AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998
REGISTRATION NO. 333-50897
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------
UNISERVICE CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 5812 65-0816177
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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<TABLE>
<S> <C>
DAVID MAYER
UNISERVICE CORPORATION
1900 GLADES ROAD, SUITE 351
1900 GLADES ROAD, SUITE 351
BOCA RATON, FLORIDA 33431
BOCA RATON, FLORIDA 33431
(561) 347-6398
(561) 347-6398
(NAME, ADDRESS AND TELEPHONE NUMBER
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND
PRINCIPAL PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF BUSINESS) OF AGENT FOR SERVICE)
</TABLE>
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COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
CHARLES B. PEARLMAN, ESQ.
JOEL D. MAYERSOHN, ESQ. DONN A. BELOFF, ESQ.
ATLAS, PEARLMAN, TROP & BORKSON, P.A. HOLLAND & KNIGHT LLP
200 EAST LAS OLAS BOULEVARD, SUITE 1900 ONE EAST BROWARD BOULEVARD, SUITE 1300
FORT LAUDERDALE, FLORIDA 33301 FORT LAUDERDALE, FLORIDA 33301
TELEPHONE (954) 763-1200 TELEPHONE (954) 525-1000
FACSIMILE (954) 766-7800 FACSIMILE (954) 463-2030
</TABLE>
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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: [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM
TITLE OF EACH CLASS TO BE OFFERING PRICE
OF SECURITIES TO BE REGISTERED REGISTERED PER SECURITY
<S> <C> <C>
Class A Common Stock ........................................... 1,610,000(2) $ 5.00
Warrants ....................................................... 1,610,000(3) $ 0.125
Class A Common Stock issuable upon exercise of the Warrants .... 1,610,000(4) $ 6.00
Representative's Warrants ...................................... 140,000 $ 0.001
Class A Common Stock ........................................... 140,000(5) $ 7.50
Warrants issuable upon the exercise of the
Representative's Warrants ..................................... 140,000(6) $ 0.1875
Class A Common Stock issuable upon the exercise of the
Representative's Warrants ..................................... 140,000(7) $ 11.25
Total ............................................................................................
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Class A Common Stock ........................................... $ 8,050,000 $ 2,374.75
Warrants ....................................................... $ 201,250 $ 59.37
Class A Common Stock issuable upon exercise of the Warrants .... $ 9,660,000 $ 2,849.70
Representative's Warrants ...................................... $ 140 $ .04
Class A Common Stock ........................................... $ 1,050,000 $ 309.75
Warrants issuable upon the exercise of the
Representative's Warrants ..................................... $ 26,250 $ 7.74
Class A Common Stock issuable upon the exercise of the
Representative's Warrants ..................................... $ 1,575,000 $ 464.63
Total ........................................................ $20,562,640 $ 6,065.98
</TABLE>
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(SEE NEXT PAGE FOR FOOTNOTES)
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.
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<PAGE>
- --------------
(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) Represents shares of Class A Common Stock issuable upon exercise of the
Representative's Warrants 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.
(6) 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.
(7) Represents shares of Class A Common Stock issuable upon exercise of the
Warrants included within the Representative's Warrants, 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.
<PAGE>
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.
SUBJECT TO COMPLETION, DATED JUNE 19, 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 "UNSRA" and "UNSRW," 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
REPRESENTATIONS TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
<S> <C> <C> <C>
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
</TABLE>
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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>
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(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 and 140,000
Warrants for a four-year period commencing one year from the Effective
Date at an exercise price of 150% of the initial public offering price for
the Class A Common Stock ($7.50 per share) and the Warrants ($.1875 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."
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE 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 THE
CLASS A COMMON STOCK OR WARRANTS 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 UNISERVICE CORPORATION'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 (THE "STOCK PURCHASES")
WHEREBY (X) 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
(Y) 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 trademark/ ("KFC/registered trademark/") 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 trademark/ franchisee in Chile and is the largest KFC/registered
trademark/ 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 trademark/
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/registered trademark/'s strong, international brand name. The Company
believes that this strategy will enable the Company to double the number of
KFC/registered trademark/ restaurants it currently owns and operates by
constructing approximately four to five new restaurants each year for the next
seven years (for a total of up to 60 Company owned restaurants by 2005). The
Company has allocated approximately $2,465,000 (or $616,250 per restaurant
based on four restaurants) of the proceeds from this Offering to open four new
KFC/registered trademark/ 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>
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered ......... 1,400,000
Warrants Offered ..................... 1,400,000
Shares of Class A Common Stock
Underlying Warrants ................. 1,400,000
Class A Common Stock Outstanding:
Before the Offering ................. 30,000
After the Offering .................. 1,430,000
Class B Common Stock Outstanding(1):
Before the Offering ................. 1,400,000
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 $5,900,000, which will be used as
follows: (1) $1,485,000 for construction of leasehold
improvements; (2) $1,261,317 for reduction of long
term debt; (3) $840,000 for equipment for four new
KFC/registered trademark/ restaurants; (4) $650,000 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/registered trademark/ restaurants; and (7) $958,683 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 ................ UNSRA
Warrants ............................ UNSRW
</TABLE>
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(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 CLASS A 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 formation 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 trademark/ 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 trademark/ restaurants during
the next twelve months. The Company intends to open an aggregate of 31
additional KFC/registered trademark/ restaurants over the next seven years, for
a total of up to 60 Company-owned KFC/registered trademark/ 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 acceptable terms
and conditions. Additionally, as a condition of the Franchise Agreement, KFCIH
must approve any future public financing proposed by the Company. Additional
equity financings may result in dilution to existing shareholders.
RISKS OF EXPANSION AND DEVELOPMENT. The Company intends to open
approximately four to five new KFC/registered trademark/ restaurants each year
for the next seven years (for a total of up to 60 Company-owned KFC/registered
trademark/ 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 trademark/ 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."
DEPENDENCE ON THE FRANCHISE AGREEMENT AND DEVELOPMENT AGREEMENT WITH
KFCIH. The Company's operations are materially dependent on the terms and
conditions of the Franchise Agreement. Pursuant to the Franchise Agreement, the
Company is presently prohibited from engaging in any KFC/registered trademark/
brand business outside of Chile. The Franchise Agreement permits the Company to
operate its restaurants in Chile using and exploiting certain proprietary
property and concepts owned or controlled by KFCIH, including the
KFC/registered trademark/ 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
royalties to KFCIH of which approximately $634,000 remains unpaid as of March
31, 1998. 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 complies with the terms of a promissory note between the Company
and KFCIH, KFCIH does not intend 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
5
<PAGE>
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 the payment of back royalties due to KFCIH, the Company will enter
into a development agreement with KFCIH (the "Development Agreement"). The
Development Agreement, whose terms have been agreed upon in principle, although
no definitive agreement has been entered into, will allow the Company to open
and operate approximately four to five new KFC/registered trademark/
restaurants each year for the next seven years, for a total of up to 60
KFC/registered trademark/ 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. In the event the Franchise Agreement is terminated,
whether resulting from default or expiration of its terms, the Company must
immediately discontinue the use of equipment and marketing methods including,
but not limited to, training, procedures, menus, advertising, trade secrets and
the use of the KFC/registered trademark/ trademarks, service marks and
distinctive building designs. In addition, termination due to default by the
Company under the Franchise Agreement may result in KFCIH reducing or
terminating any rights granted to the Company in respect of sites not yet under
construction, or ultimately acquiring the business, or locating a purchaser to
acquire the business of the Company. Accordingly, the termination of the
Franchise Agreement or Development Agreement for any reason, would have a
material adverse effect on the Company.
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 which are set forth in the
Franchise Agreement. The Franchise Agreement, which permits the Company to
operate KFC/registered trademark/ 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
97.9% and held the right to vote 99.8% of the Company's outstanding capital
stock. After this Offering, Mr. Vilensky will, directly or indirectly, own
approximately 49.5% of the outstanding capital stock, which represents the
right to vote 90.7% 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
6
<PAGE>
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 trademark/ and Burger King/registered trademark/
, each of which have multiple locations in Chile, a number of which 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 trademark/ 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 inflation, and 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 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 trademark/ 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 will continue to be available from these approved
entities. Failure to obtain equipment, food products and other supplies for the
KFC/registered trademark/ restaurants on 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 professionals 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.
7
<PAGE>
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 that the
designated operator also control 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.
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 trademark/ 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
provides that a landlord may not evict a tenant without a court hearing,
although the tenant is responsible for all costs related to such court hearing.
In the event that any landlord is 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 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 be 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 $1.89 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
8
<PAGE>
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. Moreover, the issuance of any dividends is
subject to the Company's 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. 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.
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. 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. In addition, the Company has
engaged the Representative as a consultant for a period of three years from the
closing date of this Offering, at a total fee of $105,000, all of which is
payable to the Representative on the Effective Date. Accordingly, as a result
of the foregoing, the Representative may, under certain circumstances, be able
to influence the operations of the Company. See "Underwriting."
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
9
<PAGE>
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 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."
In connection with the Offering, the Company will sell to the
Representative the Representative's Warrants. The holders of the
Representative's Warrants will have the opportunity to profit from a rise in
the market price of the Securities, if any, without assuming the risk of
ownership. The Company may find it more difficult to raise additional equity
capital, if it should be needed, for the business of the Company while the
Representative's Warrant is outstanding. At any time when the holders thereof
might be expected to exercise the Representative's Warrants, the Company would
probably not be able to obtain additional capital on terms more favorable than
those provided by the Representative's Warrant. The Company has agreed to
register under federal and state securities laws, the Common Stock underlying
the Representative's Warrants for resale. Such registration rights could
involve substantial expenses to the Company and may adversely affect the terms
upon which the Company may obtain additional financing. See "Underwriting".
POSSIBLE APPLICABILITY OF RULES RELATING TO LOW-PRICED STOCKS; POSSIBLE
FAILURE TO QUALIFY FOR NASDAQ SMALLCAP MARKET LISTING. 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 on 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 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.
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 including listing on the Nasdaq SmallCap Market. In the
event that the Class A Common Stock is never traded or becomes delisted from
trading on the Nasdaq SmallCap Market, 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 an exception is available, the penny stock regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. In addition, trading in penny stock is subject to the requirements
of Rule 15g-9 under the Securities Exchange Act of 1934, as amended. Under such
rule, a broker/dealer who recommends such low-priced securities to persons
other than established customers or accredited investors, must satisfy special
sales practice requirements, including a requirement that they make an
individualized written suitability determination for the purchaser and receive
the purchaser's written consent prior to the transaction. In addition, a
broker/dealer must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker/dealer and its salesperson
in the transaction, and monthly accounts statements showing the market value of
each penny stock held in the customer's account. Such requirements could
severely limit the market liquidity of the Class A
10
<PAGE>
Common Stock or Warrants and the ability of purchasers in the Offering to sell
their securities in the secondary market. There can be no assurance that the
Class A Common Stock or Warrants will not be treated as "penny stock". See
"Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE. 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 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 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 immediately prior to the Effective
Date by the Company's existing shareholders 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 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. 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 150% 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."
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
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<PAGE>
there can be no assurance 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
("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. 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 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
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<PAGE>
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. 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 has
applied 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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<PAGE>
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 of $717,500, (ii) a 3%
non-accountable expense allowance to the Representative of $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>
Construction(1) ................................. $1,485,000 25.2%
Reduction of long term debt(2) .................. $1,261,317 21.4%
Equipment(3) .................................... $ 840,000 14.2%
Payment of back royalties(4) .................... $ 650,000 11.0%
Repayment of loans to third parties(5) .......... $ 565,000 9.6%
Initial Fees(6) ................................. $ 140,000 2.4%
Working Capital(7) .............................. $ 958,683 16.2%
---------- ----
Total ........................................... $5,900,000 100%
========== ====
</TABLE>
- ----------------
(1) Construction of leasehold improvements for four new KFC/registered
trademark/ 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. 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 trademark/ restaurants.
(4) Payment of back royalty fees and accrued interest of 12.5% per annum due to
KFCIH.
(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, which is being used to pay a portion of
the costs and expenses of the Offering. See "Certain Relationships and
Related Transactions" and "Bridge Financing."
(6) Includes amounts due to KFCIH for initial fees for four new KFC/registered
trademark/ restaurants (at $35,000 per restaurant).
(7) Includes overhead and administrative expenses, legal expenses (not in
connection with this Offering) and reserves.
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 trademark/ 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
Operations."
14
<PAGE>
DIVIDEND POLICY
The Company has never paid dividends on its Class A Common Stock since its
formation 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. Potential purchasers of the Class A
Common Stock or the Warrants should consult their own tax advisors regarding
the impact of these taxes.
15
<PAGE>
DILUTION
At March 31, 1998, the Company had a net tangible book value of $3,087,838
or approximately $2.16 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
March 31, 1998, would have been approximately $8,812,838 or $3.11 per share of
Common Stock. This would represent an immediate increase in the net tangible
book value per share of Common Stock of $0.95 to existing shareholders and an
immediate dilution of $1.89 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:
<TABLE>
<S> <C> <C>
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 $ 2.16
Increase attributable to new investors ....................................... $ .95
------
Proforma net tangible book value after the Offering .......................... $ 3.11
------
Dilution to new investors .................................................... $ 1.89
======
Percentage of dilution to new investors ...................................... 37.8 %
</TABLE>
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 March 31, 1998
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) ......... 1,430,000 50.50% $ 3,355,259 32.40% $ 2.35
New Investors(2) ................. 1,400,000 49.50% $ 7,000,000 67.60% $ 5.00
--------- ------ ----------- ------ -------
Total ............................ 2,830,000 100.00% $10,355,259 100.00% $ 3.66
========= ====== =========== ====== =======
</TABLE>
- ----------------
(1) Gives effect to the Stock Purchases, and 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.
16
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1998, 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 ..................................................... $2,729,768 $ 1,068,451
Stockholders' equity:
Class A Common Stock ($.0001 par value) 20,000,000 shares
authorized; 30,000 shares issued and outstanding (actual) and
1,430,000 (as adjusted)(2) ...................................... 3 143
Class B Common Stock ($.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 ......................................... 3,355,259 9,198,430
Retained earnings .................................................. 308,802 308,802
Cumulative translation adjustment(3) ............................... (302,201) (302,201)
Total stockholders' equity ......................................... 3,362,003 9,205,314
Total capitalization ............................................... $6,091,771 $10,273,765
</TABLE>
- ----------------
(1) Gives effect to the Stock Purchases and excludes the issuance of (i)
1,400,000 shares of Class A Common Stock upon exercise of the Warrants,
(ii) up to 140,000 shares of Class A Common Stock issuable pursuant to the
Over-Allotment Option, (iii) up to 140,000 shares of Class A Common Stock
issuable pursuant to the Representative's Warrants; (iv) up to 140,000
shares of Class A Common Stock issuable upon the exercise of the Warrants
contained in the Representative's Warrants; and (v) up to 200,000 shares
of Class A Common Stock reserved for issuance under the Plan, of which no
shares are currently subject to the Plan. See "Underwriting,"
"Management-Incentive and Non-Qualified Stock Option Plan," and
"Description of Securities."
(2) Gives effect to the issuance of 1,400,000 shares of Class A Common Stock
and the receipt of the net proceeds therefrom and the issuance of 30,000
shares of Class A Common Stock in connection with the Bridge Financing.
Does not give effect to the sale of 1,400,000 Warrants offered hereby and
exercise of the Over-Allotment Option. See "Bridge Financing."
(3) Represents the conversion from Chilean pesos into U.S. Dollars.
17
<PAGE>
EXCHANGE RATES
Unless otherwise specified, references herein to "U.S. dollars",
"dollars", "$", 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 March 31, 1998, the exchange rate was one
(1) U.S. dollar to 454.18 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. Under the Central Bank Act, the Company may
purchase and sell foreign exchange freely without authorization from the
Central Bank of Chile. Such provisions allow the Company to expatriate earnings
at the market exchange rate.
The following table sets forth the annual high, low, and average monthly
exchange rate for U.S. dollars for each year starting in 1990 as reported by
the Central Bank of Chile.
<TABLE>
<CAPTION>
EXCHANGE RATES OF CH$ PER U.S.$
---------------------------------------
YEAR LOW(1) HIGH(1) AVERAGE(2)
- -------- ----------- ----------- -----------
<S> <C> <C> <C>
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
</TABLE>
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.
18
<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 statement of operations data for the three months ended
March 31, 1998 and 1997, and the balance sheet data at March 31, 1998 are
derived from unaudited financial statements of the Company included elsewhere
in this Prospectus. In the opinion of management, the unaudited financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments (consisting only of normal recurring
adjustments) necessary for the fair presentation of the Company's financial
condition and results of operations for such periods. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for any other interim period or the entire year. The
following financial data should be read in conjunction with the 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, THREE MONTHS ENDED MARCH 31,
------------------------------------- ---------------------------------
1996 1997 1997 1998
---------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues .................................... $ 11,706,398 $14,562,157 $ 3,244,952 $ 3,452,964
Cost of Operations .......................... 4,534,762 5,909,803 1,407,202 1,426,381
Selling and Administrative Expenses ......... 6,698,335 7,817,129 1,784,906 1,893,434
Other Income (Expenses) ..................... 61,141 478,724 55,350 82,477
Net Income .................................. 534,442 1,313,949 108,194 215,626
Net Income per common share ................. 0.38 0.94 0.08 0.15
Weighted average common shares
outstanding ............................... 1,400,000 1,400,000 1,400,000 1,410,000
Supplemental pro forma net income
per share ................................. -- 0.55(1)
</TABLE>
- ----------------
(1) Includes $250,000 of interest savings due to the reduction of debt from the
proceeds of the Offering, as described in "Use of Proceeds," and 1,400,000
of shares of A Common Stock issued at the Offering.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------- MARCH 31, 1998 MARCH 31, 1998
1996 1997 (UNAUDITED) AS ADJUSTED (UNAUDITED)(1)
---------------- ---------------- ---------------- ---------------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital ..................... $ (3,250,955) $ (1,029,940) $ (782,274) $ 3,419,807
Total assets ........................ 8,778,122 9,259,632 8,987,198 12,511,378
Total long-term liabilities ......... 1,643,181 2,875,411 2,729,768 1,068,451
Total liabilities ................... 6,478,371 6,084,073 5,625,195 3,306,064
Stockholders' equity ................ 2,299,751 3,175,559 3,362,003 9,205,314
</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.
19
<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, business 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 total revenues, as well as payroll and rent
which represent 19% and 12% of total revenues, respectively.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
RESULTS OF OPERATIONS
Gross revenues for the three months ended March 31, 1998 increased
$208,012 over the three months ended March 31, 1997 from $3,244,952 to
$3,452,964, an increase of approximately 6%. This increase is primarily due to
the opening of three new restaurants.
Cost of operations for the three months ended March 31, 1998 increased
$19,179 from $1,407,202 to $1,426,381, an increase of approximately 1%.
Although three new restaurants were operational during the three months ended
March 31, 1998, a decrease in the cost of fresh chicken and the successful
efforts of management to control costs limited the increase in costs of
operations during the three months ended March 31, 1998.
Selling and administrative expenses for the three months ended March 31,
1998 were $1,893,434 compared to $1,784,906 for the three months ended March
31, 1997, an increase of $108,528 or 6%. This increase is due to the hiring and
training of personnel to support the expected increased growth of the Company
in 1998 and the opening of three new restaurants in late 1997.
Other income (expenses) increased from $55,350 for the three months ended
March 31, 1997 to $82,477 for the three months ended March 31, 1998. This
increase of $27,127 is due to an interest expense decrease of $45,059,
resulting from the reduction of debt since the prior period.
