KFC expressly reserves the right to operate and sell and
to license others to operate and sell any products under the Trademarks through
a delivery system or any distribution channel or concept other than the Outlet.
2. TRAINING, ASSISTANCE AND DEVELOPMENT
2.1 KFC shall assist and advise FRANCHISEE in establishing,
becoming familiar with proper operation, maintaining, and developing the
Business at KFC deems appropriate and necessary. However, FRANCHISEE
acknowledges that the initial and monthly franchise fees hereunder are due in
compensation for the rights to establish and operate the Outlet under the
license granted and not for the performance of specific services.
2.2 Such assistance to FRANCHISEE which KFC might find
necessary or advisable could include any of the following:
(a) Conducting certain training programs at locations
selected by KFC which FRANCHISEE and key employees of FRANCHISEE must attend and
successfully complete at the full cost of FRANCHISEE including, without
limitation, the cost of travel, lodging, meals and other related and incidental
expenses. When required by KFC, FRANCHISEE and key employees of FRANCHISEE shall
personally attend and successfully complete additional training programs.
FRANCHISEE agrees that the Outlet shall only be managed by individuals who have
successfully completed the management training courses and uphold the KFC
standards set forth below.
(b) Reviewing the operation of the Business, the
control of quality and furnishing operating advice on a continuing basis through
its representatives in the field.
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(c) Undertaking refinement of products and equipment
and informing FRANCHISEE of such engineering research and development which in
KFC's opinion may be beneficial to FRANCHISEE's operation of the Business.
(d) Recommending such planning, accounting, analysis
and other business and marketing procedures which KFC believes may be
beneficial.
(e) Scheduling and holding from time to time regional
and international meetings and seminars for the advancement and dissemination of
its methods and in connection with furthering the Business of FRANCHISEE and the
Kentucky Fried Chicken System and protecting the Trademarks.
2.3 KFC may undertake to provide for FRANCHISEE without
obligation option services or other specified forms of assistance or may offer
products or materials for sale to FRANCHISEE. KFC may charge FRANCHISEE for such
assistance or products amounts which reflect the value conveyed.
3. PRODUCTS AND STANDARDS
3.1 FRANCHISEE shall engage only in the Business at the Outlet
and shall only manufacture, sell advertise for sale, market or give away food
products and beverages approved in writing by KFC and meeting KFC's quality
standards through the use of specifications and processes communicated by KFC
("Approved Products"). The Approved Products shall consist of Colonel Sanders
Kentucky Fried Chicken Original Recipe ("Original Recipe"), other required
products, and other products which are optionally authorized for sale by KFC
under the Trademarks. The current Approved Products are listed and the
explanation as to their authorization for use at the Outlet are set forth in
Exhibit B hereto. FRANCHISEE may not discontinue the sale of or otherwise fail
to offer any required product at the Outlet at any time during the term of this
Agreement unless so required by KFC. All products shall be sold under the
Trademarks or the brand name designated by KFC, and no products may be sold
under any other brand name.
3.2 KFC shall provide, on loan and at no cost to FRANCHISEE,
one copy of the Kentucky Fried Chicken Confidential Operations Manual ("COM")
for the Outlet. FRANCHISEE may obtain additional copies of the COM on loan from
KFC at a reasonable fee to be set by KFC. All COM's shall remain the property of
KFC and shall be returned to KFC upon any reasonable request, termination of
this Agreement or the closing of the Outlet.
The COM shall be subject to and shall be deemed to include
such reasonable supplements, revisions and subsequent instructions as may be
issued from time to time by KFC. FRANCHISEE must treat the COM in a confidential
manner as
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trade secrets of KFC and not disclose any information contained therein to
anyone except employees of FRANCHISEE as necessary for the proper operation of
the Outlet.
3.3 In the COM, its supplements and other publications, KFC
has established standards of operation (including menu content, recipes and
presentation) and standards of quality, cleanliness and service for all food,
beverages, furnishings, supplies, fixtures, interior and exterior decor and
equipment used in connection with the Business ("Standards"). KFC may change any
Standard and FRANCHISEE shall at all times conform to all Standards as issued
from time to time by KFC, which FRANCHISEE acknowledges may include remodelling
or upgrading of the Outlet and additional investment by FRANCHISEE. FRANCHISEE
shall be advised of any change and shall have thirty (30) days, or such
reasonable time as KFC deems necessary, from the date of such written notice to
fully implement any such change. The COM and other publications which establish
Standards as presently constituted and as may be hereafter amended and
supplemented by KFC from time to time are incorporated by reference herein and
thereby made a part of this Agreement.
4. PLEDGE OF OUTLET COMPLIANCE AND SUPERVISION OF STANDARDS
4.1 FRANCHISEE represents that the Outlet has in all respects
been constructed, established and prepared to conduct the Business in strict
compliance with all plans, specifications, requirements, rules and regulations
prescribed by KFC, and that any material deviations from KFC's Standards, plans,
specifications, requirements, rules and regulations, have been approved in
writing by KFC. At KFC's request FRANCHISEE will promptly correct any unapproved
deviations.
4.2 FRANCHISEE shall, consistent with the terms of this
Agreement, diligently develop the Business of the Outlet and use its best
efforts to market and promote the Approved Products offered for sale at the
Outlet.
4.3 FRANCHISEE will strictly comply with all Standards,
specifications, processes, procedures, requirements, rules, regulations and
instructions of KFC regarding the operation of the Business which now exist or
may be established from time to time, and FRANCHISEE will take such action and
precautions as necessary to assure that:
(a) FRANCHISEE's fully trained and qualified managers
devote their full time to the supervision, management and operation of the
Outlet.
(b) FRANCHISEE's employees at the Outlet attend and
complete such courses, programs and seminars as such locations, as KFC may from
time to time require, in order that such persons may be fully trained and
instructed on a continuing basis in various aspects of operating a KFC outlet.
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(c) all Approved Products offered for sale at the
Outlet are prepared at the Outlet for sale to customers at the Outlet, except as
expressly authorized in writing by KFC, but any such authorization shall
terminate, if it is found by KFC that preparation elsewhere results in a
lessening of the high quality of food products required by KFC's specifications.
(d) no sale of any product except Approved Products
is solicited, accepted or made at or from the Outlet, and no products except
Approved Products are prepared at the Outlet, except when specifically
authorized in writing by KFC.
(e) only signs and menuboards, advertising and
promotional material, equipment, supplies, uniforms, paper goods, packaging,
furnishings, fixtures, receipts, and food ingredients which meet KFC's Standards
and specifications (as established from time to time) are used at the Outlet or
in connection with its Business.
(f) equipment, signs, menuboards, supplies and other
items are added, eliminated, substituted and modified at the Outlet, as soon as
practicable in accordance with changes in KFC's specifications and requirements.
(g) the Outlet and everything located at the Outlet
are maintained in first-class condition and repair and are kept clean, neat and
sanitary; the Outlet is adequately lighted and is operated in a clean, wholesome
and sanitary manner consistent with KFC's requirements; all maintenance, repairs
and replacements requested by KFC or needed in connection with the Outlet are
promptly made; and all employees are clean and neat in appearance.
(h) no alterations of the Outlet affecting the image
are made except at KFC's request or with KFC's approval, and any such
alterations strictly conform to specifications and requirements established or
approved by KFC.
(i) the Outlet and its Business comply with
applicable laws, ordinances and governmental rules, regulations and other
requirements, including but not limited to health and sanitation requirements.
FRANCHISEE shall promptly notify KFC of any conflict between this requirement
and any other requirement in or pursuant to this Agreement.
(j) such advertising materials as may be furnished
form time to time for use by FRANCHISEE are used only in the manner and during
the period specified by KFC.
(k) the Outlet is open for business every day during
the hours specified or approved by KFC, except Christmas and any other day
expressly prohibited or regulated by the appropriate governmental authority.
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(l) the employees, and the supplies and other items
on hand at the Outlet, are at all times sufficient to meet the reasonably
anticipated volume of the Business.
(m) all debts and taxes in connection with the Outlet
and its Business, except those duly contested in a bona fide dispute, are paid
when due, including but not limited to debts payable to KFC and its affiliates.
(n) all necessary and appropriate measures are taken
to avoid an unsatisfactory or equivalent safety, sanitation or health rating at
any time from any governmental authority, and conditions or practices
disapproved by any such authority are promptly corrected.
4.4 KFC's employees and representatives shall have the right,
during business hours and at all other reasonable times, to enter and to inspect
the Outlet and all other facilities used for the preparation, storage,
transportation, etc., of any Approved Products, to discuss with FRANCHISEE or
other people as the FRANCHISEE may designate, concerning all matters that may
pertain to the Business, compliance with this Agreement and with Standards,
specifications, requirements, instructions and procedures of KFC, to take
photographs of the Outlet and such other facilities, and to buy samples of
products and other items at the Outlet and other points-of-sale. KFC employees
and representatives shall also have the right, under the supervision of
FRANCHISEE or its designee, to collect samples at any other facilities under the
control of FRANCHISEE. FRANCHISEE will in all respects operate with KFC in its
exercise of rights under this subsection. At KFC's discretion, FRANCHISEE shall
receive a written evaluation report after each formal evaluation of the Business
by KFC. In the event any such evaluation report indicates any deficiency in the
conduct of the Business, FRANCHISEE shall, within forty-eight (48) hours of
FRANCHISEE's receipt of the report (or such other time period as KFC may
provide), correct or repair any deficiency or unsatisfactory condition. If any
deficiency or unsatisfactory condition is not, in KFC's judgment, correctable or
repairable within such period of time, FRANCHISEE shall at least commence such
correction or repair and thereafter diligently pursue the same to completion
within seven (7) days after FRANCHISEE's receipt of such report. If FRANCHISEE
fails to comply with the foregoing obligations to correct and repair, KFC shall
have the right to make or cause to be made such corrections or repairs, and the
expenses thereof, including board, lodging, wages and transportation of KFC
personnel, if utilized in KFC's sole discretion, shall be paid by FRANCHISEE
upon billing by KFC.
5. SITE, OUTLET AND LEASE APPROVAL AND COMMENCEMENT OF BUSINESS
5.1 The Outlet approval procedure of KFC must be complied with
by FRANCHISEE. FRANCHISEE shall prepare for a proposed site for the proposed
outlet a written site evaluation in accordance with the site evaluation
documentation of KFC
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showing site dimensions, building type and placement on site, proposed ingress
and egress and layout. The site evaluation documentation will indicate which of
the KFC standards plans and specifications will be utilized on the site. KFC
shall evaluate each proposed site submitted and notify FRANCHISEE of any comment
or objection it may have, and if acceptable, shall issue the terms of its
approval of the site. FRANCHISEE acknowledges and agrees that in the event
modification of the plans becomes necessary than FRANCHISEE shall bear the sole
responsibility and cost and KFC approval of such modification must be obtained.
Any contract for construction or remodelling of any building for an Outlet shall
not be entered into by FRANCHISEE without KFC's prior approval, which shall not
be unreasonably withheld.
5.2 If the Outlet is the subject of an occupation under a
lease, sublease or other contract to tenancy (collectively, the "Lease"),
FRANCHISEE shall, prior to the execution thereof and upon any renewal or
modification submit the Lease and any amendments or modifications thereto to KFC
for its written approval. Any Lease shall contain a provision recognizing KFC's
rights under this Agreement and permitting KFC to enter on the site of the
Outlet to de-identify the Business without penalty as necessary pursuant to
Article 13. Such Lease language shall also provide for the right of assignment
and/or sublease by lessee to KFC, reasonable notice by the lessor to KFC of any
contemplated termination, and option for KFC to assume leasehold in the event of
termination of lease or of this Agreement. KFC shall not be named by FRANCHISEE
as a party to or guarantor of, nor shall it assume any obligations under any
such Lease.
5.3 If required by applicable law, FRANCHISEE shall promptly
file and publish a certificate of doing business under fictitious name and
comply with any other local filing or permit requirements and shall furnish a
certified copy of such to KFC promptly thereafter. Prior to the commencement of
the Business, FRANCHISEE shall obtain and shall maintain all licenses necessary
or the lawful operation of the Business. FRANCHISEE shall commence operations at
the Outlet no later than thirty (30) days following completion of the building
and improvements and shall give KFC ten (10) days written notice prior to
commencing operations.
6. MAINTENANCE AND UPGRADING OF OUTLET
6.1 FRANCHISEE shall at all times comply, and cause the Outlet
to be in compliance with all Standards, specifications, processes, procedures,
requirements and reasonable instructions of KFC regarding the Outlet's physical
facilities, including the layout of furnishings and fixtures, and facilities at
which or by means of which FRANCHISEE is permitted by KFC to store, handle,
prepare or transport Approved Products or ingredients to be used in preparing
them.
6.2 Recognizing the importance of maintenance of image,
notwithstanding any other provision of this Agreement FRANCHISEE shall abide by
any requirement of KFC with regard to the remodelling and upgrading of the
Outlet to comply
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with standards then applicable to new franchises and outlets in FRANCHISEE's
country or the region, the geographical territory of which includes FRANCHISEE's
country, provided, however, that FRANCHISEE shall commence to make any changes
required by this subsection no later than within six (6) months after receiving
notice from KFC that such changes are required and shall complete such changes
within twelve (12) months of such notice.
6.3 For all changes in or additions of equipment or changes in
or additions to the Outlet required by KFC, FRANCHISEE will bear the entire cost
thereof. Similarly, FRANCHISEE will bear the entire cost of adding equipment and
altering the Outlet for Approved Products which KFC requires or which FRANCHISEE
desires to sell. FRANCHISEE acknowledges that additional investment may be
called for pursuant to this subsection. KFC recognizes that remodelling and
upgrading should not normally be required during the first two (2) years of an
Outlet Term.
7. TRADEMARKS AND TRADE SECRETS
7.1 FRANCHISEE is not granted and shall not acquire any right,
title or interest of any kind or nature whatsoever in or to the Trademarks or
the associated goodwill of KFC. FRANCHISEE acknowledges KFC's exclusive
ownership and rights and the validity of KFC's current and future Trademarks and
all other industrial and intellectual property rights whether or not protected
by registration. FRANCHISEE shall use the Trademarks, as set forth in Exhibit C
hereto, which may be amended by KFC from time to time, only and strictly in
connection with the Business and agrees that all of FRANCHISEE's use under this
Agreement inures to the benefit of KFC. KFC retains the right at any time to
make additions to, deletions from, and changes in the Trademarks at its complete
discretion, and FRANCHISEE shall adopt and use any and all such additions,
deletions and changes.
7.2 FRANCHISEE shall use and display the Trademarks only and
strictly in such form and manner as is specifically approved by KFC and, upon
request by KFC, affix thereto any legends, markings and notices of trademark
registration or licensee or franchisee relationship specified by KFC, or any
other notice of KFC's ownership, including, without limitation, trademark,
copyright, patent applications and patents. KFC shall have the right to approve
all advertising, displays, copy and all other materials using the Trademarks
prepared by or for FRANCHISEE. FRANCHISEE agrees to follow KFC's instructions
regarding proper usage of the Trademarks in all respects.
7.3 KFC agrees to protect and defend the Trademarks in the
manner it determines to be appropriate. FRANCHISEE agrees to cooperate fully
with KFC in the defense and protection of the Trademarks and shall promptly
advise KFC in writing of any potentially infringing uses by others in addition
to any suits brought, or claims made, against FRANCHISEE involving the
Trademarks. Decisions regarding action involving the protection and defense of
the Trademarks shall be solely in the discretion of KFC.
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7.4 FRANCHISEE agrees to join with KFC in any application to
enter FRANCHISEE as a registered or permitted user, or the like, of the
Trademarks with any appropriate governmental agency or entity. Upon termination
of this Agreement for any reason whatsoever, KFC may immediately apply to cancel
FRANCHISEE's status as a registered or permitted user and FRANCHISEE shall
consent in writing to the cancellation and shall join in any cancellation
petition. The expense of any of the foregoing recording activities shall be
borne by KFC.
7.5 FRANCHISEE makes the following further commitments with
respect to its use of the Trademarks during or after the Outlet Term. It shall
not use any trademarks or other identifying characteristics in connection with
its operation of the Business other than the Trademarks. It shall not use any
other trademarks or other identifying characteristics which are similar to the
Trademarks. It shall not use or register, in whole or in part, the Trademark's
or KFC's name, or anything similar thereto, as part of FRANCHISEE's name or as
the name of any entity directly or indirectly associated with FRANCHISEE's
activities. It shall not use the Trademarks in any manner to disparage KFC or
its reputation nor take any action which will harm or jeopardize the Trademarks
in any way.
7.6 FRANCHISEE acknowledges that it will derive no benefit
from the goodwill associated with the Trademarks, except through any profit
received from the operation of the Business or approved transfer of this
Agreement. Any enhancement of the goodwill associated with the Trademarks while
the Agreement is in effect will inure to the benefit of KFC except to the extent
of such profits, if any, realized by FRANCHISEE while the Agreement is in
effect, following which no value shall be attributed to any such goodwill
associated with the Trademarks enjoyed by FRANCHISEE pursuant to this Agreement.
7.7 Confidential information contained in the COM, KFC's
secret recipes, formulae and know-how are highly confidential trade secrets and
FRANCHISEE shall not reveal any such trade secrets except as necessary in the
operation of the Business. FRANCHISEE further acknowledges and agrees that KFC
is the owner of all rights in and to the Kentucky Fried Chicken System, which
contains trade secrets of KFC which are revealed to FRANCHISEE in confidence,
and that no right is given to or acquired by FRANCHISEE to disclose, duplicate,
license, sell or reveal any such trade secret to any person, other than an
employee of FRANCHISEE required by his work to be familiar with relevant trade
secrets. FRANCHISEE agrees to keep confidential such trade secrets, to obtain
from each of its shareholders, directors, officers, employees and agents an
agreement to keep and respect such confidences, and to be responsible for
compliance by such shareholders, directors, officers, employees and agents with
such agreements.
7.8 FRANCHISEE understands that substantial irreparable injury
might be caused to KFC by any violation of FRANCHISEE's commitments under this
Article. Accordingly, FRANCHISEE recognizes and agrees that injunctive or other
equitable or
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immediate relief in addition to monetary compensation may be appropriate. The
parties acknowledge that the precise amount of KFC's actual damages would be
extremely difficult to ascertain. FRANCHISEE agrees that if it should disclose
any trade secret to any person, or one of the persons subject to FRANCHISEE's
control makes such a disclosure as a result of the failure of FRANCHISEE to use
its best efforts to take the necessary precautions to prevent such disclosure,
then FRANCHISEE shall pay to KFC for each and every breach of this covenant, a
sum representing a reasonable estimate of actual damages. The parties confirm
that the sum of One Hundred Twenty Thousand U.S. Dollars (US$120,000) as
liquidated damages and not as a penalty. In the event FRANCHISEE can establish
and prove that KFC has suffered lesser damages than the aforesaid amount, the
such lower sum shall be owed by FRANCHISEE.
8. PURCHASE OF EQUIPMENT, SUPPLIES AND MATERIALS
8.1 FRANCHISEE shall purchase all equipment, paper goods and
all other products and materials required to be utilized in the establishment or
operation of the Business and the making of the Approved Products ("Supplies")
from suppliers, manufacturers and distributors ("Supplier") approved by KFC.
FRANCHISEE will consult with KFC with respect to its purchasing intention prior
to Outlet construction and upgrading and shall seek KFC's recommendation prior
to other major purchasing decisions.
8.2 If FRANCHISEE desires to purchase Supplies from a Supplier
not then approved by KFC, FRANCHISEE shall provide KFC with all information
regarding such Supplier reasonably requested by KFC, and, where appropriate, the
Supplier may be required to provide KFC with samples of the Supplies that the
FRANCHISEE desires to purchase.
