As filed with the Securities and Exchange Commission on May 14, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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UNITED INFORMATION SYSTEMS, INC.
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(Exact name of Company as specified in its charter)
65-0267989 Delaware 3571
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(I.R.S. Employer (State or other jurisdiction (Primary Standard Industrial
Identification No.) of incorporation or organization) Classification Number)
10400 NW 33rd St.
Suite 110
Miami, Florida 33172
(305) 477-3050
(Name, address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
Carlos Maia, Chief Executive Officer
United Information Systems, Inc.
2201 N.W. 102nd Place, Unit 3
Miami, Florida 33172
(305) 477-3050
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Neil S. Baritz, Esq.
Dreier and Baritz, LLP.
1515 N. Federal Hwy.
Suite 300
Boca Raton, FL 33432
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. 9
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each
class of Proposed maximum Proposed maximum
securities to be Amount to be offering price aggregate offer- Amount of
registered registered per share (1)(2) ing price(1)(2) registration fee
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
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Common Stock,
$.001 par value
per share 4,330,729 Shares $5.94 $25,724,530 $7,795.31
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Total 4,330,729 Shares $5.94 $25,724,530 $7,795.31
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(1) The offering price was estimated based on the average of the low and
high sales prices for the Common Stock of the Company as reported on
the Over-The-Counter Bulletin Board on May 12, 1998 which was $5.94.
(2) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457 under the Securities Act of 1933, as amended.
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 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) up to
4,330,729 shares of Common Stock, $.001 par value ("Common Stock") of United
Information Systems, Inc. (the "Company"), a Delaware corporation, for sale by
the holders thereof (the "Selling Security Holders"), subject to the contractual
restrictions that certain of the Selling Security Holders may not sell all or a
portion of such Selling Security Holders' Stock for a specified period as
described in the Prospectus of which this Registration Statement forms a part.
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UNITED INFORMATION SYSTEMS, INC.
Cross Reference Sheet for Prospectus Under Form S-1
Form S-1 Item No. and Caption Caption or Location in Prospectus
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1. Forepart of the Registration Cover Page; Cross Reference
Statement and Outside Sheet; Outside Front Cover
Front Cover of Prospectus Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information, Risk Prospectus Summary; Risk Factors
Factors and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Cover Page; Risk Factors
Price
6. Dilution Not Applicable
7. Selling Security Holders Cover Page; Selling Security Holders
8. Plan of Distribution Outside Front Cover Page of Prospectus;
Sales by Selling Security Holders
9. Description of Securities to Description of Securities;
be Registered Sales by Selling Security
Holders
10. Interest of Named Experts Legal Matters; Experts
and Counsel
11. Information with Respect The Company; Selected Financial Information;
to the Registrant Management's Discussion and Analysis of Financial
Condition and Results of Operations; Management;
Executive Compensation;
Management - Principal Stockholders
12. Disclosure of Commission Management - Indemnification of Officers
Position on Indemnification and Directors
For Securities Act Liabilities
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PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 14, 1998
4,330,729 Shares
UNITED INFORMATION SYSTEMS, INC.
This Prospectus (the "Prospectus") relates to the offer and sale of
4,330,729 shares of Common Stock, $.001 par value (the "Common Stock"), of
United Information Systems, Inc., a Delaware corporation (the "Company") by
certain stockholders of the Company (the "Selling Security Holders"). Of the
4,330,729 shares of Common Stock offered hereby (the "Shares"), an aggregate of
747,314 Shares were issued upon conversion of a series of the Company's 5%
Convertible Debentures, in the aggregate principal amount of $330,000 (the
"Debentures") held by certain of the Selling Security Holders; 862,000 shares
were issued in a private placement transaction undertaken by the Company in
November, 1997, and 1,120,266 shares were issued pursuant to the terms of a
Reorganization Agreement dated November 17, 1997. The Shares are being
registered by the Company pursuant to registration rights granted to the Selling
Security Holders.
The Common Stock of the Company is quoted on the National Association
of Securities Dealers, Inc. Over-the-Counter Bulletin Board under the symbol
UISI. The Shares offered hereby may be sold, from time to time, publicly through
broker-dealers acting as agents for Selling Security Holders, or in private
sales. See "Selling Security Holders" and "Plan of Distribution." The Company
will not receive any of the proceeds from the sale of the Shares offered hereby
by the Selling Security Holders. All costs and fees in connection with the
registration of the Shares offered hereby will be borne by the Company.
Brokerage commissions, if any, directly attributable to the sale of the Shares
will be borne by the Selling Security Holders.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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.
The date of this Prospectus is May 14, 1998
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The Company intends simultaneously with the filing hereof to apply for
inclusion of the Common Stock on the Nasdaq SmallCap Market, although there can
be no assurance that such securities will be accepted for quotation or, if
accepted, that an active trading market will develop. Additionally, if the
Company's securities are accepted for quotation and active trading develops, the
Company is required to maintain certain minimum criteria established by Nasdaq,
and there can be no assurance that the Company will be able to continue to
fulfill such criteria. See "Risk Factors."
The Company has been advised by the Selling Security Holders that they
may sell all or a portion of the Securities offered hereby from time to time in
the over-the-counter market, in negotiated transactions, directly or through
brokers or otherwise, and that such shares will be sold at market prices
prevailing at the time of such sales or at negotiated prices. The Company will
not receive any of the proceeds from the sale of the Securities offered hereby.
In connection with such sales, the Selling Security Holders and any brokers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act of 1933. See "Use of Proceeds" and "Sales by Selling
Security Holders."
All costs, expenses and fees in connection with the registration of the
shares of Common Stock offered hereby will be borne by the Company. Brokerage
commissions, if any, directly attributable to the sale of the Shares will be
borne by the Selling Security Holders.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
contained in this Prospectus, and if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the Selling Security Holders. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the Shares offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale hereunder shall under any circumstances create any implication that
there has been no change in the affairs of the Company since the date hereof.
AVAILABLE INFORMATION
The Company does not file reports or other information with the
Securities and Exchange Commission (the "Commission"). However upon the
effectiveness of this Registration Statement, the Company will become subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith will be obligated to file reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New
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York, New York 10048. Copies of such material may be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Copies of such material can be
obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The address of the Web site is
(http://www.sec.gov).
The Company has, upon request, previously made available its annual
audited financial statements and prospectively, intends to furnish its
stockholders with annual reports containing audited financial statements and may
distribute quarterly reports containing unaudited summary financial information
for each of the first three quarters of each fiscal year.
This Prospectus, which constitutes part of a Registration Statement
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Act"), omits certain information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Executive Vice President,
Corporate Development, United Information Systems, Inc., 104000 NW 33rd St.,
Suite 110, Miami, Florida 33172. Telephone (305) 477-3050.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and the notes thereto
appearing elsewhere in this Prospectus. As used in this Prospectus, the term
"Company" refers to United Information Systems, Inc., a Delaware corporation,
and its wholly-owned subsidiaries, United Information Systems, Inc., a Florida
corporation, and UIS Industrial, Ltda, a Brazil corporation. Unless otherwise
indicated, all figures contained herein are stated in U.S. Dollars.
The Company
United Information Systems, Inc. (the "Company"), was organized under
the laws of the State of Delaware on February 10, 1986 under the name The
Oceania Group, Inc. Subsequent to incorporation, the Company consummated the
purchase and eventual sale of certain business operations. As of June 30, 1997,
the Company had sold all of its assets and conducted no business.
On November 17, 1997, the Company acquired United Information Systems,
Inc. ("UIS Miami"), a Florida corporation, and UIS Industrial Ltda ("UIS
Brazil"), a corporation organized under the laws of Brazil, (UIS Miami and UIS
Brazil collectively referred to as the "UIS Companies") in a stock for stock
transaction under the terms of a Reorganization Agreement (the "Reorganization
Agreement"). Through the terms of the Reorganization Agreement, the shareholders
of the UIS Companies transferred all outstanding stock of the UIS Companies to
the Company and in return received approximately 67.50% of the outstanding
common stock in the Company. As a result of the transaction, the UIS Companies
became wholly owned subsidiaries of the Company. The Company changed its
corporate name to United Information Systems, Inc. effective December 3, 1997.
The Company, through its wholly-owned and 99.5% subsidiaries, UIS Miami
and UIS Brazil, respectively, is a U.S.-headquartered manufacturer and
distributor of microcomputers and related peripherals within the Federal
Republic of Brazil. The Company's products, which include personal computers,
multimedia systems, monitors, keyboards and other input/output devices, are
marketed under the Company's proprietary "UIS" brand name and other brand names
for distribution through a variety of channels in the Brazilian marketplace. In
addition, the Company maintains an engineering support center dedicated to
assisting the Company's customers in maintaining effective networking and system
integration solutions.
The Company is listed on the National Association of Securities Dealers
Over the Counter Bulletin Board under the symbol "UISI". The Company's fiscal
year end is December 31. The Company's executive offices are located at 10400 NW
33rd St., Suite 110, Miami, Florida 33172, and its telephone number is (305)
477-3050.
The Offering
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Common Stock Outstanding
Prior to Offering........................................... 8,405,533 shares
Common Stock Offered By..................................... 4,330,792 shares
Selling Security Holders
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Risk Factors................................................ Investment in the shares of Common Stock
offered hereby involves a high degree of risk
and immediate and substantial dilution from the
price to the public. See "Risk Factors," and
"Certain Transactions."
Use of Proceeds............................................. The Company will not receive proceeds from the
sale of the Shares offered hereunder by the
Selling Security Holders.
Nasdaq OTC Bulletin Board Symbol............................ "UISI"
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Summary Financial Data
The following table sets forth certain summary financial information.
The summary statement of operations data for the years ended December 31, 1997,
1996 and 1995 are derived from the Consolidated Financial Statements of the
Company, which have been audited by Spear Safer & Harmon & Co., independent
certified public accountants. The Consolidated Financial Statements for the
periods indicated above, and the report thereon, appear elsewhere in this
Prospectus. The data in such tables should be read together with "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
notes thereto, appearing elsewhere herein.
Consolidated Statement of Operations Data:
United Information Systems, Inc.
Summary Finanicial Data
For the Three Years Ended December 31st, 1997
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Fiscal Years Ended December 31st, 1998
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1997 1996 1995
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Income Statement Data:
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Net Sales...................... 105,245,366 91,390,274 72,545,510
Gross Profit................... 27,373,173 12,876,724 11,492,728
Operating Income............... 10,059,019 5,450,349 5,431,203
Income Before Income Taxes .... 5,845,229 3,696,715 2,856,385
Income Taxes................... - - 12,000
Net Income..................... 5,845,229 3,696,715 2,844,385
Per Share Data:
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Net Income per Share (Basic)... 0.86 0.56 0.43
Net Income per Share (Diluted). 0.85 0.56 0.43
Weighted Average Shares
Outstanding................... 6,805,124 6,602,566 6,602,566
Balance Sheet Data:
- ------------------
Current Assets................. 20,659,103 35,440,832 28,135,904
Working Capital................ (7,917,990) 5,948,845 6,661,003
Average Working Capital........ (984,573) 6,304,924 3,330,502
Long Term Assets............... 24,180,690 4,445,889 726,901
Total Assets................... 44,839,793 39,886,721 28,862,805
Current Liabilities............ 28,577,093 29,491,987 21,474,901
Long Term Liabilities.......... 75,428 223,787 8,913
Total Liabilities.............. 28,652,521 29,715,774 21,483,814
Shareholder's Equity........... 16,187,272 10,170,947 7,378,991
Total Liabilities and
Shareholder's Equity........... 44,839,793 39,886,721 28,862,805
Financial Ratio Analysis
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Liquidity:
Quick Ratio 44.487% 71.258% 90.437%
Current Ratio 72.293% 120.171% 131.018%
Working Capital to Total Assets -17.658% 14.914% 23.078%
Efficiency:
Accounts Receivable Turnover 6.463 4.756 7.847
Age of Accounts Receivables 56.477 76.747 46.517
Inventory Turnover 7.268 6.996 14.237
Working Capital Turnover -106.894 14.495 21.782
Position and Coverage:
Debt to Equity: 177% 292% 291%
Debt to Total Assets 64% 75% 74%
Profitability:
Return on Sales 5.554% 4.045% 3.921%
Return on Total Assets 24.838% 16.611% 37.100%
Return on Owner's Equity 44.352% 42.128% 77.094%
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RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES
THERETO, IN EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED
HEREBY.
Need for Additional Funds.
Continuation as a Going Concern
The Company's independent auditors have included an explanatory
paragraph in their report on the Company's financial statements stating that the
Company has a substantial working capital deficiency of approximately
$7,900,000. The explanatory paragraph also states that the deficiency has
created a situation whereby the Company is unable to process orders due to the
shortage of working capital. The Company's failure to process its orders has
affected the Company;s ability to continue as a going concern. See "note 14 to
Notes to Financial Statements."
The Company believes that its current cash should be sufficient to
enable the Company to continue funding its operations at currently budgeted
spending levels. However, the Company's cash requirements may vary materially
from those now planned because of, among other things, changes in the focus and
direction of the Company, competitive and technological advances and other
factors. The Company intends to address its capital needs on an ongoing basis,
and if necessary, will attempt to raise funds through a private placement or
public offering of its securities, however no assurance can be given that such
capital will be available or if available, on terms acceptable to the Company.
See "Liquidity and Capital Resources."
Foreign Exchange Risk
The relationship of Brazil's currency to the value of the United States
dollar, and the relative rate of devaluation of Brazil's currency, may affect
the Company's operating results. In particular, the Company's accounts
receivable are denominated in the Brazilian local currency, the Real, and
initially recorded in Real for purposes of United States audit, reporting and
financial statement purposes. Thereafter, the Company's operating results are
converted to United States dollars. Accordingly, since the Consolidated
Financial Statements of the Company are prepared in United States dollars, the
Company can experience fluctuations of both revenues and expenses due to the
translation of Real to United States dollars and any significant devaluation of
the Real relative to the United States dollar could have a material adverse
effect on the Company's operating results. See Conditions in Brazil.
Competition
The manufacturing and distribution of computer equipment and related
products is highly competitive and requires substantial capital. The Company
competes with, and will compete with, numerous international, national, and
regional companies, many of which have significantly larger operations and
greater financial, marketing, human, and other resources than the Company, which
may give such competitors competitive advantages, including economies of scale
and scope. No assurance can be given that the Company will successfully compete
in any market in which it conducts or may conduct operations.
Political and Economic Uncertainty
Notwithstanding the recent stability of the Brazilian economy and
Brazil's unrestricted foreign exchange market, the Brazilian economy has been
characterized by frequent and occasionally substantial intervention by the
Brazilian Government. The Brazilian Government has, in the past, substantially
influenced monetary, credit, tariff, and other policies, including exchange
rates, and has
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utilized price and wage controls, the restriction of bank accounts, capital
controls, and restrictions on exports to influence the economy, including to
reduce extremely high levels of inflation. In addition, the Brazilian political
environment has been characterized by high levels of uncertainty since the
country returned to civilian rule in 1985. Furthermore, there have been periodic
strikes among workers in Brazil's public sector, and any such incidents in the
future could have a material adverse effect on the Company's operations during
such periods. Future changes in, or the implementation of, such policies, and
increased Brazilian political uncertainty, could also have a material adverse
effect on the Company and its financial results. See "Conditions in Brazil."
Consequences of Technological Changes
The market for the Company's products is characterized by continuous
and rapid technological advances and evolving industry standards. Compatibility
with industry standards in areas such as operating systems and communications
protocols is material to the Company's marketing strategy and product
development efforts. In order to remain competitive, the Company must respond
effectively to technological changes by continuing to enhance and improve its
existing products to incorporate emerging or evolving standards and by
successfully developing and introducing new products that meet customer
requirements. There can be no assurance that the Company will successfully
develop, market, or support such products or that the Company will respond
effectively to technological changes or new product announcements or
introductions by others. In the event that the Company does not enhance and
improve its products, the Company's sales and financial results could be
materially adversely affected. In addition, there can be no assurance that, as a
result of technological changes, a portion of the inventory of the Company would
not be rendered obsolete. See "Business -- Products."
Dependence on Key Personnel; Recruitment of Additional Personnel
The Company is dependent upon the efforts and abilities of Carlos Maia,
its Chairman of the Board and Chief Executive Officer, Saul Maia, its President
and Chief Operating Officer and William Cuervo its chief Financial Officer.
Carlos Maia and Saul Maia are brothers. Carlos Maia has entered into an
employment agreement with the Company which terminates in November, 2000. The
Company has obtained key man life insurance in the amount of $2.0 million on the
life of Carlos Maia. The policy names the Company as beneficiary. The loss or
unavailability of the services of or any of the Company's key personnel for any
significant period of time could have a material adverse effect on the Company's
business prospects.
The ability of the Company to attract and retain highly skilled
personnel is critical to the operations of the Company. To date, the Company has
been able to attract and retain the personnel necessary for its operations.
However, there can be no assurance that the Company will be able to do so in the
future. If the Company is unable to attract and retain personnel with necessary
skills when needed, its business could be materially adversely affected. See
"Management."
Assets Outside the U.S.; Enforceability of Civil Liabilities Against Foreign
Persons
While the Company is a United States corporation organized under the
laws of the State of Delaware, UIS Brazil, a wholly-owned subsidiary of the
Company, is a company organized under the laws of Brazil and is domiciled in
Brazil. In connection therewith and as a result, for the foreseeable future, a
substantial portion of the Company's assets will be held or used outside the
United States (in Brazil). As a result, it may not be possible for investors to
enforce against the Company in United
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States courts judgments of such courts predicated upon the civil liability
provisions of the federal securities laws.
No Dividends
The Company has not paid any cash dividends on its Common Stock since
its inception and does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. For the foreseeable future, the Company intends to
reinvest earnings of the Company, if any, in the development and expansion of
its business. See "Dividend Policy."
Control of the Company by Management
Immediately prior to this offering, management of the Company owned
approximately 63.9 % of the outstanding shares of the Company. Immediately
following this offering, management of the Company will own approximately 50.7%
of the outstanding shares of Common Stock. Accordingly, the management of the
Company will have the ability to elect the Company's entire Board of Directors
and control the outcome of all matters submitted to a vote of the shareholders
of the Company. See "Principal Shareholders," "Description of Securities."
Government Regulation
The manufacture of computer equipment and related products is subject
to various forms of government regulation in the United States and Brazil. The
Company and its operations are affected by technology transfer and licensing
regulations, tariff regulations, regulations governing currency conversion and
transfers of profits between jurisdictions, and labor regulations, among others.
While the Company does not believe that such regulations adversely effect the
Company or its business presently, there can be no assurance that such
regulations will not materially adversely affect the Company in the future. In
addition, the government of Brazil has exercised, and continues to exercise,
substantial influence over many aspects of the private sector in Brazil.
Authorization of Preferred Stock; Possible Anti-Takeover Effects
The Board of Directors is authorized to issue shares of preferred stock
and to determine 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 with dividend,
liquidation, conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging and delaying or preventing a change
in control of the Company. The Company has no present intention to issue any
shares of its preferred stock, although there can be no assurance that the
Company will not do so in the future. See "Description of Securities --
Preferred Stock."
Outstanding Warrants and Options.
The Company has outstanding (i) warrants issued to purchase an
aggregate of 225,000 shares of Common Stock; and (ii) options granted to
consultants to the Company to purchase an aggregate of
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600,000 shares of Common Stock. Holders of such warrants and options are likely
to exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable than those provided by the warrants and options.
Further, while these warrants and options are outstanding, the Company's ability
to obtain additional financing on favorable terms may be adversely affected. See
Selling Security Holders.
Current Prospectus and State Registration to Exercise Warrants.
Holders of warrants will only be able to exercise the warrants if (i) a
current prospectus under the Securities Act relating to the securities
underlying the warrants is then in effect and (ii) such securities are qualified
for sale or exempt from qualification under the applicable securities laws of
the states in which the various holders of warrants reside. Although the Company
has undertaken and intends to use its best efforts to maintain a current
prospectus covering the securities underlying the warrants, there can be no
assurance that the Company will be able to do so. The value of the warrants may
be greatly reduced if a prospectus covering the securities issuable upon the
exercise of the warrants is not kept current or if the securities are not
qualified, or exempt from qualification, in the states in which the holders of
warrants reside. See "Description of Capital Stock--Warrants."
Lack of Liquid Trading Market.
Sales of Common Stock or other securities, or the possibility of such
sales, in the public market may adversely affect the market price of the Common
Stock offered hereby. Historically, the Company's securities have been thinly
traded. This low trading volume may have had a significant effect on the market
price of the Company's securities, which may not be indicative of the market
price in a more liquid market.
Possible Applicability of Rules Relating to Low-Priced Stocks; Possible Failure
to Qualify for Nasdaq SmallCap Market Listing.
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
that $5.00 per share, subject to certain exceptions. Upon completion of this
Offering, the shares of Common Stock offered hereby may be deemed to be "penny
stocks" and thus will become subject to rules that impose additional sales
practice requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors, unless the Common
Stock is listed on Nasdaq. Consequently, the "penny stock" rules may restrict
the ability of broker/dealers to sell the securities and may affect the ability
of purchasers in this Offering to sell the securities in a secondary market. See
"Underwriting."
Effective February 23, 1998, The Nasdaq Stock Market, Inc. adopted
certain changes to the entry and maintenance criteria for listing eligibility on
the Nasdaq SmallCap Market. In addition to increased listing criteria, new
maintenance standards require at least $2,000,000 in net tangible assets (total
assets less total liabilities and goodwill) or $500,000 in net income in two of
the last three years, a public float of at least 500,000 shares, a $1,000,000
market value of public float, a minimum bid price of $1.00 per share, at least
two market makers, at least 300 shareholders and at least two outside directors.
If the Company is or becomes unable to meet the initial or continuing listing
criteria of the Nasdaq SmallCap Market and is never traded or becomes delisted
therefrom, trading, if any, in the Common Stock would thereafter be conducted in
the over-the-counter market on the OTC Electronic Bulletin
10
<PAGE>
Board. In such an event, the market price of the Common Stock 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 Common Stock.
Year 2000 Compliance.
The Company believes the cost of administering its Year 2000 readiness
program, exclusive of any customer claims, will not have a material adverse
impact on future earnings. Since there is no uniform definition of Year 2000
"compliance" and since all customer situations cannot be anticipated,
particularly those involving third-party products, the Company may see an
increase in warranty and other claims as a result of the Year 2000 transition.
Such claims, if successful, could have a material adverse impact on results.
The Company's efforts to address its internal hardware, operating and
information systems are currently under way in the United States and have
already been completed in Brazil. The Company is in the process of replacing
some of its older systems with new systems that are able to handle the Year 2000
transition and management will continue to review the Company's internal systems
and intends to address any issues as they arise. Although the completion of the
Company's efforts are still in process, the Company believes that the impact of
the Year 2000 transition will not have a material adverse impact on future
results. In addition to its internal review procedures, the Company is also
coordinating Year 2000 compliance issues with its suppliers. Since the
compliance of suppliers depends on their cooperation, no assurances can be given
as to the impact of their non-compliance on future operating results.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sales of
Securities by the Selling Security Holders. In the event the outstanding
warrants and options are exercised, the Company will receive gross proceeds of
approximately $3,622,500, in the aggregate. See "Selling Security Holders" for a
list of those persons and entities receiving the proceeds from the sales of the
Securities offered hereby.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Over-the-Counter Bulletin
Board under the symbol "UISI." The Company's Common Stock commenced trading on
the Over-the-Counter Bulletin Board on March 22, 1992, under the symbol "CVTI".
On May 2, 1996, the Company's name changed to Seaton Group, Inc. and began
trading under the symbol "SEGI", and on December 3, 1997, as a result of the
transaction described herein, the Company's name changed to United Information
Systems, Inc. and began trading under the symbol "UISI." On November 18, 1997,
the Company completed a 1:18.6 reverse split of its Common Stock and the prices
reported below reflect such reverse split. The following table sets forth the
high and low bid quotations for the Common Stock for the periods indicated.
These quotations reflect prices between dealers, do not include retail mark-ups,
mark-downs or commission and may not necessarily represent actual transactions.
11
<PAGE>
Quarter
Ended High ($) Low ($)
----- -------- -------
03/31/95 19.75 14.00
06/30/95 16.75 11.50
09/30/95 17.25 11.25
12/31/95 14.80 11.25
03/31/96 16.80 11.25
06/30/96 17.80 11.50
09/30/96 0.50 0.50
12/31/96 1.38 0.25
03/31/97 0.13 0.13
06/30/97 0.13 0.13
09/30/97 0.13 0.12
12/31/97 8.38 0.13
03/31/98 8.75 5.50
As of March 31, 1998, there were 419 holders of record of the Common
Stock of the Company. The closing bid price on the Over-the-Counter Bulletin
Board at May 12, 1998 was $5.94 per share.
The Company currently intends to retain all earnings for working
capital to support growth, to reduce outstanding indebtedness and for general
corporate purposes. The Company, therefore, does not anticipate paying any
dividends in the foreseeable future. The Company did not pay dividends during
the three years ended December 31, 1997.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company
at December 31, 1997 and as adjusted to give effect to the exercise of certain
Options.
Actual Adjusted(A)
12/31/97 12/31/97
------------------------------
Short-term Debt 8,595,281 8,595,281
------------------------------
Long-term Debt 178,732 178,732
------------------------------
Shareholders' Equity
Common Stock 8,212
8,712
Preferred Stock
- -
Additional Paid-in Capital 3,156,607 4,516,067
Retained Earnings 14,412,612 14,162,612
Cumulative Translation Adjustments (1,390,159) (1,390,159)
------------------------------
Total Shareholders' Equity 16,187,272 17,297,232
------------------------------
Total Capitalization 24,961,285 26,071,285
==============================
(A) Adjusted for the issuance of 500,000 shares at $2.22 pursuant to the
options issued to 2M Capital and the issuance of 40,000 shares for
services rendered pursuant to the agreement with Continental Capital &
Equity Corporation.
12
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
for the accounts of the Selling Security Holders.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock
since inception and does not intend to pay any dividends to its shareholders in
the foreseeable future. The Company currently intends to reinvest earnings, if
any, in the development and expansion of its business. The declaration of
dividends in the future will be at the discretion of the Board of Directors and
will depend upon the earnings, capital requirements, and financial position of
the Company, general economic conditions, and other pertinent factors.
SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The financial data included in the following table has been selected by
the Company and has been derived from the consolidated financial statements for
the periods indicated. The following financial data should be read in
conjunction with the Company's Consolidated Financial Statements and related
Notes and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere herein. The Company's operations for
the period prior to 1995 are not material and are therefore not stated herein
13
<PAGE>
Selected Consolidated Statement of Operations Data:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues from Operations $ 105,245,366 $ 91,390,274 $72,545,510
Net Income $ 5,845,229 $ 3,696,715 $ 2,844,385
Basic Earnings Per Share: Net Income
$ 0.86 $ 0.56 $ 0.43
Weighted Average Shares Outstanding 6,805,124 6,602,566 6,602,566
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
As of December 31,
------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Working Capital $ (7,917,990.00) $ 5,948,845.00 $ 6,661,003.00
Total Assets $ 44,839,793.00 $ 39,886,721.00 $ 28,862,805.00
Long-Term Debt, Less current portion $ 75,428.00 $ 223,787.00 $ 8,913.00
Shareholders Equity $ 16,187,272.00 $ 10,170,947.00 $ 7,378,991.00
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
information contained in the Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this prospectus.
General
The Company is a U.S.-headquartered manufacturer of microcomputers and
related peripherals within the Federal Republic of Brazil. The Company's
products, which include personal computers, multimedia systems, monitors,
keyboards and other input/output devices, are marketed under the Company's
proprietary "UIS" brand name and other brand names for sale through a variety of
channels in the Brazilian marketplace. The Company's fiscal year is December 31.
14
<PAGE>
Overview
The Company owns industrial equipment designed for the manufacture of
electronic circuitry boards as those utilized within the television,
electronics, and computer industry. The Company considers the manufacture of the
components to be an integral part of its business. The Company's primary revenue
generating activity consists of the manufacture of motherboards, video graphics
cards, memory modules, and communications cards and other personal computer
components, as well as the assembly of personal computers for the Brazilian
marketplace under the UIS brand name.
The Company does not maintain high levels of inventory of items subject
to sharp devaluation in value. The Company recognizes that the obsolescence
factor of the products it manufactures is high and is subject to wide industry
price adjustments. These products include CPUs (Central Processing Units),
memory modules, harddrives and D-RAM chips.
The Company's previous sales strategy was to focus on the distributor
channel. During 1997, the Company refocused its sales and marketing strategy in
order to position itself in the reseller market. This market was found to yield
greater profit margins than the distributor market. As a result the Company's
net income increased to $5,845,229 or 58% during 1997 from $3,696,715 in 1996.
In 1996, the Company was located in a 30,000 square foot facility where
it operated one eight hour shift in order to maintain constant supply of 8,000
to 10,000 computers per month for its distributor channel. On as needed basis,
the Company elected to run additional shifts in order to satisfy demand. The
maximum capacity of the facility in 1996 was 15,000 computers per month.
On May 4, 1998, the Company relocated its Miami operations to a new
location which has approximately 10,650 square feet, including 2,500 square feet
of office space and approximately 8,150 of warehouse space. The Company
currently operates one eight-hour shift that has the ability to maintain
constant supply of 10,000 computers per month to the reseller channel. The
Company may elect to run additional shifts in the future in order to satisfy any
increased demand. Historically, the Company's backlog has not generally exceeded
two weeks manufacturing capacity. The capacity of the current facility is 30,000
computers per month. The facility is located in an industrial area whereby
excess property is available for building expansion in order to accommodate
future growth. Additional manufacturing equipment may be required to meet demand
in excess of 30,000 units per month.
15
<PAGE>
Results of Operations
The following table sets forth, for fiscal years 1997, 1996, and 1995,
certain items from the Consolidated Statement of Income expressed as a
percentage of net sales.
Percentage of Net Sales
Fiscal Years
Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
Net Sales 100.00 100.00 100.00
Cost of Sales 74.00 85.91 84.16
----- ----- -----
Gross Profit 26.00 14.09 15.84
SG&A 6.45 8.13 8.36
---- ---- ----
Income From Operations 9.55 5.96 7.48
Other Income (Expenses) (4.00) (1.92) (3.55)
------ ------ ------
Income Before Income Taxes 5.55 4.04 3.93
Income Taxes 0.00 0.00 0.00
---- ---- ----
Net Income 5.55 4.04 3.93
=============================================
Fiscal Years Ended December 31, 1997 and 1996
Net sales increased to $105,245,366 or 15.16%, from $91,390,274. These
sales were mostly composed of UIS branded computer systems such as the UIS
Magic, UIS Efficient and UIS Netsys. The increase in sales in 1997 from 1996 is
primarily attributed to the Company's increased marketing expenditures and its
development of the UIS brand name within the Brazilian market. The increase in
net sales was primarily attributed to an increase in volume of such sales.
Cost of sales decreased to $77,872,193, or 0.82% from $78,513,550 in
1996. As a percentage of sales, cost of sales decreased to 74.00% from 85.91% in
1996. The general decrease in cost of goods sold was primarily due to a decrease
in raw material costs through higher purchasing power over and above an increase
in direct labor costs for the same period. In August of 1997, the Company moved
into a bigger facility within the Industrial District of Manaus, Brazil in order
to consolidate its manufacturing operations.