As a result of the factors discussed above, net income for the three
months ended March 31, 1998 was $215,626 compared to $108,194 for the three
months ended March 31, 1997, an increase of $107,432 or 99%.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
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
20
<PAGE>
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 of the increase in other income
(expenses) is due to miscellaneous receivables recorded from related parties
and the balance of the increase resulted from refunds from various vendors.
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 to five new KFC/registered trademark/ 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 decreased from $148,000 at December 31, 1997 to
$108,295 at March 31, 1998 as a result of a payment received from Kyoto, the
principal shareholder of the Company.
Due to related parties decreased from $679,095 at December 31, 1997 to
$656,667 at March 31, 1998 as a result of fluctuation in the Chilean peso which
offset any accrued interest. This amount represented two loan agreements
entered into with Kyoto. $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 $256,667, 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 $156,085 at March 31, 1998 from
$319,249 at December 31, 1997, a decrease of $163,164. This decrease is
attributable to management's efforts to reduce debt as well as to a decrease in
working in capital needs.
Other current assets increased to $188,820 at March 31, 1998 from $114,722
at December 31, 1997, an increase of $74,097 due to prepayment of certain
expenses and the capitalization of the cost of the Bridge Financing.
The Company did not incur 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
21
<PAGE>
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 outstanding on its line
of credit of approximately $450,000. As of March 31, 1998, the Company had no
amounts outstanding on its line of credit.
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 and its affiliates. Interest rates on the obligations range from 9.02%
to 11% APR, and are payable in Chilean Pesos and Unidad de Fomento ("UF"). The
UF is an indexed unit of account expressed in pesos and adjusted according to
inflation. Total long term obligations with banks at March 31, 1998 and
December 31, 1997 were $1,261,317 and $1,331,733, 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 restaurants 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 cash 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
trademark/ restaurant then owned for the following five years. Additionally,
the agreement also provided that each new KFC/registered trademark/ 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 supersede the
previous 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 on the earlier of (i) the
closing date of this Offering, or (ii) January 1, 2000. As additional
consideration, the investor received 30,000 shares of Class A Common Stock. In
connection with such loan, the Company capitalized approximately $67,500 and
will incur an amortization expense of $67,500 assuming such loan is repaid in
July 1998. Such expense will result in a charge to earnings of approximately
$17,000 per month beginning in April 1998 and ending upon repayment of such
loan. 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."
YEAR 2000 COMPLIANCE
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from
22
<PAGE>
calculations using the year 2000 date are a known risk. The Company is
addressing this risk to the availability and integrity of financial systems and
the reliability of operational systems. The Company has established processes
for evaluating and managing the risks and costs associated with this problem.
Major areas of potential business impact have been identified and initial
conversion efforts are underway. The Company also is communicating with
suppliers, dealers, financial institutions and others with which it does
business to coordinate year 2000 conversion. The total cost of compliance and
its effect on the Company's future results of operations is being determined as
part of the detailed conversion planning.
23
<PAGE>
BUSINESS
GENERAL
Uniservice Corporation was organized in November 1997 as a holding company
to acquire a 99.97% interest in KyF Chile, a Chilean corporation incorporated
in November 1986. KyF Chile currently owns and operates, under license, 29
Kentucky Fried Chicken/registered trademark/ ("KFC/registered trademark/")
restaurants in Chile, the majority of which are located in Santiago, pursuant
to the Franchise Agreement with KFCIH. See "Business--Franchise Agreement with
KFCIH." KyF Chile is currently the sole KFC/registered trademark/ franchisee in
Chile and is the largest KFC/registered trademark/ 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 trademark/
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/registered trademark/'s strong, international brand name. The Company
believes that this strategy will enable the Company to double the number of
KFC/registered trademark/ restaurants it currently owns and operates by
constructing approximately four to five new restaurants each year for the next
seven years (for a total of up to 60 Company owned restaurants by 2005). The
Company has allocated approximately $2,465,000 (or $616,250 per restaurant
based on four restaurants) of the proceeds from this Offering to open four new
KFC/registered trademark/ 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 formation, 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 trademark/
restaurants.
On the Effective Date, (i) Kyoto shall purchase 1,399,900 shares of Class
B Common Stock from the Company 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
24
<PAGE>
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 worldwide in 1996. The Company believes that KFC/registered trademark/
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.
<TABLE>
<CAPTION>
NUMBER OF
NAME RESTAURANTS MAJOR TYPES OF PRODUCTS
- ---------------------------------------------- ------------- --------------------------
<S> <C> <C>
Lomiton/registered trademark/ ............. 46 Pork sandwiches
Doggis/registered trademark/ .............. 38 Hot dogs
KFC/registered trademark/ ................. 29 Chicken
Pizza Hut/registered trademark/ ........... 29 Pizza
McDonald's/registered trademark/ .......... 27 Hamburgers
Burger King/registered trademark/ ......... 21 Hamburgers
Domino's/registered trademark/ ............ 16 Pizza
Embers/registered trademark/ .............. 12 Roast beef sandwiches
Mr. Chips/registered trademark/ ........... 10 Roast beef sandwiches
Taco Bell/registered trademark/ ........... 8 Tacos and burritos
Submarine/trademark/ ...................... 8 Subs/hoagies
Mei Lin Ta/registered trademark/ .......... 8 Chinese food
Burger Inn/trademark/ ..................... 8 Hamburgers
Natural Juice/trademark/ .................. 7 Salads and natural juices
</TABLE>
THE KFC/registered trademark/ RESTAURANT CONCEPT
The KFC/registered trademark/ 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 trademark/ restaurants have grown to approximately 10,000
units in over 80 countries and territories.
The KFC/registered trademark/ 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 trademark/ concept is 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 trademark/ 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 trademark/,
Extra Tasty Crispy/registered trademark/ and Tender Roast/registered trademark/
, as well as other entree items include Chunky Chicken Pot Pies/trademark/,
Colonel's Crispy Strips/registered trademark/ and various chicken sandwiches.
Restaurant exteriors, decor and packaging are characterized by KFC/registered
trademark/'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 trademark/ 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
25
<PAGE>
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 trademark/ 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 trademark/ franchise system. The Company
currently intends to open approximately 60% of its new KFC/registered
trademark/ 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."
/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 trademark/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 trademark/ brand name and products; and
(ii) the historical availability of international marketing and promotion
of KFC/registered trademark/ 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 trademark/ 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
trademark/ brand in Chile. Pursuant to the Franchise Agreement, the Company is
presently prohibited from engaging in any KFC/registered trademark/ brand
business outside of 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
trademark/ brand, subject to prior approval by KFCIH.
TRAINING
KFCIH issues detailed training manuals which cover all aspects of the
operations of KFC/registered trademark/ 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 trademark/ system-wide
operating procedures, food preparation methods and customer service standards.
26
<PAGE>
THE COMPANY'S RESTAURANTS
KFC/registered trademark/ 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 trademark/
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 trademark/ restaurants.
The Company opened its first five KFC/registered trademark/ 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 trademark/ 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 trademark/ and Taco Bell/registered trademark/
restaurants).
All of the Company's KFC/registered trademark/ restaurants offer a full
line of KFC/registered trademark/ 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 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 trademark/ 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 trademark/ has set maximum time standards for holding unsold
prepared food in order to maintain freshness of its products.
27
<PAGE>
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
trademark/'s pre-packaged seasoning which contain KFC/registered trademark/'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 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 trademark/'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
trademark/ restaurant's productivity and profitability.
MARKETING, ADVERTISING AND PROMOTION
The Company believes that one of the major advantages of being a
KFC/registered trademark/ 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 trademark/ restaurants.
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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 which opened in June 1998), "The Simpsons" television
characters and "Chicky/Camelot Quest," (a new logo/character to be identified
with KFC/registered trademark/ restaurants). The Company also advertises on
cable television and radio.
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 permitted to sell and promote only KFC/registered
trademark/ 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, unless Mr. Vilensky obtains approval from KFCIH, Mr. Vilensky
must retain at all times a minimum of 30% ownership of the Company. As a
condition to the Franchise Agreement, Mr. Vilensky 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%
provided, however, that the proceeds from such sale received by Mr. Vilensky
may not be used to start a new 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 not 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 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 trademark/ restaurant
currently owned by the Company is 5% of net revenues. Pursuant to the Franchise
Agreement, KFCIH's approval is required for the development of any new
KFC/registered trademark/ restaurants by the Company and KFCIH's consent to
such renewals, acquisitions or development may be withheld in KFCIH's sole
discretion.
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<PAGE>
The Company has agreed, with KFCIH's consent, to construct, develop, open
and operate 31 additional new KFC/registered trademark/ 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 KFC/registered
trademark/ restaurant will be 5% and for the additional 30 new KFC/registered
trademark/ restaurants will be 6%. Initial fees will be $35,000 per restaurant,
except for (i) the first four new KFC/registered trademark/ 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 31 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 ten years at, 5% following the opening of the 60th restaurant if (i) the 31
remaining new KFC/registered trademark/ 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 trademark/
restaurants owned by the Company will convert to the then current
KFC/registered trademark/ royalty rate for international franchises, which is
currently 6%. The then current standard form of KFC/registered trademark/
international franchise agreement will be executed for all KFC/registered
trademark/ restaurants subject to the Development Agreement.
The Franchise Agreement provides that the Company will be in default if
certain events occur, including but not limited to, the insolvency or
dissolution of the Company, the Company contesting in any court or proceeding
the validity of, or KFCIH's ownership of, any trademarks, trade secrets or
proprietary aspects of the Kentucky Fried Chicken system, the Company failing
to fully correct or diligently remedy any notice, or summons issued by any
government authority regarding any matter involving safety, sanitation or
health, the Company breaching any term or condition of the Franchise Agreement
or any other agreement with KFCIH, or the Company defaulting under or failing
to perform any term or condition of any lease, mortgage, deed or trust or other
agreement with respect to any KFC restaurant locations.
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 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 trademark/ and Burger King/registered
trademark/ 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.
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<PAGE>
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.
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 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. 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.
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<PAGE>
EMPLOYEES
As of March 31, 1998, the Company employed 795 employees, of which 15 were
full-time salaried employees in administration, 113 were full-time salaried
employees in supervisory and management positions and 667 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 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 trademark/ 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
provides that a landlord may not evict a tenant without a court hearing,
although 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 Inmobiliaria 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. The
Company believes that 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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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 Nominee
Juan Carlos Cerda(2) 42 Director Nominee
Avram Fritch(2) 40 Director Nominee
David Mayer(1) 56 Director, Assistant Secretary
Sergio Vivanco(2) 45 Director Nominee
</TABLE>
- ----------------
(1) Has served in his position since the Company's formation 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 formation in November 1997 and as the CEO, President
and Chairman of Kentucky Foods Chile, S.A. since its formation 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 owner 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 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 formation 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
33
<PAGE>
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."
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
34
<PAGE>
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.
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-
</TABLE>
- ----------------
(1) This table is based solely upon compensation received from KyF Chile.
(2) Represents dividends paid to Kyoto. Mr. Vilensky is the principal
shareholder of Kyoto. See "Certain Relationships and Related
Transactions."
EMPLOYMENT AGREEMENTS
RICARDO VILENSKY, CHIEF EXECUTIVE OFFICER, PRESIDENT AND CHAIRMAN. The
Company has entered 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
35
<PAGE>
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 has entered 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").
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 for individuals
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 proprietary interest of employees, advisors,
consultants and directors in USC, 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
36
<PAGE>
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 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.
OPTION EXERCISES AND HOLDINGS
To date, the Company has not issued any options or SARs to any persons. 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.
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 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.
37
<PAGE>
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, directors 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, (i) Kyoto shall purchase 1,399,900 shares of Class
B Common Stock from the Company for $2,200,000, and (ii) the Company shall
purchase Kyoto's 99.97% interest 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. 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 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 are
approximately $147,000.
In January 1992, KyF Chile agreed to guarantee certain liabilities of
Inversiones y Rentas Quebrada Honda S.A. ("IRQH"), whose shareholders are Mr.
Vilensky's brother and sister-in-law. Such liabilities are due to Banestado
Leasing S.A. in connection with certain lease obligations. As of the Effective
Date, the Company estimates that the current remaining obligations of IRQH are
approximately $60,000.
In August 1992, KyF Chile agreed to guaranty all liabilities of Comercial
Submarine Chile Limitada ("Submarine"), whose shareholder is Mr. Vilensky's
brother, 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 Submarine 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
38
<PAGE>
from this loan were used for working capital. On November 6, 1997, the Company
entered into a loan agreement with Kyoto whereby Kyoto loaned 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 by the end of
1998 in accordance with the terms of the promissory note.
On April 30, 1997, KyF Chile sold its office facility in Santiago, Chile
to Imobiliaria KilKil S.A. ("IKK"), whose shareholders include IHSA (99%) and
Mr. Vilensky (1%). In consideration for the payment price of $577,574, IKK
issued to KyF Chile 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 trademark/ 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. The
Company believes 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 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.
The Company believes that all transactions between the Company and its
officers, shareholders and each of their affiliated companies have been made on
terms no less favorable to the Company than those available from unaffiliated
parties. In the future, the Company intends to handle transactions of a similar
nature on terms no less favorable to the Company than those available from
unaffiliated parties. In addition, any forgiveness of loans will be approved by
a majority of the Company's independent directors who do not have an interest
in the transaction and who have access, at the Company's expense, to the
Company's counsel or independent counsel.
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 an aggregate of 30,000 shares of Class A Common Stock.
39
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the Common
Stock beneficially owned as of the date of this Prospectus (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, directors and director nominees; and (iii) by
all executive officers, directors and director nominees 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>
OWNERSHIP VOTING
NUMBER OF SHARES PERCENTAGE PERCENTAGE
OF COMMON STOCK ------------------------------ --------------------------
BENEFICIALLY OWNED
BEFORE AND BEFORE AFTER BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER AFTER OFFERING OFFERING(1) 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-
Inversiones e Inmobiliaria
Kyoto Limitada ..................... 1,399,900(7) 97.9% 49.5% 99.8% 90.7%
All executive officers and directors
as a group (6 persons) ............. 1,400,000(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) 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."
(4) 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 founder's shares.
(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) Represents 1,399,900 shares of Class B Common Stock that have 10 votes for
each share of Class B Common Stock held. Kyoto is owned and controlled by
Mr. Vilensky. See "Certain Relationships and Related Transactions."
(8) Includes 1,399,900 shares of Class B Common Stock issued to Kyoto in
connection with the Stock Purchases.
40
<PAGE>
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.
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 formation 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
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 90.97% 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 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 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.
41
<PAGE>
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 Securities Transfer and Trust, Inc. 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 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--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 from which the
directors derived an improper
42
<PAGE>
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 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 trademark/ concept. See "Risk Factors--Control by
Management; KFCIH Restrictions" and "Business--Franchise Agreement with KFCIH."
43
<PAGE>
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.
44
<PAGE>
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 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 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. 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. An
appropriate legend referring to these restrictions will be marked on the face
of the certificates representing all such securities.
45
<PAGE>
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.
The Company has been advised by the Representative 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
to certain dealers at a price which represents a concession not in excess of
$0.25 per share of Class A Common Stock below the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $0.10 per share of Class A Common Stock to certain other domestic
dealers who are members of the National Association of Securities Dealers, Inc.
("NASD") and which domestic dealers agree to sell the Securities in conformity
with the NASD Conduct Rules. After the initial offering of the Securities to
the public, the price to the public and such concessions may be changed by the
Representative. The Representative has advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority in excess of 1% of the Securities offered
hereby.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Over-allotment involves syndicate short sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
for and purchases of the Securities so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases
of the Securities in the open market in order to cover syndicate short
positions. Penalty bids permit the Underwriters to reclaim a selling concession
from a syndicate member when the Securities originally sold by such syndicate
member is purchased in a stabilizing transaction or syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Securities to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on The Nasdaq SmallCap Market
or otherwise and, if commenced, may be discontinued at any time.
The Underwriters and dealers may engage in passive market making
transactions in the Class A Common Stock in accordance with Rule 103 of
Regulation M under the Exchange Act. In general, a passive market maker may not
bid for, or purchase, the Class A Common Stock at a price that exceeds
46
<PAGE>
the highest independent bid. In addition, the net daily purchases made by any
passive market maker may not exceed 30% of its average daily trading volume in
the Class A Common Stock during a specified two month period, or 200 shares,
whichever is greater. A passive market maker must identify market making bids
as such on the Nasdaq electronic inter-dealer reporting system. Passive market
making may stabilize or maintain the market price of the Class A Common Stock
above independent market levels. Underwriters and dealers are not required to
engage in passive market making and may end passive market making activities at
any time.
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 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 $7.50 per share of Class A Common Stock, $.1875 per warrant, and $11.25 per
share of Class A Common Stock for each share underlying the warrant, which are
150% 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 agreed to register under Federal and States
securities laws, the Representative's Warrants and the securities underlying
the Representative's Warrants.
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 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, 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.
47
<PAGE>
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 immediately prior to the Effective Date by the
Company's existing shareholders are subject to a 24-month lock-up 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 Effective Date and is subject to early termination at the
sole discretion 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 two years from the Effective Date,
the Company will not sell or otherwise dispose of any Common Stock 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. The
Representative does not intend to exercise this right in the near future.
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, Fort Lauderdale, Florida.
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
48
<PAGE>
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. 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.
49
<PAGE>
UNISERVICE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report .......................................... F-2
Supplemental Consolidated Balance Sheets .............................. F-3
Supplemental Consolidated Statements of Income ........................ F-4
Supplemental Consolidated Statements of Stockholders' Equity .......... F-5
Supplemental Consolidated Statements of Cash Flows .................... F-6
Notes to Supplemental Consolidated Financial Statements ............... F-7
</TABLE>
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.
SPEAR, SAFER, HARMON & CO.