8.3 Any tests reasonably required by KFC to determine whether
the Supplies meet current KFC Standards and specifications shall be performed as
directed by KFC but not at KFC's cost. On the completion of such procedures and
KFC's determination as to whether the Supplier possesses adequate capacity and
facilities to supply FRANCHISEE's needs in the quantities and at times and with
the reliability requisite to an efficient operation, KFC shall notify FRANCHISEE
and the Supplier whether KFC approves the Supplier as a source for the Supplies
involved.
8.4 KFC will not approve sources of Supplies which do not meet
KFC Standards and specifications, and reserves the right to make determinations
consistent with the overall needs of the Kentucky Fried Chicken System and the
economic conditions of the markets concerned.
8.5 In order to maintain and protect uniqueness and uniformity
of taste, quality and image of the Approved Products, KFC owns, has developed
and will continue to develop certain secret blends of herbs, spices and KFC
Seasoning and other trade
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secrets, which KFC shall make available only through KFC's licensees or
Suppliers specifically appointed by KFC. KFC Seasoning will be produced by
FRANCHISEE at the prevailing available international prices from time to time
from sources specifically approved by KFC, and will be utilized by FRANCHISEE
exclusively as specified in the COM.
8.6 KFC may from time to time review the quality of the
Supplies by approved Suppliers and their capacity and facilities, and shall have
the right to monitor the production, use and ultimate disposition of all items
bearing the Trademarks or containing the secret blends. KFC may, consequently,
remove a Supplier from the list of approved sources. In such event, KFC shall
advise the FRANCHISEE and the Supplier of such action.
9. MARKETING AND ADVERTISING
9.1 FRANCHISEE shall maintain close cooperation with KFC in
advertising under the Trademarks. FRANCHISEE shall have the obligation to
diligently promote the Approved Products and make every reasonable effort to
steadily increase sales of the Products and growth of the Business.
9.2 FRANCHISEE agrees to contribute annually for advertising
and promotions not less than five percent (5%) of its annual Revenues (as
defined in Article 11). In the event KFC determines that it should directly
manage the advertising fund program among the operators in the territory or if
KFC authorizes a cooperative advertising program, FRANCHISEE must participate
and contribute directly to KFC on its behalf for such program in the manner
provided for payment of monthly franchise fees under Article 10 at four percent
(4%) of its annual Revenues as included in the aforesaid five percent (5%)
amount, or such greater amount should such be agreed by the applicable program.
9.3 KFC and FRANCHISEE shall decide on a marketing and
advertising budget and program on an annual basis ("Annual Program") at least
sixty (60) days prior to the commencement of the calendar year. The budget and
program which KFC must approve will take into account the funds and expenses to
be handled by the parties for regional and local programs. The Annual Program
will address how the funds will be allocated across various marketing and
advertising categories, including but not limited to advertising and promotional
media (i.e., television, radio, newspapers, magazines, billboards, handbills,
posters, direct mail, etc.), production (costs of producing the materials for
the above, including agency commissions and fees) promotion and market research.
A marketing activities calendar will be established and shall be approved by
KFC. KFC shall be consulted and shall approve all major decisions involving
marketing and advertising, including but not limited to the appointment or
retention of the advertising agency, adoption of marketing and pricing
strategies and other decisions of significance to the market development of the
Business.
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9.4 All advertising materials must be in form and substance
satisfactory to KFC. Upon written notice from KFC, FRANCHISEE shall promptly
remove and cease distribution of any signs or advertising materials. If
FRANCHISEE fails to do so within five (5) days immediately following the receipt
of such notice by FRANCHISEE, then KFC or its authorized agents at any time
thereafter may remove any unsatisfactory signs or advertising materials, without
thereby becoming liable to FRANCHISEE for the value or any other claims relating
to any such removal.
9.5 The parties recognize that the following shall not be
taken into account in calculation of compliance with the minimum local
advertising and marketing requirements: Permanent on-premises signs, lighting,
menus, menuboards, purchasing or maintaining vehicles even though such vehicles
display in some manner Trademarks (except the cost of the materials displayed
are included), contributions, giveaways, discounts or similar offers, employee
incentive programs not relating to marketing and other similar payments, costs
or premiums which KFC may determine should not be included in determining
whether FRANCHISEE has met its local advertising obligation.
10. CONSIDERATION FOR LICENSE GRANT
10.1 In consideration of the issuance of the license granted
hereunder, FRANCHISEE shall pay to KFC:
(a) Upon commencement of physical construction or
remodelling of the Outlet, an initial franchise fee in the amount of Twenty-Five
Thousand United States Dollars (US$25,000) .
(b) A monthly franchise fee of five percent (5%) per
month of Revenues (as defined in Article 11), subject to a monthly minimum which
may be set and updated by KFC from time to time.
10.2 In connection with the payment of the foregoing fees:
(a) If by law KFC is prohibited from receiving a
percentage of sales of alcoholic beverages or beer, the monthly franchise fee
shall be appropriately adjusted by KFC to reflect a greater percentage of gross
food and non-alcoholic beverage sales instead of Revenues.
(b) Monthly franchise fees shall be payable by
FRANCHISEE to KFC within ten (10) days after the end of each month during the
Outlet Term. Each payment shall be accompanied by a monthly franchise report
containing such information as KFC deems necessary on the form it has furnished
or approved.
(c) The initial franchise and monthly franchise fees
set forth herein and all other amounts payable hereunder are payable in United
States Dollars or,
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at KFC's sole option, in any other currency. Such amounts shall be paid by bank
wire transfer or automatic transfer to such accounts, and at such places or in
such other manner, as KFC may from time to time designate by notice to
FRANCHISEE.
(d) In order to properly establish FRANCHISEE's
United States Dollar obligations to KFC, the exchange rate between the local
currency and United States Dollar to be employed for each month's franchise fees
shall be the official rate for the purchase of United States Dollars posted for
the last business day of each month with respect to which the monthly franchise
fees are being calculated. FRANCHISEE acknowledges that it is the responsibility
of FRANCHISEE to secure and transfer funds in accordance herewith.
(e) Fees which are not paid when due shall bear
interest from and after their respective due dates at the rate of four percent
(4%) per annum above the U.S. prime rate posted by Citibank, New York, or the
highest rate permitted by local law, whichever is less. Any late payment of such
fees shall be accompanied by a late payment administrative charge of One Hundred
U.S. Dollars (US$100.00). Notwithstanding the above, nothing in this
subparagraph shall be deemed to affect in any way KFC's rights as set forth in
Article 13.
(f) All payments to KFC pursuant to this Agreement
shall be for the full amount specified herein, free and clear of any taxes due
and owing by FRANCHISEE in respect of such payments.
11. ACCOUNTING AND FINANCIAL REVIEW
11.1 All Revenues shall be recorded on cash registers, the
equipment for which must be approved by KFC. FRANCHISEE shall, in a manner and
form satisfactory to KFC, maintain an accounting system and prepare on a current
basis (and preserve for no less than three (3) years) complete and accurate
records concerning Revenues and other aspects of the Outlet. Such records shall
include but not be limited to books of account, tax returns, daily reports,
statements of Revenues (to be prepared each month for the preceding month),
profit and loss statements (to be prepared at least annually), and balance
sheets (to be prepared at least annually). FRANCHISEE shall also if so requested
by KFC submit current financial statements and such other reports as KFC may
reasonably request and allow KFC to poll FRANCHISEE's cash register, computer
and accounting equipment and data to evaluate or compile research and data on
any aspect or aspects of the Outlet or the Business.
11.2 From the date hereof until three (3) years elapse
following the end of the Outlet Term, KFC or its authorized agent shall have the
right to request, receive, inspect and audit, at all reasonable times, any or
all of the records referred to above wherever they may be located or at any
other mutually agreeable location. If such inspection or audit discloses a
deficiency in the payment of any fee, advertising
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contribution or other amount required to be paid under this Agreement,
FRANCHISEE shall immediately pay the deficiency plus interest at the maximum
rate permitted by law to KFC. In addition, if the deficiency for any audit
period equals or exceeds 2% of the correct amount due, FRANCHISEE shall also
immediately pay to KFC the entire cost of such inspection or audit (including
but not limited to travel, lodging, meals, salaries and other expenses of the
inspecting or auditing personnel).
11.3 The term "Revenues" shall mean gross cash receipts
(including checks, other means of exchange, charge slips, credit sales or other
promises to pay) received by the FRANCHISEE as payment for Approved Products,
beverages and other goods, services and supplies sold in the Business, any and
all service fees (whether governmentally imposed, resulting from local custom,
or otherwise), and gross amounts derived from any other business at the Outlet
or at special events or from catering and from all sales and orders made,
solicited or received at the Outlet or at special events (including but not
limited to vending or game receipts) but shall exclude sales or other tax
receipts which may be required by law to be collected from customers.
11.4 FRANCHISEE shall use the accounting services of any
independent national or large regional firm of chartered accountants acceptable
to KFC which acceptance shall not be unreasonably withheld. Upon request of KFC,
FRANCHISEE agrees to direct such accountants to submit to KFC profit and loss
statements and a balance sheet every three (3) months covering the immediately
preceding three (3) months' operations of the Business.
12. COVENANTS REGARDING OTHER ACTIVITIES
12.1 For purposes of this Article and Articles 7, 13 and 14,
"FRANCHISEE" shall mean the individual entity or partnership named hereinabove
as FRANCHISEE who or which has the further obligation to obtain covenants
concerning the relevant obligation of said Articles from:
- if FRANCHISEE is an individual, his employees,
spouse and minor children; or
- if FRANCHISEE is a corporate entity, the direct
or indirect shareholders holding at least a ten
percent beneficial interest in the entity, officers,
directors and employees of the level of restaurant
manager or higher; or
- if FRANCHISEE is a partnership, the partners,
participants and employees of the level of
restaurant manager or higher.
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12.2 Acknowledging that the Approved Products and the Kentucky
Fried Chicken System are unique and distinctive and have been developed by KFC
at great effort, time and expense, and that FRANCHISEE has regular and
continuing access to valuable and confidential information, training and trade
secrets regarding the Approved Products, the Kentucky Fried Chicken System and
the operation of the Business and recognizing FRANCHISEE's obligation to fully
develop the Business, FRANCHISEE agrees that:
(a) FRANCHISEE shall not, in any capacity whatsoever,
either directly or indirectly, individually or as a member of any business
organization, at any location whatsoever, engage in the production or sale at
retail or any food items similar to the Approved Products being sold at the
Outlet or have any employment or interest in, or provide any consulting services
to, any firm engaged in the production or sale thereof.
(b) FRANCHISEE shall not let or permit any part of
any premises owned or controlled by it within the country where the Outlet is
located to be used as a business, all or part of which consists of the sale at
retail of any food items similar to the Approved Products being sold at the
Outlet.
(c) FRANCHISEE shall not direct or attempt to divert
any customer or business of the Outlet or Business to any competitor, by any
direct or indirect inducement, or do or perform any other act or omission,
directly or indirectly which could damage or injure the Trademarks, the Kentucky
Fried Chicken System or the goodwill or KFC.
(d) Upon expiration, termination or transfer of this
Agreement or FRANCHISEE for any reason and continuing for a continuous,
uninterrupted period of twelve (12) months thereafter, FRANCHISEE shall observe
and honor the covenants set forth in this Article 12.
12.3 During the Outlet Term, neither party hereto, without the
prior written consent of the other party, shall employ or seek to employ,
directly or indirectly, any person serving in a managerial position who is at
the time or was at any time during the prior six months employed by the other
party, its subsidiaries or affiliates, or, in the case of FRANCHISEE, by any
other operator of a Business. KFC and FRANCHISEE agree that, if this subsection
is violated by either party hereto, the other party shall be entitled to
liquidated damages equal to twice the annual salary of the employee involved
plus reimbursement of all costs and attorney fees incurred, and shall be
entitled to seek such amounts through either arbitration or court proceedings.
For purposes of this paragraph, "managerial position" includes all employees at
the pay grade of restaurant manager and above.
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12.4 In the event any of the foregoing covenants is held
invalid or unenforceable by a competent authority, then the maximum legally
allowable restriction permitted by law shall apply and KFC and FRANCHISEE shall
be bound thereby.
12.5 Subsection 12.2 shall not apply to the ownership of one
percent or less of the issued and outstanding shares of stock in any
publicly-held corporation, unless the same shall give FRANCHISEE the power to
influence the economic conduct of such corporation.
13. COVENANTS REGARDING TRANSFER OR ASSIGNMENT
13.1 This Agreement shall inure to the benefit of KFC and its
successors and assigns. KFC may assign its rights and/or obligations under this
Agreement at any time without need of the consent of FRANCHISEE.
13.2 KFC has granted this license in reliance on the
individual or collective character, experience, skill, aptitude, dedication and
business and financial reputation and capacity of FRANCHISEE. Accordingly,
without KFC's prior written consent, FRANCHISEE shall not directly or
indirectly, pledge, mortgage or otherwise encumber, sell, assign, transfer or
convey, any direct or indirect interest in the franchise, the license rights,
FRANCHISEE or all or a significant part of FRANCHISE's assets, real or personal
tangible or intangible, pertaining to the Business or the Outlet, including any
significant part of the restaurant or food business, land, building, equipment
or fixtures. The prospective assignee shall be advised of this requirement and
KFC shall be provided the information it finds necessary for its determination.
FRANCHISEE acknowledges that in the event of KFC's consent to a transfer, (i)
any legal fees or other costs or expenses related thereto shall e for the sole
account of FRANCHISEE, (ii) FRANCHISEE shall indemnify and hold KFC harmless
with respect thereto, (iii) FRANCHISEE shall have satisfied all of its accrued
obligations to KFC in full, (iv) the assignee shall be bound and liable for the
corresponding obligations of the FRANCHISEE, (v) KFC shall have the option to
modify the terms and conditions of the Agreement, including the fee and
contribution structure and other obligations to reflect then current terms and
conditions offered by KFC, and (vi) FRANCHISEE shall pay KFC a transfer fee in
the amount of Three Thousand United States (US$3,000) or such greater amount as
required for transfers in the form of agreement then used for new franchisees.
The assignee must agree in writing satisfactory to KFC (i) to assume
all obligations of FRANCHISEE, (ii) demonstrate to KFC's satisfaction that KFC's
standards applicable to new franchisees regarding financing and other
qualifications are met, and (iii) assume or enter into a new franchise agreement
with KFC as KFC determines.
13.3 FRANCHISEE shall not offer any interest described above
in Subsection 13.2 for sale or transfer at public or private auction or
otherwise, nor publicly
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advertise (through newspapers or otherwise) an offer to sell, transfer or assign
such an interest, without first offering to KFC the right to purchase such
interest. Should FRANCHISEE desire to accept any bona fide offer to purchase or
to sell or transfer such interest, written notice must be made to KFC with full
information concerning the proposed assignee, price, contract and the other
terms and conditions. KFC shall have the right and option exercisable within
sixty (60) days from receipt of such information to notify FRANCHISEE whether
KFC will consummate the purchase on the same or reasonably equivalent terms and
conditions.
13.4 If KFC does not wish to purchase such interest, KFC may
waive its right of consent. KFC's written consent to a transfer of any interest
subject to the restrictions of this Article shall not constitute a waiver of any
claims KFC may have against the FRANCHISEE, nor shall it be deemed a waiver of
KFC's right to demand exact compliance with any of the terms of this Agreement
by the assignee. In such event, FRANCHISEE must consummate the sale on the same
terms within sixty (60) days or again be subject to KFC's right of first
refusal.
13.5 Should FRANCHISEE desire to encumber an interest
described above in Subsection 13.2, KFC reserves the right to ask the secured
party to agree that in the event of default by FRANCHISEE, (i) KFC shall have
the right and option to purchase its rights upon payment of all amounts then due
and (ii) confirm it shall not operate the Outlet without KFC's consent.
13.6 FRANCHISEE understands that substantial irreparable
injury might be caused to KFC by any violation of FRANCHISEE's commitments under
this Article. Accordingly, FRANCHISEE recognizes and agrees that injunctive or
other equitable or immediate relief in addition to monetary compensation may be
appropriate. The parties acknowledge that the exact amount of KFC's actual
damages would be extremely difficult to ascertain. FRANCHISEE agrees that if
FRANCHISEE consummates any assignment in violation of KFC's right of first
refusal, then FRANCHISEE shall pay to KFC an amount which represents a
reasonable estimate of such actual damages. The parties confirm that the best
estimate current value of the month franchise fees which would have been paid
during the remainder of the Outlet Term or the Outlet Renewal Term represents a
reasonable estimate of liquidated damages and not a penalty. In the event
FRANCHISEE can establish and prove that KFC has suffered lesser damages than the
aforesaid amount, then such lower sum shall be owed by FRANCHISEE.
13.7 If FRANCHISEE, or any successor in interest, is a
partnership, joint venture, corporation, trust or other non-individual entity:
(a) Upon the execution of this Agreement and upon
each transfer of at least a ten percent (10%) beneficial ownership interest in
this franchise or in FRANCHISEE, FRANCHISEE shall furnish KFC with a list of all
shareholders or partners having at least a ten percent (10%) beneficial
ownership interest in this franchise or in
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FRANCHISEE, the percentage interest of each shareholder or partner, and a list
of all officers and directors of FRANCHISEE substantially in form of Schedule A
to Exhibit D attached hereto. All holders of at least a ten percent (10%)
beneficial ownership interest in this franchise or in FRANCHISEE shall execute a
written agreement in substantially the form of Exhibit D personally
guaranteeing, jointly and severally with all other such holders, the full
payment of all monies due and owing and performance of FRANCHISEE's other
obligations, and all such holders shall undertake individually to be bound by
this Agreement.
(b) Neither FRANCHISEE nor any person with a
beneficial interest in FRANCHISEE shall, directly or indirectly, publicly
register, or make or cause to be made a public offering of, any securities or
other interests in FRANCHISEE, this franchise or this Agreement, without KFC's
prior written consent.
13.8 In the event of death or legal incapacity of an
individual who is FRANCHISEE or of a principal partner or principal shareholder
of an entity that is FRANCHISEE, the rights and obligations of such FRANCHISEE
hereunder shall inure to the benefit of such of the executors, administrators,
heirs, conservators or legatees of such FRANCHISEE (collectively the "Legatee")
as shall (i) elect, in a written notice received by KFC within one hundred
twenty (120) days after the date of death, or the judicial determination of
legal incapacity, to perform all of the duties and obligations required to be
performed, fulfilled and observed by the FRANCHISEE under this Agreement and
(ii) be determined by KFC in its sole reasonable discretion, to be able to
perform such duties and obligations. In the event KFC determines that the
Legatee is not capable of performing all of the duties and obligations required
to be performed by the FRANCHISEE under this Agreement, the Legatee shall use
its best efforts within the six (6) months from the date of written notice from
KFC to sell its interest hereunder to a bona fide purchaser in accordance with
and subject to all of the provisions hereof. If by the end of such six month
period, the Legatee has not effectuated a transfer of such interest in a
transaction which meets the requirements of this Agreement, KFC shall have the
option to purchase the interests at a fair price failing agreement by the
parties for market value to be established within sixty (60) days of Legatee's
receipt of written notice from KFC from the average of the two closest values
assigned by three appraisers, one appointed by KFC, one appointed by Legatee and
one appointed by agreement of these two appraisers. Such acquisition shall be
consummated within one hundred (12) days of Legatee's receipt of written notice
and KFC shall have the right to appoint the management of such Business from
Legatee's receipt of such notice.
14. DEFAULT AND TERMINATION
14.1 This Agreement and all rights granted FRANCHISEE
hereunder shall terminate without notice to FRANCHISEE unless KFC notifies
FRANCHISEE to the contrary in writing promptly after it has actual knowledge of
the relevant facts in the event that (i) FRANCHISEE becomes insolvent or is
dissolved, (ii) a receiver or trustee
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for the business of FRANCHISEE is appointed, (iii) FRANCHISEE files a voluntary
petition in bankruptcy or makes an assignment for the benefit of creditors, or
(iv) an involuntary petition in bankruptcy is filed by any other person against
FRANCHISEE and is not dismissed within ten (10) days of filing. In addition,
this Agreement shall terminate without notice if:
(a) FRANCHISEE contests in any court or proceeding
the validity of, or KFC's ownership of any of the Trademarks, trade secrets or
proprietary aspects of the Kentucky Fried Chicken System.