Gross profit increased to $27,373,173 or 26.00% from $12,876,724 or
14.09% in 1996. This significant increase is attributable to the Company's
refocusing of its sales strategy towards the more profitable reseller market.
The Company's previous sales philosophy focused on marketing its products
through 17 distributors. In 1997 the Company had 17% of its sales to one major
customer down from 28% for the same period ended December 31, 1996.
Selling, general, and administrative expenses increased to $17,314,154
or 133.14% from $7,426,375 in 1996. The increase was due to increased marketing
expenditures, additional staffing needs, increased selling expenses in
refocusing the Company's marketing efforts to the reseller target market.
Additionally, there were increased costs of operating and maintaining a larger
manufacturing facility.
Other expenses include interest income, interest expense, and other
miscellaneous items. Other expenses increased in 1997 to $4,213,790 or 140.29%
from $1,753,634 in 1996 primarily because of the company's need to seek
financing within the Federal Republic of Brazil. Interest expense, net of
16
<PAGE>
income increased to $4,676,955 or 132.29% from $2,013,447 in 1996 primarily as a
result of the high cost of borrowing in the Federal Republic of Brazil. The
Company's borrowing rate fluctuates between 36% to 48% annually. The Company is
attempting to secure debt and equity financing within the US in order to
eliminate the high cost of borrowing in Brazil.
The Company renegotiated and converted $16,991,831 of short term
accounts receivable to long term receivables. The reason for the renegotiations
stemmed from the Brazilian Government's tightening of the economy and increases
in interest rates in October of 1997. This forced many distributors of UIS brand
systems to renegotiate their debt with the Company over a longer repayment
period than 1 year. This renegotiation is expected to have an effect on the
Company's ability to meet its short-term liabilities. The Company in turn is
negotiating with its suppliers in an attempt to match its short-term assets with
its short-term liabilities while it seeks additional financing.
Fiscal Years Ended December 31, 1996 and 1995
Net sales increased to $91,390,274 or 25.98%, from $72,545,510. The
increase in sales in 1996 from 1995 is primarily attributable to the Company's
partnering with large distributors to market its product and its development of
the UIS brand name within the Brazilian market. The increase in net sales was
not attributed to any significant price increases.
Cost of sales increased to $78,513,550, or 28.60% from $61,052,782 in
1995. As a percentage of sales, cost of sales remained relatively constant at an
increase of 1.75% to 85.91% from 84.16% in 1996. The Company believes that the
increase in cost of goods sold is commensurate with its sales volume.
Gross profit decreased slightly to 14.09% from 15.84% in 1995. This
decrease was not attributable to any significant decrease in the Company's
pricing strategy. In 1996 the Company's sales philosophy was to market its
product through a handful of select distributors. In 1996 and 1995 the Company
sold 28% and 33% of its output to one major distributor, respectively.
Selling, general, and administrative expenses increased to $7,426,375
or 22.52% from $6,061,525 in 1995. The increase is attributable to the increased
volume of business. The increases included additional marketing expenditures,
increased costs for additional administrative support, and market wage increases
for its administrative personnel.
Other expenses include interest income, interest expense, and other
miscellaneous items. Other expenses net decreased in 1996 to $1,753,634 or
31.90% from $2,574,818 in 1995. This was largely due to the Company's ability to
acquire vendor financing at rates significantly lower than the then current
borrowing rates within the Federal Republic of Brazil. Interest expense net of
income decreased to $2,013,447 or 19.80% from $2,509,661 in 1995. The Company's
borrowing rate fluctuated between 36% to 48% annually. The Company was
successful in raising approximately $30 million dollars in vendor trade lines of
credit.
Liquidity and Capital Resources
The Company's primary cash requirements are for operating expenses, raw
material purchases, and funding of accounts receivable. Since the Company's
inception in 1995 the Company has been able
17
<PAGE>
to generate cash flow primarily through vendor financing and limited accounts
receivable financing with local Brazilian banks. For instance, by acquiring a
vendor line of credit with minimum repayment terms of Net 60 days, the Company
was able to begin generating a positive cash flow through its operations.
In 1996 the Company reached an all time high with in vendor trade lines
of credit exceeding $35 million with average repayment terms of net 64 days,
depending on the product line. For instance monitors, keyboards, and cases were
normally purchased at terms ranging between 90 and 120 days for an interest fee
between one to two percent monthly. These rates were extremely competitive with
the then borrowing rates of Brazil.
By the beginning of May 1997, the Federal Republic of Brazil eliminated
all short term financing in connection with the importation of technology and
automotive goods. The reasoning for this was to freeze the widening deficit
balance of trade and to ensure the long term growth and stability of the nation.
The effect of this legislation significantly reduced the Company's purchasing
power by forcing importers of raw materials to pay C.O.D. or finance the imports
utilizing bank letters of credit in excess of 365 days.
In October of 1997 in an effort to thwart an attack on the Brazilian
currency, the Real, the Government of Brazil implemented an amnesty package
designed to raise interest rates and further restrict the growth and expansion
of the economy in an effort to protect the currency. The changes effected by the
Brazilian Government in May and October of 1997 forced several of the Company's
distributors to seek to reschedule $16,991,831 of short-term debt repayments
into long term debt. This action significantly affected the Company's ability to
meet its short-term obligations.
As of December 31, 1997 the Company reflects current assets of
$20,659,103 and current liabilities of $28,577,093, thus a negative working
capital of $7,917,990. The Company is actively seeking a domestic financing of
approximately $15 million through a private placement and a secondary of
offering of $30 million in the six to twelve month time frame thereafter. The
proceeds of such financing efforts will be utilized to meet the Company's
working capital needs.
The Company invested an excess of $1,000,000 in 1997 for the purchase
of state of the art manufacturing equipment. This equipment includes SMD
(surface mount design) machines, radial and axial insertion machines, and pick
and place machinery for the manufacture of computer components and peripherals.
New Accounting Standards
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
- - The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
(undiscounted and without interest) expected to be generated by the assets. If
such assets are considered to be impaired, the impairment to be recognized is
measured as the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported
18
<PAGE>
at the lower of the carrying amount or fair value less costs to sell. Adoption
of this Statement did not have an impact on the Company's financial position
results of operations.
Earnings Per Share - In February 1997, the FASB issued SFAS No. 128,
Earnings Per Share, which simplifies the computation of earnings per share, and
requires presentation of basic and diluted earnings per share. Basic earnings
per share are based on the weighted average number of shares outstanding for
each of the years presented without giving effect to common stock equivalents.
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 - Employers'
Disclosures About Pensions and Other Post Retirement Benefits. Once effective,
none of these pronouncements are expected to have a material impact on the
consolidated financial statements of the Company.
BUSINESS
Introduction and Background
United Information Systems, Inc. (the "Company") was organized under
the laws of the State of Delaware on February 10, 1986 under the name The
Oceania Group, Inc. and subsequently changed its name to Classic Video Theatre,
Inc. ("Classic Video") upon the acquisition of Classic Video on March 22, 1992.
Under the name Classic Video, the Company engaged in the business of
distributing video cassettes and laser disks and developing interactive media
capability. The business of Classic Video ceased in May 1995, for lack of
revenues and failure to obtain sufficient funds to continue to operate the
business.
On February 23, 1996, the Company acquired K-Pasa, Inc. ("K-Pasa"), a
Florida corporation, for cash and stock whereby K-Pasa became a wholly-owned
subsidiary of the Company. On May 2, 1996, the Company changed its name from
Classic Video to Seaton Group, Inc ("Seaton"). Subsequent to the acquisition of
K-Pasa, the Company organized K-Pasa Trading Inc. ("K-Pasa Trading"), a British
Virgin Islands corporation. Through K-Pasa and K-Pasa Trading, the Company
conducted freight forwarding and freight consolidation services with K-Pasa
Trading transacting business with certain suppliers in the Caribbean. K-Pasa
also operated under the "d/b/a" Clarandon Freight Forwarders, as required by the
Federal Maritime Commission.
On June 30, 1997, pursuant to the terms of a Common Stock Purchase
Agreement, the Company sold all the outstanding capital stock of K-Pasa and
K-Pasa Trading for $345,000 to Selkirk Trading Holdings, a British Virgin
Islands corporation. Following the sale of K-Pasa and K-Pasa Trading, the
Company discontinued active operations and did not conduct business activities
in any capacity until the acquisition of United Information Systems, Inc. ("UIS
Miami"), a Florida corporation, and UIS Industrial LTDA ("UIS Brazil"), a
corporation organized under the laws of Brazil, in November 1997 (UIS Miami and
UIS Brazil collectively referred to as the "UIS Companies").
On November 17, 1997, the Company acquired the UIS Companies in a
stock-for-stock transaction under the terms of a Reorganization Agreement (the
"Reorganization Agreement").
19
<PAGE>
Through the terms of the Reorganization Agreement, the shareholders of the UIS
Companies transferred all outstanding stock of the UIS Companies to the Company
and in return received approximately 67.50% of the outstanding common stock in
the Company. As a result of the transaction, the UIS Companies became
wholly-owned subsidiaries of the Company. The Company changed its corporate name
from Seaton Group, Inc. to United Information Systems, Inc. effective December
3, 1997.
The Company, through its wholly-owned and 99.5 % subsidiaries, UIS
Miami and UIS Brazil, respectively, is a United States-headquartered
manufacturer and distributor of microcomputers and related peripherals within
the Federal Republic of Brazil. The Company's products, which include personal
computers, multimedia systems, monitors, keyboards and other input/output
devices, are marketed under the Company's proprietary "UIS" brand name and other
brand names for distribution through a variety of channels in the Brazilian
marketplace. In addition, the Company maintains an engineering support center
dedicated to assisting the Company's customers in maintaining effective
networking and system integration solutions.
The Company has experienced substantial growth since its inception in
1995, with consolidated revenues and net income increasing from $72,545,510 and
$2,844,385, respectively, for the year ended December 31, 1995, $91,390,274 and
$3,696,715, respectively, for the year ended December 31, 1996, to $105,245,366
and $5,845,229, respectively, for the year ended December 31, 1997.
Products. The Company utilizes a highly sophisticated and integrated
ISO-9002 Certified manufacturing facility, its extensive experience in the
manufacture of computer motherboards, video graphics cards, memory modules, and
monitor print circuitry boards, research and development, and an understanding
of manufacturing technology development in order to develop a complete line of
multimedia computer systems under the Company's "UIS Magic," "UIS Efficient,"
and "UIS Netsys" lines of personal computers all with Intel based processors
including Intel Pentium (with MMX Technology and Intel Pentium II) systems. The
Company has applied for Registration of the "UIS Magic", "UIS Efficient", and
"UIS Netsys" brand names and is awaiting certification from the Brazilian Patent
and Trademark Office (ASSEMP.)
The computer products distribution industry is significant and growing
in Brazil, reflecting increasing demand throughout the country for computer
products and peripherals. The Company believes that the consumers of Brazil are
nationalistic in their attitudes and exhibit a strong preference for Brazilian
made products. The UIS brand name is known throughout the country as a Brazilian
manufacturer of computer products and peripherals, and, the Company believes,
has established a national identity and demand for its UIS Magic, UIS Efficient,
and UIS Netsys lines of personal computers.
The Company also develops, manufactures, and markets an array of
multimedia computer products. The Company offers sound cards, speakers,
multimedia titles, microphones, and multimedia kits complete with user-friendly
manuals written in Portuguese. The demand for multimedia personal computers is
increasing. The Company believes that there is an evolution of the personal
computer as it penetrates the home environment from task-oriented processes such
as word processing and spreadsheets to a more user-friendly multipurpose device
for diversified applications and high speed Internet access. The Company is
actively addressing this evolution through its diversified product line.
20
<PAGE>
In 1997, during the Fenasoft computer tradeshow in Sao Paulo, Brazil,
the Company introduced the first UIS Magic equipped with an Intel Pentium II
processor and Digital Video Disc (DVD). The Company believes it was the first
manufacturer throughout all of Brazil to introduce DVD technology in a
microcomputer.
Manufacturing. The Company's manufacturing facilities are located in
Manaus, Brazil. The Company utilizes the Duty Free Trade Zone of Manaus, Brazil
as its strategic location for manufacturing and warehousing. Manaus was designed
for the free commerce of imports and exports in 1967 by the Federal Republic of
Brazil with the goal of establishing a center for industrialization, commerce,
and agriculture. Today, the Free Zone in Manaus acts as a main port of entry for
all types of raw materials used in various manufacturing processes. Many
well-known multinational corporations have established facilities in Manaus in
order to take advantage of incentives provided by the Government of the State of
The Amazonas, as well as the Federal Government. The Company benefits from
greatly reduced import duties and taxes as well as a 10-year income tax
abatement awarded by the Federal Government, of which there are six years
remaining.
Manaus is considered the gateway to the North Region because of its
proximity to the United States. From Miami, a non-stop flight will take
approximately four and one half hours before arriving at the International
Airport in Manaus. Manaus facilitates trading and increased feasibility for
travel throughout Brazil as well as South America at large.
The Company owns a state-of-the-art 140,000 square foot manufacturing
facility in Manaus, including five (5) buildings utilized for manufacturing and
assembling, warehousing, administration, and the production of packaging
materials. The facility is located in the Industrial District of Manaus,
adjacent to other multinational corporations.
The Company also manufactures for other equipment manufacturers (OEM).
With its extensive experience in the manufacturing of circuitry boards, the
Company also manufactures boards outside the scope of the computer industry in
order to utilize reserve manufacturing and purchasing capacity. Circuitry boards
for televisions, cellular phones, stereo receivers, calculators, and cable
television boxes are but a number of electronic products in which the Company
prides itself through contract manufacturing in Manaus, Brazil. For the years
ended December 31, 1997, 1996 and 1995, such reserve capacity accounted for
approximately 13.9%, 15.5% and 19% of the Company's operating revenues.
Operations. The Miami facility acts as an intermediary hub for product
purchased within the United States. The Miami facility receives components for
memory modules, video graphics cards, motherboards, CR-ROMs, floppy and disk
drives, and CPUs. Once merchandise is received, it undergoes exhaustive testing
procedures prior to shipment to Brazil. Subsequent to the product being tested,
it is repackaged and shipped via airplane or steamship line, depending on the
size and weight of the cargo. The Company believes that the operations conducted
at the Miami facility are crucial in preventing defective product from being
shipped overseas.
The Company also arranges for drop shipments directly to the
manufacturing facility from the Far East. The products drop shipped typically
are computer cases, monitors, keyboards, and mice. By drop shipping these types
of products directly, the Company saves on freight costs and delivery times.
21
<PAGE>
The Company has historically maintained a one month's supply of its UIS
Magic, UIS Efficient, and UIS Netsys computers available for immediate delivery.
The Company also maintains adequate raw materials inventory in order to fulfill
demand for built to order systems. Inventory on peripherals, such as keyboards,
mice, 14" and 15" monitors, and multimedia kits are held for a two months
supply.
The Company possesses extensive knowledge of customary business
practices in Brazil. It also has at its disposal an expansive labor source
throughout Manaus. Employees for all sectors of the Company are required to
undergo a rigorous training program designed by the Company and certified by ISO
9002 prior to commencing any type of services for the Company.
The Company maintains an engineering support center dedicated to
assisting the Company's customers in maintaining effective networking and system
integration solutions. In 1997, the Company completed a capital investment of in
excess of $600,000 to upgrade its computer, networking, and telecommunications
systems. The Company now has over 150 employees connected via internet and
intranet. The Company is currently employing approximately 10 staff members to
automate the production and the integration of production to a global accounting
system.
The Company is currently ISO 9002 certified and is actively pursuing
ISO 9001 certification. ISO 9002 is a system of quality control which has been
adopted by the computer industry and monitored and maintained by an independent
organization. In order to maintain ISO 9002 certification, the Company must
undergo rigorous on-site testing of its operating policies and procedures on a
semi-annual basis. ISO 9001 refers to the process by which proprietary products
are certified as meeting established quality standards. The Company is seeking
to be achieve ISO 14001 certification by the year 2000. ISO 14001 is an
international standard encompassing quality control in connection with the
Company's treatment of the environment.
BUSINESS CONCENTRATION
Historically, the Company has sold a substantial portion of its
products to a limited number of customers. Concentration of sales to the five
largest customers is detailed as follows:
The Company has historically marketed its products primarily through
seventeen distributors. The Company has recently refocused its sales strategy
toward the reseller market and during the 1997 calendar year, its customer
portfolio exceeded 200 customers. Although the composition of the group
comprising the Company's largest customers may vary from period to period, the
reduction in orders by any such customer, including reductions due to market,
economic or competitive conditions, is less likely to have a material adverse
effect on the Company's business, financial condition and results of operations
than in prior years. The Company's ability to increase its sales in the future
will depend in part upon its ability to obtain orders from its customers as well
as the financial condition and success of its customers and the general economy,
of which there can be no assurance.
Growth Strategy. As a result of the increased stability of the
Brazilian economy and a population growth reaching 160 million consumers, the
demand for computer equipment and related products in Brazil has increased
significantly over the last five years. Based upon news, trade reports,
specifically, a study based on 1997 data compiled by the International Data
Corporation, a market research firm, and released to the public in April, 1998,
and the Company's general experience, the Company believes that the market for
computer equipment and related products is expected to grow at
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<PAGE>
the rate of approximately 15% annually over the next three years. The Company
believes it is particularly well-positioned to capitalize upon such anticipated
growth pursuant to its business strategy to utilize (i) the Company's: highly
sophisticated and integrated ISO-9002 Certified manufacturing facility; its
extensive experience in the manufacture of computer motherboards, video graphics
cards, memory modules, and monitor print circuitry boards; research and
development; and its understanding of manufacturing technology development, and
ability to manufacture other types of electronic circuitry boards; (ii) the
Company's: strategic location within the Brazilian Duty Free Trade Zone of
Manaus, Brazil; proximity to the United States with accommodating access to the
rest of South America; state of the art warehousing and sales facilities;
knowledge of local business customs and practices; and expansive labor
resources, and (iii) the Company's: aggressive marketing program; knowledge of
Brazilian macro economic issues; and valued relationships within existing
distribution and supplier channels.
In connection with the Company's operating strategy and business plan,
the Company will seek to achieve the following:
Obtain Preferred Pricing from Suppliers. The Company intends to seek
preferred pricing from its suppliers. The Company believes that an increase in
working capital will provide leverage for an assertive procurement strategy
providing it with additional margins. See "Liquidity and Capital Resources."
Obtain Vendor Discounts. The Company has historically focused on
financing its purchases of raw materials on extended terms and at an additional
cost. This has had an impact on the operating results of the Company. The
Company believes that vendor discounts ranging between 3% to 4% may be obtained
with increased working capital. See "Liquidity and Capital Resources."
Expand Marketing Activities. The Company has traditionally focused its
marketing of "UIS" brand microcomputers towards the distributor market. During
the summer of 1997, the Company incurred an expense of in excess of $500,000US
to participate in the Comdex and Fenasoft computer market tradeshows in Sao
Paulo, Brazil in order to address and access the reseller market. The Company
believes achieving direct access to the end user by means of the reseller
channel will enable it to expand market share.
Finance Accessible Growth of the Company. The Company has historically
focused exclusively in the Brazilian technology market. With the birth of
Mercosur, the Latin America equivalent of NAFTA, the Company will be able to
market its "UIS" brand personal computer in distribution markets within
Argentina, Paraguay, and Uruguay.
Marketing and Distribution. Historically, the Company has sold its
products to distributors and resellers in Brazil. For the year ended December
31, 1997, 1996 and 1995, approximately $17,891,000, or 17%, $25,589,000, or 28%
and $23,940,000, or 33%, respectively, of such products, were sold to the
Flytech group of companies in Brazil, including Flytech Informatica Tenologia
Limitada of Bairro Linao, Flytech Sol Informatica Tenologia Limitada of Porto
Alegie and Flytech Informatica Tenologia Limitida of Boa Viagem. The balance of
sales were made to distributors and resellers throughout Brazil.
Recently, the Company adopted a new sales and diversification strategy
to position itself closer
23
<PAGE>
to the reseller market, and thus the end user, providing to the Company higher
profit margins on shorter terms of sale of ranging between 28 to 35 days. This
was accomplished by investing in excess of $500,000US in market development
funds to actively participate as an exhibitor of the two major national computer
tradeshows, Fenasoft and Comdex-SP (Sao Paulo).
At Fenasoft, the Company launched its new multimedia personal computer
line, UIS Magic. This line is strategically targeted towards the SOHO (Small
Office Home Office) segment of the Brazilian computer market. This segment has
experienced significant growth throughout the past two years approaching, by
current industry estimates, 30% of the total market. Fenasoft is a well-known
computer trade show directed at the end user and reseller market. At the show,
consumers have the opportunity to purchase the latest technological advancements
at promotional prices. The Company was named the largest seller of personal
computers at Fenasost with sales in excess of 2,000 units within six days. Also
at Fenasoft, the Company was the pioneer in introducing the sub-$1,000 personal
computer to end-users. This market is one that is now being addressed by all the
large multinationals currently in the United States.
Comdex-SP is the national computer tradeshow geared towards the
reseller market. At the show, the Company entertained in excess of 440 national
resellers interested in partnering with UIS. Out of these prospects,
approximately 60% are now engaged as UIS Authorized Resellers. This effort
provides for the Company a wider access to and coverage of the Brazilian market.
The Company invested approximately $700,000US in an aggressive
marketing campaign to increase the awareness of the UIS brand name among all
consumers. The Company has established a relationship with a professional
advertising agency with offices in Sao Paulo to create all advertisements, point
of sale promotional materials, and an extensive media campaign in various
computer-related and general information magazines, including "Computer Reseller
News "Brasil," "PC Magazine Brasil," and "PC World Brasil." As part of these
marketing efforts, the Company also initiated a cooperative advertising program
in conjunction with its major resellers in the highest circulating Brazilian
newspapers, including "Folha de Sao Paulo," "Estado de Sao Paulo," and "Liberal"
in Belem.
The Company has also established a relationship with Merrit
Communications, Ltda, a public relations firm in Sao Paolo, Brazil, in order to
solidify communications with magazine editors and computer industry analysts and
critics. The public relations firm conducts daily searches for articles and
editorials in order to monitor the market's perception of the Company and trends
within the industry. As a result of, among other things, the foregoing marketing
and distribution efforts that the Company's UIS brand has become recognized as
one of the largest manufacturer of microcomputers in Brazil.
Sales
Financial information relating to foreign and domestic operations and
export sales (all foreign sales are export sales).
Foreign sales accounted for approximately 100% of total net sales in
1995, 1996, and 1997. The Company anticipates that foreign sales will increase
as a percentage of total sales resulting from the Company's expansion plans in
Brazil. As a result, a significant portion of the Company's sales will
24
<PAGE>
be subject to certain risks, including unexpected changes in regulatory
requirements, exchange rates, tariffs and other barriers, political and economic
conditions, difficulties in receivable collections, natural disasters,
difficulties in staffing and managing foreign subsidiary and branch operations,
and potentially adverse tax consequences. The Company is also subject to the
risks associated with the imposition of legislation and regulations relating to
the import or export of products. The Company cannot predict whether quotas,
duties, taxes or other charges or restrictions will be implemented by the United
States, Brazil or any other country upon the importation or exportation of the
Company's products in the future. There can be no assurance that any of these
factors or adoption of restrictive policies will not have a material adverse
effect on the Company's business.
Purchasing
The Company purchases goods from approximately 75 vendors and
suppliers. Four vendors, Daewoo International, NECX, Seagate Technology, Inc.
and Intel Corporation, accounted for 31% of the Company's total materials
purchased during the year ended December 31, 1997. There can be no assurances
that these relationships will continue. The loss of the purchasing power the
Company has established with such vendors could have a material adverse effect
on the Company. The Company purchases computer components and other related
products from these vendors and suppliers that could be supplied by other
sources. The Company however does not consider itself dependent on any single
source for materials to manufacture its products.
Management Information Systems
The Company has and will continue to invest significant resources to
install integrated software systems that provides daily information on sales,
gross margins and inventory levels by warehouse and by stockkeeping unit. These
systems will allow the Company to compare current performance against historical
performance and the current year's budget. The systems have been designed to
integrate all major aspects of the Company business, including sales, electronic
data interchange, warehousing, manufacturing, distribution, purchasing,
inventory control, merchandise planning and replenishment, as well as various
financial systems. The Company is working with outside consultants in the
design, installation and ongoing refinement of this system. The current systems
used by the Company are primarily financial in nature, such as invoicing,
accounting, general ledger and shipping. Manufacturing and inventory management
systems are not presently integrated. The new system is being installed by
module and is expected to be completed by June 30, 1998.
The Company believes that the systems it has developed and are
presently developing, have the ability to continue to improve customer service,
operational efficiency, and management's ability to monitor critical performance
factors. The systems have been designed to support the growth and expansion of
the Company for the foreseeable future and the Company does not anticipate short
term obsolescence in connection therewith.
Competition. The manufacturing and distribution of computer equipment
and related products is highly competitive and requires substantial capital. The
Company competes with, and will compete with, numerous international, national,
and regional companies. The Company's competitors include internationally
recognized companies such as IBM, Acer, and Compaq. According to International
Data Corporation, as of year end 1997, the Company was ranked 5th in Brazil
behind Compaq (1st), IBM (2nd), Itautec (3rd) and Tropcom (4th).
25
<PAGE>
Economy. The Company conducts extensive economic market analyses to
enable it to properly position itself within the Brazilian economy. Since 1994,
the Brazilian economy has experienced one of the most sustained periods of
economic growth in the past thirty years. With the inception of the Real Plan,
the Brazilian economy has maintained annual inflation below 15% with a minimal
devaluation of its currency. The objectives of the Real Plan include reducing
inflation, maintaining long-term sustainable growth in output, investment,
employment and productivity and resolving social and economic imbalances. As a
result of the Real Plan, inflation has been bought under control, prices have
stabilized, social development has been fostered and income has been more
equitably distributed. Management believes that the continued implementation and
development of the Real Plan will foster a stable and growing economy and
enhance the Company's business prospects in Brazil.
Employees. The Company employs approximately 25 and 260 employees,
respectively, in its Miami, Florida headquarters facility and its Manaus, Brazil
manufacturing facility. All of the Company's entry-level employees, in the
United States and Brazil, are compensated at a level in excess of the respective
minimum wages. None of the Company's employees are members of a collective
bargaining unit. Technical personnel have had training in a technical school or
at a university level. These workers are generally recruited either from other
companies or technical schools and while they must be taught specific work-
related details, they are usually well-trained in advance of the commencement of
their employment. Engineers employed at the Manaus, Brazil manufacturing
facility are university trained and are paid generally between 8-12 times the
Brazilian minimum wage. All employees at the Manaus, Brazil manufacturing
facility are provided lunch and dinner depending on their work shift. As
required under Brazilian law, all employees at the manufacturing facility are
also provided transportation to and from their homes and medical assistance,
which includes regular doctor visits, prescription medicine and emergency
medical care, but not treatment for catastrophic illnesses.
Facilities. The Company is headquartered in Miami, Florida with
manufacturing facilities in Manaus, Brazil. The Miami facilities currently
consist of one (1) condominium unit approximating 6,000 square feet of warehouse
and office space, which it owns in the Westwood Business Center Complex, and
approximately 10,650 square feet of warehouse and executive office space which
it rents nearby. The Miami facilities are strategically located within four (4)
miles of the Miami International Airport and within ten (10) miles of the Port
of Miami. Besides serving as the Company's headquarters, the Miami facilities
houses certain administrative functions, conducts all procurement of raw
materials, performs product testing and homologation, consolidates shipment to
the Manaus, Brazil facility, and manages vendor and supplier relations. The
Company also owns a 140,000 square feet facility in Manaus, Brazil at which it
conducts its manufacturing and distribution operations.
Legal Proceedings
In October 1997, Techmedia Computer Systems Corp. ("Techmedia") filed
suit against UIS Miami and Carlos Maia, President of UIS Miami, in the 11th
Judicial Circuit Court in and for Dade County Florida, seeking damages of
$1,346,680 plus interest alleging that UIS Miami failed to make payment on
certain shipments of computer monitors by Techmedia to UIS Miami. The parties
have entered into a settlement agreement wherein UIS Miami and Carlos Maia will
pay to Techmedia the total sum of $1,346,680 (the "Settlement Amount") with
$500,000 of such Settlement Amount having been paid on the date of the
settlement agreement. The unpaid portion of the Settlement Amount
26
<PAGE>
($846,680) is to be paid in 33 equal weekly installments of $25,000 (the
"Installment Payments"). The Installment Payments are secured by 100,000 of
common stock (the "Settlement Shares") in the Company which was personally
pledged to Techmedia by Carlos Maia. Techmedia is entitled to registration
rights with respect to the Settlement Shares. To date, all Installment Payments
have been timely made.
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Carlos Maia 32 Chairman of the Board of Directors
and Chief Executive Officer
Saul Maia 28 President, Chief Operating
Officer and Director
William Cuervo 31 Chief Financial Officer, Treasurer,
Secretary and Director
- -------------
Carlos Maia has served as the Chairman of the Board of Directors and
Chief Executive Officer of the Company since January, 1995. Prior thereto, from
June 1994 to December 1994, Mr. Maia was the Chairman and co-founder of
Blue-Tech, Inc., a Florida based assembler and exporter of computers and
computer related products into Latin America. Blue-Tech, Inc. filed for
bankruptcy protection pursuant to Chapter 11 in August, 1994 as a result of an
underinsured loss as a result of a fire at an affiliated company. In March,
1995, the creditors committee approved a reorganization plan submitted by
Blue-Tech and in July, 1995, the bankruptcy court approved the plan. From
January, 1991 to June, 1994, Mr. Maia was the Chairman and co-founder of US
Computer of North America, a Florida based distributor or personal computer
hardware components and peripherals to the Latin American market.
Saul Maia has served as President and Director of the Company since
July, 1995. Prior thereto, from March, 1995 to June, 1995, Mr. Maia was the
President and founder of SOJ, Inc., a distributor of integrated circuitry boards
for microcomputers. From July, 1994 to June, 1995, Mr. Maia was a vice president
of sales for US Computer Produtos Para Informatica, S.P., a distributor of
personal computers to the Brazilian market. From January, 1991 to June, 1994,
Mr. Maia was responsible for the overall management of operations for Blue-Tech,
Inc. (see discussion of the bankruptcy of Blue-Tech, Inc. under the description
of Carlos Maia).
William Cuervo has served as Chief Financial Officer, Treasurer, and
Secretary of the Company since January, 1995. Prior thereto, from February, 1992
to December, 1994, Mr. Cuervo was the controller and accounting department
manager of Blue-Tech, Inc. (see discussion of the bankruptcy of
27
<PAGE>
Blue-Tech, Inc. under the description of Carlos Maia).
Directors are elected at the Company's annual meeting of shareholders
and serve a term of one year or until their successors are elected and
qualified. Officers are appointed by the Board of Directors and serve at the
discretion of the Board of Directors, subject to the By-laws of the Company. The
Company intends to add directors who are unaffiliated with the Company in the
near future.
Indemnification of Directors and Officers
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner 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. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
The By-Laws of the Company require the Company to indemnify its
Directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
Employment Agreements
In November, 1997, the Company entered into an employment agreement
(the "Employment Agreement") with Carlos Maia, the Company's Chief Executive
Officer ("CEO"), for a term of three (3) years (the "Term") at a salary of
$300,000 per year, excluding bonuses and benefits. Upon expiration of the Term,
Mr. Maia may renewed the Employment Agreement for an additional three (3) years.