Miami, Florida
February 4, 1998
F-2
<PAGE>
UNISERVICE CORPORATION
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
1998 1997 1996
-------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .............................................. $ 545,240 $ 647,549 $ 142,775
Accounts receivable, net ............................................... 374,761 373,946 585,932
Due from related party (Note 14) ....................................... 108,295 148,000 --
Other receivables (Note 2) ............................................. 159,148 115,195 137,788
Inventory .............................................................. 452,462 515,563 307,056
Income taxes receivable (Note 3) ....................................... 146,029 145,435 228,374
Offering costs ......................................................... 138,398 118,311 --
Other current assets (Note 4) .......................................... 188,820 114,723 182,310
---------- ---------- ----------
Total Current Assets ................................................. 2,113,153 2,178,722 1,584,235
---------- ---------- ----------
Property and Equipment, net (Note 5) .................................... 6,275,468 6,468,247 6,661,711
---------- ---------- ----------
Other Assets:
Intangibles, net (Note 6) .............................................. 135,767 139,404 138,937
Deposits (Note 7) ...................................................... 462,810 473,259 393,239
---------- ---------- ----------
Total Other Assets ................................................... 598,577 612,663 532,176
---------- ---------- ----------
$8,987,198 $9,259,632 $8,778,122
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ....................................................... $1,277,092 $1,300,659 $1,506,725
Obligations with banks: (Note 9)
Lines-of-credit ....................................................... -- 81,117 782,788
Current portion ....................................................... 156,085 319,249 377,478
Notes payable (Note 10) ................................................ 43,901 70,206 657,152
Bridge loan payable (Note 17) .......................................... 150,000 -- --
Sales tax and withholdings ............................................. 186,858 163,761 125,921
Accrued expenses and other current liabilities (Note 8) ................ 754,384 843,988 701,944
Current portion of capital lease obligations (Note 11) ................. 130,392 190,347 287,443
Deferred revenue (Note 12) ............................................. 196,715 239,335 395,739
---------- ---------- ----------
Total Current Liabilities ............................................ 2,895,427 3,208,662 4,835,190
---------- ---------- ----------
Long-Term Liabilities:
Obligations with banks, excluding current portion (Note 9) ............. 1,261,317 1,331,733 601,048
Due to related party (Note 15) ......................................... 656,667 679,095 --
Capital lease obligations, excluding current portion (Note 11) ......... 811,784 864,583 1,042,133
---------- ---------- ----------
Total Long-Term Liabilities .......................................... 2,729,768 2,875,411 1,643,181
---------- ---------- ----------
Stockholders' Equity: (Note 13)
Class A common stock, $.0001 par value; 20,000,000 shares
authorized; 30,000, -0-, -0- issued and outstanding at
March 31, 1998, December 31, 1997 and 1996 respectively .............. 3 -- --
Class B common stock, $.0001 par value; 2,000,000 shares
authorized; 1,400,000 shares issued and outstanding at
March 31, 1998, December 31, 1997 and 1996 ........................... 140 140 140
Preferred stock, $.0001 par value; 5,000,000 shares authorized;
no shares issued and outstanding ..................................... -- -- --
Additional paid-in capital ............................................. 3,355,259 3,287,762 2,963,476
Retained earnings (deficit) ............................................ 308,802 93,176 (574,520)
Cumulative translation adjustment ...................................... (302,201) (205,519) (89,345)
---------- ---------- ----------
Total Stockholders' Equity ........................................... 3,362,003 3,175,559 2,299,751
---------- ---------- ----------
$8,987,198 $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 STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
------------------------------ -------------------------------
1998 1997 1997 1996
------------- -------------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues .................................. $3,452,964 $3,244,952 $14,562,157 $11,706,398
Cost of Operations ........................ 1,426,381 1,407,202 5,909,803 4,534,762
---------- ---------- ----------- -----------
Gross Profit .............................. 2,026,583 1,837,750 8,652,354 7,171,636
---------- ---------- ----------- -----------
Selling and Administrative Expenses:
Payroll and employee benefits ............ 543,096 446,783 2,776,949 2,483,571
Occupancy ................................ 475,611 462,415 1,708,515 1,425,190
Other selling and administrative ......... 874,727 875,708 3,331,665 2,789,574
---------- ---------- ----------- -----------
1,893,434 1,784,906 7,817,129 6,698,335
---------- ---------- ----------- -----------
Income from Operations .................... 133,149 52,844 835,225 473,301
Other Income (Expenses):
Other, net (Note 14) ..................... 115,332 133,264 759,770 477,081
Interest expense ......................... (32,855) (77,914) (281,046) (415,940)
---------- ---------- ----------- -----------
82,477 55,350 478,724 61,141
---------- ---------- ----------- -----------
Net Income ................................ $ 215,626 108,194 $ 1,313,949 $ 534,442
========== ========== =========== ===========
Net Income Per Common Share ............... $ 0.15 $ 0.08 $ 0.94 $ 0.38
========== ========== =========== ===========
Weighted Average Common Shares
Outstanding .............................. 1,410,000 1,400,000 1,400,000 1,400,000
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-4
<PAGE>
UNISERVICE CORPORATION
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL RETAINED CUMULATIVE TOTAL
COMMON COMMON PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
STOCK STOCK CAPITAL (DEFICIT) ADJUSTMENT EQUITY
--------- --------- ------------ --------------- ------------- --------------
<S> <C> <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
Net income (unaudited) ............ -- -- -- 215,626 -- 215,626
Class A Common stock
issued in connection with
bridge loan ..................... 3 -- 67,497 -- -- 67,500
Translation adjustment
(unaudited) ..................... -- -- -- -- (96,682) (96,682)
---- ---- ---------- ----------- ---------- ----------
Balance at March 31, 1998
(unaudited) ..................... $ 3 $140 $3,355,259 $ 308,802 $ (302,201) $3,362,003
==== ==== ========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-5
<PAGE>
UNISERVICE CORPORATION
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
------------------------------ -----------------------------
1998 1997 1997 1996
------------- -------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income .................................................. $ 215,626 $ 108,194 $1,313,949 $ 534,442
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................. 197,128 115,635 715,555 546,775
Deferred income taxes ..................................... 889 (878) (1,156) 1,587
Loss on sale of building .................................. -- -- 7,852 --
Translation adjustment .................................... (96,682) 55,151 (116,174) (94,110)
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net ................................ (815) 227,844 211,986 (279,741)
Other receivables ....................................... (43,953) (311,765) 22,593 (23,797)
Inventory ............................................... 63,101 (26,612) (208,507) 324,601
Income taxes receivable ................................. (594) (251,742) 82,939 (160,900)
Offering costs .......................................... (20,087) -- (118,311) --
Other current assets .................................... (7,486) 66,756 68,743 148,095
Intangibles ............................................. (712) (3,442) (4,199) (3,329)
Deposits ................................................ 10,449 (9,374) (80,020) (33,808)
Increase (decrease) in:
Accounts payable ........................................ (23,567) (223,746) (206,066) (236,154)
Sales tax and withholdings .............................. 23,097 33,512 37,840 (10,092)
Accrued expenses and other current liabilities .......... (89,604) 129,923 142,044 296,953
Deferred revenue ........................................ (42,620) (28,298) (156,404) (172,553)
---------- ---------- ---------- ----------
Net Cash Provided by (Used In) Operating Activities ......... 184,170 (118,842) 1,712,664 837,969
---------- ---------- ---------- ----------
Cash Flows from Investing Activities:
Acquisition of property and equipment ...................... -- (276,514) (448,507) (783,240)
---------- ---------- ---------- ----------
Cash Flows from Financing Activities:
Repayment of notes payable to banks ........................ $ (26,305) $ (368,385) $ (586,946) $ 196,286
Dividends paid ............................................. -- (17,134) (321,967) (139,909)
Proceeds from bridge loan .................................. 150,000 -- -- --
Net proceeds (repayment) of lines-of-credit ................ (81,117) (782,788) (701,671) 415,894
Net proceeds from related parties .......................... 17,277 481,477 531,095 --
Payments on capital lease obligations ...................... (112,754) (11,073) (352,350) (278,614)
Proceeds from long-term debt ............................... -- 1,226,033 1,353,883 501,817
Repayment of long-term debt ................................ (233,580) -- (681,427) (801,236)
---------- ---------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities ......... (286,479) 528,130 (759,383) (105,762)
---------- ---------- ---------- ----------
Increase (Decrease) in Cash and Cash Equivalents ............ (102,309) 132,774 504,774 (51,033)
Cash and Cash Equivalents--Beginning of Period .............. 647,549 142,775 142,775 193,808
---------- ---------- ---------- ----------
Cash and Cash Equivalents--End of Period .................... $ 545,240 $ 275,549 $ 647,549 $ 142,775
========== ========== ========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest .................. $ 32,855 $ 77,914 $ 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
Issuance of Class A common stock in connection with
bridge loan ............................................. 67,500 -- -- --
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-6
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
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 99.7% 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% interest 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. Proforma consolidating
financial statements are not presented because the statements of position and
operations for Uniservice Corporation are not material.
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.
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
F-7
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
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 $-0-, $2,209 and $-0- as of March 31, 1998, 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.
EARNINGS PER COMMON SHARE--Earnings per common share are based on the
weighted average number of shares outstanding of 1,400,000 for all periods
presented, 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
F-8
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS--The accompanying interim unaudited
supplemental consolidated financial information has been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments and
eliminations, consisting only of normal recurring adjustments, necessary to
present fairly the supplemental consolidated financial position of the Company
as of March 31, 1998, and the supplemental consolidated results of its
operations and cash flows for the three months ended March 31, 1998 and 1997,
have been included. The results of operations for such interim period are not
necessarily indicative of the results for the full year.
NOTE 2--OTHER RECEIVABLES
Other receivables consist of the following at December 31:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------
1998 1997 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Advances to vendors ........................ $107,330 $ 53,024 $ 28,945
Advance payments for custom duties ......... 27,378 23,622 23,678
Travel and other sundry advances ........... 24,440 32,289 49,226
Other ...................................... -- 6,260 35,939
-------- -------- --------
$159,148 $115,195 $137,788
======== ======== ========
</TABLE>
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.
F-9
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 3--INCOME TAXES--(CONTINUED)
The following is a reconciliation of the statutory tax rates:
<TABLE>
<CAPTION>
YEARS ENDED
PERIOD ENDED DECEMBER 31,
MARCH 31, -------------------
1998 1997 1996
------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Statutory tax rate ............................. 15% 15% 15%
Credits and incentives from government ......... (15) (15) (15)
--- --- ---
Effective tax rate ............................. 0% 0% 0%
=== === ===
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
1998 1997 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Balance at beginning of year ............... $145,435 $ 228,374 $ 220,634
Payments of estimated income taxes ......... -- 125,941 163,767
Credit for fixed asset purchases ........... -- -- 32,753
Credit for educational expenses ............ 3,303 16,576 20,705
Refunds received ........................... -- (228,374) (220,634)
Other, net ................................. (2,709) 2,918 11,149
-------- ---------- ----------
$146,029 $ 145,435 $ 228,374
======== ========== ==========
</TABLE>
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-10
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 4--OTHER CURRENT ASSETS
Other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------
1998 1997 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred income taxes ................... $ 33,695 $ 34,584 $ 35,740
Prepaid expenses ........................ 78,665 75,363 81,538
Prepaid taxes other than income ......... -- -- 60,581
Bridge loan financing ................... 67,500 -- --
Other ................................... 8,960 4,776 4,451
-------- -------- --------
$188,820 $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 consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------------
1998 1997 1996
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures ................................. $ 4,592,757 $ 4,592,757 $ 3,698,163
Office equipment and machinery ......................... 1,832,859 1,832,859 1,842,381
Capital leases ......................................... 1,838,450 1,838,450 1,819,622
Buildings .............................................. -- -- 506,007
Land ................................................... -- -- 62,538
Other .................................................. 184,598 184,598 47,153
Construction in progress ............................... 45,559 45,559 --
------------ ------------ ------------
8,494,223 8,494,223 7,975,864
Less accumulated depreciation and amortization ......... (2,218,755) (2,025,976) (1,314,153)
------------ ------------ ------------
$ 6,275,468 $ 6,468,247 $ 6,661,711
============ ============ ============
</TABLE>
Depreciation and amortization expense was $197,128, $115,635, $711,823 and
$546,775 for the three months ended March 31, 1998 and 1997 and the years ended
December 31, 1997 and 1996, respectively.
F-11
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 6--INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------
1998 1997 1996
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill ............................... $114,406 $115,207 $112,003
Trademarks, licenses and other ......... 29,442 27,929 26,934
-------- -------- --------
143,848 143,136 138,937
Less accumulated amortization .......... (8,081) (3,732) --
-------- -------- --------
$135,767 $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 March 31, 1998
(unaudited), December 31, 1997 and 1996 amounted to $462,810, $473,259 and
$393,239, respectively.
NOTE 8--ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------
1998 1997 1996
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Franchise fees payable(*) ............................ $633,981 $793,793 $518,547
Other ................................................ -- 27,407 34,505
Accrued salaries and other employee benefits ......... 120,403 22,788 148,892
-------- -------- --------
$754,384 $843,988 $701,944
======== ======== ========
</TABLE>
- ----------------
(*) See Note 16 for details on franchise fees.
F-12
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 9--OBLIGATIONS WITH BANKS
Obligations with banks consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------
1998 1997 1996
------------ ---------- -----------
(UNAUDITED)
<S> <C> <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 March 31, 1998 and December 31,
1997, respectively, approximates $1,442,000 and $374,000.
Currency: Chilean Pesos and UF .......................... $ -- $81,117 $782,788
==== ======= ========
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
1998 1997 1996
-------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable to banks with maturity dates through
2005 and fully collateralized 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 ...................... $1,417,402 $1,650,982 $ 978,526
Less: Current portion ............................... (156,085) (319,249) (377,478)
---------- ---------- ----------
$1,261,317 $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.
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).
F-13
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 9--OBLIGATIONS WITH BANKS--(CONTINUED)
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------
<S> <C>
1998 ............... $ 319,249
1999 ............... 293,509
2000 ............... 293,466
2001 ............... 192,505
2002 ............... 144,412
Thereafter ......... 407,841
----------
$1,650,982
==========
</TABLE>
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 March 31, 1998 (unaudited) and December 31, 1997 and 1996,
the gross amount of assets recorded under capital leases totaled $1,838,450,
$1,838,450 and $1,819,622, respectively. Accumulated amortization related to
those assets totaled $40,324, $38,765, $163,379 and $86,745 as of March 31,
1998, March 31, 1997, December 31, 1997 and 1996, respectively.
The following is a schedule of future minimum lease payments:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- --------------------------------------
<S> <C>
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
==========
</TABLE>
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
F-14
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 12--DEFERRED REVENUE--(CONTINUED)
received approximately $780,000, net of taxes, which is being recognized and
amortized over that five year period. For the three months ended March 31, 1998
and the years ended December 31, 1997 and 1996, KyF Chile recognized $42,620,
$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.
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 1% 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. No dividends were declared during 1998.
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
F-15
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 16--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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.
Future minimum obligations over the primary terms of KyF Chile's long-term
leases as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ----------------------------------------------------------
<S> <C>
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
===========
</TABLE>
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.
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
F-16
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 16--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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 $173,000, $162,000,
$728,000 and $503,000 for the three months ended March 31, 1998 and 1997, and
for the years ended December 31, 1997 and 1996, respectively, of which
approximately $634,000, $794,000 and $519,000 remain unpaid as of March 31,
1998, 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.
YEAR 2000 CONVERSION--The Company recognizes the need to ensure its
operations will not be adversely impacted by Year 2000 software failures.
Software failures due to processing errors potentially arising from
calculations using the year 2000 date are a known risk. The Company is
addressing this risk to the availability and integrity of financial systems and
the reliability of operational systems. The Company has established processes
for evaluating and managing the risks and costs associated with this problem.
Major areas of potential business impact have been identified and initial
conversion efforts are underway. The Company also is communicating with
suppliers, dealers, financial institutions and others with which it does
business to coordinate year 2000 conversion. The total cost of compliance and
its effect on the Company's future results of operations is being determined as
part of the detailed conversion planning.
F-17
<PAGE>
UNISERVICE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED) WITH RESPECT TO MARCH 31, 1998 AND 1997
NOTE 17--OTHER MATTERS
INITIAL PUBLIC OFFERING--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
$650,000 (including interest), the repayment of $1,261,317 in long term debt,
$565,000 for repayment of loans due to third parties, and working capital of
approximately $958,683.
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. As a result, bridge loan financing costs
amounting to $67,500 are reflected in the March 31, 1998 balance sheet as a
component of other current assets and will be amortized over the term of the
loan beginning in April 1998.
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.
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-18
<PAGE>
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
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
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, IN ANY
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 DATE SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED
HEREBY BY 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
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Prospectus Summary ...................... 3
Risk Factors ............................ 5
Use of Proceeds ......................... 14
Dividend Policy ......................... 15
Dilution ................................ 16
Capitalization .......................... 17
Exchange Rates .......................... 18
Selected Financial Data ................. 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ........................... 20
Business ................................ 24
Management .............................. 33
Certain Relationships and
Related Transactions ................. 38
Bridge Financing ........................ 39
Principal Shareholders .................. 40
Description of Securities ............... 41
Shares Eligible for Future Sale ......... 45
Underwriting ............................ 46
Legal Matters ........................... 48
Experts ................................. 48
Additional Information .................. 48
Index to Financial Statements ........... F-1
</TABLE>
-----------------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS 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.
UNISERVICE
CORPORATION
1,400,000 SHARES OF
CLASS A COMMON STOCK
1,400,000 REDEEMABLE
COMMON STOCK
PURCHASE WARRANTS
-----------------------------------
PROSPECTUS
WERBEL-ROTH SECURITIES, INC.
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<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* $ 6,064.44
NASD filing fee* ........................................................ 2,506.00
NASDAQ filing fee* ...................................................... 8,220.00
Printing and engraving expenses* ........................................ 65,000.00
Accounting fees and expenses* ........................................... 50,000.00
Legal fees and expenses* ................................................ 175,000.00
Blue Sky fees and expenses* ............................................. 25,000.00
Transfer Agent fees and expenses ........................................ 750.00
Miscellaneous ........................................................... 9,709.56
------------
Total ................................................................... $ 342,250.00
============
</TABLE>
- ----------------
* Estimated
All of the above expenses of this Offering will be paid by the Company.
II-1
<PAGE>
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. Accordingly, 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 Class B Common 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 Class B
Common Stock to Kyoto will be exempt from registration pursuant to Section 4(2)
of the Act.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement(2)
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(1)
3.1 (b) Articles of Amendment to Articles of Incorporation(1)
3.2 Company's Bylaws(1)
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
Warrant Certificate(2)
4.3 Form of Class A Common Stock Certificate(2)
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.(2)
10.1 Stock Option Plan(1)
10.2 Master Franchise Agreement between Kentucky Foods Chile, S.A. and Kentucky Fried
Chicken International Holdings, Inc., as amended(1).
10.3 Loan Agreement between Kentucky Foods Chile, S.A. and Inversiones e Inmobiliaria Kyoto
Limitada dated October 3, 1997(1)
10.4 Loan Agreement between Kentucky Foods Chile, S.A. and Inversiones e Inmobiliaria Kyoto
Limitada dated November 6, 1997(1)
10.5 Bridge Loan Documents(1)
10.6 Employment Agreement between the Company and Ricardo Vilensky(2)
10.7 Employment Agreement between the Company and Mauricio Aguirre(2)
10.8 Lease Agreement between KyF Chile and Imobiliaria Kilkil S.A.(1)
10.9 Recognition of Debt Note(1)
21 Subsidiaries of Registrant(1)
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)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- --------------------------------
<S> <C>
27 Financial Data Schedule(2)
99.1 Consent of Mauricio Aguirre(2)
99.2 Consent of Juan Carlos Cerda(2)
99.3 Consent of Sergio Vivanco(2)
99.4 Consent of Avram Fritch(2)
</TABLE>
- ----------------
(1) Previously filed
(2) Filed herewith
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to:
(1) 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;
(2) 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.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
(4) The Company 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.
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.
For the purpose of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
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-3
<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 on Form SB-2 and authorizes
this Amendment to be signed on its behalf by the undersigned, in the City of
Ft. Lauderdale, State of Florida, on this 19th day of June, 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 Executive Officer June 19, 1998
and Director (Principal Executive,
Ricardo Vilensky
Financial and Accounting Officer)
/s/ DAVID MAYER Director June 19, 1998
David Mayer
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- --------- -------------------------------------------------------------------------------- -------------
<S> <C> <C>
1.1 Form of Underwriting Agreement
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
4.1 Form of Warrant Agreement together with the form of Warrant Certificate
4.2 Form of Representative's Warrant Agreement together with the form of
Representative's Warrant Certificate
4.3 Form of Class A Common Stock Certificate
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
10.6 Employment Agreement between the Company and Ricardo Vilensky
10.7 Employment Agreement between the Company and Mauricio Aguirre
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
99.1 Consent of Mauricio Aguirre
99.2 Consent of Juan Carlos Cerda
99.3 Consent of Sergio Vivanco
99.4 Consent of Avram Fritch
</TABLE>
EXHIBIT 1.1
1,400,000 SHARES
1,400,000 WARRANTS
UNISERVICE CORPORATION
UNDERWRITING AGREEMENT
June __, 1998
Werbel-Roth Securities, Inc.