(b) FRANCHISEE fails to fully correct or diligently
remedy any notice, or summons issued by any governmental authority regarding any
matter involving safety, sanitation or health.
(c) An individual who is FRANCHISEE or a principal
partner or principal shareholder of an entity that is FRANCHISEE is convicted of
felony, crime involving moral turpitude, or any other serious crime or offense
which in KFC's reasonable judgment adversely affects or reflects upon the
Approved Products, the Kentucky Fried Chicken System, the Trademarks, or the
goodwill associated therewith or KFC's interest therein.
14.2 Upon written or telexed notice to FRANCHISEE, this
Agreement and all rights granted KFC hereunder shall terminate on the cure or
termination date specified in the notice without any further notice unless
required by applicable law if any of the following events occur and are not
cured or remedied as specified in the notice:
(a) FRANCHISEE breaches any term or condition of this
Agreement or any other agreement with KFC or its subsidiaries or affiliates.
(b) FRANCHISEE defaults under or fails to perform any
term or condition of the Lease, any other lease, mortgage, deed or trust or
other agreement covering the Business or the Outlet.
(c) FRANCHISEE attempts any assignment or transfer of
the whole or any portion of any rights granted by this Agreement without KFC's
consent.
(d) In the event of any sale, transfer, change of
beneficial ownership or other disposition of all or part of FRANCHISEE, or its
shares, assets or otherwise which result directly or indirectly in a change of
effective ownership or control of FRANCHISEE, the Outlet or the Business without
KFC's consent.
(e) FRANCHISEE abandons, ceases to operate or
otherwise fails to conduct Business at the Outlet for a period of five (5) or
more consecutive days, except for a reason expressly permitted by the terms of
this Agreement or loses
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possession or the right of possession of all or a significant part of the Outlet
through condemnation or force majeure casualty and the Outlet is not relocated
or reopened as allowed by KFC on due consideration of the cause.
(f) If FRANCHISEE terminates his relationship.
14.3 In addition to and not in limitation of the foregoing,
KFC may exercise its rights, following the occurrence of any of the events
described in Subsection 14.1 and 14.2 above and upon written notice to
FRANCHISEE, to:
(a) reduce any development or terminate any license
or option rights granted to FRANCHISEE in respect of other sites not yet under
construction; and/or
(b) acquire the Business, or locate a purchaser to
acquire the Business of FRANCHISEE at a fair price, failing agreement by the
parties, for market value, to be established within sixty (60) days of
FRANCHISEE's receipt of written notice from KFC from the average of the two
closest values assigned by three appraisers, one appointed by KFC, one appointed
by FRANCHISEE and one appointed by agreement of these two appraisers. Such
acquisition shall be consummated within one hundred twenty (120) days of
FRANCHISEE's receipt of written notice and KFC shall have the right to appoint
the management of such Business from FRANCHISEE's receipt of such notice.
15. OBLIGATIONS ON TERMINATION OR EXPIRATION
15.1 Upon termination or expiration of this Agreement or the
closing of the Outlet, FRANCHISEE as this term is defined for Articles 7 and 12
shall immediately discontinue the use of the Kentucky Fried Chicken System and
the Trademarks and trade secrets. All rights or licenses granted herein with
respect to the Trademarks shall revert to KFC. This shall include the removal
from the Outlet of signs, menuboards, inserts thereto, points-of-sale material,
red-and-white stripes and any characteristically designed roof, and changing the
exterior and interior appearance so that the Outlet is no longer confusingly
similar in KFC's judgment to a Kentucky Fried Chicken Outlet and no longer bears
any Trademarks or trademarks in KFC's judgment that are similar thereto.
15.2 If the Outlet site is not owned by KFC, FRANCHISEE, shall
immediately without limiting the generality of the foregoing, make the following
alterations:
(a) Remove the Trademarks from all buildings, signs,
trade dress, fixtures and furnishings.
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(b) Alter and paint all structures and other
improvements maintained to designs and colors which basically differ from KFC's
authorized building design and colors and decor.
(c) On mansard roofs, remove the tower.
(d) On pagoda roofs, remove the entire pagoda.
(e) Paint roof other than red or terra cotta.
(f) Remove the birdcage and weather vane.
(g) Remove any exterior awnings and frames.
(h) Paint any red-and-white stripes a solid non-red
color.
(i) Remove the distinctive facia, lettering, signage,
carpeting and any other distinguishing features, including but not limited to
any etched or decal images of Colonel Sanders or other Trademarks from windows,
doors and other glass surfaces.
(j) Remove any window, door, table and counter signs,
panels, logos and menuboard inserts. Remove any banners, uniforms or emblems
depicting or recalling the Approved Products or Trademarks.
(k) All COM's and all other confidential forms and
materials which contain KFC's trade secrets or recipes, methods of food
preparation and management systems and procedures shall be removed and returned
to KFC, leaving no copies.
(l) All television and radio commercials, newspaper
advertising mats and materials, point-of-sale material and all other advertising
and promotional materials shall be returned to KFC or confirmation shall be made
to KFC that such materials have been destroyed.
(m) All unopened Supplies which bear the Trademarks
or are unique to the Kentucky Fried Chicken System shall either be returned to
the Supplier for credit or destroyed. Contents of all such Supplies which have
been opened shall be destroyed. KFC shall have the right, however, to buy, at
FRANCHISEE's cost, all quantities of KFC seasoning blends as well as other
Supplies that FRANCHISEE may have in stock.
15.3 KFC shall have the right and the option, for a sixty (60)
day period to purchase FRANCHISEE's equipment for cooking and processing under
the Kentucky Fried Chicken System for an agreed amount which shall not be less
than the book value less depreciation of such equipment or any portion thereof.
Payments shall vest KFC
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with title thereto. If such equipment is subject to any lien or security
interest, KFC may have the benefit of all of FRANCHISEE's credits for payment
and deposit. In the event title to the equipment is transferred to a third party
during the Outlet Term, FRANCHISEE shall agree that this provision shall apply
and the third party shall grant the same repurchase option as granted herein.
15.4 If FRANCHISEE shall fail to make or cause to be made any
such removal, alteration or repainting within thirty (30) days after written
notice, KFC may enter the Outlet and site, without being deemed guilty of
trespass or any other tort or civil wrong, and make or cause to be made such
removal, alterations and repainting at the reasonable expense of FRANCHISEE,
which expense the FRANCHISEE shall pay KFC upon demand.
15.5 FRANCHISEE shall not thereafter use any trademark, trade
name, service mark, logo, insignia, slogan, emblem, symbol, design, package
design, distinctive building design or other architectural feature or other
identifying characteristic that is any way associated with KFC or similar to the
Trademarks and those associated with KFC, or operate or do business under any
name or in any manner that might tend to give the public the impression that
FRANCHISEE is or was a licensee or franchisee of, or otherwise is or was
associated with, KFC. KFC shall also have the option to cause FRANCHISEE to
cease operation of the Business at any site.
15.6 KFC may retain all fees paid by FRANCHISEE pursuant to
this Agreement. FRANCHISEE shall immediately pay any and all amounts owing to
KFC and its subsidiaries and affiliates.
15.7 If this Agreement is terminated, pursuant to Article 14
or otherwise without KFC's consent, FRANCHISEE shall pay to KFC in a lump sum as
liquidated damages and not as a penalty the amount of five percent (5%) of
Revenues for the twelve (12) months immediately preceding termination of this
Agreement. Such liquidated damages shall be in addition to, and not in lieu of,
any other rights and remedies available to KFC. If the Outlet is closed for
Business for a period totalling thirty (30) days without justification permitted
under the Agreement or KFC's express written consent and the foregoing payment
is not applied, KFC may require FRANCHISEE to pay a lump sum amount as
liquidated damages, and not as a penalty, equal to two times the monthly
franchise fees paid or due with respect to the Outlet for the twelve (12) months
immediately preceding the closing. In the event of the Outlet was not open for
business for a full twelve (12) month period during the prior calendar year, the
total amount of liquidated damages due KFC shall be computed by determining the
highest monthly franchise fees paid and multiplying such figure by twenty-four
(24).
15.8 FRANCHISEE shall execute all documents and perform all
acts necessary to cause or enable KFC's representatives, agents or
attorneys-in-fact to be
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irrevocably empowered to perform all or any of the above acts and duties,
including, without limitation, a power of attorney in form and substance
satisfactory to KFC.
16. INSURANCE AND INDEMNIFICATION
16.1 FRANCHISEE shall procure before the commencement of
construction of the Outlet and maintain in full force and effect during the
Outlet Term, at its sole cost and expense, an insurance policy or policies
protecting FRANCHISEE and KFC and their respective officers, directors and
employees against any and all losses, liabilities, claims, costs and expenses
from fire, personal injury, theft, death, property damage, or other damaging or
injurious occurrence, arising out of or in connection with the condition,
operation, use or occupancy of the Outlet and the Business. KFC shall be named
as an additional insured in all such policies. Such policy or policies shall be
written by a responsible insurance company or companies and shall be in such
form and contain such limits of liability as shall be satisfactory to KFC. Such
policy or policies shall include at least the following unless KFC specifically
agrees to other limits for a specified country or jurisdiction:
KIND OF INSURANCE MINIMUM LIMITS OF LIABILITY
----------------- ---------------------------
Workers' Compensation As required by law
General Public Liability, U.S.$1,000,000 each person
including products and injury U.S.$1,000,000 each occurrence
Property Damage U.S.$1,000,000 aggregate
The insurance afforded by the aforementioned public liability policies shall not
be limited in any way by reason of any insurance which may be maintained by KFC.
KFC shall have the right to increase the minimum limits of liability on a
biennial basis consistent with insurance policies then in effect for similar
businesses.
16.2 FRANCHISEE shall insure the Outlet and other
improvements, equipment, furnishings, and other fixtures and any additions
thereto in accordance with standard fire and extended coverage insurance
policies then in effect for similar businesses. FRANCHISEE shall, upon request,
exhibit evidence of such insurance to KFC. If the Outlet or improvements,
equipment, furnishings, fixtures or additions are damaged, the proceeds of any
such insurance shall first be used to completely restore the Outlet, such
improvements, equipment, furnishings, fixtures or additions to the condition of
the Kentucky Fried Chicken System as described in the COM at that time. Within
thirty (30) days after the execution of this Agreement, certificates of
insurance showing compliance with the requirements of this Article 16 shall be
furnished by FRANCHISEE to KFC for approval. Such certificates shall state that
the policy or policies shall not be cancelled or altered without prior written
notice to KFC of at least
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thirty (30) days. Maintenance of such insurance and the performance by
FRANCHISEE of its obligations hereunder shall not relieve FRANCHISEE of
liability or limit such liability under the indemnification provisions herein.
16.3 FRANCHISEE is an independent contractor and not an agent,
legal representative, joint venturer, partner, employee or servant of KFC and is
not empowered to act on KFC's behalf in any manner. FRANCHISEE agrees that the
KFC is not in any way a fiduciary as regards FRANCHISEE.
16.4 FRANCHISEE shall indemnify KFC, its officers, directors,
employees, agents, affiliates, successors and assigns, against (i) any and all
claims, damages or liabilities based upon, arising out of, or in any way related
to the operation or condition of any part of the Business and the Outlet, the
conduct of business thereat, the ownership or possession of real or personal
property, any negligence or act or omission by FRANCHISEE or any of its agents,
contractors, servants, employees or licensees, and any obligation of FRANCHISEE
incurred pursuant to any provision of this Agreement including, without
limitation, the improper use of the Trademarks, and (ii) any and all fees
(including reasonable attorneys' fees), costs and other expenses incurred by or
on behalf of KFC in the investigation, defense or prosecution of any and all
claims.
17. NOTICES
17.1 All notices to KFC required by the terms of this
Agreement shall be in writing and sent by registered air mail, addressed to
Kentucky Fried Chicken International, Attention Vice President and General
Counsel, at 1441 Gardiner Lane, Louisville, Kentucky 40213, United States of
America (or at such other address as KFC shall designate in writing) or by telex
to such address confirmed by registered air mail.
17.2 All notices to FRANCHISEE required by the terms of this
Agreement shall be in writing and sent by registered air mail, addressed to
FRANCHISEE at the address set forth above (or at such other address as
FRANCHISEE shall designate in writing) or by telex to such address confirmed by
registered air mail.
17.3 Any notice shall be deemed to have been given when
deposited in the mail or, if by telex, when received.
17.4 This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky, United States of
America, and the parties hereto submit to the non-exclusive jurisdiction of
State and Federal courts in Kentucky. Proceedings may be brought in the courts
of any jurisdiction for the purpose of enforcing any award or order of any
Kentucky court, or for the purpose of restraining actions or threatened actions
which the Kentucky courts shall have ruled to constitute a breach of obligations
hereunder.
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18. INTERPRETATION, EXECUTIONS AND WAIVERS
18.1 All terms and words used in this Agreement, regardless of
the number and gender in which they are used, shall include singular or plural
and any other gender as the context of this Agreement may require. Headings
preceding the text, articles and paragraph numbering hereof have been inserted
solely for convenience of reference and shall not be construed to affect the
meaning, construction or effect of this Agreement.
18.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but such counterparts
together shall constitute but one and the same instrument.
18.3 This Agreement and appendices hereto express fully the
understanding between the FRANCHISEE and KFC. This Agreement and appendices
hereto may be modified only in writing signed by both the FRANCHISEE and KFC.
18.4 The failure of KFC to enforce at any time or for any
period of time any one or more of the terms and conditions of this Agreement,
shall not be a waiver of such terms and conditions or of the KFC's right
thereafter to enforce each and every term and condition of this Agreement.
18.5 Nothing in this Agreement shall bar KFC's right to obtain
injunctive relief under applicable law. All remedies provided in this Agreement
are cumulative and not exclusive of any remedies provided by law.
18.6 The parties agree that the terms of this Agreement are
confidential in nature and should not be disclosed to any third party without
the prior written consent of the other party hereto.
19. ENFORCEABILITY
19.1 If this Agreement is declared to be invalid or
unenforceable for any reason, in whole or in part, then KFC shall have the
option, upon three (3) month's notice to FRANCHISEE, of terminating the
Agreement and the rights and obligations hereunder (including any other rights
of FRANCHISEE), except for such rights and obligations which are specified to
survive any termination of this Agreement.
19.2 In the event of any such declaration, FRANCHISEE's
obligations for payment of any amounts pursuant to this Agreement shall be
discharged only by payment in full of all such amounts to KFC as provided
herein.
26
<PAGE>
20. WRITTEN APPROVALS AND NO WARRANTIES
20.1 Whenever this Agreement requires KFC's prior approval or
consent, FRANCHISEE shall make a timely written request therefor, and such
approval if granted shall be given by KFC in writing. KFC makes no warranties,
representations, or guarantees upon which FRANCHISEE may rely, and assumes no
liability or obligation to FRANCHISEE, by providing any waiver, approval,
consent or suggestion to FRANCHISEE in connection with this Agreement, or by
reason of any neglect, delay or denial or any request therefor.
20.2 KFC makes no representations or warranties concerning any
studies, reports or conclusions, financial, economic or otherwise, which may
have been prepared in connection with any aspect of negotiation leading to this
Agreement, this Agreement or any license contemplated by this Agreement.
21. SURVIVAL OF TERMS AND CONDITIONS
The rights and obligations contained in the following provisions of
this Agreement shall survive the expiration or termination of this Agreement:
Articles 5, 7, 9, 10, 11, 12, 13, 14, 15, 16 and 17.
FRANCHISEE REPRESENTS THAT IT HAS REVIEWED THIS AGREEMENT CAREFULLY
WITH THE ASSISTANCE OF LEGAL COUNSEL AND THAT IT UNDERSTANDS THE CONTENTS
HEREOF.
IN WITNESS WHEREOF, the duly authorized representatives of the parties
hereto set their hands and seals as of the day and year first above written.
KFC
KENTUCKY FRIED CHICKEN INTERNATIONAL
HOLDINGS, INC.
ATTEST:
/S/ JAIME CAREY By: /S/ DONN M. MASATO
- -------------------------- --------------------------------
Title: Vice President Finance & CEO
FRANCHISEE
/S/ RICARDO VILENSKY
------------------------------------
/S/ JAIME CAREY Title: President
- --------------------------
27
<PAGE>
KENTUCKY FRIED CHICKEN
INTERNATIONAL FRANCHISE AGREEMENT
EXHIBIT D
AGREEMENT OF SHAREHOLDERS OR PARTNERS
WHEREAS, Kentucky Fried Chicken International Holdings, Inc. ("KFC"), a
Delaware, U.S.A. corporation, has granted and entered into a Kentucky Fried
Chicken International Franchise Agreement ("Agreement") with Alimentos Merced
S.A. ("FRANCHISEE"), a company incorporated in Chile with its principal place of
business at Huerfanos 725, Fifth Floor, Santiago, Chile; and
WHEREAS, the undersigned are all the shareholders and/or partners
holding at least a ten percent (10%) beneficial interest in this franchise or in
FRANCHISEE (the "Holders") and
WHEREAS, KFC has placed great reliance upon the ability of the
undersigned in the granting and entering into the Agreement with FRANCHISEE.
NOW, THEREFORE, in consideration of KFC granting and entering into the
Agreement with FRANCHISEE to operate a Kentucky Fried Chicken Outlet and
pursuant to Article 13 of said Agreement, the undersigned, being all the Holders
as more fully described in Schedule A attached hereto and incorporated herein by
reference, agree as follows intending to be legally bound hereby:
1. Except as may be permitted under Article 13 of the Agreement,
neither FRANCHISEE nor any person with an interest in FRANCHISEE without KFC's
prior written consent, shall directly or indirectly, issue, sell, assign,
transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct
or indirect interest in this franchise; any beneficial interest in FRANCHISEE;
if FRANCHISEE is a partnership, joint venture, or privately held corporation; or
any direct or indirect interest which, together with other related previous,
simultaneous, or proposed transfers, constitutes a transfer of control of
FRANCHISEE.
2. FRANCHISEE, if it is a corporation, shall maintain stock transfer
instructions against the transfer on its records of any securities with the
voting rights subject to the restrictions of Article 13 of the Agreement and
shall issue no such securities unless upon the fact of which the following
printed legend legibly and conspicuously appears:
"The transfer of this stock is subject to the terms and conditions of one or
more Kentucky Fried Chicken International Franchise Agreements with KFC.
Reference is made to said
<PAGE>
Franchise Agreement(s) and to the restrictive provisions of the Articles and
By-laws of this corporation".
3. KFC may transact all business between it and FRANCHISEE by
communicating with and accepting communications from, or otherwise conducting
the usual affairs of the franchise relationship with Mark and Lorna Myers
(hereinafter "Designated Control Person"). The Designated Control Person who
should be responsible for the control and operation of the Kentucky Fried
Chicken Outlet is duly authorized and empowered by the Holders to act on their
behalf as their designated representative and agent with respect to the
Agreement and the franchise relationship.
4. Upon the execution of this Agreement and upon each transfer of an
interest in this franchise, or FRANCHISEE, all Holders, as appear on Schedule A,
hereby personally guarantee, jointly and severally, the full payment of all
monies owing and performance of FRANCHISEE's other obligations to KFC.
5. Upon the execution of this Agreement and upon each transfer of an
interest in this franchise or FRANCHISEE, all Holders as appear on Schedule A,
hereby individually undertake to be bound by all the terms of the Agreement as
if named as Franchisee therein.
WITNESS our signatures this 1st day of January, 1994.
WITNESS:
By /s/ Ricardo Vilensky Inversiones e Inmobiliaria Kyoto S.A.