Under the terms of the Employment Agreement, Mr. Maia is obligated to be
employed solely by the Company and to perform all duties consistent with those
of a CEO. The Employment Agreement also contains a Covenant Not to Compete which
prohibits Mr. Maia, for a period of 24 months after termination of the
Employment Agreement, from (i) engaging in the business activities, as defined
by the Employment Agreement, of the Company within certain restricted areas;
(ii) soliciting business relationships with any of the Company's clients or
employees; or (iii) interfere with any prospective relationship or contract of
the Company. The Employment Agreement also prohibits
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<PAGE>
Mr. Maia from disclosing certain confidential information of the Company.
Executive Compensation
Summary Compensation Table
United Information Systems , Inc.
Summary Compensation Table
For The Three Years Ended December 31st, 1997
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------
Salary & Other Annual
Name Title Year Bonus Compensation
---- ----- ---- --------- ------------
<S> <C> <C> <C>
Carlos Maia Chairman & CEO 1997 194,519 0.00
1996 100,520 0.00
1995 212,794 0.00
Saul Maia President 1997 281,123 0.00
1996 96,947 0.00
1995 81,000 0.00
William Cuervo Chief Financial 1997 129,383 0.00
Officer
1996 87,445 0.00
1995 39,876 0.00
Jorge Maia President - UIS 1997 147,770 0.00
Brazil
1996 124,495 0.00
1995 107,352 0.00
Odilon Velho V/P of 1997 113,316 0.00
Purchasing -
UIS Brazil 1996 92,727 0.00
1995 40,944 0.00
</TABLE>
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------------------
Awards Payouts
----------------------------- -------
Restricted Securities
Stock Underlying LTIP All Other
Name Title Year Awards ($) Options / SARs(#) Payouts ($) Compensation ($)
---- ----- ---- ---------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Carlos Maia Chairman & CEO 1997 0 0 0 0
1996 0 0 0 0
1995 0 0 0 0
Saul Maia President 1997 0 0 0 0
1996 0 0 0 0
1995 0 0 0 0
William Cuervo Chief Financial 1997 0 0 0 0
Officer 1996 0 0 0 0
1995 0 0 0 0
Jorge Maia President - UIS 1997 0 0 0 0
Brazil 1996 0 0 0 0
1995 0 0 0 0
Odilon Velho V/P of 1997 0 0 0 0
Purchasing - 1996 0 0 0 0
UIS Brazil 1995 0 0 0 0
</TABLE>
29
<PAGE>
CERTAIN TRANSACTIONS
Consulting Agreement with 2M Capital Corp.
On November 17, 1997, the Company entered into a two year consulting
agreement (the "Consulting Agreement") with 2M Capital Corp. ("2M Capital").
Pursuant to the Consulting Agreement, 2M Capital is obligated to assist the
Company in (i) implementing and monitoring an investor relations program with
investors, investment advisors, market makers and stockbrokers including, but
not limited to, meeting with the foregoing and arranging for principal officers
of the Company to meet with the foregoing; and (ii) implementing and monitoring
a strategic planning process for the Company. As compensation for the
performance of 2M Capital obligations under the Consulting Agreement, the
Company will pay 2M Capital $20,833 per month for the first four (4) months of
the term of the Consulting Agreement and $500 for the remaining twenty (20)
months and options to purchase and aggregate of 500,000 shares of the Company's
Common Stock at a purchase price of $2.22 per share. The options are
transferable and exercisable for a period of two (2) years, provided, however,
such options may not be exercised prior to the first day of the month following
the effective date of this Registration Statement, nor may options for more than
41,666 shares of Common Stock, in the aggregate, be exercised in any one month.
In addition, the holders of the options are entitled to certain registration
rights, including piggyback registration rights.
In addition, the Consulting Agreement provides that the Company may
not, for a period of twenty-four (24) months from the date of the Reorganization
Agreement, offer, sell, contract to sell, or otherwise dispose of, any
securities of the Company without the prior written consent of 2M Capital,
except for the issuance of shares of Common Stock to be issued in a public
offering, at a price not less than ninety (90%) percent of the average of the
closing bid prices of the Common Stock as reported on Nasdaq Bulletin Board for
the ten (10) consecutive trading day period immediately preceding the date of
sale. In addition to the foregoing, 2M Capital, by and through a committee
comprised of Vincent Montelione, Monte Frenkel and Milton Barbarosh ("Oversight
Committee"), shall have the right and obligation to consider and authorize, in
its discretion, the release of restrictions imposed upon any shares of Common
Stock of the Company (as hereinafter described). Mr. Montelione is a six (6%)
percent shareholder of the Company and a principal shareholder, officer and
director of 2M Capital.
Acquisition of the UIS Companies
On November 17, 1997, the Company entered into a Reorganization
Agreement with the UIS Companies, and the shareholders thereof, whereby the
Company acquired 100% of the outstanding stock of UIS and 99.5% of the
outstanding stock of UIS Brazil in exchange for the issuance of an aggregate of
5,601,334 shares or 67.50% of the Common Stock of the Company (the
"Reorganization Stock") pursuant to the terms of the Reorganization Agreement.
In connection with the Reorganization Agreement, the parties thereto agreed that
the Company would have at closing approximately $1,900,000 available cash to be
used for working capital.
The Reorganization Agreement restricts the transfer of 5,353,334 shares
of the Reorganization Stock without the prior written consent of the Oversight
Committee for a period of twenty four (24) months. The remaining portion of the
Reorganization Stock, or 248,000 shares, are subject to a nine (9) month
restriction on transfer which restriction may not be released without the prior
written consent
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<PAGE>
of the Oversight Committee. See "Certain Transactions - Consulting Agreement
with 2M Capital Corp." The Reorganization Agreement also provides that the
Company will include for registration twenty (20%) percent of the Reorganization
Stock, or 1,120,266 shares of Common Stock, in a registration statement filed
pursuant to the Securities Act of 1933, as amended. In addition, an additional
178,400 shares of Reorganization Stock received by certain members of management
were granted registration rights by the Company. Accordingly, an aggregate
amount of 1,298,666 shares of the Reorganization Stock is included in the
registration of which this Prospectus forms a part and is being offered for sale
hereby.
In connection with the reorganization, the Company entered into a
three-year employment agreement with Carlos Maia. See "Management - Employment
Agreements."
Debenture Offering
During October 1997, the Company completed a private offering in which
it issued two (2) 5% Convertible Debentures ("Debentures") for an aggregate of
$330,000 to two (2) investors. One of such Debentures, in the amount of
$230,000, entitled the holder thereof to convert the Debenture into 423,769
shares of Common Stock of the Company at a conversion price of $.5427 per share.
The second Debenture, in the amount of $100,000, entitled the holder thereof to
convert the Debenture into 323,545 shares of Common Stock of the Company at a
conversion price of $.3090 per share. Both Debentures entitle the holders
thereof to registration rights with respect to the Common Stock of the Company
issuable upon conversion of the debentures (the "Conversion Shares"). On January
15, 1998, the Debentures were converted into an aggregate of 747,314 shares of
Common Stock which are being registered hereunder. See "Selling Security
Holders". The Conversion Shares are subject to a restriction on transfer for a
period of twenty four (24) months imposed by the Company unless released earlier
at the sole discretion of the Oversight Committee. See "Certain Transactions -
Consulting Agreement with 2M Capital Corp." The Conversion Shares are also
subject to any restriction on transfer which may be imposed by an underwriter,
the National Association of Securities Dealers or any National Securities
Exchange. The proceeds from the sale of the Debentures were used in part to
finance the transaction set forth in the Reorganization Agreement.
Private Placement
In November 1997, the Company completed a private offering of 862,000
shares (the "Private Offering Shares") of its Common Stock at $2.22 per share
(the "Private Offering") for an aggregate amount of $1,913,640 in gross proceeds
to the Company. The 862,000 shares are subject to restrictions on transfer
wherein neither the subscriber nor the subscriber's representatives,
administrators, successors or assigns will offer, sell, transfer, assign,
pledge, encumber or otherwise attempt to directly or indirectly dispose of (a)
41% per investor on a pro-rata basis (or an aggregate of 389,500 shares) of the
Shares for a period of nine (9) months from the date hereof; and (b) 59% per
investor on a pro-rata basis (or an aggregate of 560,500 shares) for a period of
twenty-four (24) months from December 17, 1997, unless released earlier at the
discretion of the Oversight Committee. See "Certain Transactions - Consulting
Agreement with 2M Capital Corp." The Private Offering Shares are also subject to
any restriction on transfer which may be imposed by an underwriter, the National
Association of Securities Dealers or any National Securities Exchange. Pursuant
to the terms of the Private Offering, all of the Private Offering Shares are
being registered in the registration statement of which this Prospectus forms a
part. The Private Offering Shares also have certain "piggyback"
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<PAGE>
registration rights. The proceeds from the sale of the Private Offering Shares
were used in part to finance the transaction set forth in the Reorganization
Agreement.
Agreement with Hirel Holdings, Inc. ("HHI") and Hirel Marketing, Inc. ("HMI")
On November 17, 1997, the Company entered into an agreement with HHI
and HMI, a wholly-owned subsidiary of HHI, pursuant to which the Company issued
HHI Two Hundred Thousand (200,000) shares of Common Stock in exchange for HMI
and HHI releasing the Company and the UIS Companies from and against any and all
rights or claims HMI and HHI may have had with respect to the Company's
acquisition of the UIS Companies. Prior to November 1997, HHI and HMI engaged in
substantial negotiations with the UIS Companies in connection with HMI with the
objective of acquiring the UIS Companies. Under the terms of the Agreement with
HHI and HMI, the 200,000 shares of common stock received by HHI are being
registered in the Registration Statement of which this Prospectus forms a part.
Mr. Montelione, a six (6%) percent shareholder of the Company and member of the
Oversight Committee, is also a consultant and director of HHI.
Agreement with HHI and Vincent Montelione
On November 17, 1997, the Company entered into an agreement with HHI
and Vincent Montelione for the purpose of inducing HHI to amend its Employment
Agreement with Mr. Montelione to enable Mr. Montelione to enter into a
Consulting Agreement with the Company. Pursuant to the Agreement, HHI
represented that it did not have, and shall not have, any cause or causes of
action against the Company by virtue of any covenants against competition that
may have previously been executed by Mr. Montelione with HHI in such prior
Employment Agreement or pursuant to a current consulting agreement between Mr.
Montelione and HHI, and that Mr. Montelione does not possess any "confidential
information," as such term is defined under the prior Employment Agreement, that
does or could relate to the UIS Companies. In consideration of the foregoing,
HHI received Two Hundred Thousand (200,000) shares of the Company's Common
Stock, One Hundred Thousand (100,000) of such shares are subject to certain
restrictions upon transferability, imposed by the Company, for a twenty-four
(24) month period from November 17, 1997. Under the terms of the Agreement with
HHI, the Two Hundred Thousand (200,000) shares received by HHI are being
registered in the Registration Statement of which this Prospectus forms a part.
Mr. Montelione will remain a Director, and principal shareholder of HHI. Mr.
Montelione is also a six (6%) percent shareholder of the Company and a member of
the Oversight Committee.
The Company believes that the transactions referred to above were
advantageous to the Company and on terms no less favorable to the Company than
terms which could have been obtained from unrelated third parties.
Voting Trust
Carlos Maia, the Company's Chairman of the Board and Chief Executive
Officer, and Jorge Miguel Maia, a 35.4% shareholder of the Company and brother
of Carlos Maia, have entered into a voting trust agreement pursuant to which
Carlos Maia has the right to vote all of the shares of the Company's Common
Stock owned by Jorge Miguel Maia (2,906,334 shares). Jorge Miguel Maia received
the 2,906,334 shares pursuant to the Reorganization Agreement.
32
<PAGE>
Other
To facilitate the acquisition of certain merchandise, in 1997, Carlos
Maia, Chief Executive Officer and Chairman of the Board of the Company,
guaranteed payment to a vendor on behalf of the Company for merchandise
purchased in the sum of $1,343,873. The guarantee was foreclosed during 1997,
and Mr. Maia entered into a settlement agreement pursuant to which he is making
payments to the vendor on the sum of $1,343,873. Upon the sale of the
merchandise, in March 1998, the Company transferred the receivable from the sale
of the merchandise to Mr. Maia in satisfaction of his guarantee.
During the years ended December 31, 1997, 1996 and 1995, the Company
made sales of approximately $24,255,000, $25,394,000 and $16,265,000,
respectively, to entities whose principals are brothers of Carlos Maia, the
Company's Chief Executive Office and Chairman of the Board of Directors.
Included in the accounts receivable for the Company at December 31, 1997, 1996
and 1995, are amounts due from these entities amounting to approximately
$2,592,000, $2,803,000 and $1,884,000.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the 8,405,533 shares of Common Stock outstanding as May
12, 1998 by (i) each person who is known by the Company to own beneficially more
than 5% of the Common Stock, (ii) each director and officer of the Company, and
(iii) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address Percentage Beneficially
of Beneficial Owner(1)(3) Number of Shares Owned(2)
------------------------ ---------------- -----------------------
<S> <C> <C> <C>
Carlos Maia (4)(5) 4,498,334 53.5%
Jorge Miguel Maia (5)(6) 2,906,334 34.6%
William Cuervo(9) 59,900 0.7%
Saul Maia (5)(7) 817,000 9.7%
2M Capital Corp.(10) 500,000 5.9%
Vincent and Christine 423,769 5.0%
Montelione(8)
All directors and executive
officers as a group (3 persons) 5,375,234 63.9%
</TABLE>
- --------------------------
(1) Unless otherwise indicated, the address of each of the listed beneficial
owners identified is 10400 NW 33rd Ave., Miami, FL 33172. All shares
are beneficially owned, and sole voting and
33
<PAGE>
dispositive power is held, by the persons named, except as otherwise
noted.
(2) Percentage of ownership is based on 8,405,533 shares of Common Stock
outstanding.
(3) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants, options or other convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that
warrants, options or other convertible securities that are held by such
person (but not those held by any other person) and that are exercisable
within 60 days from the date hereof.
(4) Carlos Maia is Chairman of the Board of Directors and Chief Executive
Officer of the Company. Includes 2,906,334 shares beneficially owned by
Jorge Miguel Maia which Carlos Maia has the right to vote on all matters
brought to the Shareholders of the Company for vote pursuant to a voting
trust agreement. Includes 1,530,000 shares subject to a twenty four (24)
month restriction on transfer which commenced on November 17, 1997
pursuant to the terms of the Reorganization Agreement unless earlier
released by the Oversight Committee. See "Certain Transactions -
Acquisition of the UIS Companies." Also includes 62,000 shares, of which
41% of such shares are subject to a nine (9) month restriction on
transfer, and 59% of such shares are subject to a twenty-four (24) month
restriction on transfer, unless earlier released by the Oversight
Committee, pursuant to the terms of the Private Offering and the
Subscription Agreement therefor. See "Certain Transactions - Private
Placement" and "Certain Transactions - Consulting Agreement with 2M
Capital Corp."
(5) Carlos Maia, Jorge Miguel Maia and Saul Maia are brothers.
(6) Includes 2,906,334 shares subject to the terms of an irrevocable voting
trust between Carlos Maia and Jorge Miguel Maia which Carlos Maia has the
right to vote on all matters brought to the Shareholders of the Company
for vote pursuant to a voting trust agreement. Includes 2,906,334 shares
subject to a twenty four (24) month restriction on transfer which
commenced on November 17, 1997 pursuant to the terms of the
Reorganization Agreement unless earlier released by the Oversight
Committee. See "Certain Transactions Acquisition of the UIS Companies"
and "Certain Transactions - Consulting Agreement with 2M Capital Corp."
(7) Saul Maia is Director and President of the Company. Includes 817,000
shares subject to a twenty four (24) month restriction on transfer which
commenced on November 17, 1997 pursuant to the terms of the
Reorganization Agreement unless earlier released by the Oversight
Committee. See "Certain Transactions Acquisition of the UIS Companies"
and "Certain Transactions - Consulting Agreement with 2M Capital Corp."
(8) Vincent and Christine Montelione's address is 8980 S.W. 8th Street,
Plantation, Florida 33324. Includes 423,769 shares subject to a twenty
four (24) month restriction on transfer unless earlier released by the
Oversight Committee, which commenced on October 31, 1997, pursuant to the
terms of the Debenture Offering and the Subscription Agreement therefor.
Mr. Montelione is a member of the Oversight Committee. See "Certain
Transactions - Consulting Agreement with 2M Capital Corp." Does not
include; 500,000 shares of Common Stock issuable upon the exercise of
500,000 options held by 2M Capital Corp., a corporation of which Mr.
Montelione is an officer, director and principal shareholder or (ii)
400,000 shares of Common Stock held by
34
<PAGE>
Hirel Holdings, Inc., a corporation of which Mr. Montelione is a director
and principal shareholder.
(9) William Cuervo is a Director, Chief Financial Officer and Treasurer of
the Company. Includes 55,000 shares subject to a nine (9) month
restriction on transfer which commenced on November 17, 1997 unless
earlier released by the Oversight Committee pursuant to the terms of the
Reorganization Agreement. See "Certain Transactions - Consulting
Agreement with 2M Capital Corp." Also includes 4,900 Shares, of which 41%
of such shares are subject to a nine (9) month restriction on transfer,
and 59% of such shares are subject to a twenty-four (24) month
restriction on transfer unless earlier released by the Oversight
Committee pursuant to the terms of the Private Offering and Subscription
Agreement therefor. See "Certain Transactions - Consulting Agreement with
2M Capital Corp."
(10) Includes 500,000 shares of Common Stock issuable upon the exercise of
options at $2.22 per share. See "Certain Transactions - Consulting
Agreement with 2M Capital Corp." Mr. Montelione, a member of the
Oversight Committee and a six (6%) percent shareholder of the Company, is
a principal shareholder, officer and director of 2M Capital Corp.
<TABLE>
<CAPTION>
SELLING SECURITY HOLDERS
Name of Selling Number of Shares to Shares to be
Security Holders Shares Owned be Offered Owned After Offering
---------------- ------------ ---------- --------------------
<S> <C> <C> <C> <C>
Carlos Maia(1) 4,498,334 368,000 3,549,068
Jorge Miguel Maia(2) 2,906,334 581,266 2,325,068
Saul Maia(3) 817,000 163,400 653,600
2M Capital Corp.(4) 500,000 500,000 0
Vincent and Christine Montelione(5) 423,769 423,769 0
Hirel Holdings, Inc.(6) 400,000 400,000 0
Monte Frenkel(7) 323,545 323,545 0
Pro Futura Special Equities Fund, L.P.(8) 300,000 300,000 0
Jose Flavio Pereira de Araujo(10) 190,000 90,000 100,000
Martin Rothstein(8) 100,000 100,000 0
Milton and Ricki Barbarosh(8) 100,000 100,000 0
Richard Schweitzer(8) 90,090 90,090 0
William Cuervo(9) 59,900 59,900 0
Odilon Velho(10) 55,000 55,000 0
Ronnie Antebi(8) 50,000 50,000 0
Maria Rosilene S. de Oliveira(10) 38,000 38,000 0
Atlas Partners 25,000 25,000 0
Randi Marcus(8) 20,000 20,000 0
Katz Investments II(8) 15,000 15,000 0
Shlomo and Lilly Attas(8) 13,500 13,500 0
Alan Klien(8) 11,400 11,400 0
Harvey Fleischman(8) 11,261 11,261 0
Brian Kettler(8) 11,261 11,261 0
William Klein(10) 10,000 10,000 0
Vincent Carbone(8) 10,000 10,000 0
Andrew Perrota(8) 10,000 10,000 0
Edward J. Klaeger(8) 9,910 9,910 0
Miguel and Bridgette Daud(8) 9,800 9,800 0
Sonia Dossier Garcia(8) 4,900 4,900 0
Deborah Maia(8) 4,900 4,900 0
35
<PAGE>
Vincent Fagnani(8) 4,900 4,900 0
Jose Cancio(8) 4,000 4,000 0
Michael Duggan(8) 3,999 3,999 0
Christine Mannino(8) 3,964 3,964 0
Mel Forman(8) 3,964 3,964 0
Ruden, McClosky, Smith, Schuster
& Russell, P.A. 10,000 10,000 0
Continental Capital & Equity Corp. (11) 140,000 140,000 0
Preferred Securities Group, Inc. (12) 225,000 225,000 0
Capital Communications, Ltd. (13) 125,000 125,000 0
-------
TOTAL 4,330,729
</TABLE>
- ----------------------
(1) Carlos Maia is Chairman of the Board of Directors and Chief Executive
Officer of the Company. Includes 2,906,334 shares beneficially owned by
Jorge Miguel Maia which Carlos Maia has the right to vote on all matters
brought to the Shareholders of the Company for vote pursuant to a voting
trust agreement. Includes 1,530,000 shares subject to a twenty four (24)
month restriction on transfer which commenced on November 17, 1997
pursuant to the terms of the Reorganization Agreement, unless earlier
released by the Oversight Committee. See "Certain Transactions -
Acquisition of the UIS Companies." Also includes 62,000 shares, of which
41% of such shares are subject to a nine (9) month restriction on
transfer, and 59% of such shares are subject to a twenty-four (24) month
restriction on transfer, unless earlier released by the Oversight
Committee, pursuant to the terms of the Private Offering and the
Subscription Agreement therefor. See "Certain Transactions - Private
Placement" and "Certain Transactions - Consulting Agreement with 2M
Capital Corp."
(2) Carlos Maia and Jorge Miguel Maia are brothers. Includes 2,906,334 shares
subject to the terms of an irrevocable voting trust between Carlos Maia
and Jorge Miguel Maia wherein Carlos Maia has the right to vote such
shares on all matters brought to the Shareholders of the Company for
vote. Includes 2,906,334 shares subject to a twenty four (24) month
restriction on transfer ("Restriction") which commenced on November 17,
1997 ("Restricted Period") imposed under the terms of the Reorganization
Agreement between the Company and UIS Companies (and the shareholders
thereof) and administered on behalf of the Company by the Oversight
Committee of 2M Capital Corp which Restriction may, in the sole
discretion of the Oversight Committee, be release prior to the expiration
of the Restricted Period. Also includes 200,000 shares subject to the
terms of an escrow agreement between Jorge Maia and UIS pledged by Mr.
Maia to secure the obligations of UIS Miami and UIS Brazil under the
terms of the Reorganization Agreement.
(3) Saul Maia is Director and President of the Company and a brother of
Carlos Maia and Jorge Maia. Includes 817,000 shares subject to a twenty
four (24) month restriction on transfer which
36
<PAGE>
commenced on November 17, 1997 pursuant to the terms of the
Reorganization Agreement, unless earlier released by the Oversight
Committee. See "Certain Transactions - Acquisition of the UIS
Companies" and "Certain Transactions Consulting Agreement with 2M
Capital Corp."
(4) Includes 500,000 shares of Common Stock issuable upon the exercise of
options at $2.22 per share. See "Certain Transactions - Consulting
Agreement with 2M Capital Corp." The options are transferable,
exercisable for a period of two (2) years, provided, however, such
options may not be exercised prior to the first day of the month
following the effective date of this Registration Statement, nor may
options for more than 41,666 shares of Common Stock, in the aggregate, be
exercised in any one month. In addition, the holder of the option is
entitled to registration rights, including piggyback registration rights,
for the shares of common stock issuable upon exercise of the options
(whether or not the options have been exercised at the time the Company
files a registration statement), as adjusted, such rights to be available
when the Company files a registration statement under the Securities Act
of 1933, as amended ("33' Act").
(5) Includes 423,769 shares subject to a twenty-four (24) month restriction
on transfer which commenced on October 31, 1997, unless earlier released
by the Oversight Committee, of which Mr. Montelione is a member. See
"Certain Transactions - Consulting Agreement with 2M Capital Corp." Does
not include 500,000 shares of Common Stock issuable upon the exercise of
options held by 2M Capital Corp., a corporation which Mr. Montelione, a
six (6%) percent shareholder of the Company, is an officer, director and
principal shareholder.
(6) Includes 300,000 shares subject to a twenty-four (24) month restriction
on transfer which commenced on November 17, 1997, unless earlier released
by the Oversight Committee, of which Mr. Montelione is a member. See
"Certain Transactions - Consulting Agreement with 2M Capital Corp." Also
includes 100,000 (50,000 shares of which are subject to the twenty-four
(24) month restriction on transferability) shares held in escrow under
the terms of a consulting agreement between Hirel Holdings, Inc. and Mr.
Montelione.
(7) Includes 323,545 shares subject to a twenty four (24) month restriction
on transfer which commenced on October 15, 1997, unless earlier released
by the Oversight Committee, of which Mr. Frenkel is a member. See
"Certain Transactions - Consulting Agreement with 2M Capital Corp." Does
not include 500,000 shares of Common Stock issuable upon the exercise of
options held by 2M Capital Corp., a corporation which Mr.
Frenkel is an officer, director and principal shareholder.
(8) Of all shares owned by the shareholder, 41% are subject to a nine (9)
month restriction on transfer, and 59% of such which are subject to a
twenty-four (24) month restriction on transfer unless earlier released by
the Oversight Committee pursuant to the terms of the Private Offering and
the Subscription Agreement therefor. See "Certain Transactions -
Consulting Agreement with 2M Capital Corp."
(9) William Cuervo is a Director, Chief Financial Officer and Treasurer of
the Company. Includes 55,000 shares subject to a nine (9) month
restriction on transfer which commenced on November 17, 1997 unless
earlier released by the Oversight Committee pursuant to the terms of the
Reorganization Agreement. See "Certain Transactions - Consulting
Agreement with 2M Capital Corp." Also includes 4,900 Shares, of which 41%
of such shares are subject to a nine
37
<PAGE>
(9) month restriction on transfer, and 59% of such shares are subject
to a twenty-four (24) month restriction on transfer unless earlier
released by the Oversight Committee pursuant to the terms of the
Private Offering and Subscription Agreement therefor. See "Certain
Transactions - Consulting Agreement with 2M Capital Corp."
(10) All shares owned by the shareholder are subject to a nine (9) month
restriction on transfer which commenced in November 17, 1997, unless
earlier released by the Oversight Committee pursuant to the terms of the
Reorganization Agreement. See "Certain Transactions - Consulting
Agreement with 2M Capital Corp."
(11) Includes 100,000 shares issuable upon the exercise of options of which
50,000 of such options are exercisable at $9.00 per share and the
remaining 50,000 options are exercisable at $12.00 per share. The term of
the option commences on the date of the effectiveness of this
Registration Statement and for a period of one year thereafter.
(12) On March 12, 1998, the Company granted warrants (the "PSG Warrants") to
purchase an aggregate of 225,000 shares of Common Stock of the Company at
an exercise price of $6.50 per share to Preferred Securities Group, Inc.
("PSG") pursuant to the terms of a twelve month Consulting Agreement
between the Company and PSG. Under the terms of the consulting agreement,
PSG will provide certain corporate financing consulting services to the
Company. Beginning on June 10, 1998, 22,500 of the PSG Warrants will vest
each month for the consecutive ten (10) month period.
(13) On January 5, 1998, the Company issued 125,000 shares of common stock of
the Company to Capital Communications, Ltd. ("Capital") in consideration
for services to be rendered by Capital to the Company pursuant to the
terms of a twelve month consulting agreement. Under the terms of the
consulting agreement, Capital will assist and advise the Company in
investor communications and financial and investor public relations. The
Company granted Capital certain piggy-back registration rights with
respect to the common stock; however, Capital has agreed not to sell the
shares until March 1, 1999 or the termination of the Consulting Agreement
without the prior consent of the Company.
PLAN OF DISTRIBUTION
The Company is registering the Securities on behalf of the Selling
Security Holders. All costs, expenses and fees in connection with the
registration of the Securities offered hereby will be borne by the Company.
Brokerage commissions, if any, attributable to the sale of the Securities will
be borne by the Selling Security Holders.
Sales of Securities may be effected from time to time in transactions
(which may include block transactions) on the Nasdaq SmallCap Market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices, at market prices prevailing at the time of sale, or at negotiated
prices. The Selling Security Holders may effect such transactions by selling
Securities directly to purchasers or to or through broker-dealers which may act
as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions, or commissions from the Selling Security Holders
and/or the purchasers of Securities for whom such broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of
38
<PAGE>
customary commissions). The Selling Security Holders and any broker-dealers that
act in connection with the sale of the Securities might be deemed to be
'underwriters' within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of the Securities as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Security Holders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
Securities against certain liabilities, including liabilities arising under the
Securities Act. Liabilities under the federal securities laws cannot be waived.
Because the Selling Security Holders may be deemed to be 'underwriters'
within the meaning of Section 2(11) of the Securities Act, the Selling Security
Holders will be subject to prospectus delivery requirements under the Securities
Act. Furthermore, in the event of a "distribution" of the shares, such Selling
Security Holder, any selling broker or dealer and any "affiliated purchasers"
may be subject to Regulation M under the Exchange Act, which Regulation would
prohibit, with certain exceptions, any such person from bidding for or
purchasing any security which is the subject of such distribution until his
participation in that distribution is completed. In addition, Regulation M also
prohibits any bid or purchase for the purpose of pegging, fixing or stabilizing
the price of Common Stock in connection with this offering.
DESCRIPTION OF SECURITIES
General
The following description of the material terms of the Common Stock is
subject to the General Corporation Law of the State of Delaware and to the
provisions contained in the Company's Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), and By-laws, as amended, copies of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. See "Available Information."
The Company's authorized capital stock consists of 19,000,000 shares of
Common Stock, par value $.001, and 1,000,000 shares of preferred stock, $.001
par value (the "Preferred Stock"). Immediately prior to this offering, there
were 8,405,533 shares of Common Stock outstanding and no shares of Preferred
Stock.
Common Stock
The Company is authorized to issue 19,000,000 shares of Common Stock,
$.001 par value per share, of which as of the date of this Prospectus, 8,405,533
shares of Common Stock are outstanding. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion of this
offering will be, validly authorized and issued, fully paid, and non-assessable.
The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of shareholders. Holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution, or winding up of the Company, holders of Common Stock
are entitled to share ratably all assets remaining after payment of liabilities.
Holders of Common Stock
39
<PAGE>
have no preemptive rights and have no rights to convert their Common Stock into
any other securities.
Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, $.001 par value per share, of which no shares are outstanding as of the
date hereof. Series of the Preferred Stock may be created and issued from time
to time, with such designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the creation and
issuance of such series of preferred stock as adopted by the Board of Directors
pursuant to the authority in this paragraph given. The issuance of any such
preferred stock could adversely affect the rights of the holders of Common Stock
and, therefore, reduce the value of the Common Stock. The ability of the Board
of Directors to issue preferred stock could discourage, delay, or prevent a
takeover of the Company. See "Risk Factors--Preferred Stock; Possible
Anti-Takeover Effects."
OTC Bulletin Board
The Common Stock of the Company is listed on the OTC Bulletin Board under
the symbol "UISI."