As Representatives of the Several Underwriters
c/o Werbel-Roth Securities, Inc.
150 East Palmetto Park Road, Suite 510
Boca Raton, Florida 33432
Dear Sirs:
Uniservice Corporation, a Florida corporation (the "COMPANY"), proposes
to issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS") an aggregate of (i) 1,400,000 shares of its Class A Common
Stock, $0.0001 par value per share ("COMMON STOCK"), and (ii) 1,400,000 warrants
to purchase Class A common stock ("WARRANTS"). The 1,400,000 shares of Common
Stock to be issued and sold to the Underwriters by the Company are hereinafter
referred to as the "FIRM SHARES," and the 1,400,000 Warrants are hereinafter
referred to as the "FIRM WARRANTS." The Company also proposes to sell to you
(the "Representative"), upon the terms and conditions set forth in Section
hereof, up to an additional 210,000 shares (the "ADDITIONAL SHARES") of Common
Stock and 210,000 Warrants (the "ADDITIONAL WARRANTS") to cover over-allotments
(the "OVER-ALLOTMENT OPTION").
The Company also proposes to sell to you, upon the terms and conditions
set forth in a separate Warrant Agreement (the "REPRESENTATIVE'S WARRANT") a
warrant to purchase an additional 140,000 shares of Common Stock and 140,000
Warrants. The shares of Common Stock issuable upon exercise of the
Representative's Warrant and the Warrants are hereinafter referred to as the
"WARRANT SHARES," and the Warrants issuable upon exercise of the
Representative's Warrant are hereinafter referred to as the "WARRANT WARRANTS."
The Firm Shares, the Firm Warrants, the Additional Shares, and the Additional
Warrants, are hereinafter collectively referred to as the "OFFERING SECURITIES."
The Warrant Shares and the Warrant Warrants are hereinafter collectively
referred to as the "WARRANT SECURITIES." The Offering Securities and the Warrant
Securities are hereinafter referred to as the "SECURITIES."
The Company wishes to confirm as follows its agreements with the
Representative and the other several Underwriters on whose behalf you are
acting, in connection with the several purchases of the Securities by the
Underwriters and of the Warrant Securities by you.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "COMMISSION") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission
<PAGE>
thereunder (collectively, the "ACT"), a registration statement on Form SB-2
under the Act (the "REGISTRATION STATEMENT"), including a prospectus subject to
completion relating to the Securities. The term "REGISTRATION STATEMENT" as used
in this Agreement means the registration statement (including all financial
schedules and exhibits), as amended at the time it becomes effective, or, if the
registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed and must be
declared effective before the offering of the Securities may commence, the term
"REGISTRATION STATEMENT" as used in this Agreement means the registration
statement as amended by said post-effective amendment. The term "PROSPECTUS" as
used in this Agreement means the prospectus in the form included in the
Registration Statement, or, if the prospectus included in the Registration
Statement omits information in reliance on Rule 430A under the Act and such
information is included in a prospectus filed with the Commission pursuant to
Rule 424(b) under the Act, the term "PROSPECTUS" as used in this Agreement means
the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectus filed with the Commission pursuant to Rule 424(b). The term
"PREPRICING PROSPECTUS" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus.
2. AGREEMENTS TO SELL AND PURCHASE. Subject to such adjustments as you
may determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company contained and subject to all the terms and conditions
set forth herein, each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $4.50 per share of Common
Stock (the "PURCHASE PRICE PER SHARE") and $0.1125 per Warrant (the "PURCHASE
PRICE PER WARRANT"), the number of Firm Shares and the Number of Firm Warrants
set forth opposite the name of such Underwriter in Schedule I hereto (or such
number of Firm Shares and Firm Warrants increased as set forth in Section
hereof).
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Representative, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Representative
shall have the right to purchase from the Company, at the purchase price per
share and the purchase price per warrant, respectively, pursuant to the
Over-Allotment Option which may be exercised at any time and from time to time
prior to 9:00 P.M., Eastern time, on the 45th day after the date of the
Prospectus (or, if such 45th day shall be a Saturday or Sunday or a holiday, on
the next business day thereafter when the New York Stock Exchange is open for
trading), up to an aggregate of 210,000 Additional Shares and 210,000 Additional
Warrants from the Company. Additional Shares may be purchased only for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Securities as
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soon after the Registration Statement and this Agreement have become effective
as in your judgment is advisable and initially to offer the Offering Securities
upon the terms set forth in the Prospectus.
4. DELIVERY OF THE OFFERING SECURITIES AND PAYMENT THEREFOR. Delivery
to the Underwriters of and payment for the Firm Shares and the Firm Warrants
shall be made at the office of Werbel-Roth Securities, Inc., 150 East Palmetto
Park Road, Suite 510, Boca Raton, Florida 33432, at 10:00 A.M., Eastern time, on
, 1998 (the "INITIAL CLOSING DATE"). The place of closing for the Firm Shares
and Firm Warrants and the Initial Closing Date may be varied by agreement among
you and the Company.
Delivery to the Representative of and payment for any Additional Shares
or Additional Warrants to be purchased by the Representative shall be made at
the aforementioned office of Werbel-Roth Securities, Inc. at such time on such
date (the "OPTION CLOSING DATE"), which may be the same as the Initial Closing
Date but shall in no event be earlier than the Initial Closing Date nor earlier
than two nor later than ten business days after the giving of the notice
hereinafter referred to, as shall be specified in a written notice from the
Representative to the Company of the Representative's determination to purchase
a number, specified in such notice, of Additional Shares and Additional
Warrants. The place of closing for any Additional Shares and Additional Warrants
and the Option Closing Date for such Securities may be varied by agreement among
you and the Company.
Certificates for the Firm Shares and the Firm Warrants and for any
Additional Shares or Additional Warrants to be purchased hereunder shall be
registered in such names and in such denominations as you shall request prior to
9:30 A.M., Eastern time, on the second business day preceding the Initial
Closing Date or any Option Closing Date, as the case may be. Such certificates
shall be made available to you in Boca Raton, Florida for inspection and
packaging not later than 9:30 A.M., Eastern time, on the business day next
preceding the Initial Closing Date or the Option Closing Date, as the case may
be. The certificates evidencing the Firm Shares and the Firm Warrants and any
Additional Shares or Additional Warrants to be purchased hereunder shall be
delivered to you on the Initial Closing Date or the Option Closing Date, as the
case may be, against payment of the purchase price therefor by wire transfer or
by certified or official bank check or checks payable in New York Clearing House
(next day) funds to the order of the Company.
On the Initial Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrant for $140.00 (the "Initial Purchase
Price"), which warrant shall entitle the holders thereof to purchase an
aggregate of 140,000 Warrant Shares at a price of $7.50 per share and 140,000
Warrant Warrants at a price of $0.1875 per warrant. Payment of the Initial
Purchase Price shall be made on the Initial Closing Date.
The Warrant Securities shall be non-transferable for a period of one
year from the Initial Closing Date (except to affiliates of the Representative
or an Underwriter). The Representative's Warrants shall be exercisable for a
period of four (4) years commencing one (1) year from the effective date of the
Registration Statement. The form and terms of the Representative's
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Warrant Certificate shall be substantially in the form filed as an Exhibit to
the Registration Statement.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the Securities may
commence, the Company will endeavor to cause the Registration Statement or such
post-effective amendment to become effective as soon as possible and will advise
you promptly and, if requested by you, will confirm such advice in writing, when
the Registration Statement or such post-effective amendment has become
effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the Commission
for amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Securities
for offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the regulations thereunder
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with the Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge (i) two
signed copies of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits to the registration statement and (ii) such number of conformed copies
of the registration statement as originally filed and of each amendment thereto,
but without exhibits, as you may reasonably request.
(d) The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus, of
which you shall not previously have been advised or to which, after you shall
have received a copy of the document proposed to be filed, you shall reasonably
object in writing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form
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of the Prepricing Prospectus. The Company consents to the use, in accordance
with the provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Offering Securities are offered by the several
Underwriters and by dealers, prior to the date of the Prospectus, of each
Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the opinion
of counsel for the Underwriters a prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer, the Company
will expeditiously deliver to each Underwriter and each dealer, without charge,
as many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. If during such
period of time any event shall occur that in the judgment of the Company or in
the opinion of counsel for the Underwriters is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus in order to comply with the Act or any other law, the
Company will forthwith prepare and, subject to the provisions of paragraph
above, file with the Commission an appropriate supplement or amendment thereto
(or to such document), and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof. In the event that the Company and
you, as Representative of the several Underwriters, agree that the Prospectus
should be amended or supplemented, the Company, if requested by you, will
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(g) The Company will, concurrently with the Effective Date,
register the class of equity securities of which the Shares are a part under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") and the Company will maintain such registration for a minimum of five (5)
years from the Effective Date.
(h) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification of the
Securities for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky laws of such jurisdictions as you may designate
and will file such consents to service of process or other documents necessary
or appropriate in order to effect such registration or qualification; provided
that in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Securities, in any jurisdiction where it is not now so
subject.
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(i) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section ll(a) of the Act.
(j) For a period of five years from the Effective Date, the
Company, at its expense, will annually furnish to its shareholders a report of
its operations to include financial statements audited by independent public
accountants, and will furnish to the Underwriter as soon as practicable after
the end of each fiscal year, a balance sheet of the Company as at the end of
such fiscal year, together with statements of operations, shareholders' equity,
and changes in cash flow of the Company for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent public accountants.
(k) For a period of five years from the Effective Date, the
Company will deliver to the Representative and to Representative's Counsel on a
timely basis (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-KSB (or 10-K), 10-QSB (or 10-Q) and
exhibits thereto, filed or furnished to the Commission, any securities exchange
or the National Association of Securities Dealers, Inc. (the "NASD"); (ii) as
soon as practicable, copies of any reports or communications (financial or
other) of the Company mailed to its security holders; (iii) as soon as
practicable, a copy of any Schedule 13D, 13G, 14D-1 or 13E-3 received or
prepared by the Company from time to time; and (iv) such additional information
concerning the business and financial condition of the Company as the
Representative may from time to time reasonably request and which can be
prepared or obtained by the Company without unreasonable effort or expense. The
Company will furnish to its shareholders annual reports containing audited
financial statements and such other periodic reports as it may determine to be
appropriate or as may be required by law.
(l) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section hereof or by notice given by you terminating
this Agreement pursuant to Section or Section hereof) or if this Agreement shall
be terminated by the Underwriters because of any failure or refusal on the part
of the Company to comply with the terms or fulfill any of the conditions of this
Agreement, the Company agrees to reimburse the Representative for all
out-of-pocket expenses (including fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(m) The Company will apply the net proceeds from the sale of
the Offering Securities to be sold by it hereunder substantially in accordance
with the description set forth in the Prospectus.
(n) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will advise
you of the time and manner of such filing.
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(o) Except as provided in this Agreement, the Company will not
sell, contract to sell or otherwise dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, or
grant any options or warrants to purchase Common Stock, for a period of two
years after the date of the Prospectus, without the prior written consent of
Werbel-Roth Securities, Inc.; provided, however, that the Company may issue
Common Stock pursuant to the terms of any warrants, options or stock option
plans existing on the date hereof.
(p) The Company has furnished or will furnish to you "LOCK-UP"
letters, in form and substance satisfactory to you, signed by each of its
current stockholders.
(q) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to stabilize or manipulate, or that might
reasonably be expected to cause or result in stabilization or manipulation of,
the price of the Common Stock to facilitate the sale or resale of the
Securities.
(r) The Company will use its best efforts to have the shares
of Common Stock which it agrees to sell under this Agreement listed, subject to
notice of issuance, in Standard & Poor's and (2) on the Nasdaq SmallCap Market
on or before the Initial Closing Date and to maintain such listing for at least
five years from the Initial Closing Date.
(s) So long as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement to become effective in compliance with the Act as shall be necessary
to enable the sale of the Common Stock underlying the Warrants and cause a copy
of each Prospectus, as then amended, to be delivered to each holder of record of
a Warrant as they may request and as otherwise required by law and, to furnish
to the Representative and dealers as many copies of each such Prospectus as the
Representative or dealer may reasonably request. In addition, for so long as any
Warrant is outstanding, the Company will promptly notify the Representative of
any material change in the financial condition, business, results of operations
or properties of the Company.
(t) Neither the Company nor any person that is controlled by
the Company will take any action designed to stabilize or manipulate, or which
might be reasonably expected to cause or result in the stabilization or
manipulation of, the price of the Common Stock or Warrants.
(u) The Company shall retain a transfer agent for the Common
Stock and Warrants, reasonably acceptable to the Representative, for a period of
five (5) years from the Effective Date. In addition, for a period of five (5)
years from the Effective Date, the Company, at its own expense, shall cause such
transfer agent to provide the Representative with copies of the Company's daily
transfer sheets, and, no less frequently that weekly, a current list of the
Company's securityholders, including a list of the beneficial owners of
securities held by a depository trust company and other nominees.
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(v) The Representative and its successors will have the right
to designate a nominee for election, at its or their option, either as a member
of or a non-voting advisor to the Board of Directors of the Company, and the
Company will use its best efforts to cause such nominee to be elected and
continued in office as a director of the Company or as such advisor until the
expiration of five (5) years from the Effective Date. Each of the Company's
current officers, directors and shareholders agrees to vote all of the Common
Stock owned by such person or entity so as to elect and continue in office such
nominee of the Representative. Following the election of such nominee as a
director or advisor, such person shall receive no more or less compensation than
is paid to other non-officer directors of the Company for attendance at meetings
of the Board of Directors of the Company and shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings
including, but not limited to, food, lodging and transportation. The Company
agrees to indemnify and hold such director or advisor harmless, to the maximum
extent permitted by law, against any and all claims, actions, awards and
judgments arising out of his service as a director or advisor and, in the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, to include such director or advisor as an
insured under such policy. The rights and benefits of such indemnification and
the benefits of such insurance shall, to the extent possible, extend to the
Representative insofar as it may be or may be alleged to be responsible for such
director or advisor. If the Representative does not exercise its option to
designate a member of or advisor to the Company's Board of Directors, the
Representative shall nonetheless have the right to send a representative (who
need not be the same individual from meeting to meeting) to observe each meeting
of the Board of Directors. The Company agrees to give the Representative notice
of each such meeting and to provide the Representative with an agenda and
minutes of the meeting no later than it gives such notice and provides such
items to the directors.
(w) For a period of five (5) years from the Effective Date, or
until such earlier time as the Common Stock and Warrants are listed on the New
York Stock Exchange or the American Stock Exchange, the Company shall cause its
legal counsel to provide the Representative with a list, to be updated at least
annually, of those states in which the Common Stock and Warrants may be traded
in non-issuer transactions under the Blue Sky laws of the 50 states.
(x) For a period of five (5) years from the Effective Date,
the Company shall continue to retain Spear, Safer, Harmon & Co., P.A., (or such
other accounting firm as is acceptable to the Representative) as the Company's
independent public accountants.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the
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Act. The Commission has not issued any order preventing or suspending the use of
any Prepricing Prospectus.
(b) The Company and the transactions contemplated by this
Agreement meet the requirements for using Form SB-2 under the Act. The
registration statement in the form in which it became or becomes effective and
also in such form as it may be when any post-effective amendment thereto shall
become effective and the prospectus and any supplement or amendment thereto when
filed with the Commission under Rule 424(b) under the Act, complied or will
comply in all material respects with the provisions of the Act and will not at
any such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the registration statement or the
prospectus made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein.
(c) All the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive or similar rights; the Securities to be issued
and sold by the Company have been duly authorized and, when issued and delivered
to the Underwriters against payment therefor, or to the holders of Warrants upon
exercise thereof, in accordance with the terms hereof or the terms of the
Warrants, as the case may be, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the registration
statement and the prospectus.
(d) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Florida with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not have
a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole.
(e) All the Company's subsidiaries (collectively, the
"SUBSIDIARIES") are listed on Exhibit A hereto. Each Subsidiary is a corporation
duly organized, validly existing and in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of such
Subsidiary; all the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
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paid and nonassessable, and are owned by the Company directly, or indirectly
through one of the other Subsidiaries, free and clear of any lien, adverse
claim, security interest, equity or other encumbrance.
(f) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement that
are not described or filed as required by the Act or the Exchange Act.
(g) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or by-laws, or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or in default in any
material respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound.
(h) Neither the issuance and sale of the Securities, the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby (i) requires
any consent, approval, authorization or other order of or registration or filing
with, any court, regulatory body, administrative agency or other governmental
body, agency or official (except such as may be required for the registration of
the Securities under the Act and the Exchange Act and compliance with the
securities or Blue Sky laws of various jurisdictions, all of which have been or
will be effected in accordance with this Agreement) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
the certificate or articles of incorporation or bylaws, or other organizational
documents, of the Company or any of the Subsidiaries or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
any agreement, indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound, or violates or will violate any statute,
law, regulation or filing or judgment, injunction, order or decree applicable to
the Company or any of the Subsidiaries or any of their respective properties, or
will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Subsidiaries pursuant
to the terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of the property or assets of
any of them is subject.
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(i) The accountants, who have certified or shall certify the
financial statements included or incorporated by reference in the Registration
Statement and the Prospectus (or any amendment or supplement thereto) are
independent public accountants as required by the Act.
(j) The financial statements, together with related schedules
and notes, included or incorporated by reference in the Registration Statement
and the Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and the Subsidiaries on the basis stated in the
Registration Statement at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein and, in the case of unaudited financial statements, the absence of notes
thereto and statements of cash flows and subject to normal recurring
adjustments; and the other financial and statistical information and data
included or incorporated by reference in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) are accurately presented
and prepared on a basis consistent with such financial statements and the books
and records of the Company and the Subsidiaries.
(k) The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws.
(l) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the capital
stock, or material increase in the short-term debt or long-term debt, of the
Company or any of the Subsidiaries, or any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, net worth or results of operations of the Company and the Subsidiaries
taken as a whole.
(m) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the Prospectus
as being owned by it, free and clear of all liens, claims, security interests or
other encumbrances except such as are described in the Registration Statement
and the Prospectus or in a document filed as an exhibit to the Registration
Statement or such imperfections or liens which do not materially interfere with
the Company's use thereof, and all the property described in the Prospectus as
being held under lease by each of the Company and the Subsidiaries is held by it
under valid, subsisting and enforceable leases.
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(n) The Company has not distributed and, prior to the later to
occur of (i) the Initial Closing Date and (ii) completion of the distribution of
the Offering Securities, will not distribute any offering material in connection
with the offering and sale of the Offering Securities other than the
Registration Statement, the Prepricing Prospectus, the Prospectus or other
materials, if any, permitted by the Act.
(o) The Company and each of the Subsidiaries has such material
permits, licenses, franchises and authorizations of governmental or regulatory
authorities ("PERMITS") as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus; the Company and each of
the Subsidiaries has fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, none of such permits
contains any restriction that is materially burdensome to the Company or any of
the Subsidiaries.
(p) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (ii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iii) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(q) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any employee or agent of the Company or any Subsidiary has
made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation, which payment,
receipt or retention of funds is of a character required to be disclosed in the
Prospectus.
(r) The Company and each of the Subsidiaries have filed all
tax returns required to be filed, which returns are correct in all material
respects, and neither the Company nor any Subsidiary is in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(s) Except as set forth in the Prospectus, the Company has no
employee benefit plans (including, without limitation, profit sharing and
welfare benefit plans) or deferred compensation arrangements that are subject to
the provisions of the Employee Retirement Income Security Act of 1974.