- ----------------------- Individually and as Shareholder or Partner
WITNESS:
By /s/ Eduardo Vilensky Inversiones y Rentas Quebrada Honda S.A.
- ----------------------- Individually and as Shareholder or Partner
Shareholders of Inversiones e Inmobiliaria Kyoto S.A.
WITNESS:
By /s/ Jessica Walder Jessica Walder Celedon 33%
- --------------------- Individually and as Shareholder or Partner
<PAGE>
WITNESS:
By /s/ Ricardo Vilensky Ricardo Vilensky Cohen 67%
- ----------------------- Individually and as Shareholder or Partner
Shareholders of Inversiones y Rentas Quebrada Honda S.A.
WITNESS:
By /s/ Vivian Rosenberg Vivian Rosenberg Albagli 30%
- ----------------------- Individually and as Shareholder or Partner
WITNESS:
By /s/ Eduardo Vilensky Eduardo Vilensky Cohen 70%
- ----------------------- Individually and as Shareholder or Partner
<PAGE>
INTERNATIONAL FRANCHISE AGREEMENT
EXHIBIT A
BASIC OUTLET INFORMATION
6. "Outlet":
The Kentucky Fried Chicken Outlet shall consist of the premises, and all
structures, appurtenances, fixtures, equipment, facilities and entry, exit
parking and other areas now or at any time located on the real property the
dimensions and layout of which have previously been submitted to KFC.
7. Outlet Location and Address:
1. Alameda Bernardo O'Higgins 40 Local 3
2. Locales 32 y 24 Centro Comercial Las Palmas, Maipu
3. Vitacura 6309 at 6383
4. Cristobal Colon 7459 y 7469 Tomas Moro 1005
5. Avenida Once de Septiembre 2234, Local 101
The complete and official address and location of the Outlet for identification
and mailing purposes is as follows:
3. Summary of Some Basic Terms and Fees Specifically Detailed in the
Agreement:
3.1 Outlet Term: 10 years Commencement Date: January 1, 1994
3.2 Monthly Franchise Fee: 5% of Revenues.
3.3 Monthly Advertising Participation: 5% of Revenues.
3.4 Franchise Fee (none) to be paid upon execution of the Agreement.
<PAGE>
KENTUCKY FRIED CHICKEN
INTERNATIONAL FRANCHISE AGREEMENT
EXHIBIT B
APPROVED PRODUCTS
The Approved Products authorized for sale at the Outlet include the following:
OPTIONALLY AUTHORIZED
REQUIRED PRODUCTS PRODUCTS
----------------- --------
ENTREES:
- Original Recipe Chicken - Hot and Spicy Chicken
- Extra Tasty Crispy Chicken
- Chicken Sandwiches
(to be further identified)
SIDE ITEMS/SNACKABLES:
- Colonel's Coleslaw - Kentucky Nuggets and Sauces
- French Fries - Hot Wings
- Other Sides
(to be further identified)
BREAD:
- Biscuits
DRINKS:
- Pepsi Beverages - Coffee, Tea
- Milk Shakes
DESSERTS: - Pies
- Ice Cream
- Yogurt
REQUIRED PRODUCTS must be offered for sale at the Kentucky Fried Chicken Outlet.
KFC, in its discretion, may designate new Required Products and specifications
therefor or may withdraw products from such status. FRANCHISEE shall have ninety
(90) days from KFC's issuance of a written notice in which to comply with such
requirements.
<PAGE>
OPTIONALLY AUTHORIZED PRODUCTS may be offered for sale at the Outlet at the
option of FRANCHISEE, subject to prior submission and specific acceptance by
KFC. KFC may withdraw authorization for Optionally Authorized Products if it
determines such action to be in the best interest of the Kentucky Fried Chicken
System.
2
<PAGE>
KENTUCKY FRIED CHICKEN
INTERNATIONAL FRANCHISE AGREEMENT
EXHIBIT C
TRADEMARK REGISTRATIONS
TRADEMARK REG./APP. NO. REG./APP. DATE
- --------- ------------- --------------
<PAGE>
Local Agent: Estudio Arturo Alesandri
CHILE Amunategui 277 _________(?)
Santiago, Chile
Telephone: 011-56-2-696-5185
Telefax: 011-56-2-726-263
Cable: VALEGUI
Attn: Rsul Toro
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
REGISTRATION REGISTRATION RENEWAL
MARK CLASS NUMBER DATE DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COL. SANDERS' RECIPE
KENTUCKY FRIED CHICKEN 29 220,799 11/25/69 03/30/99
COL. SANDERS RECIPE (Commercial 333,857 06/16/78 08/15/98
KENTUCKY FRIED CHICKEN Name) (215,567)
"IT'S FINGER LICKIN GOOD" (Commercial 219,315 01/10/79 01/10/89
Name)
COL. SANDERS' RECIPE (Commercial 349,225 07/25/79 11/22/99
KENTUCKY FRIED CHICKEN Name) (222,986)
Design of Colonel Sanders' Head (Commercial 349,494 09/12/79 11/30/99
Name) (224,371)
Design of Colonel Sanders' Head 29.31 351,152 10/10/79 01/17/00
(224,896)
KENTUCKY FRIED CHICKEN (Commercial 351,826 10/30/79 02/07/00
Name) (225,503)
KENTUCKY FRIED CHICKEN (Commercial 351,826 10/30/79 02/07/00
Name) (225,503)
KENTUCKY FRIED CHICKEN 30 268,432 10/14/82 10/14/92
KENTUCKY FRIED CHICKEN 29 265,195 08/02/82 08/02/92
ES PARA CHUPARSE LOS DEDOS 16 375,275 04/02/92 02/25/01
ES PARA CHUPARSE LOS DEDOS 29 375,276 04/02/92 09/25/01
"IT'S FINGER LICKIN GOOD" 16 3/5/77 04/02/92 09/25/01
EL SABOR DE LOG BURNO 16 375,273 04/02/97 09/25/01
(Commercial Slogan)
EL SABOR DE LOG BURNO 29 375,274 04/02/92 09/25/01
(Commercial Slogan)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
REGISTRATION REGISTRATION RENEWAL
MARK CLASS NUMBER DATE DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KENTUCKY FRIED CHICKEN 42 373,224 08/23/91 08/23/01
IT'S FINGER LICKIN GOOD
*KENTUCKY 42 338,327 01/03/89 01/03/99
COLONEL SANDERS' RECIPE 42 351,177 01/17/90 01/17/00
Colonel's Mug 42 351,374 01/21/90 01/24/00
KENTUCKY FRIED CHICKEN 42 373,223 08/23/91 08/23/01
PENDING APPLICATIONS
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SERIAL DATE
MARK CLASS NUMBER FILED
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KENTUCKY NUGGETS 188,399 09/26/91
CHICKEN LITTLES 29.30 196,968 12/30/91
KFC 29.30 210,186 06/04/92
KFC 42 210,187 06/04/92
KFC Logo 29.30 210,188 06/04/92
KFC Logo 42 210,189 06/04/92
ZINGER 29 214,355 07/16/92
ZINGER 30 214,355 07/16/92
</TABLE>
Title in name of Kentucky Fried Chicken International Holdings, Inc.
___________________
*Purchased in 1989 from Lois V__________ Calderon.
3
<PAGE>
A N E X O A
-----------
- Kentucky Nuggets
- Colonel's Fillet
- Hot Wings
- Colonel's Burger
<PAGE>
KENTUCKY FRIED CHICKEN
INTERNATIONAL FRANCHISE AGREEMENT
SCHEDULE A TO
EXHIBIT D
CERTIFICATE LISTING SHAREHOLDERS OR PARTNERS
I, an authorized officer/partner of FRANCHISEE, hereby certify that the
following information is true and correct and represents all the shareholders or
partners having at least a 10% beneficial ownership interest in this franchise
or in FRANCHISEE:
NAME/ADDRESS INTEREST
Inversiones e Inmobiliaria Kyoto S.A. 65%
Inversiones y Rentas Quebrada Honda S.A. 35%
- -------------------- ----
- -------------------- ----
- -------------------- ----
- -------------------- ----
- -------------------- ----
- -------------------- ----
- -------------------- ----
DATED as of the 1st day of January, 1994.
ATTEST/WITNESS:
By /s/ Ricardo Vilensky
------------------------ --------------------
Authorized Officer
"FRANCHISEE"
(CORPORATE SEAL)
<PAGE>
ANNEX WITH SPECIAL CONDITIONS
TO FRANCHISE AGREEMENT BETWEEN KENTUCKY FRIED CHICKEN
INTERNATIONAL HOLDINGS, INC. AND ALIMENTOS MERCED S.A.
DATED JANUARY 1, 1993
- --------------------------------------------------------------------------------
Kentucky Fried Chicken International Holdings, Inc. ("KFC") and
Alimentos Merced S.A. ("Franchisee") have executed with even date a Franchise
Agreement ("Agreement") relative to KFC's franchise operations in Chile. KFC and
Franchisee agree that the terms and conditions of the Agreement shall control
except as amended herein. All capitalized terms herein shall have the same
meaning as those contained in the Agreement.
1. KFC will award Franchisee the franchise rights to operate and
develop KFC restaurants at distinct addresses in specific markets in Chile in
accordance with a detailed development agreement, a draft of which has been
included in Addendum 1 which will be finalized within the next 30 days.
Franchisee will have the right of first refusal to develop Chile, beyond the
specific restaurants identified in the development agreement as detailed in
Annex 1.
2. Each restaurant that Franchisee acquires from Smart Investments S.A.
or for any other KFC restaurant will have a term of 10(10) years with a
conditional option to renew for another 10 (ten) year term, however, after the
first 10 (ten) years, Franchisee will pay a renewal fee of US$3,000 (Three
Thousand Dollars) per restaurant that is operating.
<PAGE>
All restaurants currently operating under the name of Chicken Inn will
be incorporated into KFC franchise system and will pay a renewal fee of US$3,000
(Three Thousand Dollars) at the end of the first 10 (ten) year period.
All restaurants subject to the franchise system will pay a monthly
royalty fee of five percent (5%) on gross sales excluding IVA.
There will be no initial franchise fee for the 9 (nine) existing
Chicken Inn restaurants, nor for the future restaurants numbered 10, 11, 12, 13,
14 and 15 as long as said restaurants are opened no later than June 30, 1995,
except in the case of Concepcion in a future mall (contracts already signed)
which will be extended until December 31,1995. Any restaurants opened after June
30, 1995 would be at the standard initial fee, which is currently Twenty-Five
Thousand Dollars (US$25,000).
With regard to the restaurants that Franchisee currently operates under
the name Chicken Inn, the parties agree that Franchisee will transform such
restaurants to KFC, as soon as possible, but no later than 18 (eighteen) months
as of this date, provided that (a) KFC will endeavor to modify its chicken on
the bode specifications relating to bird color (cold scald), weight, cut and any
other specifications with the objective of achieving a raw material cost similar
to that of Chicken Inn and still maintaining the quality of the product, as
determined by KFC, within 90 days as of this date; and (b) that KFC and
Franchisee will invest up to US$1,000,000 (one million dollars) in the
proportion of 75% and 25% respectively to convert and equip the 9 (nine) Chicken
Inn restaurants in accordance with the recommendations as set forth by KFC.
2
<PAGE>
If KFC is not able to modify the specifications of the chicken on the
bone pursuant to (a) above within such 90 day period, Franchisee's obligation to
convert such 9 Chicken Inn restaurants to KFC shall be extended by an amount
equal to the delay beyond the 90 days.
In the event KFC and Franchisee determine that the conversion costs
exceed US$1,000,000, such excess shall be paid by both parties in the same
proportions indicated in (b) above.
The parties further agree to utilize KFC's current nugget
specifications with the Original Recipe breading and the Chicken Inn's sandwich
(hamburger) pattie specifications with the Original Recipe breading.
Upon completion of each renovation for conversion of Chicken Inn
restaurants, Franchisee shall pay a monthly royalty fee of 5% (five percent) of
gross sales excluding IVA, as long as they are operating as traditional
restaurants.
The exact transformation date shall be mutually agreed.
The initial fee in accordance with the agreement for all new
restaurants other than the 15 (fifteen) noted above shall be determined
considering the type of outlet in accordance to the terms described in Annex 2.
3. The parties agree to negotiate within the following 90 days a joint
venture. If a joint venture agreement is reached, the operating losses of the 5
(five) restaurants taken over from Smart Investments S.A. and the investments
made by Franchisee in the conversion will be considered as part of its
contribution.
3
<PAGE>
4. The owners of Franchisee will be allowed to sell up to 49% of their
interest in Franchisee, subject to the conditions mentioned below.
If the owners of Franchisee have a prospective buyer for part of their
shares of Franchisee, they must communicate such circumstance in writing to KFC
with the identification and background of the prospective buyer. KFC shall have
a period of 20 (Twenty) days to consent to the sale. The consent may only be
denied based if the prospective buyer is insolvent, commercially inadequate
(that is who registers protests of checks or drafts), morally unacceptable (that
its, amongst others, that has been convicted of criminal or civil wrongdoings)
or has interests in companies or entities that directly compete with KFC in the
sale of chickens or other fast food companies, such as to McDonalds or Burger
King. The prospective buyer may be an individual or company, provided that in
the case of a company it is not publicly traded.
If, after the first 2 (two) years as of this date, the owners of
Franchisee have not sold up to 49% of their shares of Franchisee, KFC shall have
the right of first refusal to purchase any shares such owners wish to sell, at a
price equal to other purchase offers they may receive. For these purposes
Franchisee's owners shall notify KFC in writing of any such offers identifying
the prospective buyers and their detailed offers, and KFC shall have a period of
30 (thirty) days to exercise its right to match such offer and a period of 60
(sixty) days to consummate the purchase.
Within the minimum of 51% that the present owners of Franchisee may not
sell, this percentage may be transferred to direct family or persons legally
associated with the company.
4
<PAGE>
Notwithstanding the foregoing, any sale of shares may not mean that the
present owners, their direct family or legally associated persons lose control
or the majority voting rights in the management of Franchisee.
Additionally Franchisee's shares may not be sold in public offerings or
in the stock market.
5. Franchisee agrees to obtain a verbal quote from his current soft
drink supplier of Chicken Inn on their pricing and incentive structure, which he
will then present verbally to Pepsi-Cola's local bottler. Such terms and
conditions will be consigned in writing by Pepsi-Cola and sent to Franchisee for
his confirmation signature. Pepsi-Cola's local bottler shall have the
responsibility of presenting their proposal to Franchisee in a meeting to be
held no later than 15 (fifteen) days after Franchisee's confirmation signature.
In the event that Pepsi-Cola's local bottler is able to meet or exceed the
conditions of the other soft drink supplier as confirmed by Franchisee,
Franchisee will convert to Pepsi-Cola for all restaurants under the KFC
Franchise Agreement and the Chicken Inn restaurants upon conversion to KFC or
earlier at the option of Franchisee, otherwise Franchisee will continue with his
current Chicken Inn soft drink supplier. Notwithstanding the above, upon
approval from Pepsi-Cola's local bottler, the foregoing procedure may be changed
for a competitive bidding process.
6. Franchisee agrees to a competitive bidding process for the
advertising agency to include the KFC agency of record (Young & Rubican) and
others at the choice of Franchisee. This bidding process will require each
agency to prepare and submit for review a detailed proposal of the marketing
plan for 1994 with details regarding media,
5
<PAGE>
print, etc. as well as support and cost structure. Following review of these
bids with KFC management, Franchisee will award the advertising business to the
company offering the best overall proposal.
7. Franchisee will have the right to sell all KFC approved products and
develop all currently approved facility types, except for those related to the
sale of frozen chicken products.
8. KFC agrees to provide Franchisee operative training at the request
of Franchisee or upon mutual agreement; or KFC will provide training of
individuals to be specified by Franchisee in KFC's training facilities in Sao
Paulo, Brazil. In the event that the training takes place outside of Chile, all
associated out of pocket costs are for the account of Franchisee whereas KFC
will assume responsibility for all training costs. The cost of transportation
and all associated out of pocket expenses of KFC personnel sent to Chile will be
the responsibility of KFC.
9. KFC agrees to work together with Franchisee and designated
manufacturers in reducing the cost of equipment and machinery and other
materials related to the construction, equipment and machinery of new facilities
in an effort to eliminate to the extent possible the need for imported products
instead of those locally produced in the least possible time.
10. Franchisee agrees not to invest or participate in any chicken or
mexican fast food concepts directly competitive to Pepsico's restaurant
businesses at any time in the future.
6
<PAGE>
11. KFC may assign all its rights and obligations under the Agreement
to PepsiCo Inc. affiliates in Chile or abroad by means of a simple written
notice to Franchisee. If the assignment is made to a Chilean company, payment of
all fees will be made in pesos at the exchange rate indicated in No. 6 of
Chapter I of Title I of the Compendium of Foreign Exchange Regulations of Banco
Central de Chile, except for fees based on percentages of sales which will be
made directly in pesos without any exchange conversion. Additionally, such local
payments will not be subject to any withholding taxes, but they will be subject
to VAT tax. Any payments made to non-Chilean companies will be free and clear of
any of Franchisee's taxes, notwithstanding that taxes that must be withheld by
Franchisee on account of KFC shall be deducted from the gross payments and paid
to the local authorities with the obligation of Franchisee of providing KFC with
the corresponding tax receipts.
12. Section 5.2 of the Agreement shall not be applicable to existing
lease agreements of Franchisee, notwithstanding that upon the renewal of such
lease agreements Franchisee shall make its best efforts to obtain from lessors
the conditions mentioned therein.
13. Franchisee shall have a 5 (five) day grace period to make any
payments under the Agreement, notwithstanding that any payments made past the
grace period will accrue interest as of the maximum original payment date under
the Agreement.
14. Franchisee is hereby authorized to constitute pledges on equipment,
installations or machinery in favor of lenders to guarantee loans in the
ordinary course
7
<PAGE>
of the KFC operations with respect to assets it purchased from Smart Investments
S.A. as well as the other assets it may already have encumbered.
15. The minimum for general liability insurance is reduced to
US$250,000 per person and per occurrence and property damage is reduced to the
replacement value of the property. Kentucky Fried Chicken International
Holdings, Inc.
By: /s/ Donn M. Mesato Dated: 1/4/94
- ----------------------
Alimentos Merced S.A.
By: /s/ Ricardo Vilensky Dated: 1/4/94
- ------------------------
8
<PAGE>
Annex I
"Tentative Draft"
Development Agreement:
Development Period: January 1, 1994 - December 31, 1997
The following schedules pertain to additional restaurants in addition to the
existing 5 KFC restaurants and the 9 Chicken Inn restaurants and the specific
cities for development:
OUTLET NUMBER OUTLET OPENING DATE
- ------------- -------------------
1 1994
2 1994
3 1995
4 1995
5 1995
6 1996
7 1996
8 1997
9 1997
10 1997
This annex may be subject to future amendments.
9
<PAGE>
CITY OUTLET NUMBERS
- ---- --------------
Santiago 5
Vina del Mar 1
Valparaiso 1
Concepcion 1
La Serena 1
Rancagua 1
This annex may be subject to future amendments.
10
<PAGE>
Annex 2
TRADITIONAL RESTAURANTS
Traditional Units typically involve the following permanent facility types:
- - Freestanding Buildings:
- With or without drive-thru
- With or without seating
- With or without delivery
- - In-Line Units:
- Restaurants
- Take-out
- With or without delivery
- - 2-1 or all-in-one units where KFC is investing in and operating the unit.