Transfer Agent
The transfer agent and registrar for the Common Stock is Fidelity
Transfer Company, 1860 Southwest Temple, Suite 301, Salt Lake City, UT 84115.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 8,405,533 shares
of Common Stock outstanding. Of these shares, 4,330,729 shares of Common Stock
offered hereby will be freely tradable without further registration under the
Securities Act. All officers and directors of the Company have agreed not to
sell or otherwise dispose of 5,392,805 shares for a period of twenty-four (24)
months and 27,429 shares for a period of nine (9) months from the November 17,
1997 and December 3, 1997, respectively, unless earlier released by the
Oversight Committee.
As of the date hereof, there are 4,302,667 outstanding shares of Common
Stock which are "restricted securities" within the meaning of Rule 144 of the
Securities Act and, if held for at least one year, would be eligible for sale in
the public market in reliance upon, and in accordance with, the provisions of
Rule 144 following the expiration of such one-year period. In general, under
Rule 144 as currently in effect, a person or persons whose shares are
aggregated, including a person who may be deemed to be an "affiliate" of the
Company as that term is defined under the Securities Act, would be entitled to
sell within any three month period a number of shares beneficially owned for at
least two years that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock, or (ii) the average weekly trading volume in
the Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain requirements as to the manner of sale,
notice, and the availability of current public information about the Company.
However, a person who is not deemed to have been an affiliate of the Company
during the 90 days preceding a sale by such
40
<PAGE>
person and who has beneficially owned shares of Common Stock for at least three
years may sell such shares without regard to the volume, manner of sale, or
notice requirements of Rule 144.
Prior to this offering, there has only been a limited public market for
the Company's securities on the Over-the-Counter Bulletin Board. Following this
offering, the Company cannot predict the effect, if any, that sales of shares of
Common Stock pursuant to Rule 144 or otherwise, or the availability of such
shares for sale, will have on the market price prevailing from time to time.
Nevertheless, sales by the current shareholders of a substantial number of
shares of Common Stock in the public market could materially adversely affect
prevailing market prices for the Common Stock. In addition, the availability for
sale of a substantial number of shares of Common Stock acquired through the
exercise of the options or warrants currently outstanding could materially
adversely affect prevailing market prices for the Common Stock. See "Risk
Factors -Shares Eligible for Future Sale."
LEGAL MATTERS
Legal matters in connection with the securities being offered hereby will
be passed upon for the Company by Dreier & Baritz, LLP 1515 North Federal
Highway, Suite 300, Boca Raton, Florida 33432.
EXPERTS
The Consolidated Balance Sheets of the Company at December 31, 1997 and
December 31, 1996 and the related statements of income, cash flows and
shareholders equity for the three years in the period then ended appearing in
this Prospectus and Registration Statement have been audited by Spear, Safer &
Harmon & Co., Miami, Florida, independent auditors, as set forth in their report
thereon appearing elsewhere herein and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company intends to furnish to its shareholders annual reports,
which will include financial statements audited by independent accountants, and
such other periodic reports as it may determine to furnish or as may be required
by law, including Sections 13(a) and 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington D.C. 20549, a registration
statement on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement and the exhibits
thereto, as permitted by the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement and to the
exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document which has been filed as an exhibit to
the Registration Statement are qualified in their entirety by reference to such
exhibits for a complete statement of their terms and conditions. The
Registration Statement and the exhibits thereto may be inspected without charge
at the offices of the Commission and copies of all or any part thereof may be
obtained from the Commission's principal office at 450 Fifth Street, N.W.,
Washington D.C. 20549 or
41
<PAGE>
at certain of the regional offices of the Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, upon payment of the fees prescribed by the
Commission. Electronic reports and other information filed through the
Electronic Data Gathering, Analysis and Retrieval System are publicly available
through the Commission's website (http://www.sec.gov.) In addition, following
approval of the Common Stock for quotation on the NASDAQ National Market,
reports and other information concerning the Company may be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington D.C. 20006.
42
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
United Information Systems, Inc.
We have audited the accompanying consolidated balance sheets of United
Information Systems, Inc. (the "Company") as of December 31, 1997 and 1996, and
the related consolidated statements of operations, shareholder's equity and cash
flows for each year in the three year period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the United
Information Systems, Inc. as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As reflected in the financial
statements, the Company as of December 31, 1997 had a working capital deficiency
of approximately $7,900,000. As more fully described in Note 14 to the financial
statements, the Company due to its lack of working capital has not been able to
process orders and therefore revenues have substantially decreased for the first
quarter of 1998. As of the date of this report the Company has not been able to
secure additional capital. Those conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Miami, Florida
March 23, 1998
(except for Note 13, as to which the
date is May 13, 1998)
F-1
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Consolidated Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
A S S E T S
1997 1996
----------------- ---------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,347,653 $ 3,068,268
Accounts receivable, net 11,365,336 17,947,109
Inventory 7,560,723 13,868,956
Prepaid expenses and other 97,880 556,499
Other receivable 287,511 -
-------------- --------------
Total Current Assets 20,659,103 35,440,832
Notes Receivable 16,991,831 -
Property and Equipment, net 7,038,859 4,445,889
Other 150,000 -
-------------- --------------
$ 44,839,793 $ 39,886,721
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Lines-of-credit $ 3,395,307 $ 1,429,350
Notes and loans payable 5,199,974 4,546,605
Due to related parties 1,343,873 2,691,485
Accounts payable and accrued expenses 18,534,635 20,690,309
Current portion of long-term debt 103,304 134,238
-------------- --------------
Total Current Liabilities 28,577,093 29,491,987
-------------- --------------
Long-Term Debt, less current portion 75,428 223,787
-------------- --------------
Shareholders' Equity:
Common stock, $.001 par value; 19,000,000 shares authorized; 8,223,033,
and 6,602,566 shares issued and outstanding at
December 31, 1997 and 1996, respectively 8,223 6,603
Preferred stock, $.001 par value; 1,000,000 shares
authorized; no shares issued and outstanding - -
Additional paid-in capital 3,156,596 894,568
Retained earnings 14,412,612 10,015,419
Cumulative translation adjustment (1,390,159) (745,643)
-------------- --------------
Total Shareholders' Equity 16,187,272 10,170,947
-------------- --------------
$ 44,839,793 $ 39,886,721
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Consolidated Statements of Operations
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues from Operations:
Sales $ 105,245,366 $ 91,390,274 $ 72,545,510
Cost of sales 77,872,193 78,513,550 61,052,782
--------------- --------------- --------------
Gross Profit 27,373,173 12,876,724 11,492,728
Selling, General and Administrative Expenses 17,314,154 7,426,375 6,061,525
--------------- --------------- --------------
10,059,019 5,450,349 5,431,203
Other Income (Expenses):
Interest income 3,717,941 1,530,809 1,557,272
Miscellaneous 463,165 259,813 (65,157)
Interest expense (8,394,896) (3,544,256) (4,066,933)
--------------- --------------- --------------
Income Before Income Taxes 5,845,229 3,696,715 2,856,385
Provision for Income Taxes - - 12,000
--------------- --------------- --------------
Net Income $ 5,845,229 $ 3,696,715 $ 2,844,385
=============== =============== ==============
Basic Earnings Per Share:
Net income $ 0.86 $ 0.56 $ 0.43
=============== =============== ==============
Weighted Average Shares Outstanding 6,805,124 6,602,566 6,602,566
=============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
----------------------------
Additional Cumulative Total
Shares Paid-In Retained Translation Shareholders'
Issues Amount Capital Earnings Adjustment Equity
----------- --------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 6,602,566 $ 6,603 $ 783,939 $ 6,967,044 $ (378,595) $ 7,378,991
Additional capital contributed - - 110,629 - - 110,629
Net income - - - 3,696,715 - 3,696,715
Distributions to shareholders - - - (648,340) - (648,340)
Translation adjustment - - - - (367,048) (367,048)
----------- ------------ ------------- ------------- ------------ ------------
Balance at December 31, 1996 6,602,566 6,603 894,568 10,015,419 (745,643) 10,170,947
----------- ------------ ------------- ------------- ------------ ------------
Issuance of shares for convertible debentures 747,314 747 329,253 - - 330,000
Issuance of shares through private placement 862,000 862 1,869,485 - - 1,870,347
Shares issued in lieu of bond 11,153 11 (11) - - -
Additional capital contributed - - 63,301 - - 63,301
Net income - - - 5,845,229 - 5,845,229
Distributions to shareholders - - - (1,448,036) - (1,448,036)
Translation adjustment - - - - (644,516) (644,516)
----------- ------------- ------------- ------------- ------------ -------------
Balance at December 31, 1997 8,223,033 $ 8,223 $ 3,156,596 $ 14,412,612 $(1,390,159) $ 16,187,272
=========== ============= ============= ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 5,845,229 $ 3,696,715 $ 2,844,385
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 355,685 152,199 42,436
(Gain) loss on sale of property and equipment (105,788) 20,089 2,425
Translation adjustment (644,516) (367,048) (294,367)
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net (10,410,058) (1,305,166) (9,391,065)
Inventory 6,308,233 (5,292,551) (2,487,468)
Prepaid expenses and other 458,619 (418,332) (85,481)
Increase (decrease) in:
Accounts payable and accrued expenses (2,155,674) 3,821,193 10,935,462
-------------- ---------------- ----------------
Net Cash Provided by (Used in) Operating Activities (348,270) 307,099 1,566,327
-------------- ---------------- ----------------
Cash Flows from Investing Activities:
Acquisition of property and equipment (3,157,332) (3,895,838) (584,017)
Proceeds from sale of equipment 26,954 4,562 500
-------------- ---------------- ----------------
Net Cash Used in Investing Activities (3,130,378) (3,891,276) (583,517)
-------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Purchase of certificate of deposit $ (150,000) $ - $ -
Net proceeds from lines-of-credit 1,965,957 1,429,350 -
Net proceeds from notes and loans payable 653,369 436,401 319,105
Repayments of amounts due to related parties (1,347,612) 2,200,654 (541,053)
Net proceeds from (repayments of) long-term debt (179,293) 344,362 12,663
Proceeds from the issuance of common stock 2,200,347 - 426,500
Capital contribution 63,301 110,629 73,229
Distributions to shareholders (1,448,036) (648,340) (120,000)
-------------- -------------- --------------
Net Cash Provided by (Used in) Financing Activities 1,758,033 3,873,056 170,444
-------------- -------------- --------------
Increase (Decrease) in Cash and Cash Equivalents (1,720,615) 288,879 1,153,254
Cash and Cash Equivalents - Beginning of Year 3,068,268 2,779,389 1,626,135
-------------- -------------- --------------
Cash and Cash Equivalents - End of Year $ 1,347,653 $ 3,068,268 $ 2,779,389
============== ============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 8,394,896 $ 3,544,256 $ 4,066,933
Income taxes - - 12,000
Supplemental Disclosure of Non-Cash Financing
Activities:
Debentures converted to common stock $ 330,000 $ - $ -
Note received from sale of property 287,511 - -
Accounts receivable converted to note receivable 16,991,831 - -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization - United Information Systems, Inc., a Florida
corporation ("UIS Miami") and UIS Industrial Ltda., a corporation
organized under the laws of the Federal Republic of Brazil ("UIS
Brazil" and collectively the "UIS Companies"), is a manufacturer
and distributor of microcomputers and related peripherals within
the Federal Republic of Brazil.
On November 17, 1997, the UIS Companies completed a planned
transaction to merge with and subsequently take control of, a
publicly-held corporation, Seaton Group, Inc. ("Seaton"), a
Delaware corporation through an exchange of shares. Through a
series of amendments and domicile changes, the merged company is
now known as United Information Systems, Inc. (the "Company"), a
Delaware corporation.
At the time of the merger, the UIS Companies had 1,885,000 shares
of $1.00 par value common stock issued and outstanding. In
addition, certain holders of Seaton's 5% convertible debentures
had the right to receive a total of 747,314 shares of the
Company's common stock. The holders of the debentures exercised
their option in December, 1997 and received 747,314 shares of the
Company's common stock (the "Conversion Shares"). The Conversion
Shares are subject to a restriction on transfer for a period of
twenty four months imposed by the Company and administered by an
oversight committee.
In accordance with the terms of the merger, shareholders of the
UIS Companies and Seaton received an aggregate of 6,177,566 newly
issued shares of the Company's common stock. In addition, the
Company issued 400,000 shares of its common stock of which 200,000
shares were issued to release the Company of certain obligations
and rights, and 200,000 were issued for the right to execute a
consulting agreement.
Concurrent with the merger, the Company issued to 2M Capital Corp.
options to purchase 500,000 shares of its common stock at $2.22
per share (see also Note 12). The options are exercisable for a
period of two years from the effective date of the merger. As of
the date of this report, no options have been exercised.
Basis of Presentation - Pursuant to the above, the merger has been
treated as an acquisition of Seaton by the Company and a
recapitalization of the Company. The historical financial
statements prior to the effective date of the merger are those of
the Company.
Principles of Consolidation - The accompanying consolidated
financial statements reflect the financial position and results of
operations of UIS, UIS Miami and UIS Brazil. All significant
inter-company transactions and balances have been eliminated in
consolidation.
F-7
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES (Continued)
Foreign Currency Translation - Financial statements of foreign
subsidiaries are translated into U.S. dollars at current rates,
except that revenues, costs and expenses are translated at average
current rates during each reporting period. Net exchange gains or
losses resulting from the translation of foreign financial
statements are accumulated and credited or charged directly to a
separate component of shareholders' equity.
Cash and Cash Equivalents - For purposes of the statements of cash
flows, the Company considers all highly liquid investments which
are readily convertible into cash and have maturities of three
months or less to be cash equivalents.
Inventory - Inventory is stated at the lower of cost or market.
Cost is determined using the average cost method.
The Company's inventories consist primarily of high-technology
computer equipment, which is subject to rapid technological
obsolescence or reduction in value as a result of new products
developed by competitors or normal competitive pressures.
Property and Equipment - Property and equipment are stated at cost
and are depreciated on a straight-line basis over their estimated
useful lives ranging from five to 30 years.
Revenue Recognition - Revenue is recognized from equipment sales
when the product is shipped to the customer and commissions are
recognized at the time the services are performed.
Concentration of Credit Risk - Financial instruments which
potentially expose the Company to concentrations of credit risk
consist principally of cash and accounts receivable. The Company
places its cash with high credit quality financial institutions
and monitors the credit worthiness of its customers.
The Company sells its product to distributors and resellers in
Brazil. For the years ended December 31, 1997, 1996 and 1995
approximately $17,891,000, $25,589,000 and $23,940,000,
respectively, were sold to one major distributor. At December 31,
1997 and 1996, accounts receivable included approximately
$4,351,000 and $3,186,000, respectively, due from this customer.
During 1997, the Company had purchases of approximately 31% from
four suppliers. At December 31, 1997, these suppliers represented
35% of accounts payable.
The Company is also dependent on the economic and political
stability of Brazil.
Foreign Operations - Substantially all of the Company's revenues
are generated in Brazil and therefore is subject to economic and
political changes in the business environment, different than that
of the United States. The success of the Company depends on the
success of the Brazilian operations and a stable economic and
political environment.
F-8
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES (Continued)
Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of - The Company adopted the provisions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, on January 1, 1996. This
statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
future net cash flows (undiscounted and without interest) expected
to be generated by the assets. If such assets are considered to be
impaired, the impairment to be recognized is measured as the
amount by which the carrying amount of the assets exceed the fair
value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.
Adoption of this Statement did not have an impact on the Company's
financial position or results of operations.
Earnings Per Share - In February 1997, the FASB issued SFAS No.
128, Earnings Per Share, which simplifies the computation of
earnings per share and requires presentation of basic and diluted
earnings per share. Pursuant to SFAS No. 128, the Company is
considered a simple capital structure and, therefore, only basic
earnings per share is required to be presented. Basic earnings per
share are based on the weighted average number of shares
outstanding for each of the years presented without giving effect
to common stock equivalents.
Income Taxes - Income taxes are based on the taxable income for
each year as measured by the tax rates in effect for each of these
years.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and
the tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to
reverse.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
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 - Employers' Disclosures About Pensions and
Other Post Retirement Benefits. Once effective, none of these
pronouncements are expected to have a material impact on the
consolidated financial statements of the Company.
F-9
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 2 - NOTES RECEIVABLE
During 1997, the Company converted several accounts receivable to
notes receivable. These notes bear interest at rates ranging from
6.48% to 17.76% per annum and require monthly payments of
principal and interest through 2003. Schedule of principle
payments from notes receivable are as follows:
Year Ended
December 31,
-----------
1998 $ 2,980,000
1999 4,490,000
2000 3,902,000
2001 2,801,000
2002 1,381,000
Thereafter 1,437,000
----------------
$ 16,991,000
================
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, consists of the following:
1997 1996
---------------- ---------------
Building $ 5,533,702 $ 3,499,391
Building improvements 272,119 231,913
Furniture and equipment 1,652,198 647,589
Vehicles 141,729 272,200
--------------- --------------
7,599,748 4,651,093
Less accumulated depreciation 560,889 205,204
--------------- --------------
$ 7,038,859 $ 4,445,889
=============== ==============
F-10
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of December 31, 1997 and
1996 consist of the following:
1997 1996
--------------- --------------
Trade payables $ 16,615,770 $ 15,441,143
Sales taxes 1,012,185 4,650,656
Payroll and related 694,848 598,510
Consulting fees 175,000 -
Other 36,832 -
--------------- --------------
$ 18,534,635 $ 20,690,309
=============== ==============
NOTE 5 - LINES-OF- CREDIT
Miami
-----
At December 31, 1997, the Company had a $1,000,000 line-of-credit
agreement with interest payable monthly at the bank's prime rate
of interest plus 1%. The line-of-credit is collateralized by the
Company's building located in Miami, Florida and a $150,000
certificate of deposit. Subsequent to December 31, 1997, the
line-of-credit agreement was renegotiated and converted to a note
under a term loan agreement. The term loan is payable in monthly
installments of principal and interest at 9.5% per annum with a
balloon payment due in January 2003.
Brazil
------
During the course of conducting its business, the Company finds
situations where it is required to borrow against its receivable.
The Company frequently factors such receivables for a period of 90
to 120 days, with local financial institutions at various rates
normally higher than the going lending rates. At December 31, 1997
and 1996, the Company owed approximately $2,395,000 and
$1,429,000, respectively, to various banks in Brazil. The
lines-of-credit require monthly interest payments at an average
rate of 6%.
NOTE 6 - NOTES AND LOANS PAYABLE
Notes and loans payable consist of four separate unsecured
short-term loans bearing interest at rates ranging from 7% to 12%
per annum and maturing through October 1998.
F-11
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 7 - LONG-TERM DEBT
Long-term debt at December 31, consists of the following:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Note payable - bank; principal and interest at 11% payable in
monthly installments of $9,822; matures in August 1999;
collateralized by building $ 178,732 $ 271,323
Note payable - bank; principal and interest at 8% payable in
monthly installments of $1,714; matures in May 2000;
collateralized by a vehicle - 47,062
Note payable - bank; principal and interest at 6% payable in
monthly installments of $3,492; matures in January 1998;
collateralized by a vehicle $ - $ 39,640
Note payable - bank; principal and interest at 9% payable in
monthly installments of $482; matures in August 1998; collater-
alized by transportation - -
------------- ------------
Total Long-Term Debt 178,732 358,025
Less Current Installments 103,304 134,238
------------- -------------
Long-Term Debt, excluding
current maturities $ 75,428 $ 223,787
============= =============
</TABLE>
Aggregate maturities of long-term debt for the years subsequent to
December 31, 1997 are as follows:
Year Ending
December 31,
-----------
1998 $ 103,304
1999 75,428
------------
$ 178,732
============
F-12
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 8 - INCOME TAXES
UIS - Miami elected, with the consent of its shareholder, to be
taxed pursuant to S corporation provisions of the Internal Revenue
Code, effective September 1, 1995. Pursuant to these provisions,
the taxable income of UIS - Miami for the period from September 1,
1995 through December 31, 1995 is reflected by the shareholder on
his individual income tax return.
Effective November 17, 1997, UIS - Miami revoked its S corporation
status and, therefore, is subject to income taxes as a regular
corporation. However, UIS - Miami had no taxable income for the
period from November 17, 1997 through December 31, 1997. In
addition, any deferred tax assets or liabilities are deemed
immaterial.
UIS - Brazil is not subject to income taxes due to a 10-year tax
abatement which expires in the year 2003 provided by the Federal
Republic of Brazil. Therefore, for the year ended December 31,
1997 and 1996, there are no provisions for income taxes.
The provision for income taxes for the year ended December 31,
1995 consists of the following current amounts related to the
period from January 1, 1995 through August 31, 1995 the period
prior to the S corporation election by UIS - Miami:
Federal $ 9,000
State 3,000
---------------
$ 12,000
===============
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 Brazilian subsidiary and no
earnings were repatriated as dividends 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.
NOTE 9 - RELATED PARTY TRANSACTION
For the years ended December 31, 1997, 1996 and 1995, the Company
had sales to related parties of approximately $24,255,000,
$25,394,000 and $16,265,000, respectively. Included in accounts
receivable at December 31, 1997 and 1996, are amounts due from
related parties amounting to approximately $2,592,000 and
$2,803,000, respectively.
F-13
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments such as cash and
cash equivalents, accounts receivable, prepaid expenses and other
current assets and accounts payable and accrued expenses
approximated fair value at December 31, 1997 and 1996, because of
the short maturity of these instruments.
Based on the borrowing rates currently available to the Company
for loans with similar terms and maturities, the fair value of
borrowings under the line-of-credit and long-term debt approximate
their carrying amounts.
NOTE 11 - PRIVATE PLACEMENT
In November 1997, the Company completed a private offering of
862,000 shares (the "Private Offering Shares") of its Common Stock
at $2.22 per share (the "Private Offering"). The 862,000 shares
are subject to restrictions on transfer wherein neither the
subscriber nor the subscriber's representatives, administrators,
successors or assignees will offer, sell, transfer, assign,
pledge, encumber or otherwise attempt to directly or indirectly
dispose of (a) 41% per investor on a pro-rata basis (or an
aggregate of 353,420 shares) of the Shares for a period of nine
months from the date hereof; and (b) 59% per investor on a
pro-rata basis (or an aggregate of 508,580 shares) for a period of
24 months from the date hereof.
The Private Offering Shares are also subject to restrictions on
transfer whereby neither the holder thereof nor the holders
representatives, administrators, successors or assignees will
offer, sell, transfer, assign, pledge, encumber or otherwise
attempt to directly or indirectly dispose of (a) 41% per investor
on a pro-rata basis (or an aggregate of 353,420 shares) of the
Private Offering Shares for a period of nine (9) months from the
date hereof (the "41% Restriction"); and (b) 59% per investor on a
pro-rata basis (or an aggregate of 508,580 shares) for a period of
twenty-four (24) months from the date hereof (the 59%
Restriction") without the prior written consent of the Oversight
Committee of 2M Capital Corp. (the "2M Capital Restriction"), who
has been designated by the Company as the administrator of the
Company's oversight on transfers of shares of common stock of the
Company. Notwithstanding the 41% Restriction or the 59%
Restriction described above, in the event a portion of the shares
offered herein are released from the 2M Capital Restriction, by
request of an investor or otherwise, the amount of shares held by
each investor subject to the 2M Capital Restriction will be
released from such restriction on a pro rata basis based on the
percentage of shares purchased by the investor in this Offering.
F-14
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Employee Agreement - In November 1997, the Company entered into an
employment agreement (the "Employment Agreement") with the
Company's Chairman and chief executive officer ("CEO"), for a term
of three years at a salary of $300,000 per year, excluding bonuses
and benefits. Upon expiration, the CEO may renew the Employment
Agreement for an additional three years. Under the terms of the
Employment Agreement, the CEO is obligated to be employed solely
by the Company to perform all duties consistent with those of a
Chairman and CEO. The Employment Agreement contains a covenant not
to compete which prohibits the CEO, for a period of 24 months
after termination of the Employment Agreement, from (i) engaging
in the business activities, as defined by the Employment
Agreement, of the Company within certain restricted areas; (ii)
soliciting business relationships with any of the Company's
clients or employees; or (iii) interfere with any prospective
relationship or contract of the Company.
Consulting Agreement - In November 1997, the Company entered into
a consulting agreement (the "Consulting Agreement") with 2M
Capital Corp. ("2M Capital") for an initial term of two years.
Pursuant to the Consulting Agreement, 2M Capital is obligated to
assist the Company in (i) implementing and monitoring an investor
relations program with investors, investment advisors, market
makers and brokers including, but not limited to, meeting with the
foregoing and arranging for principal officers of the Company to
meet with the foregoing; and (ii) implementing and monitoring a
strategic planning process for the Company.
In addition, the Consulting Agreement provides that the Company
may not, for a period of 24 months from the date of the agreement,
offer, sell, contract to sell, or otherwise dispose of, any of its
securities without the prior written consent of 2M Capital, except
for the issuance of shares of common stock to be issued in a
public offering, at a price not less than 90% of the average of
the closing bid prices of the common stock as reported on NASD
Bulletin Board for the ten consecutive trading day period
immediately preceding the date of sale. In addition to the
foregoing, 2M Capital shall have the right and obligation to
consider and authorize, in its discretion, the release of
restrictions imposed upon any shares of common stock of the
Company. As compensation for the performance of 2M Capital
obligations under the Consulting Agreement, the Company will pay
2M Capital $20,833 per month for the first four months of the term
of the Consulting Agreement and $500 for the remaining twenty
months. In addition, 2M Capital received options to purchase
500,000 shares of the Company's common stock at $2.22 per share.
Agreement with HHI and HMI - On November 17, 1997, the Company
entered into an agreement with Hirel Holdings, Inc. ("HHI") and
Hirel Marketing, Inc. ("HMI"), which HMI engaged in substantial
negotiations with the UIS Companies in connection with HMI
acquiring the UIS Companies, pursuant to which the Company issued
to HHI 200,000 shares of common stock in exchange for HMI and HHI
releasing the Company and the UIS Companies from and against any
and all rights or claims HMI and HHI may have had with respect to
the Company's acquisition of the UIS Companies.
F-15
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
Agreement with HHI - In November 1997, the Company entered into an
agreement with HHI and Vincent Montelione ("Montelione") pursuant
to which (1) the Company, HHI and Montelione agreed to terminate
an employment agreement between, Montelione and HHI, and in lieu
thereof, Montelione and HHI will enter into a consulting agreement
("Hirel Consulting Agreement"); and (2) agreed that it did not
have, and shall not have, any cause or causes of action against
the Company by virtue of any covenants against competition that
may have previously been executed by Montelione with HHI or
pursuant to the Hirel Consulting Agreement, and that Montelione
does not possess any "confidential information", as such term is
defined under the employment agreement, that does or could relate
to the UIS Companies. In consideration of the foregoing, HHI
received 200,000 shares of the Company's common stock, 100,000 of
such shares being subject to certain restrictions upon
transferability, imposed by the Company and administered by the
Oversight Committee, for a twenty-four (24) month period from the
day of issuance. Montelione will remain a Director, and principal
shareholder of HHI.
Employee Benefits - UIS Brazil is required, pursuant to the laws
of the Federal Republic of Brazil, to provide various employee
benefits including but not limited to (i) transportation to and
from their homes; (ii) medical assistance and (iii) breakfast,
lunch and dinner depending on the employees' work shift.
Legal Matters - In October 1997, a supplier filed suit against UIS
Miami and its CEO, seeking damages of $1,346,680 plus interest
alleging that UIS Miami failed to make payment on certain
shipments of computer monitors to UIS Miami. The parties have
entered into a settlement agreement wherein UIS Miami and its
president will pay the supplier the total sum of $1,346,680 (the
"Settlement Amount") with $500,000 of such Settlement Amount
having been paid on the date of the settlement agreement. The
unpaid portion of the Settlement Amount ($846,680) is to be paid
in 33 equal weekly installments of $25,000 (the "Installment
Payments"). The Installment Payments are secured by 100,000 of
common stock (the "Settlement Shares") in the Company which was
personally pledged to the supplier by the CEO of UIS Miami. The
supplier is entitled to registration rights with respect to the
Settlement Shares.
In addition, the Company and several of its suppliers have entered
into settlement agreements where in the Company will pay the
suppliers $1,223,558 of which $10,113 was paid at December 31,
1997. The unpaid amounts are to be paid over a period of 28 months
and are included in accounts payable and accrued expenses in the
accompanying 1997 balance sheet.
The Company is also involved in various legal proceedings, claims
and litigation arising in the ordinary course of business.
However, in the opinion of management, these matters will not have
a material affect on the Company's consolidated financial
position.
F-16
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
Year 2000 Compliance - The Company believes the cost of
administering its Year 2000 readiness program, exclusive of any
customer claims, will not have a material adverse impact on future
earnings. Since there is no uniform definition of Year 2000
compliance and since all customer situations cannot be
anticipated, particularly those involving third-party products,
the Company may see an increase in warranty and other claims as a
result of the Year 2000 transition. Such claims, if successful,
could have a material adverse impact on results.
The Company's efforts to address its internal hardware, operating
and information systems are currently under way in the United
States and have already been completed in Brazil. The Company is
in the process of replacing some of its older systems with new
systems that are able to handle the Year 2000 transition and
management will continue to review the Company's internal systems
and intends to address any issues as they arise. Although the
completion of the Company's efforts are still in process, the
Company believes that the impact of the Year 2000 transition will
not have a material adverse impact on future results. In addition
to its internal review procedures, the Company is also
coordinating Year 2000 compliance issues with its suppliers. Since
the compliance of suppliers depends on their cooperation, no
assurances can be given as to the impact of their non-compliance
on future operating results.
NOTE 13 - SUBSEQUENT EVENTS
Public Relations Agreement - In February 1998, the Company entered
into an agreement with Capital Communications, Ltd. ("Capital")
whereby Capital will, among other services, (i) advise and assist
the Company in developing and implementing appropriate plans and
materials for presenting the Company and its business plans,
strategy and personnel to the financial community, (ii) establish
an image for the Company in the financial community, and (iii)
create the foundation for subsequent financial public relations
efforts. The agreement is for a twelve month period expiring in
February 1999.
Pursuant to this agreement, Capital is entitled to receive a fee
of $2,000 per month for the duration of the agreement. In
addition, Capital was issued 125,000 shares of the Company's
common stock as a commencement bonus. The 125,000 shares are a
non-refundable, non-apportionable, non-ratable retainer and are
not a prepayment for future services.
F-17
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 13 - SUBSEQUENT EVENTS (Continued)
Investment Banking Agreement - In March 1998, the Company entered
into an agreement with JCA Investment Banking ("JCA") whereby JCA
will act as the Company's placement agent and investment banker
with respect to matters related to the financing of the Company's
businesses, recapitalizations, mergers and acquisitions. The
Company currently intends to issue a Private Placement Financing
Request ("Private Placement") for a minimum of $5,000,000 and up
to a maximum of $15,000,000 through JCA. Pursuant to this
agreement, the Company will pay JCA an investment banking fee of
$5,000 per month for a twelve month period expiring in March 1999.
In addition, JCA will be granted 5-year warrants at the market bid
price on the closing date of the Private Placement at a price of
$0.001 per warrant. These warrants will entitle JCA to receive 5%
of the Company's outstanding shares at the closing date of the
Private Placement. The agreement also entitles JCA to receive a
placement fee equal to 5% of the funds raised in the Private
Placement plus 10% of the amount of shares sold in the Private
Placement in the form of 5-year warrants at the market closing bid
price on the closing date of the Private Placement at $0.001 per
warrant. In May 1998, the Company terminated the agreement with
JCA. Pursuant to provisions within the contract, the termination
of this agreement will become effective June 4, 1998.