(t) No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company because of the
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filing of the registration statement or consummation of the transactions
contemplated by this Agreement.
(u) The Company and the Subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them or any of them or
necessary for the conduct of their respective businesses, and the Company is not
aware of any claim to the contrary or any challenge by any other person to the
rights of the Company and the Subsidiaries with respect to the foregoing.
(v) The Company has complied with all provisions of Florida
Statutes, ss. 517.075, relating to issuers doing business with Cuba.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each of
you and each other Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus or in the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph with respect to
any Prepricing Prospectus shall not inure to the benefit of any Underwriter (or
to the benefit of any person controlling such Underwriter) on account of any
such loss, claim, damage, liability or expense arising from the sale of the
Securities by such Underwriter to any person if a copy of the Prospectus shall
not have been delivered or sent to such person within the time required by the
Act and the regulations thereunder, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Prepricing Prospectus was corrected in the Prospectus, provided that the Company
has delivered the Prospectus to the several Underwriters in requisite quantity
on a timely basis to permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(b) If any action, suit or proceeding shall be brought against
any Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "INDEMNIFYING PARTIES"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and
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payment of all fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the indemnifying parties have agreed in writing to
pay such fees and expenses, (ii) the indemnifying parties have failed to assume
the defense and employ counsel, or (iii) the named parties to any such action,
suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by its counsel in
writing that representation of such indemnified party and any indemnifying party
by the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the indemnifying party shall not have the right to assume the defense
of such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Werbel-Roth Securities, Inc., and shall be reasonably acceptable to
the Company, and that all such fees and expenses shall be reimbursed as they are
incurred. The indemnifying parties shall not be liable for any settlement of any
such action, suit or proceeding effected without their written consent, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the indemnifying parties agree
to indemnify and hold harmless any Underwriter, to the extent provided in the
preceding paragraph, and any such controlling person from and against any loss,
claim, damage, liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Underwriter, but
only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, or failure to comply with applicable law as it
relates to this agreement. If any action, suit or proceeding shall be brought
against the Company, any of its directors, any such officer, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
, such Underwriter shall have the rights and duties given to the Company by
paragraph above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, and any such controlling person shall
have the
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rights and duties given to the Underwriters by paragraph above. The foregoing
indemnity agreement shall be in addition to any liability which any Underwriter
may otherwise have.
(d) If the indemnification provided for in this Section is
unavailable to an indemnified party under paragraphs or hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other hand from the offering of the
Securities, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus; provided that, in the event that the Representative shall have
purchased any Additional Shares or Additional Warrants hereunder, any
determination of the relative benefits received by the Company, or the
Underwriters from the offering of the Securities shall include the net proceeds
(before deducting expenses) received by the Company, and the underwriting
discounts and commissions received by the Representative, from the sale of such
Additional Securities, in each case computed on the basis of the respective
amounts set forth in the notes to the table on the cover page of the Prospectus.
The relative fault of the Company and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section were determined
by a pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph above shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section , no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Offering Securities underwritten by it and distributed to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section are several in proportion to the respective numbers of Firm Shares and
Firm Warrants set forth opposite their names in Schedule I hereto (or such
numbers of Firm Shares and Firm Warrants increased as set forth in Section
10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement involves no monetary payment by
the indemnified party and includes an unconditional release of such indemnified
party from all liability or claims that are the subject matter of such action,
suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any person
controlling the Company, (ii) acceptance of any Securities and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section .
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Offering Securities hereunder are subject to
the following conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective amendment
thereto to be declared effective before the offering of the Offering Securities
may commence, the registration statement or such post-effective amendment shall
have become effective not later than 5:30 P.M., Eastern time, on the date
hereof, or at such later date and time as shall be consented to in writing by
you, and all filings, if any, required by Rules 424 and 430A under the Act shall
have been timely made; no stop order suspending the effectiveness of the
registration statement shall have been issued and no proceeding for that purpose
shall have been instituted or, to the knowledge of the Company or any
Underwriter, threatened by the Commission, and any request of the Commission for
additional information (to be included in the registration statement or the
prospectus or otherwise) shall have been complied with to your satisfaction.
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(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which in your opinion, as
Representative of the several Underwriters, would materially adversely affect
the market for the Offering Securities, or (ii) any event or development
relating to or involving the Company or any officer or director of the Company
which makes any statement made in the Prospectus untrue or which, in the opinion
of the Company and its counsel or the Underwriters and their counsel, requires
the making of any addition to or change in the Prospectus in order to state a
material fact required by the Act or any other law to be stated therein or
necessary in order to make the statements therein not misleading, if amending or
supplementing the Prospectus to reflect such event or development would, in your
opinion, as Representative of the several Underwriters, materially adversely
affect the market for the Offering Securities.
(c) You shall have received on the Initial Closing Date, an
opinion of Atlas, Pearlman, Trop & Borkson, P.A., counsel for the Company, dated
the Initial Closing Date and addressed to you, as Representative of the several
Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the State of Florida
with full corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries taken as a whole;
(ii) Each of the Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power and authority to
own, lease, and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto); and all the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable, and are owned by the Company directly, or indirectly through
one of the other Subsidiaries, free and clear of any perfected security
interest, or, to the best knowledge of such counsel after reasonable inquiry,
any other security interest, lien, adverse claim, equity or other encumbrance;
(iii) To the best knowledge of such counsel after
reasonable inquiry, the authorized and outstanding capital stock of the Company
is as set forth under the caption "Capitalization" in the Prospectus; and the
authorized capital stock of the Company conforms in all material respects as to
legal matters to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock";
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(iv) The Offering Securities and the Warrant
Securities have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable and free of any preemptive, or
to the best knowledge of such counsel after reasonable inquiry, similar rights
that entitle or will entitle any person to acquire any Shares upon the issuance
thereof by the Company;
(v) The certificates representing the Securities are
in due and proper form and the Common Stock issuable upon the exercise of the
Firm Warrants, the Additional Warrants, the Representative's Warrant and the
Warrant Warrants has been duly authorized and reserved for issuance, and when
issued and delivered in accordance with the terms of such warrants will be duly
and validly issued, fully paid and nonassessable.
(vi) The Registration Statement and all
post-effective amendments, if any, have become effective under the Act and, to
the best knowledge of such counsel after reasonable inquiry, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose are pending before the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
accordance with Rule 424(b);
(vii) The Company has corporate power and authority
to enter into this Agreement and to issue, sell and deliver the Securities to be
sold by it to the Underwriters as provided herein, and this Agreement has been
duly authorized, executed and delivered by the Company and is a valid, legal and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except as enforcement of rights to indemnity and contribution
hereunder may be limited by Federal or state securities laws or principles of
public policy and subject to the qualification that the enforceability of the
Company's obligations may be limited by bankruptcy, fraudulent conveyance and
similar laws affecting creditors' rights generally and by general equitable
principals;
(viii) Neither the Company nor any of the
Subsidiaries is in violation of its respective certificate or articles of
incorporation or bylaws, or other organizational documents, or to the best
knowledge of such counsel after reasonable inquiry, is in default in the
performance of any material obligation, agreement or condition contained in any
bond, debenture, note or other evidence of indebtedness required to be described
in the Prospectus, except as may be disclosed in the Prospectus;
(ix) Neither the offer, sale or delivery of the
Securities, the execution, delivery or performance of this Agreement, compliance
by the Company with the provisions hereof nor consummation by the Company of the
transactions contemplated hereby conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under, the certificate or articles
of incorporation or bylaws, or other organizational documents, of the Company or
any of the Subsidiaries or any agreement, indenture, lease or other instrument
to which the Company or any of the Subsidiaries is a party or by which any of
them or any of their respective properties is bound that is an exhibit to the
Registration Statement, or is known to such counsel
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after reasonable inquiry, or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
the Subsidiaries, nor will any such action result in any violation of any
existing law, regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws), judgment, injunction, order or decree known to
such counsel after reasonable inquiry, applicable to the Company, the
Subsidiaries or any of their respective properties;
(x) No consent, approval, authorization or other
order of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official is
required on the part of the Company (except as have been obtained under the Act
and the Exchange Act or such as may be required under state securities or Blue
Sky laws governing the purchase and distribution of the Shares) for the valid
issuance and sale of the Shares to the Underwriters as contemplated by this
Agreement;
(xi) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the financial statements
and the notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act;
(xii) To the best knowledge of such counsel after
reasonable inquiry: (A) other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or any of
their property, is subject, which are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement thereto)
and (B) there are no agreements, contracts, indentures, leases or other
instruments, that are required to be described in the Registration Statement or
the Prospectus (or any amendment or supplement thereto) or to be filed as an
exhibit to the Registration Statement that are not described or filed as
required, as the case may be;
(xiii) To the best knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of any decree
of any court or governmental agency or body having jurisdiction over the Company
or any of the Subsidiaries;
(xiv) Upon delivery of the Securities pursuant to
this Agreement and payment therefor as contemplated herein the Underwriters will
acquire good and marketable title to the Securities free and clear of any lien,
claim, security interest, or other encumbrance, restriction on transfer or other
defect in title; and
(xv) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including review
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and discussion of the contents thereof and nothing has come to the attention of
such counsel that has caused them to believe that the Registration Statement at
the time the Registration Statement became effective, or the Prospectus, as of
its date and as of the Initial Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made or
that any amendment or supplement to the Prospectus, as of its respective date,
and as of the Initial Closing Date or the Option Closing Date, as the case may
be, contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and the notes thereto and the schedules and other financial
and statistical data included in the Registration Statement or the Prospectus).
(xvi) The Company and each of the Subsidiaries has
full corporate power and authority, and all necessary governmental
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental regulatory officials and bodies (except
where the failure so to have any such authorizations, approvals, orders,
licenses, certificates, franchises or permits, individually or in the aggregate,
would not have a material adverse effect on the business, properties, operations
or financial condition of the Company and the Subsidiaries taken as a whole), to
own their respective properties and to conduct their respective businesses as
now being conducted, as described in the Prospectus;
(xvii) Except as disclosed in the Prospectus, the
Company owns of record, directly or indirectly, all the outstanding shares of
capital stock of each of the Subsidiaries free and clear of any lien, adverse
claim, security interest, equity, or other encumbrance;
(xviii) The Company and the Subsidiaries own all
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them, and Atlas,
Pearlman, Trop & Borkson, P.A. is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and the Subsidiaries
with respect to the foregoing;
(xix) To the best of knowledge of such counsel after
reasonable inquiry, except as described in the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance of, and
such counsel does not know of any commitment, plan or arrangement to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company; and
(xx) To the best of knowledge of such counsel after
reasonable inquiry, except as described in the Prospectus, there is no holder of
any security of the Company or any other person who has the right, contractual
or otherwise, to cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, the Securities or the right to have any
Common Stock or other securities of the Company included in the registration
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statement or the right, as a result of the filing of the registration statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company.
In rendering their opinion, counsel may rely upon an opinion
or opinions, each dated the Initial Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
or the State of Florida, provided that (1) each such local counsel is acceptable
to the Representative, (2) such reliance is expressly authorized by each opinion
so relied upon and a copy of each such opinion is delivered to the
Representative and is, in form and substance satisfactory to them and their
counsel, and (3) counsel shall state in their opinion that they believe that
they and the Underwriters are justified in relying thereon.
(d) You shall have received on the Initial Closing Date an
opinion of Holland & Knight LLP, counsel for the Underwriters, dated the Initial
Closing Date and addressed to you, as Representative of the several
Underwriters, with respect to the matters referred to in clauses , , , , and
such other related matters as you may request.
(e) You shall have received letters addressed to you, as
Representative of the several Underwriters, and dated the date hereof and the
Initial Closing Date from Spear, Safer, Harmon & Co., P.A., independent
certified public accountants, substantially in the forms heretofore approved by
you.
(f) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Initial Closing Date; (ii)
there shall not have been any change in the capital stock of the Company nor any
material increase in the short-term or long-term debt of the Company (other than
in the ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or Supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole; (iv) the Company and the Subsidiaries shall not
have any liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries, taken as a whole, other than those reflected in the Registration
Statement or the Prospectus (or any amendment or supplement thereto); and (v)
all the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and as of the
date hereof and on and as of the Initial Closing Date as if made on and as of
the Initial Closing Date, and you shall have received a certificate, dated the
Closing Date and signed by the chief executive officer and the chief financial
officer of the Company (or such other officers as are acceptable to you), to the
effect set forth in this Section 8(f) and in Section 8(g) hereof.
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(g) The Company shall not have failed at or prior to the
Initial Closing Date to have performed or complied with any of its agreements
herein contained and required to be performed or complied with by it hereunder
at or prior to the Initial Closing Date.
(h) Prior to the Initial Closing Date the shares of Common
Stock and the Warrants which the Company agrees to sell pursuant to this
Agreement shall have been listed, subject to notice of issuance, in Standard &
Poor's and on the Nasdaq SmallCap Market.
(i) The Company shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
reasonably requested.
(j) The NASD shall have indicated that it has no objection
to the underwriting arrangements pertaining to the sale of the Securities by the
Underwriters.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are satisfactory in
form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company
and delivered to you, as Representative of the Underwriters, or to counsel for
the Underwriters, shall be deemed a representation and warranty by the Company
to each Underwriter as to the statements made therein.
The obligation of the Representative to purchase Additional
Securities hereunder is subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section , except that, if any
Option Closing Date is other than the Initial Closing Date, the certificates,
opinions and letters referred to in paragraphs shall be dated the Option Closing
Date in question and the opinions called for by paragraphs and shall be revised
to reflect the sale of Additional Securities.
9. EXPENSES.
(a) The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, and all amendments or supplements to any
of them, as may be reasonably requested for use in connection with the offering
and sale of the Offering Securities; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Securities,
including any stamp taxes in connection with the original issuance and sale of
the Securities; (iv) the printing (or reproduction) and delivery of this
Agreement, the preliminary and supplemental Blue Sky Memoranda and all other
agreements or documents printed (or reproduced) and delivered in
22
<PAGE>
connection with the offering of the Securities; (v) the listing of the Common
Stock and Warrants in Standard & Poor's and on the Nasdaq SmallCap Market; (vi)
the registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section hereof
(including the reasonable fees, expenses and disbursements of counsel for the
Underwriters relating to the preparation, printing or reproduction, and delivery
of the preliminary and supplemental Blue Sky Memoranda and such registration and
qualification); (vii) the filing fees and the fees and expenses of counsel for
the Underwriters in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.; (viii) the transportation and
other expenses incurred by or on behalf of Company representatives in connection
with presentations to prospective purchasers of the Offering Securities; and
(ix) the fees and expenses of the Company's accountants and the fees and
expenses of counsel (including local and special counsel) for the Company; (x)
the expenses of the Underwriters and counsel for the Underwriters (including
Chilean co-counsel) in connection with the due diligence investigation of the
Company; and (xi) expenses for tombstone advertising not to exceed $12,500.
(b) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 9, it will pay to
the Representative a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the Offering
Securities, of which $25,000 has been paid to date, by certified or bank
cashier's check, or at the election of the Representative, by deduction from the
proceeds of the offering contemplated herein.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Offering Securities may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the Company,
by notifying you, or by you, as Representative of the several Underwriters, by
notifying the Company.
If any one or more of the Underwriters shall fail or refuse to purchase
any Firm Shares or Firm Warrants that it or they are obligated to purchase
hereunder on the Initial Closing Date, and the aggregate number of Firm Shares
and Firm Warrants which such defaulting Underwriter or Underwriters are
obligated but fail or refuse to purchase is not more than one-tenth of the
aggregate number of such securities which the Underwriters are obligated to
purchase on the Initial Closing Date, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Firm Shares and Firm
Warrants set forth opposite its name in Schedule I hereto bears to the aggregate
number of Firm Shares and Firm Warrants set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify in
accordance with Section __ of the Master Agreement Among Underwriters of
Werbel-Roth Securities, Inc., to purchase the Firm Shares and Firm Warrants
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or refuse
to purchase Shares or Firm Warrants
23
<PAGE>
which it or they are obligated to purchase on the Initial Closing Date and the
aggregate number of securities with respect to which such default occurs is more
than one-tenth of the aggregate number of securities which the Underwriters are
obligated to purchase on the Initial Closing Date and arrangements satisfactory
to you and the Company for the purchase of such Shares by one or more
non-defaulting Underwriters or other party or parties approved by you and the
Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Initial Closing Date, but in no event for longer than seven days, in order that
the required changes, if any, in the Registration Statement and the Prospectus
or any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement. The
term "Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule I hereto who, with your approval and
the approval of the Company, purchases Firm Shares or Firm Warrants which a
defaulting Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Initial
Closing Date or any Option Closing Date (if different from the Initial Closing
Date and then only as to the Additional Securities), as the case may be, (i)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or Florida shall have been declared by either federal or state
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the
Offering Securities at the offering price to the public set forth on the cover
page of the Prospectus or to enforce contracts for the resale of the Offering
Securities by the Underwriters. Notice of such termination may be given to the
Company by telegram, telecopy or telephone and shall be subsequently confirmed
by letter.
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
cover page, and the statements in the first and third paragraphs under the
caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections and hereof. The first
paragraph under the caption "Underwriting" will contain the names and
participations of the underwriters; the third paragraph will contain the selling
concession and the reallowance.
24
<PAGE>
13. MISCELLANEOUS. Except as otherwise provided in Sections , and
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 1900 Glades Road, Suite 351, Boca Raton, Florida 33431, Attention:
Ricardo Vilensky, Chief Executive Officer; or (ii) if to you, as Representative
of the several Underwriters, care of Werbel-Roth Securities, Inc., 150 E.
Palmetto Park Road, Suite 510, Boca Raton, Florida 33432, Attention: Howard
Roth, President.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed within the State of Florida.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
*****
25
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
UNISERVICE CORPORATION
By_______________________________________
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
Werbel-Roth Securities, Inc.
As Representative of the Several Underwriters
By Werbel-Roth Securities, Inc.
By_____________________________
26
<PAGE>
SCHEDULE I
NUMBER OF NUMBER OF
UNDERWRITER FIRM SHARES FIRM WARRANTS
- ----------- ----------- -------------
Werbel-Roth Securities, Inc. ....
Total.....
27
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Kyoto Agreement") is entered into
by and among UNISERVICE CORPORATION, a Florida corporation ("Uniservice") and
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%) of Kentucky Foods Chile, S.A., a Chilean corporation
("KyF Chile"), as of the 5th day of January, 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 ("Class B Common Stock").
B. Uniservice wishes to purchase 54,216 shares of KyF Chile (the "Kyoto
Shares"), 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 Kyoto whereby as of
the Effective Date, Kyoto 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
Kyoto 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) KyF 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 KyF 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 KyF Chile
since the date
2
<PAGE>
of the financial statements previously provided to Uniservice. To the best of
Kyoto's knowledge, the only changes in the financial condition of KyF Chile
since said date are those arising from the normal and regular conduct of the
business of KyF 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 KyF 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, KyF 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 KyF 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 KyF
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 KyF Chile or the benefit of which KyF 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. Uniservice represents that it is acquiring the
Kyoto Shares 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
Carmencita #23, Office 1002
Santiago, Chile
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: /S/ RICARDO VILENSKY
------------------------
Name: RICARDO VILENSKY
Its: CEO
INVERSIONES E INMOBILIARIA
KYOTO LIMITADA
By: /S/ RICARDO VILENSKY
------------------------
Name: RICARDO VILENSKY
Its: GENERAL MANAGER
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") and
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%) of Kentucky Foods Chile, S.A., a Chilean corporation
("KyF Chile"), as of the 5th day of January, 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 ("Class B Common Stock").