- - Malls or food courts
<PAGE>
NON-TRADITIONAL RESTAURANTS
Non-traditional Restaurants generally encompass all other facility types and
locations and typically involve relocatable structures such as kiosks, carts,
mobile units, and merchandisers. Typical locations for non-traditional units
would be:
- Airports, Schools, Universities
- Office or factory canteen/cafeterias, Hospitals,
Prisons
- Retail outlets (e.g., supermarkets, convenience stores,
gas stations)
2
<PAGE>
AMENDMENT TO THE KENTUCKY FRIED CHICKEN
INTERNATIONAL FRANCHISE AGREEMENT
This Agreement entered into this 15th day of April 1996, by and among
Kentucky Fried Chicken International Holdings, Inc., a Delaware corporation with
offices at 1105 North Market Street ("KFCIH"), Kentucky Foods Chile S.A.
(formerly known as Alimentos Merced S.A.), a Chilean corporation with its
principal place of business at Calle Huerfanos 725.5O piso, Santiago, Chile
("Kentucky"), Ricardo Pedro Vilensky Cohen, a Chilean citizen, married,
businessman, holder of identification card number 6,370,999-9 and Eduardo
Gregorio Vilensky Cohen, a Chilean citizen, married businessman, holder of
identification card number 7,040,129-0 ("Vilensky").
W I T N E S S E T H:
WHEREAS, KFCIH and Kentucky entered into a Kentucky Fried Chicken
International Franchise Agreement ("Agreement") on January 1, 1994, by means of
which KFCIH granted Kentucky the rights to use the trademarks of KFC and to KFC
products in accordance with said Agreement;
WHEREAS, in the Agreement the parties agreed, among other things, that
in order for Kentucky to convert the nine (9) stores at that time existing in
Chile, under the trademark Chicken Inn, KFCIH would pay 75% (seventy-five
percent) of the cost of the equipment and conversion of the nine (9) mentioned
stores to KFC restaurants and Kentucky would pay the remaining 25% (twenty-five
percent);
WHEREAS, up to this date only seven (7) of the Nine (9) Chicken Inn
stores indicated in the Agreement have been converted, remaining to be converted
are the stores located at calle Estado nO 129 and calle Ahumada nO 178, both
located in the City Santiago;
WHEREAS, with the objective to clarify in a definitive manner the
amount that shall be paid to Kentucky to take into effect the conversion and to
equip the two (2) remaining Chicken Inn stores;
The parties do hereby agree as follows:
ARTICLE I
A. KFCIH agrees to pay to Kentucky the equivalent sum of Four Hundred
Ninety-Five Thousand United States Dollars (US$495,000) in Chilean pesos
("Payment") by April 15, 1996 to assist Kentucky in the conversion of the
Ahumada and Estada sites into KFC restaurants. KFCIH shall have a ten (10) day
grace period to make the
<PAGE>
payment. Thereafter, KFCIH will be charged interest at an annual rate of seven
(7%) percent until the Payment is made.
B. In consideration of the Payment Kentucky agrees to immediately upon
receipt of the Payment proceed with the conversion of the Ahumada and Estada
sites into KFC restaurants. The conversion of the Ahumada site must be completed
by July 30, 1996 and the conversion of the Estada site by October 30, 1996.
Notwithstanding the above Kentucky will have a grace period to complete the
conversion equal to the number of days KFCIH delays in making the payment due
April 15, 1996. In no event shall the grace period be more than ten (10) days.
C. KFCIH further agrees to the following:
1. to waive the initial fee of Ten Thousand United States
Dollars (US$10,000) for the Puerto Monte restaurant unit;
2. to waive the initial fee of Twenty-Five Thousand United
States Dollars (US$25,000) for the Galeria restaurant unit or substitute
restaurant unit approved by KFCIH provided the unit is opened in calendar year
1996;
3. to waive the initial fees of Twenty Five Thousand United
States Dollars (US$25,000) per unit for two additional restaurant units not
contemplated in items C(1) and (2) provided Kentucky completes the conversion of
the Ahumada and Estada sites on time, and the two additional units are open
before December 31, 1997.
ARTICLE II
A. Kentucky agrees to build the Ahumada and Estado KFC restaurant units
according to the KFC Standards, as defined in the Agreement entered into between
KFCIH and Kentucky on January 1, 1994.
B. Kentucky and its partners further agree not to invest or participate
in any chicken or Mexican fast food concepts competitive to PepsiCo's restaurant
businesses at any time in the future, while the Agreement dated January 1, 1994
is in full force and effect and any non-compete covenants which survive the
expiration of termination of the January 1, 1994 Agreement.
C. Kentucky hereby grants to KFCIH and KFCIH hereby grants to Kentucky
full general and irrevocable release with respect to the conversion of the first
seven Chicken Inn stores and Kentucky acknowledges that no further money is due
by KFCIH to the conversion of the mentioned stores. Any further expenses related
to the conversion of such stores will be borne exclusively by Kentucky.
2
<PAGE>
D. This Amendment expresses fully the understanding among the parties
hereto and may be modified only in writing signed all parties hereto.
E. This Amendment after being duly executed and ratified by the parties
hereto will become part of the Kentucky Fried Chicken International Franchise
Agreement entered into between KFCIH and MERCED on January 1, 1994 and
supersedes any and all other oral or written agreements between the parties
hereto with respect to the conversions of the Chicken Inn stores.
Having so agreed, the parties execute this instrument in two (2)
counterparts, all of equal purport and for a sole effect, before the two (2)
undersigned witnesses.
KENTUCKY FRIED CHICKEN
INTERNATIONAL HOLDINGS, INC.
By: /s/ William Simmons
-----------------------
KENTUCKY FOODS CHILE, S.A.
By:____________________________
/s/ Ricardo Vilensky
-------------------------------
RICARDO PEDRO VILENSKY COHEN
/s/ Eduardo Vilensky
-------------------------------
EDUARDO GREGORIO VILENSKY COHEN
Witnesses:
_________________________________
_________________________________
3
<PAGE>
AMENDMENT TO THE KENTUCKY FRIED CHICKEN
INTERNATIONAL FRANCHISE AGREEMENT
This Agreement entered into this 23rd day of April 1996, by and among
Kentucky Fried Chicken International Holdings, Inc., a Delaware corporation with
offices at 1105 North Market Street ("KFCIH"), Kentucky Foods Chile S.A.
(formerly known as Alimentos Merced S.A.), a Chilean corporation with its
principal place of business at Calle Huerfanos 725.5O piso, Santiago, Chile
("Kentucky"), Ricardo Pedro Vilensky Cohen, a Chilean citizen, married,
businessman, holder of identification card number 6,370,999-9 and Eduardo
Gregorio Vilensky Cohen, a Chilean citizen, married businessman, holder of
identification card number 7,040,129-0 ("Vilensky").
W I T N E S S E T H:
WHEREAS, KFCIH and Kentucky entered into an Amendment to Kentucky Fried
Chicken International Franchise Agreement ("Agreement") on April 15, 1996, by
means of which KFCIH granted Kentucky agreed to terms for the conversion and to
equip Kentucky's two remaining Chicken Inn Stores to KFC restaurants;
WHEREAS, KFCIH and Kentucky desire to amend the April 15, 1996
agreement;
The parties do hereby agree as follows:
A. The parties agree that Article 1(A) will be amended to read as
follows:
"KFCIH agrees to pay to Kentucky the equivalent sum of Five Hundred
Eighty Two Thousand Three Hundred Fifty United States Dollars
(US$582,350) ("Payment") by April 26, 1996 to assist Kentucky in the
conversion of the Ahumada and Estada sites into KFC restaurants. KFCIH
shall have a ten (10) day grace period to make the payment. Thereafter,
KFCIH will be charged interest at an annual rate of seven (7%) percent
until the Payment is made."
B. The remainder of the April 15, 1996 Amendment shall remain unchanged
and is incorporated herein by reference.
Having so agreed, the parties execute this instrument in two (2)
counterparts, all of equal purport and for a sole effect, before the two (2)
undersigned witnesses.
KENTUCKY FRIED CHICKEN
INTERNATIONAL HOLDINGS, INC.
By:________________________________
<PAGE>
KENTUCKY FOODS CHILE, S.A.
By: /S/ DONN MULLIGAN
------------------------------
/S/ RICARDO VILENSKY
----------------------------------
RICARDO PEDRO VILENSKY COHEN
/S/ EDUARDO VILENSKY
----------------------------------
EDUARDO GREGORIO VILENSKY COHEN
Witnesses:
_________________________________
_________________________________
2
<PAGE>
TRICON
Restaurant International
Mr. Ricardo Vilensky
KFC Chile
Santiago, Chile
October 10, 1997
Dear Ricardo,
This letter recaps the agreements reached between Kentucky Fried Chicken
International Holdings, Inc. ("KFCIH") or Tricon Global Restaurants ("Tricon")
and Kentucky Foods Chile ("KFC") on key discussion points in our September 16
meeting and subsequent phone conversations. These terms supersede any previous
agreements and form the basis for our relationship subsequent to the proposed
initial public offering ("IPO") of KFC via the Uniservice Chile Corporation
entity in the U.S. In the event the IPO or another equivalent recapitalization
of KFC does not occur by April 30, 1998, the terms herein shall be of no effect.
To signify your agreement with these terms, please initial each page and sign
the last page before a witness.
VOTING CONTROL
You will retain voting control of KFC. The structure of this control following
the IPO will be pursuant to shares of voting common stock with super voting
rights. Tricon must approve the specifics of this structure. Such approval will
not be unreasonably withheld and will be reviewed and decided upon within 72
hours of receiving a written plan of this structure.
DESIGNATED OPERATOR
Tricon must approve KFC's "designated operator", a position defined as that
individual with day-to-day general management responsibilities. As of today that
position is filled by you.
ECONOMIC INTEREST
You will retain a minimum of 30% ownership of the KFC business (either through
direct ownership of KFC or through Uniservice Chile, whichever is applicable).
In order to allow you access to some capital, we agreed that, following the IPO,
you may sell a certain limited portion of your shares without TriCon's prior
approval. This limited portion is defined as the lesser of 10% of the
outstanding shares or that amount which brings your ownership in the company
down to 30%. That is, you may sell up to 10% of the outstanding shares as long
as you retain a minimum of 30% of ownership. Further, the proceeds from such a
sale may not be used to start up a new company.
Any sale that conveys the voting control of KFC or Uniservice Chile to a new
owner must be accompanied by the sale of your entire stake in the company.
Similarly, any sale that would bring your equity in the company below 30% must
be a sale of your entire stake in the company and must include
<PAGE>
the voting control. Tricon will have a right of first refusal on such a sale and
will have 60 days form the receipt of a valid offer to exercise this right. If
Tricon decides not to exercise its right of first refusal, it retains the right
to approval the new buyer.
In computing the percentage ownership in the foregoing, no consideration is
given to the exercise of warrants issued as a part of the IPO. In the event
these warrants are exercised, your ownership percentage minimum and the amount
of shares you may sell without Tricon approval will decrease proportionally.
However, you agree to make best efforts to retain your ownership at 30%.
EFFECTIVE DATE
Date that the Development Agreement is executed. Agreement will be executed
within 10 days following the date when KFC's royalties and initial fee payments
are current per the existing franchise contract.
DEVELOPMENT SCHEDULE
Develop schedule will be for 34 stores a total of 60. The term will be seven
years with the development pace being:
By end of Year 1 4 net new restaurants 30 total restaurants
By end of Year 2 5 net new restaurants 35 total restaurants
By end of Year 3 5 net new restaurants 40 total restaurants
By end of Year 4 5 net new restaurants 45 total restaurants
By end of Year 5 5 net new restaurants 50 total restaurants
By end of Year 6 5 net new restaurants 55 total restaurants
By end of Year 7 5 net new restaurants 60 total restaurants
KFC will have a right of first refusal on development as long as it is current
with its development schedule.
FEES
Royalty rate will be 5% for stores #27, 28, 29 and 30 and 6% for all stores
beyond store #30. Initial fees will be $35,000 per unit except for stores #27,
28, 29 and 30 which will carry no iniitial fees. Development right fees of
$10,000 per unit (or $340,000) will paid in equal installments of $56,667 over
six years beginning on the first anniversary of the Effective Date and then
continuing on the following five anniversaries of that date.
Non-traditional stores, defined as relocatable structures such as kiosks, carts,
mobile units and merchandisers and typically located in airports, schools,
universities, offices, hospitals and retail outlets, will have initial fees of
$17,500 and a royalty rate of 6%. Non-traditional stores will not count against
the development schedule obligations.
Royalty rate for all stores will decrease to and be held for 10 years at 5%
years following the opening of the 60th restaurant if the 60th store is opened
within the development schedule and if there are no defaults against the
Development Agreement or any Outlet Agreement from the Effective Date of the
Development Agreement until the day of the opening of the 60th store. Following
the 10 year term of 5% royalties, royalties for all stores will convert to then
current royalty rates.
<PAGE>
RECIPIENT/CURRENCY
The recipient of KFC's fees will be KFCIH in the U.S. or any other such entity
and location as Tricon directs. Fees and royalties will be payable in U.S.
Dollars.
OUTLET AGREEMENT
The then current standard International Agreement will be executed for all
stores in the development agreement. Outlet Agreements will include a primary
term of 10 years plus one 10 year renewal term. No fee will be applied for the
renewal term.
NON-COMPETE
With the exception of your stake in Domino's, KFC and its shareholders will not
hold any ownership or management interests in any chicken, pizza or Mexican
restaurant business. Your will be given 18 months from the Effective Date to
divest your interests in Domino's.
Accepted and agreed to:
/s/ Donal L. Mulligan
- --------------------------------------------------------------------------------
For Kentucky Fried Chicken International Holdings, Inc. Date
For Tricon Global Restaurants, Inc.
Donal L. Mulligan
VP, Finance, Americas
Accepted and agreed to:
/s/ Ricardo Vilensky
- --------------------------------------------------------------------------------
Kentucky Foods Chile by Ricardo Vilensky Date
Witnessed by: Mauricio Aguirre
/s/ Mauricio Aguirre
- --------------------------------------------------------------------------------
Witness: Date
cc: R. Chase, VP/GM, Franchise Development
A. Leon, Finance Director, SOLA Franchising
<PAGE>
TRICON
Restaurant International
Mr. Ricardo Vilensky
KFC Chile
Santiago, Chile
October 20, 1997
Dear Ricardo,
Pursuant to Section 4 of the Annex with Special Conditions to the Franchise
Agreement between Kentucky Fried Chicken International Holdings, Inc. ("KFCIH")
and Alimentos Merced S.A. (predecessor of Kentucky Foods Chile ["KFC"]) executed
on January 4, 1994, Kentucky Fried Chicken International Holdings, Inc.,
approves your proposal to initiate an initial public offering ("IPO") of KFC via
the Uniservice Chile Corporation under the structure outlined in the August 28,
1997 memo from Werbel-Roth Securities, Inc. (annexed hereto and incorporated by
reference) as well as the following terms:
PROCEEDS: All proceeds from the IPO will be retained by KFC to pay down
royalties and vendor payables as well as fund store development. This condition
will be included in the SEC registration.
DIVERSIFICATION RESTRICTION: The SEC registration document will clearly state
the KFC and Uniservice Chile intend to restrict their business to the KFC brand
in Chile ant that, subject to compliance with the franchise contracts and prior
approval of Tricon Global Restaurants ("Tricon"), KFC may engage in other
businesses which do not conflict with the KFC brand. Such an approval from
Tricon will be reviewed and decided upon within 60 days from the receipt by
Tricon of formal written notification by KFC.
TRICON REVIEW OF SEC REGISTRATION DOCUMENT AND DISCLAIMER: Tricon will be given
the opportunity to review the SEC registration documents and amend relevant
sections so as to protect Tricon's interest and brands. Any amendments will be
reasonable and will be conveyed to KFC within 3 business days of receipt of each
draft of the SEC registration document. Also, a disclaimer will be included in
these documents to clearly state that KFCI and Tricon have no equity interest in
this business and do not warrant the results of the company.
CAPITAL POLICY: Pending confirmation of acceptance under U.S. securities
regulations, there will be no dividends issued by KFC or Uniservice Chile.
CONFIDENTIALITY: The terms of this approval must remain confidential to the
parties immediately involved - Tricon, the officers of KFC and Werbel-Roth.
Information released beyond this group must be approved by Tricon. Any revisions
to the IPO structure from those outlined in the August 28 Werbel-Roth memo
and/or the above noted terms must be approved in advance by Tricon.
<PAGE>
This approval is conditioned only upon the receipt by KFCIH of $400,000 in
payment toward KFC's royalty debt to KFCIH and an executed Recognition of Debt
note ("ROD") for the balance of its outstanding royalty and initial fees plus
interest by November 10, 1997, at which time this approval is rescinded if the
aforementioned payment and ROD are not received. The due date(s) for ROD will be
the earlier of three (3) days following the receipt of IPO proceeds (full
payment) or April 30, 1998 (25%of principal), August 31, 1998 (25% of principal)
and November 20, 1998 (50% of principal), August 31, 1998 (25% of principal) and
November 20, 1998 (50% of principal plus all interest). The interest rate to be
applied is that noted in the current franchise agreement.
Further, between the execution of this letter and the IPO, KFC will either
resume paying monthly royalties and initial fees or issue ROD notes as these
royalties and fees are due. These notes will carry the same due dates and
interest rate as the first ROD referenced above.
Following the IPO all royalties and initial fees must be paid in accordance with
the franchise contract. KFCIH and KFC agree to jointly develop a mechanism to
guarantee timely payment of these royalties and fees, such as a letter of
credit, an annual prepayment or a security deposit.
To signify acceptance, please sign below and initial the previous page in the
presence of a witness.
Accepted and agreed to:
/s/Donal L. Mulligan 10/20/97
- --------------------------------------------------------------------------------
For Kentucky Fried Chicken International Holdings, Inc. Date
For Tricon Global Restaurants Inc.
Donal L. Mulligan
VP, Finance, Americas
Accepted and agreed to:
/s/ Ricardo Vilensky
- --------------------------------------------------------------------------------
Kentucky Foods Chile by Ricardo Vilensky Date
Witness:
Hermen P. Erbe 10/23/97
- --------------------------------------------------------------------------------
Witness by: Date
cc: R. Chase, VP/GM, Franchise Development
A. Leon, Finance Director, SOLA Franchising
<PAGE>
TRICON
Restaurants International
Mr. Ricardo Vilensky
KFC Chile
Santiago, Chile
November 19, 1997
Dear Ricardo,
This letter confirms that Kentucky Foods Chile ("KFC") has fulfilled the
conditions of our October 20, 1997 memo regarding Kentucky Fried Chicken
International Holdings, Inc.'s ("KFCIH") approval of the proposed initial public
offering ("IPO") of KFC via the Uniservice Chile Corporation and has KFCIH's
final approval to proceed with the proposed IPO under the terms specified in the
October 20, 1997 memo.
Sincerely,
/S/ DONAL L. MULLIGAN
- ---------------------
Donal L. Mulligan
VP, Finance
Americas
cc: R. Chase, VP/GM, Franchise Development
A. Leon, Finance Director, SOLA Franchising
EXHIBIT 10.3
CREDIT CONTRACT
Santiage Chile, October 3, 1997, between Kentucky Foods Chile S.A., represented
by Mauricio Aguirre Carreno, and Inversiones e Inmibiliaria Kyoto Limitada,
represented by Ricardo Vilensky, both commercial residents are at Carmencita No.
25, Las Condes, Santiage Chile. The following has been agreed:
FIRST: Inversiones e Inmobiliaria Kyoto will lend Kyoto Foods Chile S.A. the
amount of $128,976,841 (*Fomento Units as of December 31, 1997) in accordance
to the laws of Book IV, Title XXXI of the Civil Law and the Law 18.010.
SECOND: The indebted is obligated to restore the amount indicated during the
course of the year 1998. This amount will earn an interest of 9% annually. In
case of late payment this amount will earn the maximum interest permitted by law
between the date that is late until the payment is received.
THIRD: For all the legal effects of this contract, all the participants are all
residents of the city of Santiago.
It is stated that the legal capacity of Ricardo Vilensky Cohen to represent
Inversiones e Incmobilibaria Kyoto Limitada is established in the public
documents dated November 30, 1995, notarized by Raul Undurraga Laso, notary
public of Santiago Chile.