Agreement with PSC - In March 1998, the Company entered into an
agreement with Preferred Securities Group, Inc. ("PSC") for twelve
month period expiring in March 1999. Pursuant to the agreement,
PSC shall, provide such regular and customary consulting services
requested by the Company which may include, but will not be
limited to, (i) the dissemination of permissible information about
the Company to the investment community; (ii) assistance with the
preparation of annual and interim reports and press releases;
(iii) assistance with financial public relations; (iv) assistance
in dealing with investment bankers and securities analysts and (v)
providing advice and analysis with respect to trading in the
Company's securities and other market conditions generally
pursuant to this agreement, PSC is entitled to receive a fee of
$2,500 per month for the term of the agreement and was granted
irrevocable two-year warrants to purchase 225,000 shares of the
Company's common stock at $6.50 per share. The warrants are
exercisable 10% per month commencing June 15, 1998.
F-18
<PAGE>
UNITED INFORMATION SYSTEMS, INC.
Notes to Consolidated Financial Statements
NOTE 13 - SUBSEQUENT EVENTS (Continued)
Agreement with CCEC - The Company entered into an agreement with
Continental Capital & Equity Corporation ("CCEC") whereby CCEC
will provide services which may include, but will not be limited
to (i) the dissemination of permissible information about the
Company to the investment community; (ii) advise and assist the
Company in developing and implementing plans in the achievement of
the Company's desired goals; (iii) assistance in dealing with
investment bankers and securities analysts; (iv) publicize the
Company to brokers, prospective investors and shareholders through
CCEC's network and (v) provide consulting services with respect to
providing advice and analysis on the trading of the Company's
stock and other market conditions. Services to be performed under
this agreement shall continue for not less than 12 months. In
consideration of the services to be performed the Company paid
CCEC $250,000 payable in 40,000 free trading shares of the
Company's common stock at the date of execution of the agreement.
CCEC also received an option to purchase 100,000 shares of common
stock valued as follows: 50,000 shares valued at $9.00 and 50,000
shares valued at $12.00. CCEC may exercise its right to purchase
shares of the Company's common stock pursuant to the option
agreement in minimum increments of 10,000 shares. CCEC's right to
purchase shares of the Company's common stock pursuant to this
option will expire one year to the day that the registration
statement registering the underlying shares is deemed effective.
Sale of Warehouse - In May 1998, the Company sold 1 of 3 warehouse
units located in Miami, Florida for $475,800. The proceeds from this
sale were used to pay a portion of the line-of-credit.
NOTE 14 - GOING CONCERN
As of December 31, 1997 the Company had a working capital
deficiency of approximately $7,900,000. The deficiency in the
working capital has created a situation whereby the Company is
unable to process orders due to the shortage of working capital.
This backlog of orders has also affected the Company's ability to
continue as a going concern due to a substantial decrease in
revenues for the first quarter of 1998.
F-19
<PAGE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offer contained herein, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
of any securities other than those to which it relates or an offer to sell, or a
solicitation, in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. The delivery of this Prospectus, under any
circumstances, at any time, does not imply that the information contained herein
is correct as of any time subsequent to its date.
------------
TABLE OF CONTENTS
Page
----
Prospectus Summary..........................
Risk Factors................................
Use of Proceeds.............................
Dividend Policy.............................
Dilution....................................
Capitalization..............................
Selected Financial Data.....................
Management's Discussion and
Analysis of Financial Condi-
tion and Results of Operation.............
Business....................................
Management..................................
Certain Transactions........................
Concurrent Offering.........................
Principal Shareholders......................
Description of Securities...................
Shares Eligible for Future
Sale.......................................
Underwriting................................
Legal Matters...............................
Experts.....................................
Additional Information......................
Index to Financial Statements...............
Until _________, 1998 (90 days after the commencement of this offering), dealers
effecting transactions in registered securities, whether or not participating in
the distribution, may be required to deliver a Prospectus.
UNITED INFORMATION SYSTEMS, INC.
Common Stock
PROSPECTUS
May ___, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.*
Registration Fees - Securities and
Exchange Commission $ 7,795.31
Filing Fee - National Association
Securities Dealers $ ________
Transfer Agent Fees $ 1,035.73
Cost of Printing and Engraving $ ________
Legal Fees and Expenses $ ________
Accounting Fees and Expenses $ ________
Blue Sky Fees and Expenses $ ________
Miscellaneous $ ________
Total $ ________
*Estimated
Item 14. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner 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. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
The Certificate of Incorporation and By-Laws of the Company require the
Company to indemnify its Directors and officers to the fullest extent permitted
by the General Corporation Law of
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<PAGE>
the State of Delaware.
Item 15. Recent Sales of Unregistered Securities.
Unless otherwise indicated, all sales of unregistered securities
referred to in this section were exempt from registration pursuant to section
4(2) under the Securities Act of 1933, as amended, inasmuch as each investor had
access to financial and other information concerning the Company and had the
opportunity to ask questions concerning the Company and its operations.
On February 23, 1996 the Company issued (i) 35,000 shares of Series A
Convertible Preferred Stock; (ii) and promissory notes in the aggregate amount
of $310,000 in partial consideration for the acquisition of K-Pasa, Inc. Also on
February 23, 1996, the Company issued 1,824,921 shares of Common Stock raising
$200,000 therefrom and a promissory note in the amount of $50,000 which proceeds
were used as additional consideration to consummate the acquisition of K-Pasa,
Inc.
On May 9, 1996, the Company completed a private offering of 14,400
shares of its common stock to Sampas Overseas, Inc. On August 9, 1996, the
Company issued 315,000 shares of Convertible Preferred Stock to a shareholder in
consideration for the cancellation of a $211,765 note of which the Company was
the maker.
On August 19, 1996, the Company issued 315,000 shares of Series C
Convertible Preferred Stock to Milton Barbarosh and the Stenton Leigh Group,
Inc. in consideration for the cancellation of a $315,000 note on which the
Company was maker.
On August 20, 1996, the Company issued an aggregate of 100,000 shares
of its Common Stock to Irwin Jacobson and Mark Scharman which issuance was
required as part of an adjustment to shares previously issued and sold.
On August 21, 1996, the Company completed a private offering of
2,577,705 shares of its common stock to Angus Hay, Gerard Thompson, Stanley
Rumbough, Jr., Pedro Alves and Milton Barbarosh for an aggregate of $200,000.
On October 2, 1996, the Company issued an aggregate of 362,000 shares
of its common stock to I.W. Miller and Company, Inc., Frank Miller, John
Masters, Gerard Thompson and Angus Hay in consideration for services rendered to
the Company.
On December 17, 1996, the Company completed a private offering of 2,000
shares of its common stock to Veronica De Los Santos and Kathy Palomo for
services rendered.
On October 15, 1997, the Company completed a private offering of 50,000
of its common stock to Frank Miller in consideration of services rendered to the
Company by Mr. Miller.
On November 17, 1997, the Company granted 2M Capital Corporation ("2M")
options to purchase 500,000 shares of common stock in the Company in
consideration for services rendered, or to be rendered, under the terms of a
consulting agreement between the Company and 2M Capital Corporation. Under the
terms of the Consulting Agreement, which has an initial term of two (2) years,
II-2
<PAGE>
2M is obligated to assist the Company in (i) implementing and monitoring an
investor relations program with investors, investment advisors, market makers
and stockbrokers including, but not limited to, meeting with the foregoing and
arranging for principal officers of the Company to meet with the foregoing; and
(ii) implementing and monitoring a strategic planning process for the Company.
On September 30, 1997, the Company completed a private offering in
which it issued a 5% Convertible Debenture ("Debenture A") for $100,000 to a
single investor. Debenture A entitles the holder thereof to convert the
Debenture into 323,545 shares of Common Stock of the Company at a conversion
price of $.3090 per share.
On October 15, 1997, the Company completed a private offering in which
it issued a 5% Convertible Debenture ("Debenture B") for $230,000 to a single
investor. Debenture B entitles the holder thereof to convert the Debenture into
423,769 shares of Common Stock of the Company at a conversion price of $.5427.
On November 14, 1997, the Company commenced an private offering of
950,000 shares of its Common Stock at $2.22 per share under Rule 506 of
Regulation D through which the Company sold 862,000 shares and received net
proceeds of $1,774,934.06. The proceeds from the offering were used to
consummate the acquisition by the Company of the UIS Companies.
On November 17, 1997, the Company entered into an agreement with Hirel
Holdings, Inc. ("HHI") and Hirel Marketing, Inc. ("HMI"), a wholly-owned
subsidiary of HHI, pursuant to which the Company issued HHI Two Hundred Thousand
(200,000) shares of Common Stock in exchange for HMI and HHI releasing the
Company and the UIS Companies from and against any and all rights or claims HMI
and HHI may have had with respect to the Company's acquisition of the UIS
Companies. Prior to November 1997, HHI and HMI engaged in substantial
negotiations with the UIS Companies in connection with HMI with the objective of
acquiring the UIS Companies. Under the terms of the Agreement with HHI and HMI,
the 200,000 shares of common stock received by HHI are being registered in the
registration statement of which this Prospectus forms a part. Mr. Montelione, a
six (6%) percent shareholder of the Company and member of the Oversight
Committee, is also a consultant and director of HHI.
On November 17, 1997, the Company entered into an agreement with HHI
and Vincent Montelione for the purpose of inducing HHI to amend its Employment
Agreement with Mr. Montelione to enable Mr. Montelione to enter into a
Consulting Agreement with the Company. Pursuant to the Agreement, HHI
represented that it did not have, and shall not have, any cause or causes of
action against the Company by virtue of any covenants against competition that
may have previously been executed by Mr. Montelione with HHI in such prior
Employment Agreement or pursuant to a current consulting agreement between Mr.
Montelione and HHI, and that Mr. Montelione does not possess any "confidential
information," as such term is defined under the prior Employment Agreement, that
does or could relate to the UIS Companies. In consideration of the foregoing,
HHI received Two Hundred Thousand (200,000) shares of the Company's Common
Stock, One Hundred Thousand (100,000) of such shares are subject to certain
restrictions upon transferability, imposed by the Company, for a twenty-four
(24) month period from November 17, 1997. Under the terms of the Agreement with
HHI, the Two Hundred Thousand (200,000) shares received by HHI are being
registered in the registration statement of which this Prospectus forms a part.
Mr. Montelione will remain a Director, and principal shareholder of HHI. Mr.
Montelione is also a six (6%) percent shareholder of the
II-3
<PAGE>
Company and a member of the Oversight Committee.
On January 5, 1998, the Company issued 125,000 shares of common stock
of the Company to Capital Communications, Ltd. ("Capital") in consideration for
services to be rendered by Capital to the Company pursuant to the terms of a
twelve month consulting agreement. Under the terms of the consulting agreement,
Capital will assist and advise the Company in investor communications and
financial and investor public relations. The Company granted Capital certain
piggy-back registration rights with respect to the common stock; however,
Capital has agreed not to sell the shares until March 1, 1999 or the termination
of the Consulting Agreement without the prior consent of the Company.
On March 12, 1998, the Company granted warrants (the "PSG Warrants") to
purchase an aggregate of 225,000 shares of Common Stock of the Company at an
exercise price of $6.50 per share to Preferred Securities Group, Inc. ("PSG")
pursuant to the terms of a twelve month Consulting Agreement between the Company
and PSG. Under the terms of the consulting agreement, PSG will provide certain
corporate financing consulting services to the Company. Beginning on June 10,
1998, 22,500 of the PSG Warrants will vest each month for the consecutive ten
(10) month period.
On April 8, 1998, the Company entered into a Client Services Agreement
with Continental Capital & Equity Corporation ("Continental"). Pursuant to the
terms of the Agreement, the Company granted Continental options to purchase an
aggregate of 100,000 shares of Common Stock, with 50,000 of such options
exercisable at $9.00 per share and the remaining 50,000 options exercisable at
$12.00 per share. The exercise period commences on the date this Registration
Statement becomes effective and for a period of one year thereafter.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
<S> <C>
2.1 Reorganization Agreement by and among Seaton Group, Inc., United Information Systems, Inc., UIS
Industrial LTDA, and the Shareholders of United Information Systems, Inc. and UIS Industrial LTDA
dated November 17, 1997 (the "Reorganization Agreement").(1)
2.2 Amendment No. 1 to the Reorganization Agreement dated November 21, 1997.(1)
3.1 Articles of Incorporation of The Oceana Group, Inc. dated February 10, 1986.(1)
3.2 Certificate of Amendment to the Certificate of Incorporation of The Oceana Group, Inc.
dated March 20, 1992 filed March 23, 1992.(1)
3.3 Certificate of Amendment to the Certificate of Incorporation of Classic Video Theatre,
Inc. dated May 2, 1996 filed May 10, 1992.(1)
3.4 Certificate of Amendment to the Certificate of Incorporation of Seaton Group, Inc.
dated May 2, 1996 filed May 13, 1996.(1)
II-4
<PAGE>
3.5 Certificate of Amendment to the Certificate of Incorporation of Seaton Group, Inc.
filed November 18, 1997.(1)
3.6 Certificate of Designation of Series C Convertible Preferred Stock dated November 18,
1997.(1)
3.7 Certificate of Elimination of Series A&C Convertible Preferred Stock of Seaton Group,
Inc. filed November 18, 1997.(1)
3.8 Certificate of Amendment to the Certificate of Incorporation of Seaton Group, Inc.
filed December 3, 1997.(1)
3.9 Bylaws of The Oceana Group(1)
4.1 Form of Common Stock Certificate(2)
5. Opinion of Dreier & Baritz, L.L.P. as to the validity of the securities being
registered(2)
10.1 Agreement between Seaton Group, Inc., Hirel Holdings, Inc. and Hirel Marketing, Inc.
dated November 17, 1997.(1)
10.2 Amendment to Agreement between Seaton Group, Inc., Hirel Holdings, Inc. and Hirel
Marketing, Inc. dated November 17, 1997.(1)
10.3 Agreement between Seaton Group, Inc., Hirel Holdings, Inc. and Vincent Montelione
dated December 1, 1997.(1)
10.4 Consulting Agreement between Seaton Group, Inc. and 2M Capital Corp. dated November
17, 1997.(1)
10.5 Amendment to Consulting Agreement between Seaton Group, Inc. and 2M Capital Corp.
dated November 17, 1997.(1)
10.6 Indemnification Agreement between Seaton Group, Inc. and United Information Systems,
Inc. and UIS Industrial Ltda. dated November 17, 1997.(1)
10.7 Employment Agreement between Seaton Group, Inc. and Carlos Maia dated November 17,
1997.(1)
10.8 Consulting Agreement between United Information Systems, Inc. and
Preferred Securities, Inc. dated April 13, 1998.(1)
10.9 Consulting Agreement between United Information Systems, Inc. and
Capital Communications, Ltd. dated January 5, 1998.(1)
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<PAGE>
10.10 Client Service Agreement between Continental Capital & Equity Corp.
and United Information Systems, Inc. dated April 8, 1998.(1)
10.11 Voting Trust Agreement between Carlos Maia and Jorge Miguel Maia. (2)
10.12 Investment Banking Services Agreement between United Information Systems, Inc.
and JCA Investment Banking dated March 12, 1998.(1)
22. Subsidiaries(1)
23.1 Consent of Spear, Safer, Harmon and Co.(1)
23.2 Consent of Dreier & Baritz, L.L.P. [included as part of Exhibit 5.](2)
27. Financial Data Schedule(1)
</TABLE>
- ----------------
1. Filed herewith.
2. To be filed.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officer, 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement which:
(i) includes any prospectus required by section 10(a)(3) of
the Securities Act of 1993;
(ii) reflects in the prospectus any facts or events arising
after the effective date of
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<PAGE>
the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement.
(iii) includes any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(d) (i) that for purposes of determining any liability under the
Securities 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 Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(ii) that for the purpose of determining any liability under
the Securities 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-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Miami, State
of Florida on the _____ day of May, 1998.
UNITED INFORMATION SYSTEMS, INC.
By: /s/ Carlos Maia
------------------------------------
Carlos Maia, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Chairman of the Board and
Chief Executive Officer
/s/ Carlos Maia (Principal Executive Officer) May ___, 1998
- --------------------------------
Carlos Maia
/s/ Saul Maia President and Director May ___, 1998
- ----------------------------------
Saul Maia
Chief Financial Officer,
Treasurer and Director
/s/ William Cuervo (Principal Accounting Officer) May ___, 1998
- --------------------------------
William Cuervo
</TABLE>
II-8
REORGANIZATION AGREEMENT
by and among
SEATON GROUP, INC., a Delaware corporation,
UNITED INFORMATION SYSTEMS, INC., a Florida corporation,
UIS INDUSTRIAL LTDA.,
a company organized under the laws of Brazil,
THE SHAREHOLDER OF UNITED INFORMATION SYSTEMS, INC.
and
THE SHAREHOLDERS OF UIS INDUSTRIAL, LTD.
November 17, 1997
<PAGE>
REORGANIZATION AGREEMENT
------------------------
THIS REORGANIZATION AGREEMENT (the "Agreement") is made and entered
into as of the 17th day of November, 1997, by and among SEATON GROUP, INC., a
Delaware corporation ("Seaton"), UNITED INFORMATION SYSTEMS, INC., a Florida
corporation ("UIS"), UIS INDUSTRIAL LTDA., a company organized under the laws of
Brazil ("UIS Brazil"), and the shareholders of UIS Brazil ("UIS Brazil
Shareholders") and UIS ("UIS Shareholder") whose names are set forth on Schedule
A attached hereto (the UIS Shareholders and UIS Brazil Shareholders are
sometimes collectively hereinafter referred to as "Shareholders"). UIS Brazil
and the UIS Brazil Shareholders shall be jointly and severally liable (under
United States and Brazilian laws) hereunder with respect to any representations
and warranties hereunder made by UIS Brazil and the UIS Brazil Shareholders. UIS
and the UIS Shareholder shall be jointly and severally liable hereunder with
respect to any representations and warranties hereunder made by UIS and the UIS
Shareholders.
W I T N E S S E T H:
WHEREAS, UIS Brazil is engaged in the business of assembling,
manufacturing, distributing and selling personal computers, computer parts,
components and accessories (the "UIS Brazil Business"); and
WHEREAS, UIS is engaged in the business of distributing and selling
computer parts, components and accessories (the "UIS Business"); and
WHEREAS, subject to the terms and conditions hereinafter set forth,
Seaton desires to acquire from the Shareholders and the Shareholders desires to
transfer to Seaton, all the stock owned by the Shareholders in UIS and UIS
Brazil, as the case maybe ("UIS Brazil Stock" and "UIS Stock", and
collectively), in exchange for the "Exchange Stock" (as hereinafter defined);
and
WHEREAS, the UIS Brazil Shareholders constitutes all of the
shareholders of UIS Brazil, and the UIS Shareholder is the Sole Shareholder of
UIS.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as follows:
ARTICLE I
RECITALS, EXHIBITS, SCHEDULES
-----------------------------
The foregoing recitals are true and correct and, together with the
schedules and exhibits referred to hereafter, are hereby incorporated into this
Agreement by this reference. Certain capitalized terms used herein are defined
in Exhibit A hereof.
<PAGE>
ARTICLE II
REORGANIZATION
--------------
2.1 Stock Exchange. At Closing, in exchange for the issuance of the
Exchange Stock, and subject to the terms and conditions hereof, Shareholders
hereby agrees to transfer, convey and deliver to Seaton, and Seaton hereby
agrees to acquire from Shareholders, all of the UIS Brazil Stock and UIS Stock,
free and clear of all Encumbrances. Except as may be hereafter agreed by the
Shareholders, the Exchange Stock shall be issued to Shareholders in the amounts
and percentages set forth on Schedule A.
2.2 Pre-Conditions of Closing. Seaton covenants and agrees, and the
obligation of the Shareholders to close hereunder shall be conditioned upon the
following being true and correct at Closing, as follows:
(a) The Exchange Stock shall constitute 67.50% or 5,601,334 of
all of the issued and outstanding shares of stock of Seaton.
(b) The shares of Common Stock of Seaton are trading on the
NASDAQ Bulletin Board under the symbol "SEGI."
(c) Seaton shall have audited financial statements for the
year ended December 31, 1996, and financial statements for the period ended
September 30, 1997 prepared in accordance with generally accepted accounting
principles, all of which shall be provided to the Shareholders prior to Closing.
Seaton shall have cash on hand as of Closing of not less than $2,200,000, and
shall not be a party to any liabilities (other than the Convertible Debentures).
(d) Within thirty (30) days following the Closing, Seaton
shall file a registration statement with the Securities Exchange Commission that
shall include twenty (20%) percent of each of the Shareholders' Exchange Stock
of the Exchange Stock. Shareholders acknowledge that the Exchange Stock will be
subject to certain "lock-up" provisions pursuant to Section 2.5 hereof, but in
no event shall the "lock-up" provisions extend for more than 24 months following
the Closing Date, as hereinafter defined.
(e) Seaton shall enter into an employment agreement with
Carlos Maia, substantially in the form attached hereto as Exhibit B.
2.3 Closing Date. The closing of the transactions provided for herein
("Closing") shall take place at the offices of the law firm Atlas, Pearlman,
Trop & Borkson, P.A. 200 East Las Olas Boulevard, Fort Lauderdale, Florida
33301, at such date mutually designated by the parties hereto in writing but in
no event later than November 30, 1997 ("Closing Date").
2.4 Qualification as Reorganization. The parties hereto hereby agree
that this transaction is intended to qualify as a reorganization within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
("Reorganization"). Each of the parties agrees that it shall report the
transaction as a Reorganization on its respective federal income tax return,
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and shall cooperate to the extent reasonably necessary to complete all
information reporting necessary in connection therewith.
2.5 Restrictions on Transferability.
(a) Except as provided in Section 2.5 hereof, the Shareholders
hereby agree that neither the Shareholders nor the Shareholder's
representatives, administrators, successors or assigns will offer, sell,
transfer, assign, pledge, hypothecate, encumber or otherwise attempt to directly
or indirectly dispose of any of the Exchange Stock either pursuant to Rule 144
of the Securities Act of 1933, as amended, a registration statement or
otherwise, or dispose of any beneficial interest therein for a period of twenty
four (24) months following the Closing Date without the prior written consent of
the Oversight Committee of 2M Capital Corp.
(b) Notwithstanding paragraph 2.5(a), the shareholders listed
on Schedule B hereto hereby agree that neither the shareholders nor the
shareholder's representatives, administrators, successors or assigns will offer,
sell, transfer, assign, pledge, hypothecate, encumber or otherwise attempt to
directly or indirectly dispose of any of the Exchange Stock in the amounts
designated on Schedule B either pursuant to Rule 144 of the Securities Act of
1933, as amended, a registration statement or otherwise, or dispose of any
beneficial interest therein for a period of nine (9) months following the
Closing Date without the prior written consent of the Oversight Committee of 2M
Capital Corp.
(c) The Exchange Shares will be subject to any restrictions on
transfer or disposition pursuant to a Registration Statement, imposed by (i) an
underwriter for any public offering of the Company's securities, which lock-up
period the Company anticipates not to exceed twenty-four (24) months from the
effective date of the Registration Statement for such public offering; (ii) the
National Association of Securities Dealers (NASD); or (iii) any national
exchange including the National Association of Securities Dealers Automated
Quotation System ("NASDAQ").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UIS BRAZIL AND THE UIS BRAZIL
---------------------------------------------------------------
SHAREHOLDERS, UIS AND THE UIS SHAREHOLDER
-----------------------------------------
As to UIS Brazil, UIS Brazil and the UIS Brazil Shareholders hereby
jointly and severally make the following representations and warranties to
Seaton, each of which UIS Brazil and the UIS Brazil Shareholders represent to be
true and correct on the date hereof and (except as UIS Brazil and the
Shareholders may notify Seaton in writing prior to Closing) shall be deemed made
again as of the Closing Date and represented by the UIS Brazil and the UIS
Brazil Shareholders to be true and correct on the Closing Date, and as to UIS,
UIS and the UIS Shareholder jointly and severally hereby make the following
representations and warranties to Seaton, each of which UIS and the UIS
Shareholder represent to be true and correct on the date hereof and (except as
UIS and the UIS Shareholder may notify Seaton in writing prior to Closing) shall
be deemed made again as of the Closing Date and represented by UIS and the UIS
Shareholder to be true and correct on the Closing Date. The following
representations and warranties are made by UIS
3
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Brazil and the UIS Brazil Shareholders on the one hand and by UIS and the UIS
Shareholder, on the other hand, severally and not jointly:
3.1 Organization. UIS Brazil is a corporation duly organized, validly
existing and in good standing under the Laws of Brazil, and UIS is a corporation
duly organized, validly existing and in good standing under the Laws of Florida.
Neither UIS Brazil nor UIS have subsidiaries or interests in any other Persons
and are not required to be qualified or licensed as foreign corporations in any
jurisdiction in which the failure to be so qualified or licensed would have a
materially adverse effect on their respective Businesses. UIS Brazil and UIS
have the full power and authority to own all their Assets and to conduct their
respective Businesses as and where the Businesses are conducted. Accurate,
current, and complete copies of the Articles of Incorporation and Bylaws of UIS
Brazil and UIS and, if any, all fictitious name registrations of UIS Brazil and
UIS have been delivered to Seaton at or prior to the execution of this
Agreement. The Shareholder constitutes all the Shareholders of UIS and the
Shareholders constitute all the Shareholders of UIS Brazil.
3.2 Authority and Approval of Agreement.
(a) The execution and delivery of this Agreement by UIS Brazil
and the UIS Brazil Shareholders and UIS and the UIS Shareholder, and the
performance of all its respective obligations hereunder have been duly
authorized and approved by all requisite corporate action on the part of the UIS
Brazil and the UIS Brazil Shareholders and UIS and the UIS Shareholder pursuant
to applicable Law, which included unanimous approval by their respective Boards
of Directors and their Shareholders, and said authorization and approval has not
been altered, amended or revoked. Pursuant to said authorization and approval,
UIS Brazil and the UIS Brazil Shareholders and UIS and the UIS Shareholder have
the power and authority to execute and deliver this Agreement and to perform all
its obligations hereunder.
(b) This Agreement and each of the other documents,
instruments and agreements executed by UIS Brazil and the UIS Brazil
Shareholders and UIS and the UIS Shareholder in connection herewith constitute
the valid and legally binding agreements of such Persons enforceable against
such Persons in accordance with its terms, except that: (i) enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application affecting the enforcement of the rights and
remedies of creditors; and (ii) the availability of equitable remedies may be
limited by equitable principles.
3.3 No Violations. Except as set forth on Schedule 3.3 hereto, the
execution, delivery or performance of this Agreement or any other documents,
instruments or agreements executed by UIS Brazil, UIS or the Shareholders of
either in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, do not and will not: (i) constitute a violation
of or default under (either immediately, upon notice or upon lapse of time) the
Articles of Incorporation or Bylaws of UIS Brazil or UIS, any provision of any
Contract to which UIS Brazil or UIS or the Assets of UIS Brazil or UIS may be
bound, any Judgment or any Law; or (ii) result in the creation or imposition of
any Encumbrance upon, or give to any third person any interest in or right to,
any of the UIS Brazil or UIS Assets; or (iii) result in the loss or adverse
4
<PAGE>
modification of, or the imposition of any fine or penalty with respect to, any
Permit or franchise granted or issued to, or otherwise held by or for the use
of, UIS Brazil or UIS.
3.4 Financial Statements. Attached hereto as Schedule 3.4 are financial
statements of UIS Brazil and UIS ("Financial Statements"), including audited
balance sheets and statements of operations for the fiscal years ended December
31, 1995 and December 31, 1996, and internally prepared income statements and
Balance Sheets of UIS Brazil and UIS at September 30, 1997. The Financial
Statements are true, correct and complete, were prepared in accordance with the
accrual method of accounting and generally accepted accounting principles as
adopted by the American Institute of Certified Public Accountants, and
accurately reflect UIS Brazil's and UIS's financial condition and the results of
their operations for the periods and as of the dates which they purport to
cover. As of the Closing, (a) the net book equity of the Assets in excess of
aggregate liabilities of UIS Brazil and UIS ("Liabilities") shall be not less
than $6,000,000 ("Minimum Net Asset Amount"), and (b) the current assets shall
be at least $500,000 greater than the current liabilities ("Minimum Liquidity").
All dollar amounts are in US dollars based on the conversion price of Brazilian
Real as of the last day of the applicable period.
3.5 Conduct Since Date of Unaudited Statements. Except as disclosed in
Schedule 3.5 hereto, none of the following have occurred since September 30,
1997:
(a) Any change in the Assets, Obligations, Business, financial
condition, prospects or operations of UIS Brazil or UIS which individually or in
the aggregate have had or may have any material adverse effect on the Assets,
the Liabilities, or the Businesses, financial condition or operations of UIS
Brazil or UIS, nor are there any circumstances known to UIS Brazil or UIS which
might result in such change or such an effect;
(b) Any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Assets or Business;
(c) Any disposition, lease or Encumbrance of the Business, the
Assets, or increase of indebtedness of or guaranteed by UIS Brazil or the UIS
Brazil Shareholders or UIS or the UIS Shareholder, other than in the ordinary
course of business consistent with past practices; provided, however, that no
such disposition, lease or Encumbrance, regardless of the consideration
therefor, has been made between UIS Brazil or UIS, and any of their
shareholders, directors, officers, agents, contractors or employees (or any
member of their respective families);
(d) Any discharge or satisfaction by the UIS Brazil or UIS of
any lien or encumbrance or payment by UIS Brazil or UIS of any obligation or
liability (fixed or contingent) other than (a) current liabilities included in
the Balance Sheets, and (b) current liabilities incurred since the date of the
Balance Sheets in the ordinary course of business;
(e) Any transaction entered into by UIS Brazil or UIS other
than in the ordinary course of business consistent with past practices;
(f) Any notice received by UIS Brazil or the UIS Brazil
Shareholders or UIS or the UIS Shareholder of any actual or threatened labor
dispute or any event or condition of any
5
<PAGE>
character which has had or can reasonably be expected to have a material adverse
effect on the Businesses, the Assets or the financial condition or operations of
either UIS Brazil or UIS;
(g) Any change in the accounting principles followed by UIS
Brazil or UIS or the methods of applying such principles;
(h) Any Contract binding UIS Brazil or UIS to do or take any
of the actions referred to in this Section 3.5 (other than subsections (b) or
(f)); or
(i) Except for historically normal annual salary increases not
exceeding 6 percent in any individual case, any increase in the compensation,
pension or other benefits payable or to become payable by UIS Brazil or UIS to
any of its officers or employees, or any bonus payments or arrangements made to
or with any of them.
3.6 Title to Assets. Except as set forth in Schedule 3.6 hereto, UIS
Brazil and UIS are the sole and unconditional owners of and have good, valid and
marketable title to all the Assets, free and clear of all Encumbrances, except
for the Liabilities, and there exists no restrictions on the transfer or use of
the Assets. Schedule 3.6 hereto also includes an accurate, current and complete
list of each lease or sublease of Equipment to which UIS Brazil or UIS is a
party or by which UIS Brazil or UIS may be bound and a description of all
Equipment leased under each such lease or sublease. There are no materially
dangerous conditions with respect to any Asset.