B. Uniservice wishes to purchase 54,216 shares of KyF Chile (the "Kyoto
Shares"), 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 Kyoto whereby as of
the Effective Date, Kyoto 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
<PAGE>
shares of Class B Common Stock for 54,216 Kyoto Shares. It is the
Parties' intention 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
Kyoto 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) KyF 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 KyF 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 KyF Chile
since the date
2
<PAGE>
of the financial statements previously provided to Uniservice. To the best of
Kyoto's knowledge, the only changes in the financial condition of KyF Chile
since said date are those arising from the normal and regular conduct of the
business of KyF 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 KyF 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, KyF 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 KyF 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 KyF
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 KyF Chile or the benefit of which KyF 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. Uniservice represents that it is acquiring the
Kyoto Shares 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
Carmencita #23, Office 1002
Santiago, Chile
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: /S/ RICARDO VILENSKY
-----------------------------------
Name: RICARDO VILENSKY
Its: CEO
INVERSIONES E INMOBILIARIA
KYOTO LIMITADA
By: /S/ RICARDO VILENSKY
-----------------------------------
Name: RICARDO VILENSKY
Its: GENERAL MANAGER
EXHIBIT 4.1
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement") is made and entered into as of
this ____ day of June, 1998, by and between UNISERVICE CORPORATION, a
corporation organized and existing under the laws of the State of Florida
("Company"), and AMERICAN SECURITIES TRANSFER & TRUST, INC., a national banking
association, as warrant agent ("Warrant Agent").
WHEREAS, the Company proposes to offer and sell a maximum of 1,610,000
shares of common stock ("Class A Common Stock"), $.0001 par value per share,
(which includes 210,000 shares of Class A Common Stock pursuant to the
Underwriters' over-allotment option) at a purchase price of $5.00 per share and
1,610,000 redeemable Class A Common Stock purchase warrants ("Warrants") (which
includes 210,000 shares of Warrants pursuant to the Underwriters' over-allotment
option) at a purchase price of $.125 per Warrant pursuant to a Registration
Statement on Form SB-2 (the "Prospectus"), File Number 333-50897, filed with the
Securities and Exchange Commission; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, registration of transfer, exchange and exercise of the
Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
2. FORM OF WARRANTS. The text and the terms of the Warrants, and the
form of election to purchase shares of Class A Common Stock appearing on the
reverse side thereof shall be substantially as set forth in EXHIBIT A attached
hereto and made a part hereof. The Warrants shall be executed on behalf of the
Company by the manual or facsimile signature of the president or a vice
president of the Company and by the manual or facsimile of the secretary or
assistant secretary of the Company under its corporate seal, affixed or in
facsimile.
The Warrants shall be dated by the Warrant Agent as of the initial date
of issuance thereof, and upon transfer or exchange, the Warrant shall be dated
as of such subsequent issuance date.
3. REGISTRATION AND COUNTERSIGNATURE. The Warrant Agent shall maintain
books for the transfer and registration of the Warrants. Upon the initial
issuance of the
<PAGE>
Warrants, the Warrant Agent shall issue and register the Warrants in the names
of the respective registered holders, and upon subsequent issuance, such
Warrants shall be registered in the names of the respective succeeding
registered holders. The Warrants shall be countersigned by the Warrant Agent (or
by any successor to the Warrant Agent then acting as warrant agent under this
Agreement) and shall not be valid for any purpose unless so countersigned.
Warrants may be so countersigned, however, by the Warrant Agent (or by its
successor as warrant agent) and be delivered by the Warrant Agent,
notwithstanding that the persons whose manual or facsimile signature appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature or delivery. Until a Warrant is transferred
on the books of the Warrant Agent, the Company and the Warrant Agent may treat
any registered holder of Warrants as the absolute owner thereof for all
purposes, notwithstanding any notice to the contrary.
4. REGISTRATION OF TRANSFERS AND EXCHANGES. The Warrant Agent shall
transfer any outstanding Warrants on the books to be maintained by the Warrant
Agent for that purpose, upon surrender thereof for transfer, properly endorsed
or accompanied by appropriate instructions for transfer with proper documentary
stamps affixed thereto, if requested. Upon any such transfer, a new Warrant
shall be issued to the transferee, and the surrendered Warrant shall be canceled
by the Warrant Agent. Warrants so canceled shall be delivered by the Warrant
Agent to the Company from time to time. Warrants may be exchanged at the option
of the holder thereof when surrendered at the office of the Warrant Agent, for
another Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Class A Common Stock. The Warrant Agent is hereby irrevocably authorized to
countersign and deliver the Warrants in accordance with the provisions of this
Paragraph 4, and the Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrants duly executed on behalf of the Company
for such purpose.
5. EXERCISE OF WARRANTS. Subject to the provisions of this Agreement,
each registered holder of Warrants shall have the right, which right may be
exercised as in such Warrants expressed, during the five year period commencing
on the date of the Company's Prospectus dated ___________, 1998 ("Prospectus")
to purchase from the Company, and the Company shall issue and sell to such
registered holder of Warrants, the number of fully paid and non-assessable
shares of Class A Common Stock specified in such Warrants, upon surrender to the
Company at the office of the Warrant Agent, with the form of election to
purchase on the reverse side thereof duly completed and signed, and upon payment
to the Warrant Agent for the account of the Company of the Exercise Price, as
hereinafter defined, for the number of shares of Class A Common Stock in respect
of which such Warrants are then exercised. Payment of such Exercise Price may be
made in cash or by certified check, bank draft, or postal or express money
order, payable in United States dollars, to the order of the Company. Subject to
the provisions of Paragraph 8 hereof, upon such surrender of Warrants and
payment of the
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<PAGE>
Exercise Price as aforesaid, the Company, acting through the Warrant Agent,
shall issue and cause to be delivered with all reasonable dispatch to or upon
the written order of the registered holder of such Warrants and in such name or
names as such registered holder may designate, a certificate or certificates for
the number of full shares of Class A Common Stock so purchased upon the exercise
of such Warrants. Such certificates shall be deemed to have been issued, and any
person so designated to be named therein shall be deemed to have become a holder
of record of such Class A Common Stock, as of the date of surrender of such
Warrants and payment of the Exercise Price, as aforesaid; provided, however,
that if, at the date of surrender of such warrants and the payment of such
Exercise Price, the transfer books for the Class A Common Stock purchasable upon
the exercise of such Warrants shall be closed, the certificates for the shares
in respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened, and until such date the Company
shall be under no duty to deliver any certificate for such shares; provided
further, however, that the transfer books aforesaid, unless otherwise required
by law, shall not be closed at any one time for a period longer than 20 days.
The right of purchase represented by the Warrants shall be exercisable, at the
election of the registered holders thereof, either as an entirety or, from time
to time, for part only of the shares specified therein, and in the event that
any Warrant is exercised in respect of less than all of the shares specified
therein at any time prior to the date of expiration of the Warrants, a new
Warrant or warrants will be issued for the remaining number of Class A Common
Stock specified in the Warrant so surrendered, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrants
pursuant to the provisions of this Paragraph 5 and of Paragraph 3 of this
Agreement, and the Company, whenever required by the Warrant Agent, will supply
the Warrant Agent with Warrants duly executed on behalf of the Company for such
purposes.
Notwithstanding anything contained herein to the contrary, no Warrant
may be exercised if the issuance of Class A Common Stock in connection therewith
would constitute a violation of the registration provisions of federal or state
securities laws.
The Company will 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. In addition, the Company will
use its best efforts to qualify for sale the Warrants and the Class A Common
Stock underlying the Warrants in those states in which the Warrants and the
Class A Common Stock are to be offered.
Upon thirty (30) days' prior written notice to all holders of the
Warrants, 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.
The "Exercise Price" of the Warrants shall mean the exercise price
specified in the Warrants until the occurrence of a recapitalization or
reclassification that, pursuant to the provisions hereof, shall require an
increase or decrease in the exercise price of the Warrants, and thereafter shall
mean said price as adjusted from time to time in accordance with the provisions
hereof. No such adjustment shall be made unless such
3
<PAGE>
adjustment would change the then purchase price per share by Ten Cents ($.10) or
more; provided, however, that all adjustments not so made shall be deferred and
made when the aggregate thereof would change the then purchase price per share
by Ten Cents ($.10) or more. No adjustment made pursuant to any provision hereof
shall have the effect of increasing the total consideration payable upon
exercise of any of the Warrants.
6. ADJUSTMENTS IN CERTAIN CASES. In case the Company shall at any time
prior to the exercise or termination of any of the Warrants effect a
recapitalization or reclassification of such character that its Class A Common
Stock shall be changed into or become exchangeable for a larger or smaller
number of shares, then, upon the effective date thereof, the number of shares of
Class A Common Stock that the holders of the Warrants shall be entitled to
purchase upon exercise thereof shall be increased or decreased, as the case may
be, in direct proportion to the increase or decrease in such number of shares of
Class A Common Stock by reason of such recapitalization or reclassification on,
and the purchase price per share of such recapitalized or reclassified Class A
Common Stock shall, in the case of an increase in the number of shares, be
proportionately decreased and, in the case of a decrease in the number of
shares, be proportionately increased.
In case the Company shall at any time prior to the exercise or
termination of any of the Warrants distribute to holders of its Class A Common
Stock cash, evidences of indebtedness, or other securities or assets, other than
as dividends or distributions payable out of current or accumulated earnings,
then, in any such case, the holders of the Warrants shall be entitled to
receive, upon exercise thereof, with respect to each share of Class A Common
Stock issuable upon such exercise, the amount of cash or evidences of
indebtedness or other securities or assets that such holder would have been
entitled to receive with respect to the Class A Common Stock as a result of the
happening of such event, had the Warrants been exercised immediately prior to
the record date or other date fixing shareholders to be affected by such event
(without giving effect to any restriction upon such exercise).
In case the Company shall at any time prior to the exercise or
termination of any of the Warrants consolidate or merge with any other
corporation or transfer all or substantially all of its assets to any other
corporation preparatory to a dissolution, then the Company shall, as a condition
precedent to such transaction, cause effective provision to be made so that the
holders of the Warrants, upon the exercise thereof after the effective date of
such transaction, shall be entitled to receive the kind and amount of shares,
evidences of indebtedness, and/or other property receivable on such transaction
by a holder of the number of shares of Class A Common Stock as to which the
Warrants were exercisable immediately prior to such transaction (without giving
effect to any restriction upon such exercise); and, in any such case,
appropriate provision shall be made with respect to the rights and interests of
the holders thereof to the effect that the provisions of the Warrants shall
thereafter be applicable (as nearly as may be
4
<PAGE>
practicable) with respect to any shares, evidences of indebtedness, or other
securities or assets thereafter deliverable upon exercise of the Warrants.
Whenever the number of shares of Class A Common Stock or other types of
securities or assets purchasable upon exercise of any of the Warrants shall be
adjusted as provided herein, the Company shall forthwith obtain and file with
its corporate records a certificate or letter from a firm of independent public
accountants of recognized standing, which may include the Company's then
independent auditing firm setting forth the computation and the adjusted number
of shares of Class A Common Stock or other securities or assets purchasable
hereunder resulting from such adjustments, and a copy of such certificate or
letter shall be mailed to each of the registered holders of the Warrants. Any
such certificate or letter shall be conclusive evidence as to the correctness of
the adjustment or adjustments referred to therein and shall be available for
inspection by the holders of the Warrants on any day during normal business
hours.
In the event that at any time as a result of an adjustment made
pursuant hereto the holders of the Warrants shall become entitled to purchase
upon exercise thereof shares, evidences of indebtedness, or other securities or
assets (other than Class A Common Stock, then, wherever appropriate, all
references herein to Class A Common Stock shall be deemed to refer to and
include such shares, evidences of indebtedness, or other securities or assets,
and thereafter the number of such shares, evidences of indebtedness, or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions
hereof.
7. REDEMPTION. The Warrants may be redeemed at the option of the
Company, at a redemption price of $.25 per Warrant (subject to adjustment as set
forth herein) at any time commencing twelve (12) months from the date of the
Prospectus upon not less than thirty (30) days prior written notice, subject to
exercise by the Warrantholder, if the closing bid price of the Company's Class A
Common Stock, as reported by the principal exchange on which the Class A Common
Stock is traded, the NASDAQ SmallCap Market or the National Quotation Bureau,
Incorporated, as the case may be, equals or exceeds $7.00 per share for thirty
(30) consecutive trading days. However, the Company may not redeem the Warrants
at any time that a current registration statement under the Securities Act of
1933 covering the shares of Class A Common Stock issuable upon exercise of the
Warrants is not then in effect. On and after the date fixed for redemption, the
Registered Holder shall have no rights with respect to the Warrants except to
receive the $.25 per Warrant upon surrender of this Warrant Certificate.
8. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of securities upon the exercise of
the Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes that may be payable in respect of any transfer involved in the
issue or delivery of any
5
<PAGE>
securities in a name other than that of the registered holder of Warrants in
respect of which such securities are issued and, in such case, neither the
Company nor the Warrant Agent shall be required to issue or deliver any
certificate representing such securities or any Warrant until the person
requesting the same has paid to the Company or the Warrant Agent the amount of
such tax or has established to the Company's satisfaction that such tax has been
paid.
9. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Warrant Agent may countersign and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to the Warrant Agent of
such loss, theft or destruction of such Warrants and indemnity, if requested,
also satisfactory to them. Applicants for such substitute Warrants shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company or the Warrant Agent may prescribe.
10. RESERVATION OF CLASS A COMMON STOCK. Prior to the issuance of any
Warrants, there shall have been reserved, and the Company shall at all times
keep reserved out of the authorized and unissued Class A Common Stock, a number
of shares of Class A Common Stock sufficient to provide for the exercise of the
rights of purchase represented by the Warrants, and the transfer agent for the
Class A Common Stock and every subsequent transfer for any of the Company's
Class A Common Stock issuable upon the exercise of any of the rights of purchase
aforesaid are hereby irrevocably authorized and directed at all times to reserve
such number of authorized and unissued Class A Common Stock as shall be
requisite for such purpose. The Company agrees that all Class A Common Stock
issued upon exercise of the Warrants shall be, at the time of delivery of the
certificates representing such Class A Common Stock, validly issued and
outstanding, fully paid and non-assessable. The Company will keep a copy of this
Agreement on file with the transfer agent for the Class A Common Stock and with
every subsequent transfer agent for the Company's Class A Common Stock issuable
upon the exercise of the right of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time to time
from such transfer agent stock certificates required to honor outstanding
Warrants that have been exercised. The Company will supply such transfer agent
with duly executed stock certificates for such purpose. All Warrants surrendered
in the exercise of the rights thereby evidenced shall be canceled by the Warrant
Agent and shall thereafter be delivered to the Company, and such canceled
Warrants shall constitute sufficient evidence of the number of shares of Class A
Common Stock that have been issued upon the exercise of such Warrants. All
Warrants surrendered for transfer, exchange or partial exercise shall be
canceled by the Warrant Agent and delivered to the Company. Promptly after the
date of expiration of the Warrants, the Warrant Agent shall certify to the
Company the total aggregate amount of Warrants then outstanding and, thereafter,
no Class A Common Stock shall be subject to reservation in respect of such
Warrants.
6
<PAGE>
11. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS. Unless otherwise
instructed by the Company in writing, the Warrant Agent shall account promptly
to the Company with respect to Warrants exercised and shall promptly deposit in
an account for the benefit of the Company, in a bank designated by the Company,
all monies received by the Warrant Agent for the purchase of Class A Common
Stock through the exercise of such Warrants.
12. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation or company that may succeed to the business of the Warrant Agent by
merger or consolidation or otherwise to which the Warrant Agent shall be a
party, or any corporation or company or otherwise succeeding to the business of
the Warrant Agent shall be the successor to the Warrant Agent hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, however, that such corporation would be eligible
for appointment as a successor Warrant Agent under the provision of Paragraph 14
of this Agreement. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement or in case at any time the name
of the Warrant Agent shall be changed, and any of the Warrants shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent and deliver such
Warrants so countersigned; and in case at the time any of the Warrants shall not
have been countersigned, the successor to the Warrant Agent may countersign such
Warrants, either in the name of the predecessor Warrant Agent or in the name of
the successor Warrant Agent; and in all such cases, such Warrants shall have the
full force provided in the Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned; and if at that time any of the Warrants
shall not have been countersigned, the Warrant Agent may countersign such
Warrants either in its prior name or in its changed name; and in all such cases,
such Warrants shall have the full force provided in the Warrants and this
Agreement.
13. DUTIES OF THE WARRANT AGENT.
(a) The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company shall be bound:
(i) The statements contained herein and in the
Warrants shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same, except such as
describe the Warrant Agent or action or actions taken or to be taken by it. The
Warrant Agent assumes no
7
<PAGE>
responsibility with respect to the distribution of the Warrants, except as
herein otherwise provided.
(ii) The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrants to be complied with by the Company.
(iii) The Warrant Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder,
either itself, or by or through its attorneys, agents or employees.
(iv) The Warrant Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to any holder
of any Warrant in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or advice of such
counsel, provided the Warrant Agent shall have exercised reasonable care in the
selection and continued employment of such counsel.
(v) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance upon any notice, resolution, waiver, consent, order,
certificate or other paper, document or instrument reasonably believed by it to
have been signed, sent or presented by the proper party or parties.
(vi) The Company agrees to pay the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
execution of this Agreement; to reimburse the Warrant Agent for all expenses,
taxes, governmental charges and other charges of any kind and nature incurred by
the Warrant Agent in the execution of this Agreement; and to indemnify the
Warrant Agent and save it harmless from and against any and all liabilities,
including judgments, costs and reasonable attorneys' fees for anything done or
omitted by the Warrant Agent in the execution of this Agreement, except as a
result of the Warrant Agent's negligence or bad faith.
(vii) The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding, or to take any other action
likely to involve expense, unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity. All rights of action under this Agreement or under any of the
Warrants or in the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent, and any recovery of judgment
shall be for the benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
8
<PAGE>
(viii) The Warrant Agent and any shareholder,
director, officer, partner or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to or otherwise act as fully and
freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(ix) The Warrant Agent shall act hereunder solely as
agent, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything that it may do or refrain from
doing in connection with this Agreement, except for its own negligence or bad
faith.
(x) The Warrant Agent shall keep copies of this
Agreement available for inspection by holders of the Warrants during normal
business hours at its principal office in Colorado.
14. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving notice in writing to
the Company and by giving notice by mailing to holders of the Warrants at their
addresses as such addresses appear on the Warrant register of such resignation,
specifying a date when such resignation shall take effect, which date shall not
be less than 30 days after the mailing of said notice. The Warrant Agent may be
removed at the discretion of the Company by like notice to the Warrant Agent
from the Company and by like mailing of notice to the holders of the Warrants.
If the Warrant Agent shall resign or be removed or otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after
such removal, or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by the registered
holder of a Warrant (who shall, with such notice, submit his Warrant for
inspection by the Company), then the registered holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. After appointment, any successor Warrant Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed, but the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent any
property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall give notice thereof to
the predecessor Warrant Agent and each transfer agent for the Class A Common
Stock, and shall forthwith give notice to the holders of the Warrants in the
manner prescribed in this section. Failure to file or mail any notice provided
for in this Section 14, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Warrant Agent or the
appointment of any successor Warrant Agent, as the case may be.