The legal capacity of Mauricio Aguirre Carreno to represent Kentucky Foods Chile
S.A. is approved by the Public Documents dated October 21, 1994, notarized by
the Notary Public of Santiago Chile Gonzalo de la Cuadra Fabres, referred to in
the recorded of proceeding of the Directors of Sociedad Kentucky Foods Chile,
S.A., dated October 23, 1995, notarized by Raul Undurraga Laso.
/S/ RICARDO VILENSKY COHEN /S/ MAURICIO AGUIRRE CORRENO
- -------------------------- -----------------------------
Ricardo Vilensky Cohen Mauricio Aguirre Correno
Inv. e Inmob. Kyoto Ltda. Kentucky Foods Chile S.A.
EXHIBIT 10.4
CREDIT CONTRACT
Santiago Chile, November 6, 1997, between Kentucky Foods Chile S.A. represented
by Mauricio Aguirre Carreno and Inversiones e Inmobiliaria Kyoto Limitada
represented by Ricardo Vilensky Cohen, both commercial residents are at
Carmencita No. 25, Las Conded, Santiago, Chile the following has been agreed.
FIRST: Inversiones e Inmobiliaria Kyoto Limitada lends to Kentucky Foods Chile
the amount of $169,300,000, in accordance with to the laws of Book IV, Title
XXXI of the Civil Law and the Law 18.010.
SECOND: The indebted is obligated to restore the amount indicated during the
course of the year 1998. Starting January 1, 1998 this amount will earn an
interest of 7.8% annually. In case of late payment, this amount will earn the
maximum interest permitted by law between the date that is late until the
payment is received.
THIRD: For all the legal effects of this contract, all the participating are all
residents of the city of Santiago.
It is stated that the legal capacity of Ricardo Vilensky Cohen to represent
Inversiones e Inmobiliaria Kyoto Limitada is established in the public documents
dated November 30, 1995, notarized by Raul Undurraga Laso, notary public of
Santiago Chile.
The legal capacity of Mauricio Aguirre Carreno to represent Kentucky Foods Chile
S.A. is approved by the Public Documents dated October 21, 1994, notarized by
the Notary Public of Santiago Chile Gonzalo de la Cuedra Fabres, referred to in
the record of proceeding of the Directors of Sociedad Kentucky Foods Chile S.A.,
dated October 23, 1995, notarized by Raul Undurraga Laso.
/S/ RICARDO VILENSKY COHEN /S/ MAURICIO AGUIRRE CORRENO
- -------------------------- -----------------------------
Ricardo Vilensky Cohen Mauricio Aguirre Correno
Inv. e Inmob. Kyoto Ltda. Kentucky Foods Chile S.A.
EXHIBIT 10.5
AGREEMENT
In consideration for a loan by MKK Investment Company, Inc. (the
"Payee") to Uniservice Corporation, a Florida corporation ("UC/Company"), UC
hereby agrees that the principal amount of the loan of One Hundred and Fifty
Thousand ($150,000) Dollars, together with interest at eight and one half
percent (8-1/2%) per annum, shall be paid from the proceeds of the UC initial
public offering on Form SB-2 (the "Registration Statement") which the Company
intends to file with the Securities and Exchange Commission.
This loan shall be evidenced by a Promissory Note between the Company
as Maker and the Company as Payee of even date.
As additional consideration, the Payee shall receive 30,000 shares of
restricted Class A Voting Common Stock, par value $.0001 (the "Class A Common
Stock") of UC, subject to a lock-up period of six (6) months from the effective
date of the Registration Statement or such other lock-up period as may be
imposed by the Company's Underwriter or the National Association or Securities
Dealers or by any national exchange including the National Association of
Securities Dealers Automated Quotation (Nasdaq) System in connection with the
Registration Statement.
If for any reason the Registration Statement is not effective and
closed by January 1, 2000, then and in that event payment shall be made by UC.
The Company intends to use the proceeds received from the Payee in
connection with the costs and expenses related to the Registration Statement.
The Company has given David Mayer, a Director of UC whose business address is
c/o Andean Engineering & Finance Corp., 1900 Glades Boulevard, Suite 351, Boca
Raton, FL 33431 the right to disburse any and funds received by UC from the
Payee in connection with the related costs and expenses of the Registration
Statement, subject to the prior written approval of Ricardo Vilensky, the
President and CEO of UC or Sergio Vivanco, the general counsel for UC.
This Agreement shall be governed by the laws of Florida and shall be
deemed entered into at March 31, 1998.
This Agreement is made this 31st day of March, 1998.
Uniservice Corporation
By: /s/ Ricardo Vilensky
------------------------------
Ricardo Vilensky. President
<PAGE>
FORM
OF
PROMISSORY NOTE
$150,000
Palm Beach County, Florida March 31, 1998
FOR VALUE RECEIVED, UNISERVICE CORPORATION, a Florida corporation (the
"Maker") promises to pay to the order of MKK Investment Company, Inc. (the
"Payee"), at the earlier of (i) the closing of the Maker's underwritten public
offering of its securities or (ii) January 1, 2000, the principal sum (of an
aggregate of) One Hundred Fifty Thousand ($150,000) Dollars in lawful money of
the United States, in hand or at the principal office of the Payee as may from
time to time be designated by the Payee. This Note shall bear interest on the
unpaid principal balance at the rate of Eight and One-Half Percent (8-1/2%),
payable at the time of the payment of the principal sum of this Note.
In the event of any default in any payment on this Note, then at the
option of the Payee, this Note shall bear interest computed from the date of
such default at one and one-half percent (1-1/2%) per month, but in any event
not in excess of the legally prescribed rate for instruments of this kind. The
term "event of default" as used herein, shall mean the failure of Maker to make
any payment of the principal or interest due under the Note, which failure shall
continue for five (5) days after notice of default, such notice to be delivered
to Maker by registered, certified or overnight mail duly recorded at the
principal office of the Maker.
An provision hereof which may prove unenforceable under any law shall
not affect the validity of any other provisions hereof.
Maker hereby waives presentment for payment, protest and notice of
protest and all other notices or demands in connection with the delivery,
acceptance, performance, default or endorsement of this Note.
This Note shall be governed by the laws of the State of Florida or the
Country of Chile, in the sole discretion of the Payee.
UNISERVICE CORPORATION
BY: /s/ Ricardo Vilensky
-----------------------------------------
Ricardo Vilensky, Chief Executive Officer
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and
between UNISERVICE CORPORATION, a corporation organized and existing under the
laws of the State of Florida and having its executive offices at 1900 Glades
Road, Suite 351, Boca Raton, Florida 33431 ("Company"), and RICARDO VILENSKY,
whose address is Carmencita #23, Office 1002, Santiago, Chile ("Mr. Vilensky")
on January 5, 1998, but shall be effective as of the effective date of the
initial public offering of the Company's securities ("Effective Date") pursuant
to a registration statement filed with the Securities and Exchange Commission on
Form SB-2 ("IPO").
W I T N E S S T H:
WHEREAS, Mr. Vilensky is currently serving as President and Chief
Executive Officer of the Company and as Chairman of the Company's Board of
Directors (the "Board"); and
WHEREAS, the Company desires to secure for itself the continued
availability of Mr. Vilensky's services; and
WHEREAS, for purposes of securing for the Company Mr. Vilensky's
services, the Board has approved and authorized the execution of this Agreement
with Mr. Vilensky on the terms and conditions set forth herein; and
WHEREAS, Mr. Vilensky is willing to continue to make his services
available to the Company on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations hereinafter set forth, the Company and Mr. Vilensky
hereby agree as follows:
SECTION 1. EMPLOYMENT
The Company hereby agrees to continue the employment of Mr. Vilensky
and Mr. Vilensky hereby agrees to continue such employment during the period and
upon the terms and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD
Except as otherwise provided in this Agreement to the contrary, the
terms and conditions of this Agreement shall be and remain in effect during the
period of employment ("Employment Period") established under this Section 2. The
Employment Period shall be for a term of three (3) years commencing on the
Effective Date and shall automatically be extended for each successive year
thereafter unless (i) the parties mutually agree in writing to alter or amend
the terms of the Agreement; or (ii) one or both of the parties exercises their
right, pursuant to this Agreement, to terminate this employment relationship.
<PAGE>
SECTION 3. DUTIES
Mr. Vilensky shall serve as President and Chief Executive Officer of
the Company. Mr. Vilensky's responsibilities, duties and authority as President
and Chief Executive Officer of the Company shall, subject to the direction of
the Board and the By-laws of the Company and any applicable provisions of the
Florida Business Corporation Act ("Corporation Act"), be those commonly
associated with such position and shall include, but shall not be limited to,
the employment, general supervision and direction of all operating officers, the
employment, general supervision and direction of the Company's personnel and
planning for the Company's long-term needs and objectives. Mr. Vilensky shall be
responsible for the general supervision and management of the business affairs
of the Company, and, under authority given to him by the Board, shall execute
documents in the name of the Company and do such other official acts on behalf
of the Company as are appropriate and permitted by the By-laws of the Company.
Mr. Vilensky shall serve as President and Chief Executive Officer of any and all
subsidiaries hereafter created by the Company during the Employment Period
without additional compensation therefor.
SECTION 4. COMPENSATION
(a) BASE SALARY. In consideration for the services rendered by Mr.
Vilensky under this Agreement, the Company shall pay to Mr Vilensky a salary at
an annual rate equal to Eighty Thousand Dollars ($80,000.00). The annual salary
payable under this Section 4(a) shall be paid in approximately equal
installments in accordance with the Company's customary payroll practices.
(b) BONUSES. In addition to the salary provided under Section 4(a), Mr.
Vilensky shall be entitled to receive a bonus (initially for the first year of
this Agreement of up to $100,000), at the times and in the amounts and
determined in such reasonable manner as may be prescribed by the Board from time
to time.
(c) ADDITIONAL ANNUAL COMPENSATION. In addition to the salary provided
under Section 4(a) and the Bonuses provided under Section 4(b), Mr. Vilensky
shall be entitled to receive additional annual compensation of $90,000 which
includes (i) $15,000 for school expenses for Mr. Vilensky's children, (ii)
$10,000 for entertainment, (iii) $20,000 for travel, (iv) $20,000 for medical
reimbursement, and (v) $28,000 for automobile expenses, including the cost of
vehicle, maintenance and insurance.
(d) ISAPRE. In addition to the compensation described in Sections 4(a),
(b) and (c) above, Mr. Vilensky shall also be entitled to receive social
security benefits pursuant to Chilean law including without limitation, to the
Institutions and Provisional Health (ISAPRE) and Administrators of Pension Funds
(AFP).
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SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS
(a) Mr. Vilensky shall be entitled to a minimum of four (4) weeks of
paid vacation in each calendar year, all of which shall be deemed accrued,
earned and available for use on the first day of the year.
(b) The Company shall also purchase or lease, for Mr. Vilensky's
exclusive use, a beeper and cellular telephone of his choice and shall pay, or
reimburse Mr. Vilensky for his payment of, all charges relating thereto.
(c) Except as otherwise provided in this Agreement, Mr. Vilensky shall,
during the Employment Period, be entitled to participate in and receive benefits
under the Company's group life, health (including hospitalization, medical and
major medical), dental, accident and long term disability insurance plans, and
such other employee benefit plans and programs, including, but not limited to,
any pension plans, incentive compensation plans or programs (whether or not
employee benefit plans or programs), and any stock option and appreciation
rights plan, employee stock ownership plan and restricted stock plan, as may
from time to time be maintained by, or cover executive and/or employees of, the
Company, in accordance with the terms and conditions of such benefit plans and
programs and compensation plans and programs and with the Company's customary
practices.
SECTION 6. INVESTMENTS AND OTHER BUSINESS INTERESTS
Mr. Vilensky may engage in personal business and investment activities
for his own account including, without limitation, serving on boards of
directors and engaging in charitable and community affairs; provided, however,
that such personal business and investment activities shall not materially
interfere with the performance of his duties under this Agreement and shall in
all events be subject to the provisions of Section 10 hereof.
SECTION 7. WORKING FACILITIES AND EXPENSES
Mr. Vilensky's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other location
as the Company and Mr. Vilensky may mutually agree upon. The Company shall
provide Mr. Vilensky at his principal place of employment with a private office,
secretarial services and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Mr. Vilensky for his ordinary and necessary business expenses,
including, without limitation, fees for memberships in one business or social
club of his choice (up to maximum cost of $5,000 per year) and in such other
clubs and organizations as Mr. Vilensky and the Company shall mutually agree are
necessary and appropriate for business purposes, and his travel and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement upon presentation to the Company of an itemized account of
such expenses in such form as the Company may reasonably require.
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SECTION 8. TERMINATION OF EMPLOYMENT WITH COMPANY LIABILITY
(a) In the event that Mr. Vilensky's employment with the Company shall
terminate during the Employment Period on account of:
(i) Mr. Vilensky's voluntary resignation from employment with
the Company within ninety (90) days after the occurrence, without the
express written consent of Mr. Vilensky, of any of the following:
(A) the failure of the Company's Board to appoint or
re-appoint or elect or re-elect Mr. Vilensky to the offices of
President and Chief Executive Officer (or a more senior office) of the
Company;
(B) the failure of the stockholders of the Company to
elect or re-elect Mr. Vilensky as Chairman of the Board and a Director
of the Company;
(C) a material failure of the Company, whether by
amendment of the Company's Articles of Incorporation or By-laws, action
of the Board or the Company's stockholders or otherwise, to vest in Mr.
Vilensky the functions, duties, or responsibilities prescribed in
Section 3 of this Agreement or the By-Laws of the Company or any
significant change in any of the foregoing;
(D) a material breach of this Agreement by the
Company;
(E) a "Change of Control" (as hereinafter defined) of
the Company; as used herein, a "Change of Control" shall mean:
(a) individuals who as of the date hereof
constitute the Board (the "Incumbent Board") cease for any
reason to constitute a majority of the Board other than
through action by the Board in creating and filling vacancies
on the Board; or
(b) either
(i) the acquisition, after the
completion of the IPO, by any individual, entity or
group (within the meaning of Section 13 (d)(3) or 14
(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (a "Person"), of
beneficial ownership (within the meaning of Rule 1
3d-3 promulgated under the Exchange Act) of voting
securities of the Company where such acquisition
causes such Person to own 35% or more of the
outstanding voting securities of the Company
("Securities Acquisition"); or
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(ii) the approval by the
stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition
of all or substantially all of the assets of the
Company ("Business Combination"),
unless pursuant to such Securities Acquisition or Business
Combination (A) all or substantially all of the individuals
and entities who were the beneficial owners of the outstanding
voting securities of the Company prior to the Securities
Acquisition or Business Combination beneficially own more than
66-2/3 % of the then outstanding voting securities of the
Company (if it is the surviving corporation) or the surviving
corporation (if it is other than the Company) in substantially
the same proportions as their ownership immediately prior to
the Securities Acquisition or Business Combination, and (B) at
least a majority of the members of the Board of the surviving
corporation were members of the Incumbent Board immediately
prior to the Securities Acquisition or Business Combination;
(F) a five percent (5%) reduction in Mr. Vilensky's
compensation below the salary in effect immediately prior to such
reduction;
(G) a material reduction of Mr. Vilensky's benefits
under any employee benefit plan, program or arrangement (for Mr.
Vilensky individually or as part of a group) of the Company as then in
effect or as in effect on the effective date of the Agreement, which
reduction shall not be effectuated for similarly situation employees of
the Company; or
(H) failure by a successor company to assume the
obligations under the Agreement; or
(ii) the discharge of Mr. Vilensky by the Company for any
reason other than for "cause" as provided in Section 9(a);
then the Company shall provide the benefits and pay to Mr. Vilensky the amounts
provided for under Section 8(b). Notwithstanding anything contained herein to
the contrary, the Company shall not be liable for the payments and benefits
under Section 8(b) in the case of (a) a resignation described in Section
8(a)(i)(C) or (1) for reasons other than failure to pay compensation due
hereunder unless Mr. Vilensky has given written notice to the Company of its
breach and the Company fails to cure such breach within thirty (30) days
thereafter or Mr Vilensky has, within the twelve (12) month period ending on the
date of his resignation, given the Company written notice of a substantially
similar breach which was subsequently cured, or (b) Mr. Vilensky's employment
with the Company shall terminate under circumstances described in this Section
8(a) which Mr. Vilensky has directly and willfully caused to occur.
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(b) Upon the termination of Mr. Vilensky's employment with the Company
under circumstances described in Section 8(a) of this Agreement, the Company
shall pay and provide to Mr Vilensky (or, in the event of his death, to his
estate):
(i) his earned but unpaid salary as of the date of the
termination of his employment with the Company, and his earned but
unpaid bonus as of the date of his termination, pro-rated for the
fiscal quarter during which his termination occurs (based on the number
of days that he was in the Company's employ during such fiscal quarter)
if the termination is other than on the last day of a fiscal quarter;
(ii) except as provided in Section 8(b)(iv), the benefits, if
any, to which he is entitled as a former employee under the employee
benefit plans and programs and compensation plans and programs
maintained for the benefit of the Company's officers and employees;
(iii) continued life, health (including hospitalization,
medical and major medical), dental, accident and long term disability
insurance benefits, in addition to that provided pursuant to Section
8(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for Mr.
Vilensky for the remaining unexpired Employment Period, coverage
equivalent to the coverage to which he would have been entitled if he
had continued working for the Company during the remaining unexpired
Employment Period at the highest annual rate of compensation achieved
during that portion of the Employment Period which is prior to Mr.
Vilensky's termination of employment with the Company;
(iv) within thirty (30) days following his termination of
employment with the Company and in lieu of any monetary payments to
which he may be entitled under any severance pay plan, program or
policy, a lump sum payment, in an amount equal to the present value of
the salary that Mr. Vilensky would have earned at the rate set forth in
Section 4(a) if he had continued working for the Company during the
remaining unexpired Employment Period, where such present value is to
be determined using a discount rate of six percent (6%) per annum,
compounded monthly (or the compounding period corresponding to the
Company's regular payroll periods with respect to its officers, if not
monthly), such lump sum to be paid in lieu of all other payments of
salary provided for under this Agreement in respect of the period
following any such termination (other than the additional severance
payment provided for in Section 8(c) as set forth therein);
(v) within thirty (30) days following his termination of
employment with the Company, a lump sum payment in an amount equal to
the excess, if any, of: (A) the present value of the benefits to which
he would be entitled under any benefit plans maintained by, or covering
employees of, the Company if he were 100% vested thereunder and had
continued working for the Company during the remaining unexpired
employment period at the highest annual rate of compensation achieved
during that portion of the Employment Period which is prior to Mr.
Vilensky's termination of
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employment with the Company, over (B) the present value of the benefits
to which he is actually entitled under any benefit plans maintained by,
or covering employees of, the Company as of the date of his
termination, where such present values are to be determined using a
discount rate of six percent (6%) per annum, compounded monthly;
(vi) within thirty (30) days following his termination of
employment with the Company a lump sum cash payment in the amount of
the payments that would have been made to Mr. Vilensky (in cash and
stock) under Section 4(b) of this Agreement if he had continued working
for the Company during the remaining unexpired Employment Period and
had earned an annual bonus payment for each fiscal quarter equal to the
highest amount, if any, actually paid to Mr. Vilensky for any fiscal
quarter pursuant to Section 4(b);
(vii) at the election of Mr. Vilensky made within thirty (30)
days following his termination of employment with the Company, upon the
surrender of options or appreciation rights issued to Mr. Vilensky
under any stock option and appreciation rights plan or program or
restricted stock plan maintained by, or covering employees of, the
Company, a lump sum payment in an amount equal to the product of:
(A) in the case of a stock option or
appreciation rights plan or program:
(I) the excess of (A) the fair
market value of a share of stock of the same class as
the stock subject to the option or appreciation
right, determined as of the date of termination of
employment, over (B) the exercise price per share for
such option or appreciation right, as specified in or
under the relevant plan or program; multiplied by
(II) the number of shares with
respect to which options or appreciation rights are
being surrendered; and
(B) in the case of a restricted stock plan:
(I) the fair market value of a
share of stock of the same class of stock granted
under such plan, determined as of the date of Mr
Vilensky's termination of employment; multiplied by
(II) the number of shares which are
being surrendered.