3.7 Lease of Real Property. Schedule 3.7 hereto is an accurate and
complete list as of September 30, 1997 of each lease or sublease of Real
Property to which UIS Brazil and UIS is a party or by which UIS Brazil or UIS
may be bound and a description of the Real Property leased thereunder. With
respect to each lease or sublease of UIS Brazil and UIS described on Schedule
3.7 hereto: (i) UIS Brazil and UIS have been in peaceful possession of the
property leased thereunder and neither UIS Brazil nor UIS nor the landlord (to
the knowledge of such UIS Brazil and UIS) is in default thereunder; (ii) no
waiver, indulgence or postponement of any of the Obligations thereunder has been
granted by the lessee or lessor thereunder; and (iii) there exists no event,
occurrence, condition, or act known to UIS Brazil and UIS which upon notice or
lapse of time would be or become a default thereunder. UIS Brazil and UIS have
not violated or breached any provision of any such lease or sublease, and all
Obligations required to be performed by UIS Brazil and UIS have been fully and
properly performed. Except as set forth on Schedule 3.7 hereto, no Consent of
any Person is required under any such lease or sublease in order for such lease
or sublease to continue to be valid and subsisting and entitle Hirel to come
into and remain in possession of the premises demised thereunder after the
consummation of the transactions contemplated by this Agreement.
3.8 Indebtedness. Except for Indebtedness or as set forth on Schedule
3.8 reflected or reserved against in the Balance Sheets and Indebtedness
incurred in the ordinary course of business after the date of the Balance
Sheets, neither UIS Brazil nor UIS have Indebtedness outstanding at the date
hereof. Neither UIS Brazil nor UIS are in default with respect to any
outstanding Indebtedness or any instrument relating thereto, and no such
Indebtedness or any instrument or agreement relating thereto purports to limit
the issuance of any securities by UIS
6
<PAGE>
Brazil or UIS or the operation of the business of UIS Brazil or UIS. Complete
and correct copies of all instruments (including all amendments, supplements,
waivers and consents) relating to any Indebtedness of UIS Brazil or UIS have
been furnished to Seaton.
3.9 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in the Balance Sheets or incurred in the ordinary course of
business after the date of the Balance Sheets or described in Schedule 3.9,
neither UIS Brazil nor UIS have liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others) and whether due or to become due including, without limitation, any
liabilities for Taxes due or to become due.
3.10 Environmental Matters.
(a) UIS Brazil and UIS have obtained all material Permits
which are required in connection with the conduct of the Business under
applicable Laws, and are in full compliance with all Laws, relating to pollution
or protection of the environment including, but not limited to, Laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including without limitation ambient air, space water,
groundwater, or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes ("Environmental Matters").
(b) UIS Brazil and UIS are in material compliance in the
conduct of their respective Businesses with all terms and conditions of the
required Permits and are also in material compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in those Laws or contained in any Judgment,
notice or demand letter issued, entered, promulgated or approved thereunder.
(c) Neither UIS Brazil nor UIS have received written notice of
any conditions or incidents that violate or prevent compliance or continued
compliance with those Laws otherwise form the basis of any Proceeding, based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, release
or threatened release into the environment, of any pollutant, contaminant,
chemical, or industrial, toxic or hazardous substance or waste.
(d) Neither UIS Brazil nor UIS have received notice of any
civil, criminal or administrative Proceeding pending or threatened against UIS
Brazil or UIS in connection with the conduct of their Businesses relating in any
way to those laws, or injunctions, notice or demand letter issued, entered,
promulgated or approved thereunder.
3.11 Assets Required for Operation. Attached as Schedule 3.11 is an
accurate and complete list as of September 30, 1997 of all the Assets in excess
of $5,000 in value used in the operation of the Business of UIS Brazil and UIS.
The Assets comprise all of the Assets used in the operation of the Businesses of
UIS Brazil and UIS in the manner and to the extent currently
7
<PAGE>
conducted. Except as otherwise provided on Schedule 3.11, all of the Assets are
located at the Premises of UIS Brazil or UIS.
3.12 Customers. Attached as Schedule 3.12 is an accurate and complete
list as of September 30, 1997 of the names of UIS Brazil's and UIS's material
customers as of date hereof (defined for these purposes to mean the customers
representing 10% or more of the total sales by UIS Brazil or UIS), their
addresses and telephone numbers. Schedule 3.12 also includes a copy of all
Contracts with customers. Neither UIS Brazil nor UIS have been notified nor has
any reason to believe, that any of its customers will not continue to do
business with Seaton after the consummation of the transaction contemplated
hereby as and to the extent such customer is currently doing business with UIS
Brazil or UIS.
3.13 Other Contracts. Schedule 3.13 hereto is an accurate, and complete
list as of September 30, 1997 and description of each of the Contracts
evidencing aggregate obligations of UIS Brazil or UIS in excess of $50,000 to
which UIS Brazil or UIS is a party or by which UIS Brazil or UIS or any of its
Assets are bound. Each such Contract is a valid and binding obligation of the
parties thereto in accordance with the terms and conditions thereof. No party to
any such Contract is in default with respect to any term or condition thereof,
nor has any event occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or would cause the
acceleration of any obligation of any party thereto. Except as set forth on
Schedule 3.13 hereto, no Contract described on Schedule 3.13 hereto: (a)
is a Contract that will not continue to be effective in accordance with its
terms subsequent to the transaction contemplated hereby without additional
consideration to or the consent or authorization of any third party to this
Agreement; or (b) is not cancelable by UIS Brazil or UIS giving thirty (30) days
notice or less, without liability, penalty or premium. Except as identified in
Schedule 3.13 hereto, there are no outstanding offers, bids, proposals or
quotations made by UIS Brazil which, if accepted, would create a Contract with
UIS Brazil or UIS.
3.14 Books and Records. UIS Brazil's and UIS's books and records
accurately reflect in all material respects all of UIS Brazil's and UIS's
Assets, Obligations and accruals, and all transactions (normally reflected in
books and records in accordance with the accrual method of accounting) to which
UIS Brazil or UIS is or was a party or by which UIS Brazil or UIS or any of its
Assets are or were affected.
3.15 Tax Returns. UIS Brazil and UIS have duly and timely filed with
the appropriate governmental agencies all tax and other returns and reports
required by any Law to be filed by it and all such returns and reports have been
accurately prepared and properly completed. Accurate and complete copies of all
such returns and reports filed by UIS Brazil during the past three (3) years
have been delivered to Seaton.
3.16 Taxes. All Taxes due, owing and payable by UIS Brazil and UIS have
been fully paid or are reflected on the Financial Statements for the period
ended September 30, 1997. No claim for any Tax due from or assessed against UIS
Brazil or UIS is being contested. Except as set forth on Schedule 3.16 hereto,
none of UIS Brazil's or UIS's Tax returns or reports have been audited by the
Internal Revenue Service or any state or local Tax authority, and neither UIS
Brazil nor UIS have received any notice of deficiency or other adjustment from
the Internal
8
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Revenue Service or any state or local Tax authority. There are no agreements,
waivers, or other arrangements providing an extension of time with respect to
the assessment of any Tax against UIS Brazil or UIS, nor are there any Tax
Proceedings now pending or threatened against UIS Brazil or UIS. UIS Brazil and
UIS have made all deposits required by Law, to be made with respect to
employees' withholding and other employment taxes. No state of facts exists or
has existed, nor has any event occurred, which would constitute grounds for the
assessment of any further Tax against UIS Brazil or UIS.
3.17 Proceedings. Neither UIS Brazil nor UIS are a party to, the
subject of, or threatened with any Proceeding nor, to the best of UIS Brazil's
or UIS's knowledge, is there any basis for any Proceeding. Neither UIS Brazil
nor UIS is contemplating the institution of any Proceeding.
3.18 Other Liabilities. No claim of breach of Contract, tort, product
liability or other claim (whether arising from UIS Brazil's or UIS's Business or
otherwise), contingent or otherwise, has been asserted or threatened against UIS
Brazil nor UIS, nor, to the best of UIS Brazil's and UIS's knowledge, is capable
of being asserted by any employee, creditor, claimant or other Person against
UIS Brazil or UIS, except for claims for warranty arising in the ordinary course
of the business of UIS Brazil or UIS. No state of facts exists or has existed,
nor has any event occurred, which could give rise to the assertion of any such
claim by any Person.
3.19 Permits. Schedule 3.19 lists all Permits obtained by UIS Brazil
and UIS to operate their respective Businesses. UIS Brazil and UIS have obtained
and presently hold all Permits which are required under applicable Law to
conduct their respective Businesses as and where currently conducted. All such
Permits are in effect, are included in the Assets and are transferable to
Seaton, and no Consent of any Person is required in connection with any such
Permit for the transactions contemplated by this Agreement. Neither UIS Brazil
nor UIS is in default under, nor has it received any notice of any claim of
default or any other notice with respect to, any such Permit.
3.20 Consents. The execution, delivery and performance by UIS Brazil
and UIS of this Agreement and the consummation by UIS Brazil and UIS of the
transactions contemplated hereby do not require any Consent that has not been
received prior to the date hereof.
3.21 Judgments. There is no outstanding Judgment against UIS Brazil or
UIS or against or affecting any of the Assets or their respective Businesses. To
the best knowledge of UIS Brazil and UIS, there is no health or safety problem
involving or affecting UIS Brazil or UIS or the Assets of either. There are no
open workmen's compensation claims against UIS Brazil or UIS, or any contingent
liability of UIS Brazil or UIS, or any other Obligation, fact or circumstance
which would give rise to any right of indemnification on the part of any current
or former shareholder, director, officer, employee or agent of UIS Brazil or
UIS, or any heir or personal representative thereof, against UIS Brazil or UIS
or any successor to the business of UIS Brazil or UIS.
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3.22 Brokerage Fees. There is no Person acting on behalf of UIS Brazil
or UIS who is entitled to or has any claim for any brokerage or finder's fee or
commission in connection with the execution of this Agreement or the
consummation of the transactions contemplated hereby.
3.23 Compliance with Laws. UIS Brazil and UIS and their respective
Businesses are in material compliance with all Laws where such failure to comply
would materially adversely effect the Business or Assets of UIS and UIS Brazil.
3.24 Labor Agreements, Employee Benefit Plans and Employment
Agreements. Except as reflected in Schedule 3.24 attached hereto, neither UIS
Brazil nor UIS is a party to: (i) any union collective bargaining or similar
agreement; (ii) any profit sharing, pension, retirement, deferred compensation,
bonus, stock option, stock purchase, retainer, consulting, health, welfare or
incentive plan or agreement or other Employee Benefit Plan, whether legally
binding or not; (iii) any plan providing for "fringe benefits" to its employees,
including, but not limited to, vacation, disability, sick leave, medical,
hospitalization and life insurance and other insurance plans, or related
benefits; or (iv) any employment agreement, severance agreement, noncompete
agreement or other Contract with any of their employees.
3.25 Labor Disputes; Unfair Labor Practices. There is no pending or
threatened labor dispute, strike or work stoppage which affects or which may
affect the Businesses of UIS Brazil or UIS or which may interfere with the
continued operation of the Businesses of either. To the best of UIS Brazil's and
UIS's knowledge, neither UIS Brazil nor UIS nor any agent, representative or
management employee of UIS Brazil or UIS has committed any unfair labor practice
as defined in the National Labor Relations Act of 1947, as amended. There is not
now pending or threatened any charge or complaint against UIS Brazil or UIS by
the National Labor Relations Board or any representative thereof. All references
in this section 3.25 as to UIS Brazil relate to Brazilian law.
3.26 Potential Conflicts of Interest. Except as set forth on Schedule
3.26, no officer or director of either UIS Brazil or UIS (a) owns, directly or
indirectly, any interest in (excepting not more than 1 percent stock holdings
for investment purposes in securities of publicly held and traded companies) or
is an officer, director, employee or consultant of any Person which is a
competitor, lessor, lessee, customer or supplier of either UIS Brazil or UIS;
(b) owns, directly or indirectly, in whole or in part, any tangible or
intangible property which either UIS Brazil or UIS is using or the use of which
is necessary for the businesses of either UIS Brazil or UIS; or (c) has any
cause of action or other claim whatsoever against, or owes any amount to, UIS
Brazil or UIS, except for claims in the ordinary course of business, such as for
accrued vacation pay, accrued benefits under employee benefit plans and similar
matters and agreements, none of which claims have accrued for a period greater
than 12 months prior to the date hereof.
3.27 Overtime, Back Wages, Vacation and Minimum Wages. Neither UIS
Brazil nor UIS has received notice of any claim (whether under federal or state
Law, any employment agreement or otherwise) on account of or for: (i) overtime
pay, other than overtime pay for the current payroll period; (ii) wages or
salary for any period other than the current payroll period; (iii) vacation,
time off or pay in lieu of vacation or time off, other than that earned in
respect of
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the current Calendar Year, or (iv) any violation of any statute ordinance or
regulation relating to minimum wages or maximum hours of work.
3.28 Discrimination and Occupational Safety Statutes and Regulations.
Neither UIS Brazil nor UIS has received (including, but not limited to,
governmental agencies of any kind) any claim or basis for any Proceeding against
UIS Brazil or UIS arising out of any Law relating to discrimination in
employment or to employment practices or occupation safety and health standards.
3.29 Employees, Contractors and Agents. UIS and UIS Brazil employ
approximately 320 employees. Except as set forth on Schedule 3.29, neither UIS
Brazil nor UIS has any reason to believe that any of its employees, contractors
or agents will not continue their employment/service with UIS or UIS Brazil
following the consummation of the transactions contemplated herein.
3.30 Insurance. The Assets, Businesses and operations of UIS Brazil and
UIS are insured under various policies of general liability and other forms of
insurance, all of which are listed on Schedule 3.30. All such policies are in
full force and effect in accordance with their terms, no notice of cancellation
has been received, and there is no existing default or event which with the
giving of notice or lapse of time, or both, would constitute a default
thereunder. All premiums to date have been paid in full. Neither UIS Brazil nor
UIS has been refused any insurance, nor has its coverage been limited, beyond
the normal scope of policy limitations, by any insurance carrier to which it has
applied for insurance or with which it has carried insurance during the past
five (5) years.
3.31 Related Parties Transactions. Schedule 3.31 sets forth a complete
list of all contracts and business transactions between UIS Brazil and any
shareholder, officer, director or employee or the spouse of any officer,
director or employee or shareholder of UIS Brazil and a complete list of all
contracts and business transactions between UIS and any shareholder, officer,
director or employee or the spouse of any officer, director or employee or
shareholder of UIS. All transactions listed on Schedule 3.31 were made on terms
no less favorable to UIS Brazil or UIS, respectively, than would be available
from unaffiliated parties. UIS Brazil and UIS Brazil Shareholders, and UIS and
UIS Shareholder represent and warrant herein that all future transactions
involving UIS Brazil, UIS or Seaton and any of its officers, directors or 5%
shareholders shall be on terms no less favorable than could be obtained from
unaffiliated parties.
3.32 Suppliers. Schedule 3.32 sets forth a true, correct and complete
list of the names and addresses of all of the material suppliers of UIS Brazil
and UIS (defined for these purposes to mean the supplier of goods representing
10% or more of the total purchases by UIS Brazil or UIS). Neither UIS Brazil nor
UIS has been notified nor has any reason to believe, that any of its suppliers
will not continue to do business with Seaton after the consummation of the
transaction contemplated hereby as and to the extent such supplier is currently
doing business with UIS Brazil or UIS.
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3.33 Intangibles. Schedule 3.33 lists all patents, copyrights,
trademarks and other Intangibles owned or used by UIS Brazil or UIS (specifying,
as to each, whether owned or licensed and, if the latter, the licensor). There
are no Proceedings pending or threatened with respect to any Intangible owned or
used by UIS Brazil or UIS. Neither UIS Brazil nor UIS granted any license to any
other Person with respect to any Intangible. Neither UIS Brazil nor UIS
infringes upon or unlawfully or wrongfully use any Intangible owned or claimed
by any other Person. To the best knowledge of UIS and UIS Brazil, except as
reflected in Schedule 3.33, no present or former employee of UIS Brazil or UIS
or any other Person owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any Intangible which wither UIS
Brazil or UIS owns, possesses or uses in their respective Businesses. Neither
UIS Brazil nor UIS is a party to a noncompetition, confidentiality or
nondisclosure agreement, nor is any present or former employee of UIS Brazil or
UIS is a party to any such agreement, except for such agreements between UIS
Brazil or UIS and its employees set forth in Schedule 3.29.
3.34 Accounts. Set forth on Schedule 3.34 attached hereto is an
accurate and complete list showing (a) the name and address of each bank and
brokerage firm in which UIS Brazil or UIS has an account or safe deposit box,
the number of any such account or any such box and the names of all persons
authorized to craw thereon or to have access thereto; and (b) the names of all
persons, if any, holding powers of attorney from UIS Brazil or UIS with respect
to such bank or brokerage account and a summary statement of the terms thereof.
3.35 Accounts Receivable. Schedule 3.35 contains a true and accurate
aging schedule of all Accounts Receivable of UIS Brazil and UIS as of September
30, 1997. Except as disclosed on Schedule 3.35, (a) each Account Receivable
represents a sale made in the ordinary course of business by UIS Brazil or UIS
which arose pursuant to an enforceable written Contract for a bona fide sale of
goods or for services performed and UIS Brazil and UIS have performed all their
obligations to produce the goods or perform the services to which such Account
Receivable relates, and (b) to the best of UIS Brazil's and UIS's knowledge and
belief, no Account Receivable is subject to any claim for reduction,
counterclaim, setoff, recoupment or other claim for credit, allowances or
adjustments by the obligor thereof. Except as reserved against in the Balance
Sheets or as set forth on Schedule 3.35, all Accounts Receivable are collectible
in full within the terms under which such Accounts Receivable arose.
3.36 Accounts Payable. Schedule 3.36 hereto contains a true and
accurate aging schedule of all accounts payable of UIS Brazil and UIS as of
September 30, 1997. Except as disclosed on Schedule 3.36, (a) each account
payable represents an obligation of UIS Brazil or UIS incurred in the ordinary
course of their respective Businesses for goods sold to, or for bona fide
services performed for UIS Brazil or UIS; and (b) no claim for reduction,
counterclaim, setoff, recoupment or other claim for credit, allowances or
adjustments has been made by UIS Brazil or UIS with respect to any such accounts
payable.
3.37 Improper Payments. Neither UIS Brazil nor UIS, nor any of their
current shareholders, directors, officers, or employees or agents, nor any
Person acting on behalf of UIS Brazil or UIS, has directly or indirectly, made
any bribe, kickback or other payment of a similar or comparable nature, whether
lawful or not, to any person, public or private, regardless of form,
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whether in money, property or services, to obtain favorable treatment for
business secured or special concessions already obtained for the benefit of UIS
Brazil or UIS. No funds or Assets of UIS Brazil or UIS were donated, loaned or
made available directly or indirectly for the benefit of, or for the purpose of
supporting or opposing, any government or subdivision thereof, political party,
candidate or committee, either domestic or foreign. Neither UIS Brazil nor UIS
has maintained and does not maintain a bank account, or any other account of any
kind, whether domestic or foreign, or which account was not listed, titled or
identified in the name of UIS Brazil or UIS.
3.38 Restrictions on Transferability.
(a) The Shareholders hereby agree that neither the
Shareholders nor the Shareholder's representatives, administrators, successors
or assigns will offer, sell, transfer, assign, pledge, hypothecate, encumber or
otherwise attempt to directly or indirectly dispose of any of the Exchange Stock
either pursuant to Rule 144 of the Securities Act of 1933, as amended, a
registration statement or otherwise, or dispose of any beneficial interest
therein for a period of twenty four (24) months following the Closing Date
without the prior written consent of the Oversight Committee of 2M Capital Corp.
(b) Notwithstanding paragraph 3.38(a), the shareholders listed
on Schedule B hereto hereby agree that neither the shareholders nor the
shareholder's representatives, administrators, successors or assigns will offer,
sell, transfer, assign, pledge, hypothecate, encumber or otherwise attempt to
directly or indirectly dispose of any of the Exchange Stock designated on
Schedule B either pursuant to Rule 144 of the Securities Act of 1933, as
amended, a registration statement or otherwise, or dispose of any beneficial
interest therein for a period of nine (9) months following the Closing Date
without the prior written consent of the Oversight Committee of 2M Capital Corp.
(c) The Exchange Shares will be subject to any restrictions on
transfer or disposition pursuant to such Registration Statement, imposed by (i)
an underwriter for any public offering of the Company's securities, which
lock-up period the Company anticipates not to exceed twenty-four (24) months
from the effective date of the Registration Statement for such public offering;
(ii) the National Association of Securities Dealers (NASD); or (iii) any
national exchange including the National Association of Securities Dealers
Automated Quotation System ("NASDAQ").
3.39 Capitalization.
(a) All of the issued and outstanding shares (quotas) of UIS
Brazil, having one (1) Brazil Real par value, consist of One Million Eight
Hundred Eighty Thousand (1,880,000) shares (quotas). All issued and outstanding
shares of capital stock of UIS Brazil are validly issued, fully paid and
non-assessable. Except as set forth on Schedule 3.39 there are no outstanding
(a) securities convertible into or exchangeable for the shares of capital stock
of UIS Brazil; (b) options, warrants or other rights to purchase or subscribe
shares of capital stock of UIS Brazil or securities convertible into or
exchangeable for shares of capital stock of UIS Brazil; or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind relating
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to the issuance of any capital stock of UIS Brazil, any such convertible or
exchangeable securities or any such options, warrants or rights.
(b) UIS authorized capitalization consists of Five Thousand
(5,000) shares of common stock having a par value of $1.00 per share, of which
Five Thousand (5,000) shares are issued and outstanding. All issued and
outstanding shares of capital stock of UIS are validly issued, fully paid and
non-assessable. Except as set forth on Schedule 3.39 there are no outstanding
(a) securities convertible into or exchangeable for the shares of capital stock
of UIS; (b) options, warrants or other rights to purchase or subscribe shares of
capital stock of UIS or securities convertible into or exchangeable for shares
of capital stock of UIS; or (iii) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance of any
capital stock of UIS, any such convertible or exchangeable securities or any
such options, warrants or rights.
3.40 Tax Exempt Status of UIS Brazil. UIS Brazil is exempt from any tax
on income imposed by the Brazilian government ("Exemption"), as set forth in
Schedule 3.40, and the consummation of the transaction herein between the
parties hereto will not terminate or otherwise adversely effect UIS Brazil's
Exemption. Such Exemption is in full force in effect.
ARTICLE IV
SEATON'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seaton hereby makes the following representations and warranties to UIS
Brazil and the UIS Brazil Shareholders and UIS and the UIS Shareholder, each of
which Seaton represents to be true and correct on the date hereof, and (except
as Seaton may notify UIS Brazil and the UIS Brazil Shareholders and UIS and the
UIS Shareholder in writing prior to Closing) shall be deemed made again as of
the Closing Date and represented by Seaton to be true and correct on the Closing
Date.
4.1 Organization. Seaton is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the full power and authority to own all its Assets and to conduct its business
as and where its business is presently conducted. Seaton has no subsidiaries or
interest in any other Person, and is not required to be qualified or licensed as
a foreign corporation in any jurisdiction in which the failure to be so
qualified or licensed would have a materially adverse effect on the Business.
Seaton has the full power and authority to own all its Assets and to conduct the
Business as and where the Business is conducted. Accurate, current, and complete
copies of the Articles of Incorporation and Bylaws of Seaton and, if any, all
fictitious name registrations of Seaton have been, delivered to UIS Brazil and
the Shareholders and UIS and the Shareholder of UIS at or prior to the execution
of this Agreement.
4.2 Authority and Approval of Agreement.
(a) The execution and delivery of this Agreement by Seaton and
the performance of all Seaton obligations hereunder have been duly authorized
and approved by all requisite corporate action on the part of Seaton pursuant to
applicable Law. Seaton has the power and authority to execute and deliver this
Agreement and to perform all its obligations hereunder.
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(b) This Agreement and each of the other documents,
instruments and agreements executed by Seaton in connection herewith constitute
the valid and legally binding agreements of Seaton, enforceable against Seaton
in accordance with their terms, except that: (i) enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
of general application affecting the enforcement of the rights and remedies of
creditors; and (ii) the availability of equitable remedies may be limited by
equitable principles.
4.3 No Violations. Except as otherwise set forth in Schedule 4.3, the
execution, delivery or performance of this Agreement or any other documents,
instruments or agreements executed by Seaton in connection herewith, and the
consummation of the transactions contemplated hereby, do not and will not (i)
constitute a violation of or default under (either immediately, upon notice or
upon lapse of time) the Articles of Incorporation or Bylaws of Seaton, any
provision of any Contract to which Seaton may be bound, any Judgment or any Law;
or (ii) result in the creation or imposition of any Encumbrance upon, or give to
any third person any interest in or right to, any of the Seaton Assets; or (iii)
result in the loss or adverse modification of, or the imposition of any fine or
penalty with respect to, any Permit or franchise granted or issued to, or
otherwise held by or for the use of, Seaton.
4.4 Brokerage Fees. There is no Person acting on behalf of Seaton who
is entitled to or has any claim for any brokerage or finder's fee or commission
in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby.
4.5 Consents. The execution, delivery, and performance by Seaton of
this Agreement and the consummation by Seaton of the transactions contemplated
hereby do not require any Consent that has not been received prior to the date
hereof.
4.6 Closing Representations. Seaton represents and warrants that:
(a) The Exchange Stock shall constitute 67.50% of all of the
issued and outstanding shares of stock of Seaton.
(b) The shares of Common Stock of Seaton are trading on the
NASDAQ Bulletin Board under the symbol "SEGI."
(c) Seaton shall have audited financial statements for the
year ended December 31, 1996, and internally prepared financial statements for
the period ended September 30, 1997 prepared in accordance with generally
accepted accounting principles, all of which shall be provided to the
Shareholders prior to Closing. Seaton shall have cash on hand as of Closing of
not less than $2,200,000, and shall not be a party to any liabilities (other
than the Convertible Debentures of $330,000).
(d) Within thirty (30) days following the Closing, Seaton
shall file a registration statement with the Securities Exchange Commission that
shall include twenty (20%) percent of each of the Shareholders' Exchange Stock.
Shareholders acknowledges that the Exchange Stock will be subject to certain
"lock -up" provisions pursuant to Section 2.5 hereof,
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but in no event shall the "lock-up" provisions extend for more than 24 months
following the Closing Date, as hereinafter defined.
4.7 Full Disclosure. All the representations and warranties made by
Seaton herein or in any schedule hereto, and all of the statements, documents or
other information pertaining to the transaction contemplated herein made or
given by Seaton, its agents or representatives are true and complete, and do not
omit any information required to make the statements or information provided, in
light of the transactions contemplated herein, true, complete and
non-misleading.
4.8 Financial Statements. Attached hereto as Schedule 4.8 are financial
statements of Seaton ("Financial Statements"), including audited balance sheets
and statements of operations for the fiscal years ended December 31, 1996 and
internally prepared income statements and Balance Sheets of Seaton at September
30, 1997. The Financial Statements are true, correct and complete, were prepared
in accordance with the accrual method of accounting and generally accepted
accounting principles as adopted by the American Institute of Certified Public
Accountants, and accurately reflect Seaton's financial condition and the results
of its operations for the periods and as of the dates which they purport to
cover.
4.9 Conduct Since Date of Unaudited Statements. Except as disclosed in
Schedule 4.9 hereto, none of the following have occurred since September 30,
1997:
(a) Any change in the Assets, Obligations, Business, financial
condition, prospects or operations of Seaton which individually or in the
aggregate have had or may have any material adverse effect on the Assets, the
Liabilities, or the Business, financial condition or operations of Seaton, nor
are there any circumstances known to Seaton which might result in such change or
such an effect;
(b) Any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Assets or Business;
(c) Any disposition, lease or Encumbrance of the Business, the
Assets, or increase of indebtedness of or guaranteed by Seaton, other than in
the ordinary course of business consistent with past practices; provided,
however, that no such disposition, lease or Encumbrance, regardless of the
consideration therefor, has been made between Seaton, and any of its
shareholders, directors, officers, agents, contractors or employees (or any
member of their respective families);
(d) Any discharge or satisfaction by Seaton of any lien or
encumbrance or payment by the Seaton of any obligation or liability (fixed or
contingent) other than (a) current liabilities included in the Balance Sheet,
and (b) current liabilities incurred since the date of the Balance Sheet in the
ordinary course of business;
(e) Any transaction entered into by Seaton other than in the
ordinary course of business consistent with past practices;
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(f) Any notice received by Seaton of any actual or threatened
labor dispute or any event or condition of any character which has had or can
reasonably be expected to have a material adverse effect on the Business, the
Assets or the financial condition or operations of Seaton;
(g) Any change in the accounting principles followed by Seaton
or the methods of applying such principles; or
(h) Any Contract binding Seaton to do or take any of the
actions referred to in this Section 4.9 (other than subsections (b) or (f)).
(i) Any salaries have been paid or have any agreements as to
the payment of any salaries been made since September 30, 1997.
4.10 Title to Assets. Except as set forth in Schedule 4.10 hereto,
Seaton is the sole and unconditional owner of and has good, valid and marketable
title to all the Assets, free and clear of all Encumbrances, except for the
Liabilities, and there exists no restriction on the transfer or use of the
Assets. Schedule 4.10 hereto also includes an accurate, current and complete
list of each lease, or sublease of Equipment, to which Seaton is a party or by
which Seaton may be bound and a description of all Equipment leased under each
such lease or sublease. There are no materially dangerous conditions with
respect to any Asset.
4.11 Lease of Real Property. There is no lease or sublease of Real
Property to which Seaton is a party or by which Seaton may be bound.
4.12 Indebtedness. Except for Indebtedness set forth on Schedule 4.12
as reflected or reserved against in the Balance Sheet and Indebtedness incurred
in the ordinary course of business after the date of the Balance Sheet, the
Company has no Indebtedness outstanding at the date hereof. Seaton is not in
default with respect to any outstanding Indebtedness or any instrument relating
thereto, and no such Indebtedness or any instrument or agreement relating
thereto purports to limit the issuance of any securities by Seaton or the
operation of the business of Seaton. Complete and correct copies of all
instruments (including all amendments, supplements, waivers and consents)
relating to any Indebtedness of the Seaton have been furnished to UIS Brazil and
UIS.
4.13 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in the Balance Sheet or incurred in the ordinary course of
business after the date of the Balance Sheet or described in Schedule 4.13
hereto, Seaton has no liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise (including, without limitation, liabilities as
guarantor or otherwise with respect to obligations of others) and whether due or
to become due including, without limitation, any liabilities for Taxes (as
defined in Exhibit A) due or to become due.
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4.14 Environmental Matters.
(a) Seaton has obtained all material Permits which are
required in connection with the conduct of the Business under applicable Laws,
and is in full compliance with all Laws, relating to pollution or protection of
the environment including, but not limited to, Laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including without limitation ambient air, space water, groundwater,
or land), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
("Environmental Matters").
(b) Seaton is in material compliance in the conduct of the
Business with all terms and conditions of the required Permits and is also in
material compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in those Laws or contained in any Judgment, notice or demand letter
issued, entered, promulgated or approved thereunder.
(c) Seaton has not received written notice of any conditions
or incidents that violate or prevent compliance or continued compliance with
those Laws otherwise form the basis of any Proceeding, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, chemical, or
industrial, toxic or hazardous substance or waste.