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<PAGE>
15. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of any
transfer agent other than the Warrant Agent for the Class A Common Stock of the
Company issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such transfer agent.
16. NOTICES. Any notice pursuant to this Agreement to be given or made
by the Warrant Agent or by the registered holder of any Warrant to the Company
shall be deemed to have been sufficiently given or made if sent by certified
mail, return receipt requested, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
To the Company: Uniservice Corporation
1900 Glades Road, Suite 351
Boca Raton, FL 33431
To the Warrant Agent: American Securities Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, CO 80202
Any notice pursuant to this Agreement to be given or made by the Company or by
the registered holder of any Warrant to the Warrant Agent shall be deemed to
have been sufficiently given or made if sent by certified mail, return receipt
requested, postage prepaid, addressed (until another address is filed ln writing
by the Warrant Agent with the Company) to the Warrant Agent as set forth above.
17. STANDARD OF CONDUCT. Notwithstanding any implication to the
contrary elsewhere herein, whenever the Company or the Warrant Agent are
required or permitted to make any judgment or to take any action, no such
judgment or action shall be made or taken in bad faith or in any arbitrary or
capricious fashion.
18. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Agent may,
from time to time, supplement or amend this Agreement without the approval of
any of the holders of the Warrants in order to cure any ambiguity or to correct
or supplement any provision contained herein that may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder that the Company and the
Warrant Agent may deem necessary or desirable, that shall not be inconsistent
with the provisions of the Warrants, and that shall not materially adversely
affect the rights of the holders of the Warrants.
19. SUCCESSORS. All of the covenants and provisions hereof by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
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20. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge
or consolidate with or into any other corporation, unless the corporation
resulting from such merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the Warrant Agent and
executed and delivered to the Warrant Agent, the due and punctual performance
and observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
21. FLORIDA CONTRACT. This Agreement and each Warrant issued hereunder
shall be deemed to be a contract made under the laws of the State of Florida and
for all purposes shall be construed in accordance with the laws of said state.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give any person or corporation, other than the Company, the Warrant
Agent and the registered holders of the Warrants, any legal or equitable right,
remedy or claim under this Agreement, but this Agreement shall be for the sole
and exclusive benefit of the Company and the Warrant Agent and their respective
successors and of the holders of the Warrant Certificates.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
UNISERVICE CORPORATION
By:_____________________________
Name: __________________________
Its: ___________________________
ATTEST:
________________________
AMERICAN SECURITIES TRANSFER &
TRUST, INC.
By:_____________________________
Name: __________________________
Its: ___________________________
ATTEST:
________________________
11
EXHIBIT 4.2
WARRANT AGREEMENT
THIS WARRANT AGREEMENT is dated as of June __, 1998 between Uniservice
Corporation, a Florida corporation (the "COMPANY"), and Werbel-Roth Securities,
Inc., (hereinafter referred to as the "UNDERWRITER").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter warrants (the
"WARRANTS") to purchase up to 140,000 (as such number may be adjusted from time
to time pursuant to Article 8 of this Warrant Agreement) shares (the "SHARES")
of the common stock, par value $.0001 per share, of the Company (the "COMMON
STOCK"); up to 140,000 (as such number may be adjusted from time to time
pursuant to Article 8 of this Warrant Agreement) Common Stock purchase warrants
(the "UNDERLYING WARRANTS"); and
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "UNDERWRITING AGREEMENT") dated June __, 1998 between the
Underwriter and the Company, to act as the underwriter in connection with the
Company's proposed public offering (the "PUBLIC OFFERING") of 1,400,000 shares
of Common Stock (the "PUBLIC SHARES") at an initial public offering price of
$5.00 per Public Share and 1,400,000 warrants (the "PUBLIC WARRANTS") at an
initial public offering price of $0.125 per Public Warrant; and
WHEREAS, the Warrants issued pursuant to this Agreement are being
issued by the Company to the Underwriter or to its designees who are officers of
the Underwriter or to members of the selling group participating in the
distribution of the Public Shares and Public Warrants to the public in the
Public Offering and/or their respective officers or partners (collectively, the
"DESIGNEES"), in consideration for, and as part of the Underwriter's
compensation in connection with, the Underwriter acting as the Underwriter
pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter or its designees to the Company of One Hundred Forty Dollar
($140.00), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. GRANT.
The Underwriter and/or the Designees are hereby granted the
right to purchase, commencing ________ __, 1999 until 5:00 P.M., Eastern time,
on _________, 2003 (the "WARRANT EXERCISE TERM"), up to 140,000 fully-paid and
non-assessable Shares at an initial exercise price (subject to adjustment as
provided in Article 6 hereof) of $7.50 per Share and up to 140,000 Underlying
Warrants at an initial exercise price (subject to adjustment as provided in
Article 6 hereof) of $0.1875 per Underlying Warrant.
The Underlying Warrants are each exercisable to purchase one
fully-paid and non-assessable share of Common Stock (collectively, the
"UNDERLYING WARRANT SHARES") at a
<PAGE>
price of $11.25 per Underlying Warrant Share. The Underlying Warrants are
exercisable at any time commencing _________, 1999 until 5:00 P.M., Eastern time
on ________, 2003. The Holder (defined hereafter) may purchase, upon exercise of
the Warrants, either all or part of the Shares or all or part of the Underlying
Warrants or all or part of both. The Shares and, except as provided in Article
13 hereof, the Underlying Warrants are in all respects identical to the Public
Shares and Public Warrants, respectively, being sold to the public pursuant to
the terms and provisions of the Underwriting Agreement.
2. WARRANT CERTIFICATES. The warrant certificates delivered and to be
delivered pursuant to this Agreement (the "WARRANT CERTIFICATES") shall be, for
the Warrants exercisable for the purchase of Underlying Shares, in the form set
forth in Exhibit A attached hereto and made a part hereof, and, for the Warrants
exercisable for the purchase of Underlying Warrants, in the form of Exhibit B
attached hereto and made a part hereof, each with such appropriate insertions,
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. EXERCISE OF WARRANTS.
3.1. CASH EXERCISE. The Warrants initially are exercisable at
a price of $7.50 per Share purchased and $0.1875 per Underlying Warrant
purchased, payable in cash or by check to the order of the Company, or any
combination thereof, subject to adjustment as provided in Article 8 hereof. Upon
surrender of the Warrant Certificate(s) with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Shares and Underlying Warrants purchased, at the
Company's principal offices in Florida (currently located at 1900 Glades Road,
Suite 351, Boca Raton, Florida 33431) the registered holder of a Warrant
Certificate ("HOLDER" or "HOLDERS") shall be entitled to receive a certificate
or certificates for the Shares so purchased and/or a certificate or certificates
for the Underlying Warrants so purchased. The purchase rights represented by
each Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional Shares or fractional Underlying
Warrants). In the case of the purchase of less than all Shares or Underlying
Warrants purchasable under any Warrant Certificate, the Company shall cancel
said Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the Shares or
Underlying Warrants purchasable thereunder.
3.2. CASHLESS EXERCISE. At any time during the Warrant
Exercise Term, the Holder may, at the Holder's option, exchange, in whole or in
part, the Warrants represented by such Holder's Warrant Certificate which are
exercisable for the purchase of Shares and Underlying Warrants (a "WARRANT
EXCHANGE"), into the number of Shares and Underlying Warrants determined in
accordance with this Section , by surrendering such Warrant Certificate at the
principal office of the Company or at the office of its transfer agent,
accompanied by a notice stating such Holder's intent to effect such exchange,
the number of Warrants to be so exchanged and the date on which the Holder
requests that such Warrant Exchange occur (the "NOTICE OF EXCHANGE"). The
Warrant Exchange shall take place on the date specified in the Notice of
Exchange or, if later, the date the Notice of Exchange is received by the
Company (the "EXCHANGE DATE"). Certificates for the Shares and Underlying
Warrants issuable upon such Warrant Exchange and, if applicable, a new Warrant
Certificate of like tenor
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representing the Warrants which were subject to the surrendered Warrant
Certificate and not included in the Warrant Exchange, shall be issued as of the
Exchange Date and delivered to the Holder within three (3) days following the
Exchange Date.
In connection with any Warrant Exchange, the Holder shall be entitled
to subscribe for and acquire (i) the number of Shares (rounded to the next
highest integer) which would, but for such Warrant Exchange, than be issuable
pursuant to the provisions of Section above upon the exercise of the Warrants
specified by the Holder in its Notice of Exchange (the "TOTAL SHARE NUMBER")
less (ii) the number of Shares equal to the quotient obtained by dividing (a)
the product of the Total Share Number and the existing Exercise Price (as
hereinafter defined) per Share by (b) the Public Shares Market Price (as
hereinafter defined) of a Public Share on the day preceding the Warrant
Exchange. "PUBLIC SHARES MARKET PRICE" at any date shall be deemed to be the
last reported sale price of the Common Stock, or, in case no such reported sales
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading or as reported on the Nasdaq SmallCap Market, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or quoted
in the Nasdaq SmallCap Market, the closing bid price as furnished by (i) the
National Association of Securities Dealers, Inc. (the "NASD") through the Nasdaq
Stock Market Inc. ("NASDAQ") or (ii) a similar organization if NASDAQ is no
longer reporting such information.
In connection with any Warrant Exchange, the Holder shall be entitled
to subscribe for and acquire (i) the number of Underlying Warrants (rounded to
the next highest integer) which would, but for such Warrant Exchange, than be
issuable pursuant to the provisions of Section 3.1 above upon the exercise of
the Warrants specified by the Holder in its Notice of Exchange (the "TOTAL
UNDERLYING WARRANT NUMBER") less (ii) the number of Underlying Warrants equal to
the quotient obtained by dividing (a) the product of the Total Underlying
Warrant Number and the existing Exercise Price per Underlying Warrant by (b) the
Public Warrants Market Price (as hereinafter defined) of a Public Warrant on the
day preceding the Warrant Exchange. "PUBLIC WARRANTS MARKET PRICE" at any date
shall be deemed to be the last reported sale price of the Public Warrants, or,
in case no such reported sales takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Public
Warrants are listed or admitted to trading or as reported on the Nasdaq SmallCap
Market, or, if the Public Warrants are not listed or admitted to trading on any
national securities exchange or quoted in the Nasdaq SmallCap Market, the
closing bid price as furnished by (i) the National Association of Securities
Dealers, Inc. (the "NASD") through the Nasdaq Stock Market Inc. ("NASDAQ") or
(ii) a similar organization if NASDAQ is no longer reporting such information.
4. ISSUANCE OF CERTIFICATES.
Upon the exercise of the Warrants, the issuance of
certificates for the Shares purchased and certificates for the Underlying
Warrants purchased, and upon the exercise of the Underlying Warrants, the
issuance of certificates for the Underlying Warrant Shares purchased, shall be
made forthwith (and in any event within three (3) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax
which may be payable in
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<PAGE>
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Article hereof) be issued in the name of, or in such names as may
be directed by, the Holder thereof; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
and the Underlying Warrants shall be executed on behalf of the Company by the
manual or facsimile signature of the present or any future Chairman or Vice
Chairman of the Board of Directors or Chief Executive Officer, President or Vice
President of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the present or any future Secretary
or Assistant Secretary of the Company. Warrant Certificates and certificates
representing the Underlying Warrants shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Shares and the Underlying Warrants purchased, and upon
exercise, in whole or in part, of the Underlying Warrants, certificates
representing the Underlying Warrant Shares purchased (collectively, the "WARRANT
SECURITIES"), shall bear a legend substantially similar to the following:
"The securities represented by this certificate and the other
securities issuable upon exercise thereof have not been registered for
purposes of public distribution under the Securities Act of 1933, as
amended (the "ACT"), and may not be offered or sold except (i) pursuant
to an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any similar
rule under such Act relating to the disposition of securities), or
(iii) upon the delivery by the holder to the Company of an opinion of
counsel, reasonably satisfactory to counsel to the Company, stating
that an exemption from registration under such Act is available."
5. RESTRICTION ON TRANSFER OF WARRANTS.
The Holder of a Warrant Certificate, by the Holder's
acceptance thereof, covenants and agrees that the Warrants are being acquired as
an investment and not with a view to the distribution thereof, and that the
Warrants, Shares, Underlying Warrants and Underlying Warrant Shares may not be
sold, transferred, assigned, pledged or hypothecated or otherwise disposed of,
in whole or in part, for a period of one (1) year from the date hereof, except
to the Underwriter or to the Designees.
6. PRICE.
6.1. INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise
price of each Warrant shall be $7.50 per Share and $0.1875 per Underlying
Warrant. The adjusted exercise
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<PAGE>
price per Share and the adjusted exercise price per Underlying Warrant shall be
the prices which shall result from time to time from any and all adjustments of
the initial exercise price per Share or per Underlying Warrant, as the case may
be, in accordance with the provisions of Article 8 hereof.
6.2. EXERCISE PRICE. The term "EXERCISE PRICE" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. REGISTRATION RIGHTS.
7.1. REGISTRATION UNDER THE SECURITIES ACT OF 1933. All of the
Warrants, the Shares, the Underlying Warrants, and the Underlying Warrant Shares
have been registered for purposes of public distribution under the Securities
Act of 1933, as amended (the "ACT").
7.2. REGISTRABLE SECURITIES. As used herein the term
"REGISTRABLE SECURITY" means each of the Warrants, the Shares, the Underlying
Warrants, the Underlying Warrant Shares and any shares of Common Stock issued
upon any stock split or stock dividend in respect of such Shares or Underlying
Warrant Shares; provided, however, that with respect to any particular
Registrable Security, such security shall cease to be a Registrable Security
when, as of the date of determination, (i) it has been effectively registered
under the Act and disposed of pursuant thereto, (ii) registration under the Act
is no longer required for subsequent public distribution of such security, or
(iii) it has ceased to be outstanding. The term "REGISTRABLE SECURITIES" means
any and/or all of the securities falling within the foregoing definition of a
"REGISTRABLE SECURITY." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be made in the definition of
"REGISTRABLE SECURITY" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Article .
7.3. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION.
The Company covenants and agrees as follows:
(a) Once effective, the Company will use its best
efforts to maintain the effectiveness of the Registration Statement until the
earlier of (i) the date that all of the Registrable Securities have been sold or
(ii) the date the holders thereof receive an opinion of counsel to the Company
that all of the Registrable Securities may be freely traded without registration
under the Act, under Rule 144(k) promulgated under the Act or otherwise.
(b) In connection with the registration under Section
7.1 hereof, the Company shall file the Registration Statement as expeditiously
as possible, but in any event no later than furnish each holder of Registrable
Securities such number of prospectuses as shall reasonably be requested.
(c) The Company shall pay all costs, fees and
expenses (other than underwriting fees, discounts and nonaccountable expense
allowance applicable to the Registrable Securities and fees and expenses of
counsel retained by the holders of Registrable Securities) in connection with
all Registration Statements filed pursuant to Section 7.1 hereof including,
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<PAGE>
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses.
(d) The Company will take all necessary action which
may be required in qualifying or registering the Registrable Securities included
in the Registration Statement, for offering and sale under the securities or
blue sky laws of such states as are reasonably requested by the holders of such
securities.
(e) The Company shall indemnify any holder of the
Registrable Securities to be sold pursuant to any Registration Statement and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such holder or underwriter or person deemed to be an
underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"), against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such registration statement to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriter, and to provide for just and equitable contribution, as set
forth in Section 7 of the Underwriting Agreement.
(f) Any holder of Registrable Securities to be sold
pursuant to a registration statement, and such holder's successors and assigns,
shall severally, and not jointly, indemnify, the Company, its officers and
directors and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such holder, or such
holder's successors or assigns, for specific inclusion in such Registration
Statement to the same extent and with the same effect as the provisions pursuant
to which the Underwriter has agreed to indemnify the Company, and to provide for
just and equitable contribution, as set forth in Section 7 of the Underwriting
Agreement.
(g) Nothing contained in this Agreement shall be
construed as requiring any holder to exercise the Warrants or the Underlying
Warrants held by such holder prior to the initial filing of any registration
statement or the effectiveness thereof.
(h) If the Company shall fail to comply with the
provisions of this Article , the Company shall, in addition to any other
equitable or other relief available to the holders of Registrable Securities, be
liable for any or all incidental, special and consequential damages sustained by
the holders of Registrable Securities, requesting registration of their
Registrable Securities.
(i) The Company shall promptly deliver copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the Registration Statement to each holder of Registrable Securities
included for such registration in such Registration Statement
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<PAGE>
pursuant to Section 7.1 hereof requesting such correspondence and memoranda and
to the managing underwriter, if any, of the offering in connection with which
such Holder's Registrable Securities are being registered and shall permit each
holder of Registrable Securities and such underwriter to do such reasonable
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the Registration Statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such holder of Registrable Securities or underwriter shall
reasonably request.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SECURITIES. The
following adjustments apply to the Exercise Price of the Warrants with respect
to the Shares and the number of Shares purchasable upon exercise of the
Warrants. In the event the Exercise Price per Share and/or the number of Shares
so purchasable is adjusted, then the Exercise Price of the Warrants relating to
the Underlying Warrants and the number of Underlying Warrants purchasable
thereunder shall be adjusted in the same proportion.
8.1. DISTRIBUTION OF SECURITIES. In case the Company shall at
any time after the date hereof pay a dividend in shares of Common Stock or make
any issuance or distribution in shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (other than
securities to employees of the Company pursuant to an employee stock purchase or
option plan that has been approved by the Company's stockholders in which
non-executive employees are eligible to participate), then upon such dividend or
distribution, the holder of Warrants shall receive the amount of such dividend
in shares of Common Stock or the amount of such other distribution in shares of
Common Stock which would have otherwise been payable to such holder if it been
the holder of record of Common Stock issuable upon exercise of its Warrant on
the record date for the determination of those entitled to such stock dividend
or distribution.
8.2. SUBDIVISION AND COMBINATION. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.3. ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Article , the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price. Notwithstanding the
foregoing, in the case of adjustments to the exercise price of the Warrants with
respect to the Underlying Warrants and/or the number of Underlying Warrants
purchasable upon exercise of the Warrants, if an event occurs that results in an
adjustment of the number and/or price of the shares of Common Stock issuable
upon exercise of the Public Warrants pursuant to Section 6 of the Warrant
Agreement by and among the Company, the Underwriter and American Securities
Transfer & Trust, Inc. dated as of July __, 1998 ("PUBLIC WARRANT AGREEMENT"),
resulting in
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<PAGE>
automatic adjustment in the number and/or price of the Underlying Warrant Shares
issuable upon exercise of the Underlying Warrants pursuant to Section 8.5
hereof, then the adjustment provided for in this Section shall not, in such
instance, result in any further adjustment in the aggregate number of shares of
Common Stock ultimately issuable upon exercise of the Underlying Warrants.
8.4. RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of
any reclassification or change of the outstanding shares of Common Stock (other
than a change in par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holders shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holders were the owners of both the Shares
and the Underlying Warrant Shares immediately prior to any such events.
8.5. ADJUSTMENT OF UNDERLYING WARRANTS' EXERCISE PRICE AND
SECURITIES ISSUABLE UPON EXERCISE OF UNDERLYING WARRANTS. With respect to any of
the Underlying Warrants, whether or not the Warrants have been exercised and
whether or not the Warrants are issued and outstanding, the exercise price for,
and the number of, Underlying Warrant Shares issuable upon exercise of the
Underlying Warrants shall automatically be proportionately adjusted in
accordance with Section 6 of the Public Warrant Agreement, upon the occurrence
of any of the events described therein. Thereafter, until the next such
adjustment or until otherwise adjusted in accordance with this Section 8.5, the
Underlying Warrants shall be exercisable at such adjusted exercise price and for
such adjusted number of Underlying Warrant Shares.