For purposes of this Section 8(b)(vii) and for purposes of determining Mr.
Vilensky's right following his termination of employment with the Company to
exercise any options or appreciation rights not surrendered pursuant hereto, Mr.
Vilensky shall be deemed fully vested in all options and appreciation rights
under any stock option or appreciation rights plan or
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program maintained by, or covering employees of, the Company, even if he is not
vested under such plan or program.
(c) In the event that a termination of employment occurs pursuant to
Section 8(a) on or after November 1, 1999, then in addition to all of the
payments and benefits which the Company shall pay or provide pursuant to Section
8(b), the Company shall also pay to Mr. Vilensky (or his estate, as applicable)
within thirty (30) days following his termination of employment, the following
severance payments:
(A) a lump sum cash payment in an amount equal to the
difference between the amounts actually paid relating to Mr. Vilensky's
salary under Section 8(b) and an amount equal to two (2) times Mr
Vilensky's annual salary, based upon the greater of Mr. Vilensky's
salary (i) immediately prior to the effective date of termination or
(ii) as of ninety (90) days prior to the effective date of termination;
plus
(B) a lump sum cash payment in an amount equal to the highest
annual bonus payment, if any, that was actually paid to Mr. Vilensky
(in cash and stock) for any fiscal year pursuant to Section 4(b).
(d) The Company and Mr. Vilensky hereby stipulate that the damages
which may be incurred by Mr. Vilensky following any termination of employment
pursuant to Section 8(a) are not capable of accurate measurement as of the date
first above written and that the payments and benefits contemplated by Section
8(b) and 8(c) constitute reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and without regard to
Mr. Vilensky's efforts, if any, to damages.
(e) In the event of the death of Mr. Vilensky during the Employment
Period of the Agreement, salary shall be paid to Mr Vilensky's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of Mr. Vilensky for a period of up to the date of death.
Other death benefits will be determined in accordance with the terms of the
Company's benefit programs and plans.
(f) In the event of Mr. Vilensky's disability, as hereinafter defined,
Mr. Vilensky shall be entitled to compensation in accordance with the Company's
disability compensation practice for senior executives, including any separate
arrangement or policy covering Mr. Vilensky, but in all events Mr. Vilensky
shall continue to receive Mr. Vilensky's salary for a period, at the annual rate
in effect immediately prior to the commencement of disability, of not less than
180 days from the date on which the disability has been deemed to occur as
hereinafter provided below. "Disability" for the purposes of this Agreement,
shall be deemed to have occurred in the event (A) Mr. Vilensky is permanently
unable by reason of sickness or accident to perform Mr. Vilensky's duties under
this Agreement for a continuous period of 180 days. Termination due to
disability shall be deemed to have occurred upon the first day of the month
following the determination of disability as defined in the preceding sentence.
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(g) In the event of termination as a result of Mr. Vilensky's death or
disability, and in addition to the payments set forth in Sections 8(e) or 8(f),
as the case may be, Mr. Vilensky (or his estate) shall also be paid his earned
but unpaid bonus as of the date of his termination, pro-rated for the fiscal
quarter during which his termination occurs (based on the number of days he was
in the Company's employ during such fiscal quarter) if the date of termination
is other than on the last day of a fiscal quarter; and the provisions of such
other benefits, if any, to which he is entitled as a former employee under this
Agreement and the employee benefit plans and programs and compensation plans and
programs maintained by, or covering employees of, the Company.
SECTION 9. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY
In the event that Mr. Vilensky's employment with the Company shall
terminate during the Employment Period on account of:
(a) the discharge of Mr. Vilensky for "cause" which, for purposes of
this Agreement, shall mean his repeated and gross negligence in the fulfillment
of, or repeated failure of Mr. Vilensky to fulfill, his material obligation
under this Agreement, in either event after due written notice thereof (which
notice requirement shall be deemed satisfied if due written notice of a
substantially similar act or omission shall have been given within three (3)
months prior to such discharge), or willful misconduct by Mr. Vilensky in
respect of his obligations hereunder, or his conviction of a felony under the
laws of the United States or any State, but only if such gross negligence,
repeated failure, willful misconduct or conviction materially impairs his
ability to effectively perform his duties under this Agreement; provided,
however, that cause shall not include, without limitation:
(i) the refusal by Mr. Vilensky of an assignment not
consistent with the status, titles and reporting requirements set forth
herein or contemplated hereby; or
(ii) bad judgment or negligence of Mr. Vilensky; or
(iii) any act or omission (other than one constituting a
material breach of trust committed in willful and reckless disregard of
the interests of the Company and undertaken for personal gain) in
respect of which a determination could properly have been made by the
Board that Mr. Vilensky met the applicable standard of conduct
prescribed for indemnification or reimbursement under the By-Laws of
the Company or the laws of the State in which the Company is then
chartered, in each case in effect at the time of such act or omission;
or
(iv) any act or omission with respect to which notice of
termination is given more than three (3) months after the earliest date
on which any non-employee director of the Company who was not a party
to such act or omission knew or should have known of such act or
omission; or
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(b) Mr. Vilensky's voluntary resignation from employment with the
Company for reasons other than those specified in Section 8(a)(i);
then the Company shall have no further obligations under this Agreement, other
than the payment to Mr. Vilensky of his earned but unpaid salary as of the date
of the termination of his employment; his earned but unpaid bonus as of the date
of his termination, pro-rated for the fiscal quarter during which his
termination occurs (based on the number of days he was in the Company's employ
during such fiscal quarter) if the date of termination is other than on the last
day of a fiscal quarter; and the provisions of such other benefits, if any, to
which he is entitled as a former employee under this Agreement and the employee
benefit plans and programs and compensation plans and programs maintained by, or
covering employees of, the Company.
SECTION 9A. SEVERANCE AT EXPIRATION OF EMPLOYMENT PERIOD
In the event that at the expiration of the Employment Period, Mr
Vilensky's employment is not continued for any reason, then the Company shall
pay to Mr. Vilensky (or his estate, as applicable) his earned but unpaid salary
as of the date of the termination of his employment and his earned but unpaid
bonus, if any, as of the date of his termination, pro-rated for the fiscal
quarter during which his termination occurs (based on the number of days he was
in the Company's employ during such fiscal quarter) if the date of termination
is other than on the last day of a fiscal quarter; shall provide to Mr. Vilensky
all of the benefits, if any, to which he is entitled as a former employee under
this Agreement and the employee benefit plans and programs and compensation
plans and programs maintained by, or covering employees of, the Company; and, in
addition, shall pay to Mr. Vilensky an amount equal to the aggregate of the
highest salary and bonus earned by Mr. Vilensky during any calendar year during
the Employment Period.
SECTION 10. COVENANT NOT TO COMPETE
Mr. Vilensky hereby covenants and agrees that, during the Employment
Period and in the event of his termination of employment with the Company prior
to the expiration of the Employment Period, for a period of one (1) year
following the date of his termination of employment with the Company (or, if
less, for the remaining unexpired Employment Period), he shall not, without the
written consent of the Company, become an officer, employee, consultant,
director or trustee of any entity, or any direct or indirect subsidiary or
affiliate of any such entity, that directly or indirectly competes with this
Company in providing services to the gay community in any market area in which
it is active; provided, however, that this Section 10 shall not apply if Mr.
Vilensky's employment is terminated for the reasons set forth in Section 8(a);
and, provided, further, that if Mr. Vilensky's employment shall be terminated on
account of disability as provided in Section 9(d) of this Agreement, this
Section 10 shall not prevent Mr. Vilensky from accepting any position or
performing any services if (a) he first offers, by written notice, to accept a
similar position with, or perform similar services for, the Company on
substantially the same terms and conditions and (b) the Company declines to
accept such offer within ten (10) days after such notice is given.
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SECTION 11. CONFIDENTIALITY PROPRIETARY INFORMATION
(a) Unless he obtains the prior written consent of the Company (which
consent shall not be unreasonably withheld), Mr. Vilensky shall keep
confidential and shall refrain from using for the benefit of any person or
entity other than the Company or any entity which is a subsidiary of the Company
or of which the Company is a subsidiary, any material document or information
obtained from the Company, or from its parent or subsidiaries, in the course of
his employment with any of them concerning their properties, operations or
business (unless such document or information is readily ascertainable from
public or published information or trade sources or has otherwise been made
available to the public through no fault of his own) until the same ceases to be
material (or becomes so ascertainable or available); provided, however, that
nothing in this Section 11 shall prevent Mr. Vilensky, with or without the
Company's consent, from participating in or disclosing documents or information
in connection with any judicial or administrative investigation, inquiry or
proceeding to the extent that such participation or disclosure is required under
applicable law.
(b) Mr. Vilensky acknowledges that during the course of his employment
with the Company he may develop or otherwise acquire papers, files or other
records involving or relating to confidential or secret processes, formulas,
discoveries, inventions, machinery, plans, design information of any kind,
devices, material, research, new product development, customers or customer
lists. All such papers, files and other records shall be the exclusive property
of the Company and shall, together with any and all copies thereof, be returned
to the Company upon Mr Vilensky's termination of employment.
SECTION 12. SOLICITATION
Mr. Vilensky hereby covenants and agrees that in the event of his
termination of employment with the Company prior to the expiration of the
Employment Period, for a period of one (1) year following his termination of
employment with the Company (or, if less, the remaining unexpired Employment
Period), he shall not, without the written consent of the Company, either
directly or indirectly:
(a) solicit, offer employment to, or take any other action intended, or
that a reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee of the Company (other than a member of
Mr. Vilensky's family) or any subsidiary of the Company to terminate his or her
employment and accept employment or become affiliated with, or provide services
for compensation in any capacity whatsoever to, any entity that directly or
indirectly competes with this Company in any market area in which it is then
active;
(b) provide any information, advice or recommendation with respect to
any officer or employee of the Company (other than a member of Mr. Vilensky's
Family) or any subsidiary of the Company to any entity engaged or to be engaged
in the same or competing business with the Company that is intended, or that a
reasonable person acting in like circumstances would expect, to have the effect
of causing any such officer or employee to terminate his or her employment
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and accept employment or become affiliated with, or provide services for
compensation in any capacity whatsoever to, any entity that directly or
indirectly competes with the Company in any market area in which it is then
active; provided, however, that nothing in this Section 12(b) shall be construed
as prohibiting Mr. Vilensky from serving as a reference if so requested by an
officer or employee of the Company or subsidiary of the Company;
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of the
Company with which Mr. Vilensky has had substantial contact to terminate an
existing business or commercial relationship with the Company;
provided, however, that this Section 12 shall not apply if Mr. Vilensky's
employment is terminated for any of the reasons set forth in Section 8(a).
Nothing in this Section 12 shall prevent Mr Vilensky from directly or indirectly
advertising employment opportunities or disseminating marketing materials
through newspapers of general circulation or other mass media.
SECTION 13. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS
The termination of Mr. Vilensky's employment during the term of this
Agreement or thereafter, whether by the Company or by Mr. Vilensky, shall have
no effect on the rights and obligations of the parties hereto, which shall
continue for a period of two (2) years after Mr. Vilensky's termination under
the Company's pension plan, group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability insurance
plans or such other employee benefit plans or programs, or compensation plans or
programs (whether or not employee benefit plans or programs) and any stock
option and appreciation rights plan, employee stock ownership plan and
restricted stock plan, as may be maintained by, or cover employees of, the
Company from time to time.
SECTION 14. INDEMNIFICATION AND ATTORNEYS' FEES
The Company shall provide Mr. Vilensky with payment of legal fees and
indemnification to the maximum extent permitted from time to time by the
Corporation Act or other applicable laws or regulations. Mr. Vilensky shall
continue to be covered by the Articles of Incorporation and/or the Bylaws of the
Company with respect to matters occurring on or prior to the date of termination
of Mr. Vilensky's employment with the Company, subject to all the provisions of
Florida and Federal law and the Articles of Incorporation and Bylaws of the
Company then in effect. The Company shall indemnify and hold harmless Mr.
Vilensky against reasonable costs, including, without limitation, legal fees and
expenses, incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved to defend or enforce the terms of this
Agreement, without regard to whether Mr. Vilensky is the prevailing party in
such action, suit or proceeding. Such reasonable expenses, including attorneys'
fees that may be covered by the Articles of Incorporation and/or Bylaws of the
Company shall be paid by the Company on a current basis in accordance with such
provision, the Company's Articles of Incorporation and applicable law. To the
extent that any such payments by the Company pursuant
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to the Company's Articles of Incorporation and/or Bylaws may be subject to
repayment by Mr. Vilensky pursuant to the provisions of the Company's Articles
of Incorporation or Bylaws, or pursuant to applicable law, such repayment shall
be due and payable by Mr. Vilensky to the Company within twelve (12) months
after the termination of all proceedings, if any, which relate to such repayment
and to the Company's affairs for the period prior to the date of termination of
Mr. Vilensky's employment with the Company and as to which Mr. Vilensky has been
covered by such applicable provisions.
SECTION 15. EXCISE TAX
(a) If, in connection with the termination of Mr. Vilensky's
employment, Mr. Vilensky shall be liable for the payment of an excise tax under
Section 4999 of the Code with respect to any payment of money or property made
by the Company, the Company shall pay to Mr. Vilensky an amount to indemnify Mr.
Vilensky against such excise tax and against any additional income and excise
taxes imposed on him as a result of such indemnification. With respect to any
payment that is made to Mr. Vilensky under the terms of this Agreement in the
year of his termination of employment and on which an excise tax under Section
4999 of the Code will be assessed, the payment determined under this Section
15(a) shall be made to Mr. Vilensky not later than thirty (30) days following
his termination of employment. With respect to any payment made under the terms
of this Agreement in any other year and on which an excise tax under Section
4999 of the Code will be assessed, the payment under this Section 15(a) shall be
made to Mr. Vilensky not later than December 31 st of the year in which the
payment on which such excise tax will be assessed is made to Mr. Vilensky or, if
earlier, the date on which such tax is required to be remitted to the Internal
Revenue Service The payments made by the Company under this Section 1 5(a) shall
be determined by the Company on the basis of advice from the firm of independent
certified public accountants regularly retained by the Company to audit its
books and shall be subject to subsequent adjustment as provided in Section
15(b).
(b) In the event that Mr. Vilensky's liability for the excise tax under
Section 4999 of the Code for a taxable year is subsequently determined to be
different than the amount paid for such year pursuant to Section 15(a), Mr
Vilensky or the Company, as the case may be, shall pay to the other party at the
time that the amount of such excise tax is finally determined, an appropriate
amount, plus interest, such that the payment made under Section 15(a), when
increased by the amount of the payment made to Mr. Vilensky under this Section
15(b) by the Company, or when reduced by the amount of the payment made to the
Company under this Section 15(b) by Mr. Vilensky, equals the amount finally
determined to have been properly payable to Mr. Vilensky under Section 15(a).
The interest paid under this Section 15(b) shall be determined at the rate
provided under Section 1274(b)(2)(B) of the Code. To confirm that the proper
amount, if any, was paid to Mr. Vilensky under this Section 15, Mr. Vilensky
shall furnish to the Company a copy of each tax return which reflects a
liability for an excise tax payment under Section 4999 of the Code with respect
to a payment made by the Company, at least twenty (20) days before the date on
which such return is required to be filed with the Internal Revenue Service. If
Mr. Vilensky fails to furnish any such return by the prescribed date, then (i)
the Company's payment obligation hereunder shall be deferred until twenty (20)
days after the date
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on which such return is actually furnished and (ii) the Company shall have no
liability to indemnify Mr. Vilensky against any excess tax payment which the
Company reasonably believes to have been made in error.
SECTION 16. SUCCESSORS AND ASSIGNS; SURVIVORSHIP
This Agreement will inure to the benefit of and be binding upon Mr.
Vilensky, his legal representatives, heirs and assigns, and the Company, its
respective successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the respective assets and business of the
Company may be sold or otherwise transferred.
SECTION 17. WAIVER
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 18. NOTICES
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Mr. Vilensky:
Carmencita #23, Office 1002
Santiago, Chile
If to the Company:
Uniservice Corporation
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
Attention: Corporate Secretary
14
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with copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale,Florida 33301
Attention: Gayle Coleman, Esq.
SECTION 19. SEVERABILITY
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 20. COUNTERPARTS
This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.
SECTION 21. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Florida, without reference to conflicts
of law principles.
SECTION 22. HEADINGS AND CONSTRUCTION
The headings of Sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any Section. Any
reference to a Section number shall refer to a Section of this Agreement, unless
otherwise stated.
SECTION 23. SURVIVAL
The rights and obligations of the Company and Mr. Vilensky under
Sections 10, 11, 12, 14 and 15 of this Agreement shall survive the termination
or expiration of this Agreement, notwithstanding anything contained herein to
the contrary.
SECTION 24. EQUITABLE REMEDIES
The Company and Mr. Vilensky hereby stipulate that monetary damages
shall be an inadequate remedy for violations of Sections 10, 11 and 12, of this
Agreement and agree that equitable remedies, including, without limitation, the
remedies of specific performance and injunctive relief, shall be available with
respect to the enforcement of such provisions.
SECTION 25. ENTIRE AGREEMENT, MODIFICATIONS
15
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This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and Mr. Vilensky has hereunto set his hand, all as of the day and year
first above written.
__________________________________
RICARDO VILENSKY
ATTEST: UNISERVICE CORPORATION
By:________________________________ By:_______________________________
Secretary Name:
Title:
16
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and
between UNISERVICE CORPORATION, a corporation organized and existing under the
laws of the State of Florida and having its executive offices at 1900 Glades
Road, Suite 351, Boca Raton, Florida 33431 ("Company"), and MAURICIO AGUIRRE,
whose address is Carmencita #23, Office 1002, Santiago, Chile ("Mr. Aguirre") on
January 5, 1998, but shall be effective as of the effective date of the initial
public offering of the Company's securities ("Effective Date") pursuant to a
registration statement filed with the Securities and Exchange Commission on Form
SB-2 ("IPO").
W I T N E S S T H:
WHEREAS, Mr. Aguirre is currently serving as Vice President of
Administration and Finance and Director of KFC Chile, S.A. and
WHEREAS, the Company desires to secure for itself the availability of
Mr. Aguirre's services; and
WHEREAS, for purposes of securing for the Company Mr. Aguirre's
services, the Board of Directors of the Company ("Board") has approved and
authorized the execution of this Agreement with Mr. Aguirre on the terms and
conditions set forth herein; and
WHEREAS, Mr. Aguirre upon the Effective Date is willing to make his
services available to the Company on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations hereinafter set forth, the Company and Mr. Aguirre
hereby agree as follows:
SECTION 1. EMPLOYMENT
The Company hereby agrees to the employment of Mr. Aguirre and Mr.
Aguirre hereby agrees to such employment during the period and upon the terms
and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD
Except as otherwise provided in this Agreement to the contrary, the
terms and conditions of this Agreement shall be and remain in effect during the
period of employment ("Employment Period") established under this Section 2. The
Employment Period shall be for a term of one (1) year commencing on the
Effective Date and shall automatically be extended for each successive year
thereafter unless (i) the parties mutually agree in writing to alter or amend
the terms of the Agreement; or (ii) one or both of the parties exercises their
right, pursuant to this Agreement, to terminate this employment relationship.
Upon the Effective Date, the employment agreement between Kentucky Foods Chile,
S.A. and Mr. Aguirre then in effect shall terminate and has no further force or
effect.