(d) Seaton has not received notice of any civil, criminal or
administrative Proceeding pending or threatened against Seaton in connection
with the conduct of the Business relating in any way to those laws, or
injunctions, notice or demand letter issued, entered, promulgated or approved
thereunder.
4.15 Customers. Attached as Schedule 4.15 is an accurate, current and
complete list of the names of Seaton's material customers as of date hereof
(defined for these purposes to mean the customers representing 10% or more of
the total sales by Seaton), their addresses and telephone numbers. Schedule 4.15
also includes a copy of all Contracts with customers. Seaton has not been
notified nor has any reason to believe, that any of its customers will not
continue to do business with Seaton after the consummation of the transaction
contemplated hereby as and to the extent such customer is currently doing
business with Seaton.
4.16 Other Contracts. As of the closing date, Seaton has no
contracts outstanding.
4.17 Books and Records. Seaton's books and records accurately reflect
in all material aspects all of Seaton's Assets, Obligations and accruals, and
all transactions (normally reflected in books and records in accordance with the
accrual method of accounting) to which Seaton is or was a party or by which
Seaton or any of its Assets are or were affected.
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4.18 Tax Returns. Seaton has duly and timely filed with the appropriate
governmental agencies all tax and other returns and reports required by any Law
to be filed by it and all such returns and reports have been accurately prepared
and properly completed. Accurate and complete copies of all such returns and
reports filed by Seaton during the past three (3) years have been delivered to
UIS Brazil and UIS.
4.19 Taxes. All Taxes due, owing and payable by Seaton have been fully
paid or are reflected on the Financial Statements for the period ended September
30, 1997. No claim for any Tax due from or assessed against Seaton is being
contested. Except as set forth on Schedule 4.19 hereto, none of Seaton's Tax
returns or reports have been audited by the Internal Revenue Service or any
state or local Tax authority, and Seaton has not received any notice of
deficiency or other adjustment from the Internal Revenue Service or any state or
local Tax authority. There are no agreements, waivers, or other arrangements
providing an extension of time with respect to the assessment of any Tax against
Seaton, nor are there any Tax Proceedings now pending or threatened against
Seaton. Seaton has made all deposits required by Law, to be made with respect to
employees' withholding and other employment taxes. No state of facts exists or
has existed, nor has any event occurred, which would constitute grounds for the
assessment of any further Tax against Seaton.
4.20 Proceedings. Seaton is not a party to, the subject of, or
threatened with any Proceeding nor, to the best of Seaton's knowledge, is there
any basis for any Proceeding. Seaton is not contemplating the institution of any
Proceeding.
4.21 Other Liabilities. No claim of breach of Contract, tort, product
liability or other claim (whether arising from Seaton's Business or otherwise),
contingent or otherwise, has been asserted or threatened against Seaton nor, to
the best of Seaton's knowledge, is capable of being asserted by any employee,
creditor, claimant or other Person against Seaton, except for claims for
warranty arising in the ordinary course of the business of Seaton. No state of
facts exists or has existed, nor has any event occurred, which could give rise
to the assertion of any such claim by any Person.
4.22 Permits. Schedule 4.22 lists all Permits obtained by Seaton to
operate the Business. Seaton has obtained and presently holds all Permits which
are required under applicable Law to conduct the Business as and where currently
conducted. All such Permits are in effect, are included in the Assets and are
transferable to Seaton, and no Consent of any Person is required in connection
with any such Permit for the transactions contemplated by this Agreement. Seaton
is not in default under, nor has it received any notice of any claim of default
or any other notice with respect to, any such Permit.
4.23 Consents. The execution, delivery and performance by Seaton of
this Agreement and the consummation by Seaton of the transactions contemplated
hereby do not require any Consent that has not been received prior to the date
hereof.
4.24 Judgments. There is no outstanding Judgment against Seaton or
against or affecting any of the Assets or the Business. To the best knowledge of
UIS Brazil and UIS, there is no health or safety problem involving or affecting
Seaton or the Assets. There are no open
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workmen's compensation claims against Seaton, or any contingent liability of
Seaton, or any other Obligation, fact or circumstance which would give rise to
any right of indemnification on the part of any current or former shareholder,
director, officer, employee or agent of Seaton, or any heir or personal
representative thereof, against Seaton or any successor to the business of
Seaton.
4.25 Compliance with Laws. Seaton and the Business are in material
compliance with all Laws where such failure to comply would materially adversely
effect the Business.
4.26 Labor Agreements, Employee Benefit Plans and Employment
Agreements. Except as reflected in Schedule 4.26 attached hereto, Seaton is not
a party to: (i) any union collective bargaining or similar agreement; (ii) any
profit sharing, pension, retirement, deferred compensation, bonus, stock option,
stock purchase, retainer, consulting, health, welfare or incentive plan or
agreement or other Employee Benefit Plan, whether legally binding or not; (iii)
any plan providing for "fringe benefits" to its employees, including, but not
limited to, vacation, disability, sick leave, medical, hospitalization and life
insurance and other insurance plans, or related benefits; or (iv) any employment
agreement, severance agreement, noncompete agreement or other Contract with any
of its employees.
4.27 Labor Disputes; Unfair Labor Practices. There is no pending or
threatened labor dispute, strike or work stoppage which affects or which may
affect the Business or which may interfere with the continued operation of the
Business. To the best of Seaton's knowledge, neither Seaton nor any agent,
representative or management employee of Seaton has committed any unfair labor
practice as defined in the National Labor Relations Act of 1947, as amended.
There is not now pending or threatened any charge or complaint against Seaton by
the National Labor Relations Board or any representative thereof.
4.28 Potential Conflicts of Interest. Except as set forth on Schedule
4.28, no officer or director of the Company (a) owns, directly or indirectly,
any interest in (excepting not more than one (1%) percent stock holdings for
investment purposes in securities of publicly held and traded companies) or is
an officer, director, employee or consultant of any Person which is a
competitor, lessor, lessee, customer or supplier of Seaton; (b) owns, directly
or indirectly, in whole or in part, any tangible or intangible property which
Seaton is using or the use of which is necessary for the business of Seaton; or
(c) has any cause of action or other claim whatsoever against, or owes any
amount to, Seaton, except for claims in the ordinary course of business, such as
for accrued vacation pay, accrued benefits under employee benefit plans and
similar matters and agreements, none of which claims have accrued for a period
greater than 12 months prior to the date hereof.
4.29 Overtime, Back Wages, Vacation and Minimum Wages. No present or
former employee of Seaton has any claim (whether under federal or state Law, any
employment agreement or otherwise) on account of or for: (i) overtime pay, other
than overtime pay for the current payroll period; (ii) wages or salary for any
period other than the current payroll period; (iii) vacation, time off or pay in
lieu of vacation or time off, other than that earned in respect of the current
Calendar Year, or (iv) any violation of any statute ordinance or regulation
relating to minimum wages or maximum hours of work.
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4.30 Discrimination and Occupational Safety Statutes and Regulations.
No Person or party (including, but not limited to, governmental agencies of any
kind) has any claim or basis for any Proceeding against Seaton arising out of
any Law relating to discrimination in employment or to employment practices or
occupation safety and health standards.
4.31 Employees, Contractors and Agents. Set forth on Schedule 4.31
annexed hereto is a complete list of Seaton's employees, contractors and agents,
their respective positions with Seaton, and the compensation and all vacation
and other benefits they are entitled to receive from Seaton. Except as set forth
on Schedule 4.31, Seaton does not have any reason to believe that any of its
employees, contractors or agents will not continue their employment/service with
Seaton following the consummation of the transactions contemplated herein.
4.32 Insurance. The Assets, Business and operations of Seaton are
insured under various policies of general liability and other forms of
insurance, all of which are listed on Schedule 4.32. All such policies are in
full force and effect in accordance with their terms, no notice of cancellation
has been received, and there is no existing default or event which with the
giving of notice or lapse of time, or both, would constitute a default
thereunder. All premiums to date have been paid in full. Seaton has not been
refused any insurance, nor has its coverage been limited, beyond the normal
scope of policy limitations, by any insurance carrier to which it has applied
for insurance or with which it has carried insurance during the past five (5)
years.
4.33 Related Parties Transactions. Schedule 4.33 sets forth a complete
list of all contracts and business transactions between Seaton and any
shareholder, officer, director or employee or the spouse of any officer,
director or employee or shareholder of Seaton.
4.34 Suppliers. Schedule 4.34 sets forth a true, correct and complete
list of the names and addresses of all of the material suppliers of Seaton
(defined for these purposes to mean the supplier of goods representing 10% or
more of the total purchases by Seaton). Seaton has not been notified nor has any
reason to believe, that any of its suppliers will not continue to do business
with Seaton after the consummation of the transaction contemplated hereby as and
to the extent such supplier is currently doing business with Seaton.
4.35 Intangibles. Schedule 4.35 lists all patents, copyrights,
trademarks and other Intangibles owned or used by Seaton (specifying, as to
each, whether owned or licensed and, if the latter, the licensor). There are no
Proceedings pending or threatened with respect to any Intangible owned or used
by Seaton. Seaton has not granted any license to any other Person with respect
to any Intangible. Seaton does not infringe upon or unlawfully or wrongfully use
any Intangible owned or claimed by any other Person. Except as reflected in
Schedule 4.35, no present or former employee of Seaton or any other Person owns
or has any proprietary, financial or other interest, direct or indirect, in
whole or in part, in any Intangible which Seaton owns, possesses or uses in the
Business. Seaton is not a party to a noncompetition, confidentiality or
nondisclosure agreement, nor is any present or former employee of Seaton a party
to any such agreement, except for such agreements between Seaton and its
employees set forth in Schedule 4.35.
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4.36 Accounts. Set forth on Schedule 4.36 attached hereto is an
accurate and complete list showing (a) the name and address of each bank and
brokerage firm in which Seaton has an account or safe deposit box, the number of
any such account or any such box and the names of all persons authorized to craw
thereon or to have access thereto; and (b) the names of all persons, if any,
holding powers of attorney from Seaton with respect to such bank or brokerage
account and a summary statement of the terms thereof.
4.37 Accounts Receivable. Schedule 4.37 contains a true and accurate
aging schedule of all Accounts Receivable of Seaton as of September 30, 1997.
Except as disclosed on Schedule 4.37, (a) each Account Receivable represents a
sale made in the ordinary course of business by Seaton which arose pursuant to
an enforceable written Contract for a bona fide sale of goods or for services
performed and Seaton has performed all its obligations to produce the goods or
perform the services to which such Account Receivable relates, and (b) to the
best of Seaton's knowledge and belief, no Account Receivable is subject to any
claim for reduction, counterclaim, setoff, recoupment or other claim for credit,
allowances or adjustments by the obligor thereof. Except as reserved again in
the Balance Sheet or as set forth on Schedule 4.37, all Accounts Receivable are
collectible in full within the terms under which such Accounts Receivable arose.
4.38 Accounts Payable. Schedule 4.38 hereto contains a true and
accurate aging schedule of all accounts payable of Seaton as of September 30,
1997. Except as disclosed on Schedule 4.38, (a) each account payable represents
an obligation of Seaton incurred in the ordinary course of the Business for
goods sold to, or for bona fide services performed for, Seaton; and (b) no claim
for reduction, counterclaim, setoff, recoupment or other claim for credit,
allowances or adjustments has been made by Seaton with respect to any such
accounts payable.
4.39 Improper Payments. Neither Seaton, nor any of its current
shareholders, directors, officers, or employees or agents, nor any Person acting
on behalf of Seaton, has directly or indirectly, made any bribe, kickback or
other payment of a similar or comparable nature, whether lawful or not, to any
person, public or private, regardless of form, whether in money, property or
services, to obtain favorable treatment for business secured or special
concessions already obtained for the benefit of Seaton. No funds or Assets of
Seaton were donated, loaned or made available directly or indirectly for the
benefit of, or for the purpose of supporting or opposing, any government or
subdivision thereof, political party, candidate or committee, either domestic or
foreign. Seaton has not maintained and does not maintain a bank account, or any
other account of any kind, whether domestic or foreign, or which account was not
listed, titled or identified in the name of Seaton.
4.40 Capitalization. Seaton's authorized capitalization consists of
19,000,000 shares of common stock having $.001 par value, of which Five Hundred
and Ninety Nine Thousand (599,000) shares shall be issued and outstanding on the
day of Closing and 1,000,000 shares of Preferred Stock have $.001 par value, of
which no shares shall be issued and outstanding on the day of Closing. All
issued and outstanding shares of capital stock of Seaton are validly issued,
fully paid and non-assessable. Except as set forth on Schedule 4.40 there are no
outstanding (a) securities convertible into or exchangeable for the shares of
capital stock of Seaton; (b) options, warrants or other rights to purchase or
subscribe shares of capital stock of Seaton or securities
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convertible into or exchangeable for shares of capital stock of Seaton; or (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of Seaton, any such convertible or
exchangeable securities or any such options, warrants or rights.
4.41 Registration Rights. The UIS Brazil Shareholders and UIS
Shareholder are entitled to registration rights, including piggyback
registration rights, for twenty (20%) percent of the Exchange Stock, as
adjusted, with such rights to be available when the Company proposes to file a
registration statement under the Securities Act of 1933, as amended ("33' Act"),
with respect to an offering for its own account of any class of security (other
than in connection with a merger pursuant to a Form S-3) or for the account of
the Company's shareholders. Seaton shall, in each case, give written notice of
the proposed filing to the UIS Brazil Shareholders and UIS Shareholder at least
thirty (30) days prior to the anticipated filing date, and such notice shall
offer such holders the opportunity to register such Exchange Stock as such
holder may request. Seaton will use its best efforts to cause the underwriter,
if any, to permit the UIS Brazil Shareholders and the UIS Shareholder to include
such Exchange Stock on the same terms and conditions as other shares of Common
Stock of Seaton included therein. Notwithstanding the foregoing, if the
underwriter or underwriters of such offering delivers a written opinion to
Seaton that in its sole and absolute discretion the total number of securities
which such holders, Seaton or other persons and entities entitled to be included
in such offering exceeds the number which can reasonably be sold in such
offering, then the securities to be offered for the account of the UIS Brazil
Shareholders and UIS Shareholder will be reduced pro rata to the extent
necessary to reduce the total number of securities to be included in such
offering to the number recommended by such underwriter in its sole and absolute
discretion. Seaton will bear all expenses of such registration, except that the
UIS Brazil Shareholders and the UIS Shareholder shall bear the fees and expenses
of any counsel or other representative attributable to the Exchange Stock.
4.42 Future Sales. Seaton has agreed pursuant to the terms of a
Consulting Agreement that it will not, for a period of twenty-four (24) months
from the Closing Date, without the prior written consent of 2M Capital Corp.,
offer, sell, contract to sell, or otherwise dispose of, any securities of
Seaton, except for the issuance of shares of Common Stock to be issued in a
public offering, at a price not less than ninety (90%) percent of the average of
the closing bid prices of the Common Stock as reported on NASD Bulletin Board
for the ten (10) consecutive trading day period immediately preceding the date
of sale.
4.43 Securities Laws. Seaton is not subject to the reporting
requirements under the Securities and Exchange Act of 1934, as amended ("34
Act"); however, to the extent Seaton is subject to the 33 Act or the 34 Act, to
the best of Seaton's knowledge, Seaton has complied with all requirements to
which Seaton is subject pursuant to the 33 Act and the 34 Act.
ARTICLE V
INTERPRETATION AND SURVIVAL OF
------------------------------
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Interpretation. Each warranty and representation made by a party in
this Agreement or pursuant hereto is independent of all other warranties and
representations made by
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the same party in this Agreement or pursuant hereto (whether or not covering
identical, related or similar matters) and must be independently and separately
satisfied. Exceptions or qualifications to any such warranty or representation
shall not be construed as exceptions or qualifications to any other warranty or
representation.
5.2 Reliance by Seaton. Notwithstanding the right of Seaton to
investigate UIS Brazil and UIS, their Businesses and the Assets, and
notwithstanding any knowledge of facts determined or determinable by them as a
result of such investigation or right of investigation, Seaton has the
unqualified right to rely upon the representations and warranties made by UIS
Brazil or UIS in this Agreement and in the Schedules attached hereto or pursuant
hereto.
5.3 Reliance by UIS Brazil and UIS. Notwithstanding the right of UIS
Brazil and UIS to investigate Seaton, its Business and the Assets, and
notwithstanding any knowledge of facts determined or determinable by them as a
result of such investigation or right of investigation, UIS Brazil and UIS have
the unqualified right to rely upon the representations and warranties made by
Seaton in this Agreement and in the Schedules attached hereto or pursuant
hereto.
5.4 Survival. All representations and warranties made in this Agreement
or pursuant hereto shall survive the date hereof, the consummation of the
transactions contemplated hereby, and any investigation for a period of eighteen
(18) months except as it relates to taxes, which representations and warranties
shall survive for the period provided for in the Statute of Limitations, and as
it relates to title to the shares of Stock owned by the Shareholders in UIS and
UIS Brazil, the representations and warranties shall survive indefinitely.
ARTICLE VI
OBLIGATIONS TO CLOSING
----------------------
6.1 Conduct of the UIS and UIS Brazil. Prior to the Closing Date, UIS
Brazil and UIS have:
(a) maintain its existence in good standing in its state of
domicile and each other jurisdiction where it is required to be licensed or
qualified as a foreign corporation;
(b) duly and timely file all returns and reports it is
required by Law to file, promptly pay when due all Taxes assessed against it or
any of its Assets, and conform to and fully comply with all the Laws pertaining
to the Business;
(c) conduct the Business in a good and diligent manner
consistent with past practices, not make any change in its business practices
and in good faith use its best efforts to preserve the Business intact, keeping
available the services of its current officers, employees, salesmen, agents, and
representatives, and maintain the goodwill of its suppliers, customers and other
Persons having business relations with UIS Brazil or UIS;
(d) maintain all its tangible Assets in the same condition as
it has in the past and repair and conform to and fully comply with all terms and
conditions pursuant to which any such Assets are held;
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(e) maintain in full force and effect all insurance policies
and, if any of the Assets are damaged or destroyed by fire or other casualty,
whether or not insured, it shall promptly proceed with the repair, restoration
or replacement thereof;
(f) not alter or amend its Articles of Incorporation or
Bylaws;
(g) not increase the compensation or rate of compensation or
extraordinary benefits payable or to become payable to, any of the its
directors, officers, employees, salesmen, agents, or representatives or pay any
of the foregoing Persons any bonus and not hire any new employees, agents or
representatives, except to replace positions existing as of the date hereof at
compensation comparable to that of the position being replaced, or otherwise
make any material changes in any of its employment arrangements;
(h) keep seaton advised of all material aspects of the
operation of the Business;
(i) not adopt or enter into an Employee Benefit Plan or alter
any existing Employee Benefit Plan, if any;
(j) not create any Obligation for borrowed money and not make
any loans or advances to, or assume, guarantee, endorse, or otherwise become
liable with respect to any Obligation of, any Person, or commit for any capital
expenditure whatsoever, or abandon or sell any of its Assets other than
Inventory sold in the ordinary course of Business;
(k) not perform or omit to perform any act which will cause a
breach of or default under any Contract to which it is a party or by which it or
its Assets may be bound and to take all action necessary to maintain the use and
value of all Permits and Intangibles;
(l) not waive any right of material value; and
(m) not take any action, or enter into any Contract which
requires or commits UIS Brazil or UIS to take any action, which would be
inconsistent with any of the foregoing provisions of this Section 6.1.
6.2 Consents. UIS Brazil and UIS shall obtain, on or before the Closing
Date, all Consents required to consummate the transactions contemplated hereby,
without causing any breach or failure of any warranty or representation made by
UIS Brazil or UIS in this Agreement or pursuant hereto, and without causing any
breach or default of any term or condition of this Agreement to be satisfied or
performed by UIS Brazil or UIS.
6.3 Investigation. From the date of this Agreement until Closing,
unless this Agreement is terminated in accordance with Article XII hereof, UIS
Brazil and UIS shall permit Seaton, their attorneys, accountants, and its other
advisors, authorized representatives and agents full access to UIS Brazil and
UIS and its business and properties during normal business hours to observe and
investigate the Business and the Assets and Obligations of UIS Brazil and UIS,
and to meet with UIS Brazil's and UIS's officers, agents and contractors, and to
audit, examine and copy all of UIS Brazil's and UIS's files, books and records,
and other documents and papers.
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UIS Brazil and UIS shall furnish Seaton and their authorized attorneys,
underwriters, representatives and agents with all information concerning UIS
Brazil's and UIS's Business, its Assets and Obligations, which they reasonably
request.
6.4 Cooperation. During the period from the date hereof until the
Closing Date, UIS Brazil and UIS shall fully cooperate with Seaton and his
authorized representatives and agents, and shall promptly execute and deliver
all agreements, certificates, instruments, and documents and take such other
actions as are reasonably requested by Seaton. Seaton may engage in the sale of
corporate securities prior or subsequent to the Closing ("Offering"). One of the
purposes for the Offering is to provide Seaton with the funds necessary to
comply with Section 2.2(c) hereof. UIS Brazil and UIS shall promptly provide, in
written format, all information concerning UIS Brazil and UIS and the Business
as Seaton may request in connection with the preparation of any registration or
offering materials for the Offering ("UIS Brazil's and UIS's Disclosures"). UIS
Brazil and UIS agree that all of UIS Brazil's and UIS's Disclosures shall be
true and complete and shall not omit any information required to make the
statements or information provided, in light of the circumstances, true,
complete and not misleading. UIS Brazil and UIS shall provide all other
cooperation reasonably requested in connection with the Offering by Seaton, its
underwriters or attorneys including, but not limited to, the execution of
appropriate cross- indemnities and other documents and instruments. Seaton
hereby indemnifies and holds harmless UIS Brazil and UIS, from and against any
and all Proceedings, Judgments, Obligations, losses, damages, deficiencies,
settlements, assessments, charges, costs and expenses (including, without
limitation, reasonable attorneys' fees, paralegals' fees, investigation
expenses, court costs, interest and penalties) arising out of or in connection
with, or caused by, directly or indirectly, any violations of the Securities
Laws by Seaton based upon UIS Brazil's and UIS's Disclosures; provided, however,
that nothing contained herein shall limit the liability of UIS Brazil and UIS
pursuant to Article XI hereof.
6.5 Notice of Developments. UIS Brazil and UIS shall give Seaton prompt
written notice of any material adverse development with respect to UIS Brazil
and UIS that could cause any of UIS Brazil's and UIS's representations made in
Article III hereof to be untrue or misleading. No disclosure made pursuant to
this Section 6.5, however, shall be deemed to prevent or cure any
misrepresentation, breach of warranty or breach of contract so as to preclude
Seaton from exercising his right to terminate this Agreement pursuant to Article
XII hereof.
6.6 Exclusivity. Neither UIS Brazil nor Shareholder nor UIS nor its
Shareholders shall: (a) solicit, initiate or encourage the submission of any
proposal or offer from any Person relating to the acquisition of the capital
stock or other voting securities of UIS Brazil or UIS or any substantial
proportion of the Assets of UIS Brazil or UIS including any acquisitions
structured as a merger, consolidation or share exchange; and (b) participate in
any discussions or negotiations regarding any information with respect to,
assist or participate in or facilitate in any other manner, any effort or
attempt by any Person to do or seek any of the foregoing. UIS Brazil and UIS
shall notify Seaton in writing if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
6.7 Confidentiality. The parties each agree not to disclose or use for
their own benefit or for the benefit of others, any confidential information of
a special and unique nature and value
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affecting and relating to UIS Brazil, UIS, Seaton, or the Business that is
disclosed to or otherwise acquired by either party in connection with this
transaction, except for the purpose of Seaton's and its representatives' and
agents' evaluation of the transactions contemplated hereby or as may be required
by Law, or in connection with any Proceeding arising in connection with this
Agreement. In the event of any breach or threatened breach by either party of
this provision, the parties recognize that such breach could result in
irreparable harm to the nonbreaching party and, accordingly, in such event the
same remedies as are available to Seaton pursuant to Section 12.2 hereof shall
be available to the harmed party. Notwithstanding the foregoing, Seaton shall
have the right to issue a public statement that this Agreement has been executed
with respect to the transactions contemplated herein, and to otherwise comply
with its disclosure obligations under the Securities Laws, which public
statement shall be approved by UIS, which approval shall not be unreasonably
withheld.
ARTICLE VII
CONDITIONS PRECEDENT TO SEATON'S OBLIGATIONS
--------------------------------------------
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, Seaton's obligations to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
of each of the conditions set forth in this Article VII, except to the extent
that such satisfaction is waived in writing by Seaton.
7.1 Representations and Warranties of UIS Brazil. All representations
and warranties made by UIS Brazil and UIS in this Agreement and the Schedules
hereto shall have been true and correct in all respects on the date of this
Agreement, and shall be true and correct in all respects on the Closing Date as
though such representations and warranties were again made, without exception or
deviation, on the Closing Date.
7.2 Performance of this Agreement. UIS Brazil and the UIS Brazil
Shareholder and UIS and the UIS Shareholders shall have duly performed or
complied with all of their covenants and obligations under this Agreement that
are to be performed or complied with by UIS Brazil and the UIS Brazil
Shareholder and UIS and the UIS Shareholders on or prior to the Closing Date.
7.3 Absence of Proceedings. No Proceeding shall have been instituted or
threatened on or before the Closing Date by any Person, the result of which did
or could prevent or make illegal the consummation of all or any of the
transactions contemplated by this Agreement, or which had or could have a
material adverse effect on the Business or the Assets.
7.4 Consents. UIS Brazil and UIS shall deliver to Seaton, all Consents,
in form and substance reasonably acceptable to Seaton, as Seaton reasonably
deems required under any of UIS Brazil's or UIS's Contracts or Permits as a
result of the sale of the Assets to Seaton and the other transactions
contemplated under this Agreement. UIS Brazil and UIS shall be responsible to
pay for all costs and expenses incurred in obtaining all such Consents. Included
specifically in the foregoing shall be consents from all lessors of Real
Property to UIS Brazil or UIS, if any, together with estoppel letters from such
lessors, in form reasonably acceptable to Seaton,
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acknowledging that each applicable lease is in full force and effect, all rent
and other payments due thereunder have been paid and no event of default has
occurred.
7.5 Deliveries by UIS Brazil and UIS. In addition to all other
deliveries to be made by UIS Brazil or UIS hereunder, UIS Brazil and UIS shall
have delivered to Seaton at Closing: an opinion of counsel rendered to Seaton,
in form, substance, and by a law firm reasonably acceptable to Seaton, and its
counsel, as to the matters set forth in Exhibit C attached hereto.
7.6 Releases. Shareholder and the "Affiliates" (as hereinafter defined)
shall have delivered a release, if any, of all claims against UIS Brazil or UIS
and/or the Assets in form and substance satisfactory to Seaton in the reasonable
exercise of its discretion.
7.7 Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to Seaton pursuant to this Article VII or
otherwise reasonably requested by Seaton shall be reasonably satisfactory to
Seaton and its counsel.
ARTICLE VIII
CONDITIONS PRECEDENT TO UIS BRAZIL'S AND UIS'S OBLIGATIONS
----------------------------------------------------------
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, UIS Brazil's and UIS's obligations to consummate
the transaction contemplated by this Agreement shall be subject to the
satisfaction of each of the conditions set forth in this Article VII except to
the extent that such satisfaction is waived by UIS Brazil and UIS in writing.
8.1 Representations and Warranties of Seaton. All representations and
warranties of Seaton contained in this Agreement and any Schedules hereto shall
have been true and correct in all respects on the date of this Agreement, and
shall be true and correct in all respects on the Closing Date as though such
representations and warranties were again made, without exception or deviation,
on the Closing Date, including, but not limited to, all covenants regarding the
Exchange Stock and Seaton.
8.2 Performance of this Agreement. Seaton shall have duly performed or
complied with all of the covenants and obligations under this Agreement to be
performed or complied with by him on or prior to the Closing Date.
8.3 Absence of Proceedings. No Proceeding shall have been instituted or
threatened on or before the Closing Date by any Person, the result of which did
or could prevent or make illegal the consummation of all or any of the
transactions contemplated by this Agreement, or which had or could have a
material adverse effect on the Business or the Assets.
8.4 Consents. Seaton shall deliver to UIS Brazil and UIS all Consents,
in form and substance reasonably acceptable to UIS Brazil and UIS, as UIS Brazil
and UIS reasonably deem required under any of Seaton's Contracts or Permits as a
result of the transactions contemplated under this Agreement. Seaton shall be
responsible to pay for all costs and expenses incurred in
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obtaining all such Consents. Included specifically in the foregoing shall be
consents from all lessors of Real Property to Seaton, if any, together with
estoppel letters from such lessors, in form reasonably acceptable to Seaton,
acknowledging that each applicable lease is in full force and effect, all rent
and other payments due thereunder have been paid and no event of default has
occurred.
8.5 Deliveries by Seaton. In addition to all other deliveries to be
made by Seaton hereunder, Seaton shall have delivered to UIS Brazil and UIS at
Closing: an opinion of counsel rendered to UIS Brazil and UIS, in form,
substance, and by a law firm reasonably acceptable to UIS Brazil and UIS, and
its counsel, as to the matters set forth in Exhibit D attached hereto.
8.6 Releases. Shareholder and the "Affiliates" (as hereinafter defined)
shall have delivered a release, if any, of all claims against Seaton and/or the
Assets in form and substance satisfactory to Seaton in the reasonable exercise
of its discretion.
8.7 Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to UIS Brazil and UIS pursuant to this
Article VII or otherwise reasonably requested by UIS Brazil and UIS shall be
reasonably satisfactory to UIS Brazil, UIS and its counsel.
ARTICLE IX
OBLIGATIONS AT CLOSING
----------------------
9.1 Obligations of UIS Brazil and the UIS Brazil Shareholders and UIS
and the UIS Shareholder to Seaton at Closing. In addition to the other
deliveries to be made by UIS Brazil and the UIS Brazil Shareholders and UIS and
the UIS Shareholder as set forth herein, UIS Brazil and the UIS Brazil
Shareholders and UIS and the UIS Shareholders hereby covenant and agree to
deliver or cause to be delivered to Seaton, at Closing, the following:
(a) The UIS Brazil and UIS Stock;
(b) All Consents referred to in Section 7.4 of this
Agreement;
(c) Good Standing Certificates, certifying that UIS Brazil is
duly qualified and is currently in good standing under the laws of Brazil, and
certifying that UIS is duly qualified and is currently in good standing under
the laws of Florida, dated no earlier than five (5) days before the Closing
Date.
(d) Such other documents and instruments as counsel to Seaton
may reasonably request including, without limitation, such documents as
necessary to convey to Seaton all rights to the UIS Brazil and UIS Stock.
(e) Executed employment agreement between Seaton and Carlos
Maia, substantially in the form attached hereto as Exhibit B.
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(f) Executed escrow agreement between Seaton and Jorge Maia as
set forth in Section 10.1(d) hereof.
9.2 Obligations of Seaton at Closing. In addition to the other
deliveries to be made by Seaton as set forth herein, Seaton hereby covenants and
agrees to deliver or cause to be delivered to UIS Brazil and UIS, at Closing,
the Exchange Stock, as provided in Article II hereof.
(a) The Exchange Stock as set forth in Section 2.2(a) hereof;
(b) All Consents referred to in Section 8.4 of this Agreement;
(c) Good Standing Certificate, certifying that Seaton is duly
qualified and is currently in good standing under the laws of Delaware, dated no
earlier than five (5) days before the Closing Date.