8.6. DISTRIBUTION OF ASSETS. In the event that the Company
shall at any time prior to the exercise of all Warrants make any distribution of
its assets to holders of its Common Stock as a liquidating or a partial
liquidating dividend, then the holder of Warrants who exercises its Warrants
after the record date for the determination of those holders of Common Stock
entitled to such distribution of assets as a liquidating or partial liquidating
dividend shall be entitled to receive for the Warrant Price per Warrant, in
addition to each share of Common Stock, the amount of such distribution (or, at
the option of the Company, a sum equal to the value of any such assets at the
time of such distribution as determined by the Board of Directors of the Company
in good faith) which would have been payable to such holder had he been the
holder of record of the Common Stock receivable upon exercise of his Warrant on
the record date for the determination of those entitled to such distribution. At
the time of any such dividend or distribution, the Company shall make
appropriate reserves to ensure the timely performance of the provisions of this
Subsection 8.6.
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9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
Each Warrant Certificate is exchangeable without expense, upon
the surrender thereof by the registered Holder at the principal executive office
of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
securities in such denominations as shall be designated by the Holder thereof at
the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant Certificate, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates
representing fractions of Shares or fractions of Underlying Warrants upon the
exercise of the Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Shares and Underlying Warrants.
11. RESERVATION AND LISTING OF SECURITIES.
The Company shall at all times reserve and keep available out
of its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrants and the Underlying Warrants, such number of
shares of Common Stock as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefor, all Shares issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder. The Company further covenants and agrees
that upon exercise of the Underlying Warrants and payment of the respective
Underlying Warrant exercise price therefor, all Underlying Warrant Shares
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants and the Underlying Warrants and all Underlying Warrants to be listed on
or quoted by NASDAQ or listed on such national securities exchange, in the event
the Common Stock is listed on a national securities exchange.
12. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder or Holders the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
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(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed; or
(d) reclassification or change of the outstanding
shares of Common Stock (other than a change in par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or a sale or conveyance to another corporation of the property of
the Company as an entirety is proposed; or
(e) The Company or an affiliate of the Company shall
propose to issue any rights to subscribe for shares of Common Stock or any other
securities of the Company or of such affiliate to all the shareholders of the
Company;
then, in any one or more of said events, the Company shall give written notice
to the Holder or Holders of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. UNDERLYING WARRANTS.
The form of the certificates representing the Underlying
Warrants (and the form of election to purchase shares of Common Stock upon the
exercise of the Underlying Warrants and the form of assignment printed on the
reverse thereof) shall be substantially as set forth in Exhibit "B" hereto. As
set forth in Section 8.3 of this Agreement, the exercise price of the Underlying
Warrants and the number of shares of Common Stock issuable upon the exercise of
the Underlying Warrants are subject to adjustment, whether or not the Warrants
have been
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exercised and the Underlying Warrants have been issued, in the manner and upon
the occurrence of the events set forth in Section 6 of the Public Warrant
Agreement, which is hereby incorporated herein by reference and made a part
hereof as if set forth in its entirety herein. Subject to the provisions of this
Agreement and upon issuance of the Underlying Warrants, each registered holder
of such Underlying Warrants shall have the right to purchase from the Company
(and the Company shall issue to such registered holders) up to the number of
fully paid and non-assessable Underlying Warrant Shares (subject to adjustment
as provided herein and in the Public Warrant Agreement), free and clear of all
preemptive rights of shareholders, provided that such registered holder
complies, in connection with the exercise of such holders' Underlying Warrants,
with the terms governing exercise of the Public Warrants set forth in the Public
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Public Warrant Agreement. Upon exercise of the
Underlying Warrants, the Company shall forthwith issue to the registered holder
of any such Underlying Warrants, in such holder's name or in such name as may be
directed by such holder, certificates for the number of Underlying Warrant
Shares so purchased. The Underlying Warrants shall be transferable in the manner
provided in the Public Warrant Agreement, and upon any such transfer, a new
Underlying Warrant shall be issued promptly to the transferee. The Company
covenants to, and agrees with, each Holder that without the prior written
consent of all the Holders, the Public Warrant Agreement will not be modified,
amended, cancelled, altered or superseded, and that the Company will send to
each Holder, irrespective of whether or not the Warrants have been exercised,
any and all notices required by the Public Warrant Agreement to be sent to
holders of the Public Warrants.
14. NOTICES.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section of this Agreement or to such other address as the Company may designate
by notice to the Holders.
15. SUPPLEMENTS AND AMENDMENTS.
The Company and the Underwriter may from time to time
supplement or amend this Agreement without the approval of any Holders of the
Warrants and/or Warrant Securities in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem not to
adversely affect the interests of the Holders of Warrant Certificates.
11
<PAGE>
16. SUCCESSORS.
All the covenants and provisions of this Agreement by or for
the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
17. TERMINATION.
This Agreement shall terminate at the close of business on
_________, 2006. Notwithstanding the foregoing, this Agreement will terminate on
any earlier date when all Warrants and Underlying Warrants have been exercised
and all Warrant Securities have been resold to the public; provided, however,
that the provisions of Section shall survive any termination pursuant to this
Section until the close of business on __________, 2008.
18. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Florida and
for all purposes shall be construed in accordance with the laws of said State.
19. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and the Underwriter and any other
registered holder or holders of the Warrant Certificates or Warrant Securities
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Underwriter and any other holder or holders of the Warrant Certificates or
Warrant Securities.
20. COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
UNISERVICE CORPORATION
By:_________________________________
Name:
Title:
WERBEL-ROTH SECURITIES, INC.
By:_________________________________
Name:
Title:
13
<PAGE>
EXHIBIT A
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE AT ANY TIME COMMENCING _________, 1999
UNTIL 5:00 P.M., EASTERN TIME, _______, 2003
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that_______________________
_______________ or registered assigns, is the registered holder of __________
Warrants to purchase, at any time until 5:00 P.M. Eastern time on _______, 2003
("EXPIRATION DATE"), up to _______ fully-paid and non-assessable shares (the
"SHARES") of the common stock, par value $.0001 per share (the "COMMON STOCK"),
of Uniservice Corporation, a Florida corporation (the "COMPANY"), at an initial
exercise price, subject to adjustment in certain events (the "EXERCISE PRICE"),
of $7.50 per Share, upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of _______,
1998 between the Company and Werbel-Roth Securities, inc. (the "WARRANT
AGREEMENT"). Payment of the Exercise Price may be made in cash, or by certified
or official bank check in New York Clearing House funds payable to the order of
the Company, or any combination thereof.
No Warrant may be exercised after 5:00 P.M., Eastern time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "HOLDERS" or "HOLDER" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
A-1
<PAGE>
This Warrant Certificate may be divided or combined with other
Warrant Certificates of other denominations upon surrender hereof at an office
or agency maintained by the Corporation for such purpose, together with a
written notice specifying the names and denominations (in whole Warrants) in
which new Warrant Certificates are to be issued, signed by the holder thereof or
his duly authorized attorney, together with the funds to pay any transfer,
documentary, stamp or other taxes or government charges payable in connection
with such transfer and any other amounts required pursuant to this Warrant
Certificate. Upon such surrender and payment, a new Warrant Certificate or
Certificates representing a like aggregate number of Warrants shall be issued
and delivered in accordance with such notice.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: _______, 1998 UNISERVICE CORPORATION
By:__________________________
Name:
Title:
A-2
<PAGE>
[FORM OF ELECTION TO PURCHASE]
PLEASE CHECK THE APPROPRIATE BOX
[ ] Pursuant to Section 3.1 of the Warrant Agreement, the undersigned
hereby irrevocably elects to exercise the right, represented by this Warrant
Certificate, to purchase _________ Shares of Common Stock and herewith tenders
in payment for such securities, cash or a certified or official bank check
payable in New York Clearing House Funds to the order of UNISERVICE CORPORATION
in the amount of $________, all in accordance with the terms hereof. The
undersigned requests that a certificate for such securities be registered in the
name of_____________________________ ________________, whose address is
___________________, and that such Certificate be delivered
to__________________________, whose address is
___________________________________.
[ ] Pursuant to Section 3.2 of the Warrant Agreement, the undersigned
hereby irrevocably elects to exchange _________ Warrants represented by this
Warrant Certificate for __________ _________ Shares of Common Stock. The
undersigned requests that a certificate for such securities be registered in the
name of_____________________________ ________________, whose address is
___________________, and that such certificate be delivered
to__________________________, whose address is
___________________________________.
Dated:____________________ (Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Signature:________________ Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
A-3
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED
--------------------------------------
hereby sells, assigns and transfers unto
-------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated:____________________ (Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Signature:________________ Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
A-4
<PAGE>
EXHIBIT B
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE AT ANY TIME COMMENCING _________, 1999
UNTIL 5:00 P.M., EASTERN TIME, _______, 2003
No. W- _________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________
____________________, or registered assigns, is the registered holder of
___________________________ (_______) Warrants to purchase, at any time until
5:00 P.M. Eastern time on _______, 2003 ("EXPIRATION DATE"), an aggregate of up
to ___________________________ (_______) common stock purchase warrants, each
common stock purchase warrant entitling the holder thereof to purchase one share
of common stock, par value $.0001 per share (collectively, the "UNDERLYING
WARRANTS"), of Uniservice Corporation, a Florida corporation (the "COMPANY"), at
an initial exercise price, subject to adjustment in certain events (the
"EXERCISE PRICE"), of $0.1875 per Underlying Warrant, upon surrender of this
Warrant Certificate and payment of the Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of _______, 1997 between the Company and Werbel-Roth
Securities, Inc. (the "WARRANT AGREEMENT"). Payment of the Exercise Price may be
made in cash, or by certified or official bank check in New York Clearing House
funds payable to the order of the Company, or any combination thereof.
The Underlying Warrants issuable upon exercise of the Warrants
will be exercisable at any time from _______, 1999 (or such earlier date on
which the Underwriter consents to the exercise of the Public Warrants (as
defined in the Public Warrant Agreement which is hereinafter defined)) until
5:00 P.M. Eastern time _______, 2003 each Underlying Warrant entitling the
holder thereof to purchase one fully-paid and non-assessable share of common
stock of the Company, at an initial exercise price, subject to adjustment in
certain events, of $11.25 per share. The Underlying Warrants are issuable
pursuant to the terms and provisions of a certain agreement dated as of _______,
1998 by and among the Company, Werbel-Roth Securities, Inc. and
______________________________ (the "PUBLIC WARRANT AGREEMENT"). The Public
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to (except as otherwise provided in the
Warrant Agreement) for a description of the rights, limitations of rights,
manner of exercise, anti-dilution provisions and other provisions with respect
to the Underlying Warrants.
No Warrant may be exercised after 5:00 P.M., Eastern time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
B-1
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "HOLDERS" or "HOLDER" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that, upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair the rights
of the holder as set forth in the Warrant Agreement.
This Warrant Certificate may be divided or combined with other
Warrant Certificates of other denominations upon surrender hereof at an office
or agency maintained by the Corporation for such purpose, together with a
written notice specifying the names and denominations (in whole Warrants) in
which new Warrant Certificates are to be issued, signed by the holder thereof or
his duly authorized attorney, together with the funds to pay any transfer,
documentary, stamp or other taxes or government charges payable in connection
with such transfer and any other amounts required pursuant to this Warrant
Certificate. Upon such surrender and payment, a new Warrant Certificate or
Certificates representing a like aggregate number of Warrants shall be issued
and delivered in accordance with such notice.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: _______, 1998 UNISERVICE CORPORATION
By:__________________________
Name:
Title:
B-2
<PAGE>
[FORM OF ELECTION TO PURCHASE]
PLEASE CHECK THE APPROPRIATE BOX
[ ] Pursuant to Section 3.1 of the Warrant Agreement, the undersigned
hereby irrevocably elects to exercise the right, represented by this Warrant
Certificate, to purchase _________ Underlying Warrants and herewith tenders in
payment for such securities, cash or a certified or official bank check payable
in New York Clearing House Funds to the order of UNISERVICE CORPORATION in the
amount of $________, all in accordance with the terms hereof. The undersigned
requests that a certificate for such securities be registered in the name
of_____________________________ ________________, whose address is
___________________, and that such Certificate be delivered
to__________________________, whose address is
___________________________________.
[ ] Pursuant to Section 3.2 of the Warrant Agreement, the undersigned
hereby irrevocably elects to exchange _________ Warrants represented by this
Warrant Certificate for __________ _________ Underlying Warrants. The
undersigned requests that a certificate for such securities be registered in the
name of_____________________________ ________________, whose address is
___________________, and that such certificate be delivered
to__________________________, whose address is
___________________________________.
Dated:____________________ (Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Signature:________________ Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
B-3
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED
--------------------------------------
hereby sells, assigns and transfers unto
-------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated:____________________ (Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Signature:________________ Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
B-4
EXHIBIT 4.3
SPECIMEN COMMON STOCK CERTIFICATE (FRONT)
- --------------------------------------------------------------------------------
Number Shares
- --------------------- ------------------
Class A Common Stock
UNISERVICE CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
CUSIP
909176 10 9
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON STOCK, PAR
VALUE $.0001 PER SHARE, OF
UNISERVICE CORPORATION transferable only on the books of the Corporation by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Certificate properly endorsed. This Certificate is not valid until countersigned
by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
CORPORATE SEAL
<PAGE>
SPECIMEN SPECIMEN
/s/ Signature /s/ Signature
- ------------------------------ -----------------------------------
Assistant Secretary President
COUNTERSIGNED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. BOX 1596, Denver, CO 80201
Transfer Agent a Registrar Authorized Signature
SPECIMEN COMMON STOCK CERTIFICATE (REVERSE)
- --------------------------------------------------------------------------------
UNISERVICE CORPORATION
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
A FULL STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF OF THE CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF SUCH PREFERENCES AND/OR RIGHTS, SUCH REQUEST MAY BE MADE TO THE CORPORATION
OR THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT--
_________Custodian__________
(cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
JT ENT -- as joint tenants with right of Act__________________________
survivorship and not as tenant (State)
in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,__________________ hereby sell, assign and transfer unto
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- -------------------------------------------------------------------------Shares
of the common stock represented by the within certificate and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated -----------------------------
--------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS AGREEMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
SIGNATURE(S) GUARANTEED: -------------------------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17 Ad-15.
EXHIBIT 5.1
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
June 18, 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") including up to 210,000 shares of Class A Common Stock issuable
in connection with the Underwriters' over-allotment option, 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 including up
to 210,000 Warrants issuable in connection with the Underwriters' over-allotment
option.
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 verifying the accuracy of such
documents, records and instruments.
<PAGE>
Uniservice Corporation
June 18, 1998
Page 2
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 10.6
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).
2
<PAGE>
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
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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 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
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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
<PAGE>
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.
/S/ RICARDO VILENSKY
------------------------------
RICARDO VILENSKY
ATTEST: UNISERVICE CORPORATION
By: /S/ DAVID MAYER By: /S/ RICARDO VILENSKY
----------------------- ---------------------------
Secretary Name: RICARDO VILENSKY
Title: CEO
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
<PAGE>
between Kentucky Foods Chile, S.A., a Chilean corporation and Mr. Aguirre then
in effect shall terminate and shall have no further force or effect.
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).
2
<PAGE>
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.
(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
3
<PAGE>
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 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
4
<PAGE>
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. 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.
5
<PAGE>
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
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
6
<PAGE>
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, 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
7
<PAGE>
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
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
8
<PAGE>
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.
9
<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.
/S/ MAURICIO AGUIRRE
-----------------------------------
MAURICIO AGUIRRE
ATTEST: UNISERVICE CORPORATION
By: /S/ DAVID MAYER By: /S/ RICARDO VILENSKY
------------------ --------------------------------
Secretary Name: RICARDO VILENSKY
Title: CEO
10
EXHIBIT 23.2
SPEAR, SAFER, HARMON & CO. LETTERHEAD
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this First Amendment to Form SB-2 being filed
under the Securities Exchange Act of 1934 by Uniservice Corporation or our
report dated February 4, 1998, relating to our audits of the supplemental
consolidated financial statements of Uniservice Corporation as of December 31,
1997 and 1996 and appearing in the aforementioned First Amendment to Form SB-2.
/S/ SPEAR, SAFER, HARMON & CO.
- ------------------------------
SPEAR, SAFER, HARMON & CO.
Miami, Florida
June 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 545,240
<SECURITIES> 0
<RECEIVABLES> 374,761
<ALLOWANCES> 0
<INVENTORY> 452,462
<CURRENT-ASSETS> 740,690
<PP&E> 8,494,223
<DEPRECIATION> 2,218,755
<TOTAL-ASSETS> 8,987,198
<CURRENT-LIABILITIES> 2,895,427
<BONDS> 0
0
0
<COMMON> 143
<OTHER-SE> 3,361,860
<TOTAL-LIABILITY-AND-EQUITY> 8,987,198
<SALES> 3,452,964
<TOTAL-REVENUES> 3,452,964
<CGS> 1,426,381
<TOTAL-COSTS> 1,893,434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,855
<INCOME-PRETAX> 215,626
<INCOME-TAX> 0
<INCOME-CONTINUING> 215,626
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,626
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
EXHIBIT 99.1
CONSENT OF NOMINEE DIRECTOR
OF
UNISERVICE CORPORATION
The undersigned nominee for director of Uniservice Corporation (the
"Company") hereby consents to the following:
Pursuant to Rule 438 of the Securities Act of 1933, the undersigned
nominee director consents to the inclusion of his name and references to him in
the Registration Statement on Form SB-2 filed by the Company, with regard to
becoming a director of the Company upon the effective date of the Company's
initial public offering.
Dated: June 17, 1998.
/S/ MAURICIO AGUIRRE
---------------------------
Mauricio Aguirre
EXHIBIT 99.2
CONSENT OF NOMINEE DIRECTOR
OF
UNISERVICE CORPORATION
The undersigned nominee for director of Uniservice Corporation (the
"Company") hereby consents to the following:
Pursuant to Rule 438 of the Securities Act of 1933, the undersigned
nominee director consents to the inclusion of his name and references to him in
the Registration Statement on Form SB-2 filed by the Company, with regard to
becoming a director of the Company upon the effective date of the Company's
initial public offering.
Dated: June 17, 1998.
/S/ JUAN CARLOS CERDA
------------------------------
Juan Carlos Cerda
EXHIBIT 99.3
CONSENT OF NOMINEE DIRECTOR
OF
UNISERVICE CORPORATION
The undersigned nominee for director of Uniservice Corporation (the
"Company") hereby consents to the following:
Pursuant to Rule 438 of the Securities Act of 1933, the undersigned
nominee director consents to the inclusion of his name and references to him in
the Registration Statement on Form SB-2 filed by the Company, with regard to
becoming a director of the Company upon the effective date of the Company's
initial public offering.
Dated: June 17, 1998.
/S/ AVRAM FRITCH
--------------------------
Avram Fritch
EXHIBIT 99.4
CONSENT OF NOMINEE DIRECTOR
OF
UNISERVICE CORPORATION
The undersigned nominee for director of Uniservice Corporation (the
"Company") hereby consents to the following:
Pursuant to Rule 438 of the Securities Act of 1933, the undersigned
nominee director consents to the inclusion of his name and references to him in
the Registration Statement on Form SB-2 filed by the Company, with regard to
becoming a director of the Company upon the effective date of the Company's
initial public offering.
Dated: June 17, 1998.
/S/ SERGIO VIVANCO
------------------------------
Sergio Vivanco