<PAGE>
SECTION 3. DUTIES
Mr. Aguirre shall serve as Chief Financial Officer and a Director of
the Company. Mr. Aguirre's responsibilities, duties and authority as Chief
Financial Officer and a Director of the Company shall, subject to the direction
of the Board and the By-laws of the Company and any applicable provisions of the
Florida Business Corporation Act ("Corporation Act"), be those commonly
associated with such position and shall include, but shall not be limited to,
the employment, general supervision and direction of all operating officers, the
employment, general supervision and direction of the Company's personnel and
planning for the Company's long-term needs and objectives. Mr. Aguirre shall be
responsible for the general supervision and management of the business affairs
of the Company, and, under authority given to him by the Board, shall execute
documents in the name of the Company and do such other official acts on behalf
of the Company as are appropriate and permitted by the By-laws of the Company.
Mr. Aguirre shall serve as Chief Financial Officer and a Director of any and all
subsidiaries hereafter created by the Company during the Employment Period
without additional compensation therefor.
SECTION 4. COMPENSATION
(a) BASE SALARY. In consideration for the services rendered by Mr.
Aguirre under this Agreement, the Company shall pay to Mr Vilensky a salary at
an annual rate equal to Sixty Thousand Dollars ($60,000.00). The annual salary
payable under this Section 4(a) shall be paid in approximately equal
installments in accordance with the Company's customary payroll practices.
(b) BONUSES. In addition to the salary provided under Section 4(a), Mr.
Aguirre shall be entitled to receive a bonus of up to $30,000 (initially for the
first year of this Agreement of up to $30,000), at the times and in the amounts
and determined in such reasonable manner as may be prescribed by the Board from
time to time.
(c) ADDITIONAL ANNUAL COMPENSATION. In addition to the salary provided
under Section 4(a) and the Bonuses provided under Section 4(b), Mr. Aguirre
shall be entitled to receive additional annual compensation of $20,000 which
includes (i) $10,000 for medical reimbursement, and (ii) $10,000 for automobile
expenses.
(d) ISAPRE. In addition to the compensation described in Sections 4(a),
(b) and (c) above, Mr. Aguirre shall also be entitled to receive social security
benefits pursuant to Chilean law including without limitation, to the
Institutions and Provisional Health (ISAPRE) and Administrators of Pension Funds
(AFP).
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS
(a) Mr. Aguirre shall be entitled to a minimum of two (2) weeks of paid
vacation in each calendar year, all of which shall be deemed accrued, earned and
available for use on the first day of the year.
2
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(b) Except as otherwise provided in this Agreement, Mr. Aguirre shall,
during the Employment Period, be entitled to participate in and receive benefits
under the Company's group life, health (including hospitalization, medical and
major medical), dental, accident and long term disability insurance plans, and
such other employee benefit plans and programs, including, but not limited to,
any pension plans, incentive compensation plans or programs (whether or not
employee benefit plans or programs), and any stock option and appreciation
rights plan, employee stock ownership plan and restricted stock plan, as may
from time to time be maintained by, or cover executive and/or employees of, the
Company, in accordance with the terms and conditions of such benefit plans and
programs and compensation plans and programs and with the Company's customary
practices.
SECTION 6. TERMINATION.
a. TERMINATION WITHOUT CAUSE. Subject to the provisions of
Section 6 and 7 of this Agreement, Mr. Aguirre's employment with the Company may
be terminated by either party upon ninety (90) days prior written notice of the
terminating party's intent to terminate Mr.
Aguirre's employment with the Company.
b. TERMINATION BY THE COMPANY FOR CAUSE.
(1) Nothing herein shall prevent the Company from
terminating Mr. Aguirre's employment immediately for "Cause," as
hereinafter defined. Any rights and benefits Mr. Aguirre may have in
respect of any compensation shall be determined in accordance with the
terms of such other compensation arrangements or such plans or
programs.
(2) "Cause" shall mean and include those actions or
events specified below in subsections (A) through (G) to the extent the
same occur, or the events constituting the same take place, subsequent
to the date of execution of this Agreement: (A) Failing, neglecting or
refusing to perform in any material respect any of Mr. Aguirre's duties
hereunder at the time; (B) Committing or participating in an injurious
act of fraud, gross neglect or embezzlement against the Company; (C)
committing or participating in any other injurious act or omission
wantonly, willfully, recklessly or in a manner which was grossly
negligent against the Company, monetarily or otherwise; (D) engaging in
a criminal enterprise involving moral turpitude; (E) conviction of an
act or acts constituting a felony under the laws of the United States
or Chile or any state or province thereof; (F) the death of Mr.
Aguirre; or (G) "disability" of Mr. Aguirre, as defined in Section
6(b)(4). No actions, events or circumstances occurring or taking place
at any time prior to the date of this Agreement shall in any event
constitute or provide any basis for any termination of this Agreement
for Cause;
(3) Notwithstanding anything else contained in this
Agreement, this Agreement will not be deemed to have been terminated
for Cause unless and until there shall have been delivered to Mr.
Aguirre a notice of termination stating that Mr. Aguirre
3
<PAGE>
committed one of the types of conduct set forth in Section 6(b)(2) of
this Agreement and specifying the particulars thereof.
(4) For the purposes of this Agreement, Mr. Aguirre
shall be deemed to have become disabled if, because of ill health,
physical or mental disability or for other causes beyond Mr. Aguirre's
control, Mr. Aguirre shall have been unable or shall have failed to
perform his duties hereunder for a cumulative total of 180 days in any
twelve-month period, or if he shall have been unable or shall have
failed to perform his/her duties for sixty (60) or more consecutive
days.
SECTION 7. CONFIDENTIALITY PROPRIETARY INFORMATION
(a) Unless he obtains the prior written consent of the Company (which
consent shall not be unreasonably withheld), Mr. Aguirre shall keep confidential
and shall refrain from using for the benefit of any person or entity other than
the Company or any entity which is a subsidiary of the Company or of which the
Company is a subsidiary, any material document or information obtained from the
Company, or from its parent or subsidiaries, in the course of his employment
with any of them concerning their properties, operations or business (unless
such document or information is readily ascertainable from public or published
information or trade sources or has otherwise been made available to the public
through no fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); provided, however, that nothing in this Section 7
shall prevent Mr. Aguirre, with or without the Company's consent, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding to the extent
that such participation or disclosure is required under applicable law.
(b) Mr. Aguirre acknowledges that during the course of his employment
with the Company he may develop or otherwise acquire papers, files or other
records involving or relating to confidential or secret processes, formulas,
discoveries, inventions, machinery, plans, design information of any kind,
devices, material, research, new product development, customers or customer
lists. All such papers, files and other records shall be the exclusive property
of the Company and shall, together with any and all copies thereof, be returned
to the Company upon Mr Vilensky's termination of employment.
SECTION 8. SOLICITATION
Mr. Aguirre hereby covenants and agrees that in the event of his
termination of employment with the Company prior to the expiration of the
Employment Period, for a period of one (1) year following his termination of
employment with the Company (or, if less, the remaining unexpired Employment
Period), he shall not, without the written consent of the Company, either
directly or indirectly:
(a) solicit, offer employment to, or take any other action intended, or
that a reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or
4
<PAGE>
employee of the Company (other than a member of Mr. Aguirre's family) or any
subsidiary of the Company to terminate his or her employment and accept
employment or become affiliated with, or provide services for compensation in
any capacity whatsoever to, any entity that directly or indirectly competes with
this Company in any market area in which it is then active;
(b) provide any information, advice or recommendation with respect to
any officer or employee of the Company (other than a member of Mr. Aguirre's
Family) or any subsidiary of the Company to any entity engaged or to be engaged
in the same or competing business with the Company that is intended, or that a
reasonable person acting in like circumstances would expect, to have the effect
of causing any such officer or employee to terminate his or her employment and
accept employment or become affiliated with, or provide services for
compensation in any capacity whatsoever to, any entity that directly or
indirectly competes with the Company in any market area in which it is then
active; provided, however, that nothing in this Section 8(b) shall be construed
as prohibiting Mr. Aguirre from serving as a reference if so requested by an
officer or employee of the Company or subsidiary of the Company;
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of the
Company with which Mr. Aguirre has had substantial contact to terminate an
existing business or commercial relationship with the Company.
SECTION 9. INDEMNIFICATION AND ATTORNEYS' FEES
The Company shall provide Mr. Aguirre with payment of legal fees and
indemnification to the maximum extent permitted from time to time by the
Corporation Act or other applicable laws or regulations. Mr. Aguirre shall
continue to be covered by the Articles of Incorporation and/or the Bylaws of the
Company with respect to matters occurring on or prior to the date of termination
of Mr. Aguirre's employment with the Company, subject to all the provisions of
Florida and Federal law and the Articles of Incorporation and Bylaws of the
Company then in effect. The Company shall indemnify and hold harmless Mr.
Aguirre against reasonable costs, including, without limitation, legal fees and
expenses, incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved to defend or enforce the terms of this
Agreement, without regard to whether Mr. Aguirre is the prevailing party in such
action, suit or proceeding. Such reasonable expenses, including attorneys' fees
that may be covered by the Articles of Incorporation and/or Bylaws of the
Company shall be paid by the Company on a current basis in accordance with such
provision, the Company's Articles of Incorporation and applicable law. To the
extent that any such payments by the Company pursuant to the Company's Articles
of Incorporation and/or Bylaws may be subject to repayment by Mr. Aguirre
pursuant to the provisions of the Company's Articles of Incorporation or Bylaws,
or pursuant to applicable law, such repayment shall be due and payable by Mr.
Aguirre to the Company within twelve (12) months after the termination of all
proceedings, if any, which relate to such repayment and to the Company's affairs
for the period prior to the date of termination of Mr. Aguirre's employment with
the Company and as to which Mr. Aguirre has been covered by such applicable
provisions
5
<PAGE>
SECTION 10. EXCISE TAX
(a) If, in connection with the termination of Mr. Aguirre's employment,
Mr. Aguirre shall be liable for the payment of an excise tax under Section 4999
of the Code with respect to any payment of money or property made by the
Company, the Company shall pay to Mr. Aguirre an amount to indemnify Mr. Aguirre
against such excise tax and against any additional income and excise taxes
imposed on him as a result of such indemnification. With respect to any payment
that is made to Mr. Aguirre under the terms of this Agreement in the year of his
termination of employment and on which an excise tax under Section 4999 of the
Code will be assessed, the payment determined under this Section 10(a) shall be
made to Mr. Aguirre not later than thirty (30) days following his termination of
employment. With respect to any payment made under the terms of this Agreement
in any other year and on which an excise tax under Section 4999 of the Code will
be assessed, the payment under this Section 10(a) shall be made to Mr. Aguirre
not later than December 31 st of the year in which the payment on which such
excise tax will be assessed is made to Mr. Aguirre or, if earlier, the date on
which such tax is required to be remitted to the Internal Revenue Service The
payments made by the Company under this Section 10(a) shall be determined by the
Company on the basis of advice from the firm of independent certified public
accountants regularly retained by the Company to audit its books and shall be
subject to subsequent adjustment as provided in Section 10(b).
(b) In the event that Mr. Aguirre's liability for the excise tax under
Section 4999 of the Code for a taxable year is subsequently determined to be
different than the amount paid for such year pursuant to Section 10(a), Mr
Vilensky or the Company, as the case may be, shall pay to the other party at the
time that the amount of such excise tax is finally determined, an appropriate
amount, plus interest, such that the payment made under Section 10(a), when
increased by the amount of the payment made to Mr. Aguirre under this Section
10(b) by the Company, or when reduced by the amount of the payment made to the
Company under this Section 10(b) by Mr. Aguirre, equals the amount finally
determined to have been properly payable to Mr. Aguirre under Section 10(a). The
interest paid under this Section 10(b) shall be determined at the rate provided
under Section 1274(b)(2)(B) of the Code. To confirm that the proper amount, if
any, was paid to Mr. Aguirre under this Section 15, Mr. Aguirre shall furnish to
the Company a copy of each tax return which reflects a liability for an excise
tax payment under Section 4999 of the Code with respect to a payment made by the
Company, at least twenty (20) days before the date on which such return is
required to be filed with the Internal Revenue Service. If Mr. Aguirre fails to
furnish any such return by the prescribed date, then (i) the Company's payment
obligation hereunder shall be deferred until twenty (20) days after the date on
which such return is actually furnished and (ii) the Company shall have no
liability to indemnify Mr. Aguirre against any excess tax payment which the
Company reasonably believes to have been made in error.
SECTION 11. SUCCESSORS AND ASSIGNS; SURVIVORSHIP
This Agreement will inure to the benefit of and be binding upon Mr.
Aguirre, his legal representatives, heirs and assigns, and the Company, its
respective successors and assigns,
6
<PAGE>
including any successor by merger or consolidation or a statutory receiver or
any other person or firm or corporation to which all or substantially all of the
respective assets and business of the Company may be sold or otherwise
transferred.
SECTION 12. WAIVER
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 13. NOTICES
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Mr. Aguirre:
Carmencita #23, Office 1002
Santiago, Chile
If to the Company:
Uniservice Corporation
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
Attention: Corporate Secretary
with copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale,Florida 33301
Attention: Gayle Coleman, Esq.
SECTION 14. SEVERABILITY
7
<PAGE>
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 15. COUNTERPARTS
This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.
SECTION 16. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Florida, without reference to conflicts
of law principles.
SECTION 17. HEADINGS AND CONSTRUCTION
The headings of Sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any Section. Any
reference to a Section number shall refer to a Section of this Agreement, unless
otherwise stated.
SECTION 18. SURVIVAL
The rights and obligations of the Company and Mr. Aguirre under
Sections 7, 8, 9 and 10 of this Agreement shall survive the termination or
expiration of this Agreement, notwithstanding anything contained herein to the
contrary.
SECTION 19. EQUITABLE REMEDIES
The Company and Mr. Aguirre hereby stipulate that monetary damages
shall be an inadequate remedy for violations of Sections 7, 8, 9 and 10 of this
Agreement and agree that equitable remedies, including, without limitation, the
remedies of specific performance and injunctive relief, shall be available with
respect to the enforcement of such provisions.
SECTION 20. ENTIRE AGREEMENT, MODIFICATIONS
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
8
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and Mr. Aguirre has hereunto set his hand, all as of the day and year
first above written.
__________________________________
MAURICIO AGUIRRE
ATTEST: UNISERVICE CORPORATION
By:________________________________ By:_______________________________
Secretary Name:
Title:
9
EXHIBIT 10.8
LEASE AGREEMENT
This is a contract between Inmobiliaria Kilkil S.A. RUT., 96.825.080-9, located
at Carmencita 25, of 102, Santiago, Las Condes, represented by Ricardo Vilensky
Cohen, ("Lessor"), and Kentucky Foods Chile S.A., represented by Mauricio
Aguirre Carreno, ("Lessee") are in agreement with the following:
FIRST: Inversiones Kilkil S.A. leases to Kentucky Foods Chile S.A., the
commercial property located at Carmencita 25, of 102 of Las Condes of the
Metropolitan area along with the following offices: #35, 36, 37, 38, 52, 64, 65,
66, 67, 104, 105, 139, 140, 141, 142 and store #'s 8 and 16.
SECOND: The monthly rent will be paid in the first five days of each month to
the Lessor as follows:
Administrative offices 380 m2, a UF 0.57 m2 UF 216.00
15 locations m UF 3.00 o/u 45.00
2 stores No.'s 8 and 16 UF 4,50 c/u 9.00
TOTAL UF 278.00
The rent will be increase automatically by 10% at the end of the 5th year.
THIRD: The present agreement has been in effect since May 1, 1997 and will be
in effect for ten years. It will automatically be renewed for the same period of
time. If either side decides not to renew this contract then they must send a
certified letter 90 days prior to the expiration of this agreement.
FOURTH: The LESSEE has in its possession and is totally satisfied with the
locations.
FIFTH: The LESSEE will be responsible for the expenses to keep the location in
good and clean condition.
SIXTH: The LESSEE shall pay all electric, gas water, etc...bills.
SEVENTH:
EIGHTH: The LESSOR is not responsible for any damages occurred by fire, flood,
accidents, etc...
NINTH:
<PAGE>
TENTH: The solicitorship of Ricardo Vilensky Cohen as representative of
Inmobiliaria Kilkil S.A is recorded in the public records on April 24, 1997
before the notary public by the name of Raul Undurraga Laso.
ELEVENTH: The solicitorship of Mauricia Aguirre Carreno as representative of
Kentucky Foods Chile S.A. is recorded in the public records on October 21, 1994
before the notary public by the name of Gonzalo de la Cuadra Fabres.
This present agreement is signed by both individuals on May 2, 1997 in Santiago,
Chile.
EXHIBIT 10.9
RECOGNITION OF DEBT
KENTUCKY FOODS CHILE, SA
with
KENTUCKY FRIED CHICKEN INTERNATIONAL HOLDINGS, INC.
Santiago Chile, November 7, 1997. Eduardo Pinto Peralta, attorney, notary
public, commercial resident at Calle Huertanos 1052, Piso 3; and Ricardo
Vilensky, Chilean, married, entrepreneur of legal age, representing Kentucky
Foods Chile SA (KFC), commercial resident at Carmencita 25, Suite 102, Las
Condes, Santiago Chile.
FIRST: KFC, represented as described above, recognizes to owe Kentucky Fried
Chicken International Holdings, Inc. (KFC International) the sum of US
$689,429.42 plus interest earned until September 30, 1997, according to the
license contract dated january 1, 1994.
SECOND: KFC is obligated to pay KFC International the amount indicated as soon
as one of the following occurs: (a) three days after the KFC IPO, or any of its
related companies, in the United States of America, in such case all whole
amount must be paid, including interest, (b) April 30, 1998 - 25% of the
capital, August 31, 1998 another 25% of the capital, November 20, 1998 - 50% of
the capital plus all the interest earned.
THIRD: The amount of the debt will earn an interest of 12.5% from this date and
until the effective payment of the total debt is received.
FOURTH: Failure of the time frame or any other circumstances, during the effect
of the obligations stated in this recognition of debt, will give KFC
International the right to demand the total of the capital and the interest as
if the terms were expired: (a) last payment of any of the quotes and/or interest
in which the debt is divided, (b) if any of the obligations, direct or indirect,
of the debtor with KFC International ceased, (c) if KFC dissolves or is
liquidated.
FIFTH: In case of late payment of the capital and interest the total amount will
incur the maximum conventional interest rate permitted by law, only if this
interest rate is higher than the one already being enforced. KFC can anticipate
any payment at any time, all or part of the obligation described in this
document, without penalty.
SIXTH: The expenses or taxes that may originate, eventually, from this contract,
will be paid by KFC.
SEVENTH: This contract will be governed by the laws of Chile. Authorized copies
will be made that will require signatures from the inscriptions, subscriptions,
notes or any other publication that will proceed.
/S/ RICARDO VILENSKY
-------------------------
Ricardo Vilensky
Kentucky Foods Chile S.A.
EXHIBIT 21
SUBSIDIARY OF UNSERVICE CORPORATION
Upon the Effective Date of the Offering, the sole subsidiary of Uniservice
Corporation shall be Kentucky Foods Chile, S.A., a Chilean corporation, in which
Unservice Corporation shall own a 99.97% ownership interest.
EXHIBIT 23.2
SPEAR, SAFER, HARMON & CO. LETTERHEAD
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Form SB-2 being filed under the Securities
Exchange Act of 1934 by Uniservice Corporation of our report dated February 4,
1998, relating to our examinations of the supplemental consolidated financial
statements of Uniservice Corporation as of December 31, 1997 and 1996 and for
the two years then ended and appearing in the aforementioned SB-2.
/S/ SPEAR, SAFER, HARMON & CO.
- --------------------------------
Spear, Safer, Harmon & Co.
Certified Public Accountants
Miami, Florida
April 2, 1998
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<PERIOD-START> JAN-01-1997
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