(d) Such other documents and instruments as counsel to UIS
Brazil or UIS may reasonably request including, without limitation, such
documents as necessary to convey to UIS Brazil and UIS all rights to the
Exchange Stock.
(e) Executed employment agreement between Carlos Maia and
Seaton, substantially in the form attached hereto as Exhibit B.
(f) Executed escrow agreement between UIS Brazil and the UIS
Brazil Shareholders and UIS and the UIS Shareholder and Angus Hay and Gerard
Thompson as set forth in Section 10.5(d) hereof.
ARTICLE X
INDEMNIFICATION
---------------
10.1 Obligation of UIS Brazil, and UIS Indemnify. As to UIS Brazil, UIS
Brazil agrees that the following shall be deemed made, and as to UIS, UIS agrees
to the following, and the following agreements made as to indemnification are
made by UIS Brazil on the one hand and by UIS, on the other hand, severally and
not jointly.
(a) In addition to, and not in lieu of, any right or remedy
available to Seaton at law or in equity, UIS Brazil and UIS hereby indemnify and
holds Seaton harmless from and against any and all Proceedings, Judgments,
Obligations, losses, damages, deficiencies, settlements, assessments, charges,
costs and expenses (including without limitation reasonable attorneys' fees,
paralegals' fees, investigation expenses, court costs, interest and penalties)
arising out of or in connection with, or caused by, directly or indirectly, any
or all of the following:
(i) Any misrepresentation, breach or failure of any
warranty or representation made by UIS Brazil or Shareholder in this Agreement
or pursuant hereto, including, but not limited to, the failure of the Assets to
include the Minimum Net Asset Amount and the Minimum Liquidity;
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(ii) Any failure or refusal by UIS Brazil and the UIS
Brazil Shareholders and UIS and the UIS Shareholder to satisfy or perform any
covenant or agreement in this Agreement; and
(iii) Any claim, Obligation of or Judgment against
UIS Brazil and the UIS Brazil Shareholders and UIS and the UIS Shareholder or
affecting the Assets arising, or arising from facts or circumstances occurring,
prior to the date hereof including, but not limited to, any Environmental
Matters, excluding only the Liabilities and other matters disclosed by Exhibit
____ in Schedule ____ herein.
(b) For the remaining provisions of this section 10.1 and
sections 10.2, 10.3 and 10.4, Seaton shall be referred to as the "Indemnified
Party," and each party against whom such indemnity is sought is referred to as
an "Indemnifying Party."
(c) Notwithstanding anything to the contrary contained herein,
UIS , UIS Brazil shall not be liable to Seaton under this Article X for any
claim relating to a breach of any representation or warranty ("Misrepresentation
Claim") unless:
(i) such Misrepresentation Claim is asserted in
writing by the party seeking indemnification hereunder not later than
eighteen (18) months after the Closing Date except as set forth in
section 5.4; and
(ii) the aggregate amount claimed by Seaton due for
all Misrepresentation Claims shall exceed $25,000, in which case the
liability of UIS Brazil and UIS under this Article X shall be from the
first dollar of claim.
(c) Jorge Maia shall deposit 200,000 shares of Common Stock
("Escrow Shares") of Seaton with Atlas, Pearlman, Trop & Borkson, P.A. as Escrow
Agent pursuant to an Escrow Agreement, attached hereto as Exhibit F, for a
period of eighteen (18) months from the date hereof for the purpose of securing
the obligations of UIS Brazil and UIS to Seaton to (i) indemnify Seaton under
this Article X; (ii) indemnify Seaton for all taxes due and owing and payable by
UIS and UIS Brazil as set forth in section 3.16 hereof; and (iii) indemnify
Seaton for all representations set forth in section 3.35 and all amounts set
forth on Schedule 3.35 hereof. Absent fraud or willful misconduct, in the event
Seaton becomes obligated to indemnify UIS Brazil and the UIS Brazil Shareholders
and UIS and the UIS Shareholder under this Article X, such Escrow Shares shall
constitute the sole source from which the Indemnified Party may recover.
10.2 Defense of Actions. The Indemnifying Party shall be solely
responsible, at its expense, for litigating, defending or otherwise attempting
to resolve any Proceeding against which the Indemnified Party is indemnified
under this Article X, except that: (i) the Indemnified Party shall have the
right to participate in the defense of any such Proceeding at the Indemnified
Party's expense and through counsel of the Indemnified Party's choice; (ii) the
Indemnified Party may at its option, defend or otherwise attempt to resolve, or
cause the Indemnifying Party to defend or otherwise attempt to resolve, any
Proceeding against which the Indemnified Party is indemnified under this Article
X if the Indemnifying Party does not promptly and diligently
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<PAGE>
defend or otherwise attempt to resolve any such Proceeding or if the Indemnified
Party, in good faith, believes that the defense or resolution of such proceeding
might adversely affect its relations with a customer or supplier, in which event
the Indemnifying Party shall continue to be obligated to indemnify the
Indemnified Party hereunder in connection with such Proceedings; and (iii) the
Indemnifying Party shall not agree to any settlement without the Indemnified
Party's express prior written consent which shall not be unreasonably withheld.
10.3 Notices and Payments. With respect to each separate matter or
series of matters against which the Indemnified Party is indemnified under this
Article X:
(a) Upon the Indemnified Party's receipt of written documents
pertaining to the Proceeding underlying such matter or series of matters, or, if
such matter or series of matters does not involve a third party claim, after the
Indemnified Party first learning of such matter or series of matters and the
amount demanded or claimed in connection therewith, the Indemnified Party shall
give notice to the Indemnifying Party of such documents and information as it
shall have so received.
(b) After a final agreement is reached or a final Judgment is
rendered with respect to such matter or series of matters or the amount owing by
the Indemnifying Party pursuant to this Article X as a result of such matter or
series of matters is otherwise determinable in whole or in part, the Indemnified
Party shall give notice to the Indemnifying Party of the amount owing by the
Indemnifying Party ("Indemnification Amount") with respect to such matter or
series of matters ("Indemnification Payment Notice").
(c) The Indemnifying Party shall pay the Indemnified Party the
Indemnification Amount within ten (10) days of the date the Indemnification
Notice is given.
10.4 Other Rights and Remedies Not Affected. The indemnification rights
of the Indemnified Party under this Article X are independent of and in addition
to such rights and remedies as the Indemnified Party may have at law or in
equity or otherwise for any misrepresentations breach of warranty or failure to
fulfill any agreement or covenant hereunder on the part of any party hereto.
10.5 Obligation of Seaton to Indemnify.
(a) In addition to, and not in lieu of, any right or remedy
available to UIS Brazil and the UIS Brazil Shareholders and UIS and the UIS
Shareholder at law or in equity, Seaton hereby indemnifies and holds UIS Brazil
and the UIS Brazil Shareholders and UIS and the UIS Shareholder harmless from
and against any and all Proceedings, Judgments, Obligations, losses, damages,
deficiencies, settlements, assessments, charges, costs and expenses (including
without limitation reasonable attorneys' fees, paralegals' fees, investigation
expenses, court costs, interest and penalties) arising out of or in connection
with, or caused by, directly or indirectly, any or all of the following:
(i) Any misrepresentation, breach or failure of
any warranty or representation made by Seaton in this Agreement or pursuant
hereto;
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(ii) Any failure or refusal by Seaton to satisfy or
perform any covenant or agreement in this Agreement; and
(iii) Any claim, Obligation of or Judgment against
Seaton affecting the Assets arising, or arising from facts or circumstances
occurring, prior to the date hereof including, but not limited to, any
Environmental Matters, excluding only the Liabilities.
(b) For the remaining provisions of this section 10.5 and
sections 10.6, 10.7 and 10.8, UIS Brazil and the UIS Brazil Shareholders and UIS
and the UIS Shareholder shall be referred to as the "Indemnified Party," and
each party against whom such indemnity is sought is referred to as an
"Indemnifying Party."
(c) Notwithstanding anything to the contrary contained herein,
neither UIS Brazil nor the UIS Brazil Shareholders nor UIS nor the UIS
Shareholder shall be liable to Seaton under this Article X for any claim
relating to a breach of any representation or warranty ("Misrepresentation
Claim") unless:
(i) such Misrepresentation Claim is asserted in
writing by the party seeking indemnification hereunder not later than
eighteen (18) months after the Closing Date except as set forth in
section 5.4; and
(ii) the aggregate amount claimed by Seaton due for
all Misrepresentation Claims shall exceed $25,000, in which case the
liability of UIS Brazil and the UIS Brazil Shareholders and UIS and the
UIS Shareholder under this Article X shall be from the first dollar of
claim.
(d) Angus Hay and Gerard Thompson, two principal shareholders
of Seaton, shall deposit 15,000 shares of Common Stock ("Escrow Shares") of
Seaton with Atlas, Pearlman, Trop & Borkson, P.A. as Escrow Agent pursuant to an
Escrow Agreement, attached hereto as Exhibit E, for a period of eighteen (18)
months from the date hereof for the purpose of securing the obligations of
Seaton to indemnify UIS Brazil and the UIS Brazil Shareholders and UIS and the
UIS Shareholder under this Article X. Absent fraud or willful misconduct, in the
event Seaton becomes obligated to indemnify UIS Brazil and the UIS Brazil
Shareholders and UIS and the UIS Shareholder under this Article X, such Escrow
Shares shall constitute the sole source from which the Indemnified Party may
recover.
10.6 Defense of Actions. The Indemnifying Party shall be solely
responsible, at its expense, for litigating, defending or otherwise attempting
to resolve any Proceeding against which the Indemnified Party is indemnified
under this Article X, except that: (i) the Indemnified Party shall have the
right to participate in the defense of any such Proceeding at the Indemnified
Party's expense and through counsel of the Indemnified Party's choice; (ii) the
Indemnified Party may at its option, defend or otherwise attempt to resolve, or
cause the Indemnifying Party to defend or otherwise attempt to resolve, any
Proceeding against which the Indemnified Party is indemnified under this Article
X if the Indemnifying Party does not promptly and diligently defend or otherwise
attempt to resolve any such Proceeding or if the Indemnified Party, in good
faith, believes that the defense or resolution of such proceeding might
adversely affect its
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relations with a customer or supplier, in which event the Indemnifying Party
shall continue to be obligated to indemnify the Indemnified Party hereunder in
connection with such Proceedings; and (iii) the Indemnifying Party shall not
agree to any settlement without the Indemnified Party's express prior written
consent which shall not be unreasonably withheld.
10.7 Notices and Payments. With respect to each separate matter or
series of matters against which the Indemnified Party is indemnified under this
Article X:
(a) Upon the Indemnified Party's receipt of written documents
pertaining to the Proceeding underlying such matter or series of matters, or, if
such matter or series of matters does not involve a third party claim, after the
Indemnified Party first learning of such matter or series of matters and the
amount demanded or claimed in connection therewith, the Indemnified Party shall
give notice to the Indemnifying Party of such documents and information as it
shall have so received.
(b) After a final agreement is reached or a final Judgment is
rendered with respect to such matter or series of matters or the amount owing by
the Indemnifying Party pursuant to this Article X as a result of such matter or
series of matters is otherwise determinable in whole or in part, the Indemnified
Party shall give notice to the Indemnifying Party of the amount owing by the
Indemnifying Party ("Indemnification Amount") with respect to such matter or
series of matters ("Indemnification Payment Notice").
(c) The Indemnifying Party shall pay the Indemnified Party the
Indemnification Amount within ten (10) days of the date the Indemnification
Notice is given.
10.8 Other Rights and Remedies Not Affected. The indemnification rights
of the Indemnified Party under this Article X are independent of and in addition
to such rights and remedies as the Indemnified Party may have at law or in
equity or otherwise for any misrepresentations breach of warranty or failure to
fulfill any agreement or covenant hereunder on the part of any party hereto.
10.9 Indemnification for Tax Matters.
Notwithstanding anything otherwise provided herein (including, without
limitation, the provisions of sections 10.1 through 10.4, inclusive, of this
Agreement), the following provisions shall govern the allocation of
responsibility as between Seaton and the UIS Shareholder for certain Tax matters
following the Closing Date:
10.9.1 Indemnification for Taxes Attributable to Operations
During Tax Periods Ending On or Prior to the Closing Date. The UIS Shareholder
shall indemnify and hold Seaton, UIS and UIS Brazil harmless from and against
all liabilities for Taxes (including any related losses) attributable to all Tax
periods ending on or prior to the Closing Date imposed with respect to UIS, but
only to the extent that such Taxes exceed Tax refunds then received by or
acknowledged by the applicable Taxing authority to be due to UIS.
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10.9.2 Tax Payments and Tax Returns for Tax Periods Ending On
or Before the Closing Date. Seaton shall cause UIS to prepare (or cause to be
prepared) and file (or cause to be filed) on a timely basis any Tax Returns of
UIS for Tax periods ending on or prior to the Closing Date that are due
(including all applicable extensions) after the Closing Date. Such Tax Returns
shall be prepared on a basis consistent with past practice to the extent such
practice is consistent with all applicable federal, state, local and foreign tax
laws, rules and regulations. Seaton shall cause UIS to pay (or cause to be paid)
all Taxes shown to be due on such Tax Returns. The UIS Shareholder shall
reimburse and indemnify UIS for such Taxes to the extent not accrued on the
Closing Date Balance Sheet and for the reasonable costs of preparing said Tax
Returns to the extent not accrued on the Closing Date Balance Sheet within five
days of notice to the UIS Shareholder that Seaton has paid such Taxes. The UIS
Shareholder shall be given the opportunity to review such Tax Returns prior to
their being filed.
10.9.3 Cooperation on Tax Matters; Conduct of Proceedings.
10.9.3.1 Seaton and the UIS Shareholder shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the preparation and filing of Tax Returns pursuant to this
Section 10.9 and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to such preparation and filing and to any audit, litigation or other proceeding
relating thereto and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder.
10.9.3.2 Seaton shall be responsible for defending
any audit, litigation or other proceeding with respect to Taxes and shall have
the authority to negotiate, compromise and settle any such audit, litigation or
other proceeding. However, in the event that any such compromise or settlement
would create any indemnification obligation hereunder for the UIS Shareholder in
excess of $5,000, Seaton shall not agree to any such compromise or settlement
without the prior consent of the UIS Shareholder, which shall not be
unreasonably withheld, conditioned or delayed. Seaton shall notify the UIS
Shareholder promptly upon receipt of any notice of such audit, litigation or
other proceeding and shall keep the UIS Shareholder reasonably informed as to
the progress of any such audit, litigation or other proceeding with respect to
Taxes. The UIS Shareholder shall have the right, at their expense, to
participate in the conduct of such audit, litigation or other proceeding. If, as
a result of any such audit, litigation or proceeding Seaton or UIS is required
to pay any additional Taxes, within five days after notice to the UIS
Shareholder that Seaton has paid such Taxes, the UIS Shareholder shall reimburse
Seaton or UIS for that portion of such Taxes attributable to periods for which
the UIS Shareholder have agreed to indemnify Seaton pursuant to this Section
10.9.
10.9.3.3 Notwithstanding the foregoing provisions of
this Section 10.9, the UIS Shareholder shall not be required to indemnify Seaton
for any particular Tax if a sufficient reserve for such Tax was included on the
Closing Balance Sheet.
10.9.3.4 Notwithstanding the foregoing provisions of
this Section 10.9, the obligation of the UIS Shareholder to indemnify Seaton
with respect to any Taxes shall be net of
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any refunds of Taxes received by UIS after the Closing and attributable to any
Tax period for which the UIS Shareholder is responsible under this Section 10.9
other than any Tax refund to the extent such Tax refund was reflected on the
Closing Balance Sheet.
ARTICLE XI
CONFIDENTIALITY AND COMPETITION
-------------------------------
11.1 Confidential Information and Competition as to UIS Brazil and the
UIS Brazil Shareholders and UIS and the UIS Shareholder.
(a) Confidential Information. UIS Brazil and the UIS Brazil
Shareholders and UIS and the UIS Shareholder (collectively, the "Covenantor")
hereby acknowledges that they possess confidential information of a special and
unique nature and value affecting and relating to the Business, the Assets, the
UIS Brazil's and UIS's operations all of which information is included in the
Assets including, but not limited to, the identity of UIS Brazil's and UIS's
customers and suppliers, prices paid by UIS Brazil and UIS for inventory, its
business practices, marketing strategies, expansion plans, UIS Brazil's and
UIS's Contracts, business records and other records, trade secrets, inventions,
techniques used in UIS Brazil's and UIS's business, know-how and technologies,
whether or not patentable, and other similar information relating to the
Business (all the foregoing regardless of whether same is or becomes known to
third parties is hereinafter referred to collectively as "Confidential
Information"). The Covenantor further recognizes and acknowledges that, upon
Closing, all Confidential Information is the exclusive property of Seaton, is
material and confidential, and greatly affects the legitimate business
interests, goodwill and effective and successful conduct of the Business and
Seaton. Accordingly, the Covenantor hereby covenants and agrees that it will use
the Confidential Information only for the benefit of the Business and shall not
at any time, directly or indirectly, divulge, reveal or communicate any
Confidential Information to any person, firm, corporation or entity whatsoever
other than Seaton or as otherwise contemplated herein, or use any Confidential
Information for its own benefit or for the benefit of others.
(b) Non-Competition. The parties hereto hereby acknowledge and
agree that Seaton would suffer irreparable injury if the Covenantor competes
with Seaton. As a material inducement to Seaton to enter into this Agreement,
the Covenantor hereby covenants and agrees that the Covenantor shall not:
(i) during the period beginning on the Closing Date
and continuing until two (2) years following the termination of employment of
covenants with Seaton or its affiliates, for any reason, directly or indirectly,
operate, organize, maintain, establish, manage, own, participate in, or in any
manner whatsoever, individually or through any corporation, firm or organization
of which the Covenantor shall be affiliated in any manner whatsoever, have any
interest in, whether as owner, operator, partner, stockholder, director,
trustee, officer, lender, employee, principal, agent, consultant or otherwise,
any business or venture other than Seaton in any county or city anywhere in the
world where Seaton does business, which engages in the business or is otherwise
in competition with Seaton or any assigns of Seaton, unless such activity shall
have been previously agreed to in writing by Seaton and its successors and
assigns;
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(ii) during the period beginning on the Closing
Date and continuing until two (2) years following the termination of employment
convenants with Seaton or its affiliates, for any reason, directly or
indirectly, divert business from Seaton or its successors or assigns, or solicit
business from, divert the business of, or attempt to convert to other methods of
using the same or similar services as are provided by Seaton, any client or
account of Seaton; or
(iii) during the period beginning on the Closing Date
hereof and continuing until two (2) years following the termination of
employment convenants with Seaton or its affiliates, for any reason, directly or
indirectly, solicit for employment, employ or otherwise engage the services of,
any employees or consultants of Seaton or its successors or assigns.
The covenants set forth in this Section 11.1 are in addition
to and not in lieu of any other non-competition agreement to which Seaton and
the Covenantor are parties.
11.2 Injunction and Attorneys' Fees. In view of the irreparable injury
to Seaton that would result from a breach or threatened breach by the Covenantor
of the covenants or agreements under Section 11.1 hereof, and because there is
not an adequate remedy at law to protect Seaton from the ongoing breach of those
covenants, Seaton shall have the right to receive, and the Covenantor hereby
consents to the issuance of, a permanent injunction enjoining the Covenantor
from any violation of the covenants set forth in Section 11.1 hereof. The
Covenantor acknowledges that a permanent injunction is an appropriate remedy for
such a breach or threatened breach. These remedies shall be in addition to and
not in limitation of any other rights or remedies to which Seaton is or may be
entitled at law or in equity under this Agreement. The Covenantor further agrees
that in the event Seaton incurs any fees or costs in order to enforce the
provisions of Section 11.1 hereof and Seaton prevails in such enforcement, the
Covenantor shall pay all fees and costs so incurred by Seaton including, but not
limited to, reasonable attorneys' and paralegals' fees.
11.3 Reasonableness of Restrictions. The Covenantor has carefully read
and considered the provisions of Sections 11.1 and 11.2 hereof and, having done
so, agrees that the covenants set forth in those sections are fair and
reasonable and are reasonably required to protect the legitimate business
interests of Seaton, including, but not limited to, protection of the goodwill
included in the Assets. The Covenantor agrees that the covenants set forth in
Sections 11.1 and 11.2 hereof do not unreasonably impair the ability of the
Covenantor to conduct any unrelated business or to find gainful work in their
respective fields. The parties hereto agree that if a court of competent
jurisdiction holds any of the covenants set forth in Section 11.1 unenforceable,
the court shall substitute an enforceable covenant that preserves, to the
maximum lawful extent, the scope, duration and all other aspects of the covenant
deemed unenforceable, and that the covenant substituted by the court shall be
immediately enforceable against the Covenantor. The foregoing shall not be
deemed to affect the right of the parties hereto to appeal any decision by a
court concerning this Agreement. The provisions of Sections 11.1, 11.2 and 11.3
hereof shall survive the execution of this Agreement and the consummation of the
transactions contemplated hereby.
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ARTICLE XII
TERMINATION AND REMEDIES
------------------------
12.1 Termination on Default. If, prior to the Closing Date, a party
hereto shall materially breach or default in the full and timely performance and
satisfaction of any of his, hers or its representations and warranties or
obligations under this Agreement, and such breach or default is not cured on or
before the fifth (5th) day after the date notice is given by the non-defaulting
party to the defaulting party specifying the nature of such breach or default
(or on or before the Closing Date if sooner), then the non-defaulting party may
terminate this Agreement immediately upon notice to the defaulting party.
12.2 Termination at Closing. If any of the conditions set forth in
Article VII hereof are not satisfied as of the Closing Date, then Seaton may
terminate this Agreement by notifying UIS and UIS Brazil in writing on the
Closing Date. If any of the conditions set forth in Article VII hereof are not
satisfied as of the Closing Date, then UIS or UIS Brazil may terminate this
Agreement by notifying Seaton in writing on the Closing Date.
12.3 Remedies Not Exclusive. The rights and remedies of the parties
pursuant to this Article XII are not exclusive and are in addition to all other
rights and remedies which they may have at law or in equity and may be exercised
in any manner, order or combination.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 Notices. All notices, demands and other communications given
hereunder shall be in writing and shall be deemed to have been duly given: (a)
upon hand delivery thereof, (b) upon telefax and written confirmation of
receipt, (c) upon receipt of any overnight deliveries, or (d) on the third (3rd)
business day after mailing UIS States registered or certified mail, return
receipt requested, postage prepaid, addressed as set forth below, or at such
other address, or to such other person and at such address for that person, as
any party shall designate in writing to the other parties for such purpose in
the manner hereinabove set forth:
If to Seaton: Seaton Group, Inc.
1900 Corporate Blvd., Suite 305-W
Boca Raton, Florida 33431
Attn: Angus Hay, President
With a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Ft. Lauderdale, Florida 33301
Attn: Charles B. Pearlman, Esq.
Roxanne K. Beilly, Esq.
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If to UIS Brazil: UIS Industrial Ltda. (Brazil)
Rua IGA, Numero 100
Distrito Industrial
Manaus-AM-69.000 (Brazil)
Attn: Jorge Maia, President
With a copy to: Dr. Joao Antonio Da S. Tolentino
Rua Barroso, Numero 301
Manaus-AM-Brazil
If to UIS: UIS Information Systems, Inc.
2201 N.W. 102 Place,
Unit 3
Miami, Florida 33172
Attn: Carlos Maia, President
If to Shareholders: c/o Carlos Maia
2201 N.W. 102 Place
Unit 3
Miami, Florida 33172
With a copy to: Romanik, Lavin, Huss & Paoli, P.A.
1901 Harrison Street
Hollywood, Florida 33020
Attention: David Romanik, Esq.
13.2 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto and the documents delivered pursuant hereto, sets
forth all the promises, covenants, agreements, conditions and understandings
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings, inducements
or conditions, expressed or implied, oral or written, except as herein
contained. No changes of or modifications or additions to this Agreement shall
be valid unless the same shall be in writing and signed by the parties hereto.
13.3 Binding Effect; Assignment. This Agreement shall be binding upon
the parties hereto, their beneficiaries, heirs and administrators. No party may
assign or transfer its interests herein, or delegate its duties hereunder,
without the written consent of the other parties; provided, however, that Seaton
may assign its rights hereunder to any subsidiary or affiliated entity, provided
that Seaton shall remain liable hereunder unless UIS Brazil otherwise agrees in
writing.
13.4 Amendment. The parties hereby irrevocably agree that no attempted
amendment, modification, or change (collectively, "Amendment") of this Agreement
shall be valid and effective, unless the parties shall unanimously agree in
writing to such Amendment.
13.5 No Waiver. No waiver of any provision of this Agreement shall be
effective, unless it is in writing and signed by the party against whom it is
asserted, and any such written
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waiver shall only be applicable to the specific instance to which it relates and
shall not be deemed to be a continuing or future waiver.
13.6 Gender and Use of Singular and Plural. All pronouns shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the party or parties or their personal representatives, successors
and assigns may require.
13.7 Counterparts. This Agreement and any amendments may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together will constitute one and the same instrument.
13.8 Headings. The article and section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of the Agreement.
13.9 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Florida and any proceeding arising between the
parties in any manner pertaining or related to this Agreement shall, to the
extent permitted by law, be held in Broward County, Florida.
13.10 Further Assurances. The parties hereto will execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
13.11 Litigation. If any party hereto is required to engage in
litigation or arbitration against any other party hereto, either as plaintiff or
as defendant, in order to enforce or defend any of its or his rights under this
Agreement, and such litigation results in a final judgment in favor of such
party ("Prevailing Party"), then the party or parties against whom said final
judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred by the Prevailing Party in so enforcing
or defending its or his rights hereunder, including, but not limited to, all
attorneys' fees, paralegals' fees and all sales tax thereon, and all court costs
and other expenses incurred throughout all negotiations, trials or appeals
undertaken in order to enforce the Prevailing Party's rights hereunder.
13.12 Construction. Should any provision of this Agreement require
judicial interpretation, the parties hereto agree that the court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against one party by reason of the rule of construction
that a document is to be more strictly construed against the party that itself
or through its agent prepared the same, it being agreed that the parties hereto
and their respective agents and legal counsel have participated in the
preparation hereto.
13.13 Power of Attorney. Each of the Shareholders hereby make,
constitute and appoint Carlos Maia, with full power of substitution, their true
and lawful attorney-in-fact, and in the name, place and stead of each such
Shareholder, with the power from time to time to execute, acknowledge, make,
swear to, verify, deliver, record, publish and/or file: (a) any and all
amendments to this Agreement; and (b) all such other instruments as said
attorney may deem necessary or desirable to carry out the provisions of this
Agreement in accordance with its terms
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and to complete the closing of the transactions contemplated herein. Said
attorney shall have full power and authority to do and perform each and every
act and thing whatsoever requisite and necessary in and about the foregoing as
fully as the Shareholders might or could do if personally present and the
Shareholders hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue hereof. The foregoing grant of authority is a
Special Power of Attorney coupled with an interest in favor of Carlos Maia and
as such shall be irrevocable.
13.14 English Language. The parties hereby acknowledge and agree that
each is fluent in the English language, or that the Agreement has been
translated or explained to them in Portuguese. Cada assinante deste documento
confirma que, alem do fato que este acordo esta escrito na lingua inglesa, ele
entende aquela lingua ou, sim nao, consiguio uma traducao em portugues do mesmo
ou o mesmo foi explicado para ele na lingua portuguesa.
13.15 Best Knowledge. As used in this Agreement, "to the best
knowledge" or words of similar import shall mean actual knowledge possessed by
an executive officer of the parties, and "to the best of Buyer's knowledge" or
words of similar import shall mean actual knowledge possessed by an executive
officer of Buyer.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year set forth above.
WITNESSES: SEATON:
SEATON GROUP, INC., a
Delaware corporation
- ----------------------------
By:/s/ Angus Hay
-----------------------------------
____________________________ Angus Hay, President
UIS:
UNITED INFORMATION SYSTEMS, INC.,
a Florida corporation
- ----------------------------
By:_________________________________
- ----------------------------
UIS BRAZIL:
UIS INDUSTRIAS LTDA., a company
organized under the laws of Brazil
- ----------------------------
By:__________________________________
- ----------------------------
SHAREHOLDERS:
- ---------------------------- /s/ Carlos Maia
- ---------------------------- -----------------------------------
Carlos Maia
- ---------------------------- /s/ Jorge Miguel Maia
- ---------------------------- -----------------------------------
Jorge Miguel Maia
- ---------------------------- /s/ Jose Flavio Pereira de Araujo
- ---------------------------- -----------------------------------
Jose Flavio Pereira de Araujo
- ---------------------------- /s/ Maria Rosilene S. de Oliveira
- ---------------------------- -----------------------------------
Maria Rosilene S. de Oliveira
ALL SIGNATURES MUST BE NOTARIZED.
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SHAREHOLDERS SIGNATURES (con't.)
WITNESSES: SHAREHOLDERS:
/s/ William Cuervo
- ---------------------------- -----------------------------------
William Cuervo
- ----------------------------
/s/ Odilon Velho
- ---------------------------- -----------------------------------
Odilon Velho
- ----------------------------
ALL SIGNATURES MUST BE NOTARIZED
NOTARIAL CERTIFICATES ARE ON FOLLOWING PAGE
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<PAGE>
SHAREHOLDERS SIGNATURES (con't.)
WITNESSES: SHAREHOLDERS:
/s/ Saul Maia
- ---------------------------- -----------------------------------
Saul Maia
- ----------------------------
ALL SIGNATURES MUST BE NOTARIZED
NOTARIAL CERTIFICATES ARE ON FOLLOWING PAGE
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SHAREHOLDERS SIGNATURES (con't.)
WITNESSES: SHAREHOLDERS:
/s/ William Klein
- ---------------------------- -----------------------------------
William Klein
- ----------------------------
ALL SIGNATURES MUST BE NOTARIZED
NOTARIAL CERTIFICATES ARE ON FOLLOWING PAGE
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NOTARIAL CERTIFICATES FOR SIGNATURES ON PRECEDING PAGES
STATE OF FLORIDA )
):SS
COUNTY OF ______ )
The foregoing instrument was acknowledged before me this _______ day of
November, 1997, by Angus Hay, as President of Seaton Group, Inc., a Delaware
corporation, who is personally known to me or who has produced __________ as
identification and who did/did not take an oath.
------------------------------
(SEAL) NOTARY PUBLIC
------------------------------
Print Name of Notary
STATE OF FLORIDA )
):SS
COUNTY OF ______ )
The foregoing instrument was acknowledged before me this _______ day of
November, 1997, by ______________, as _______________ of United Information
Systems, Inc., a Florida corporation, who is personally known to me or who has
produced __________ as identification and who did/did not take an oath.
------------------------------
(SEAL) NOTARY PUBLIC
------------------------------
Print Name of Notary
COUNTRY OF BRAZIL )
):SS
PROVINCE OF _______ )
The foregoing instrument was acknowledged before me this _______ day of
November, 1997, by ______________, as _______________ of UIS Industrias Ltda., a
company organized under the laws of Brazil, who is personally known to me or who
has produced __________ as identification and who did/did not take an oath.
------------------------------
NOTARY PUBLIC
------------------------------
Print Name of Notary
46
<PAGE>
STATE OF FLORIDA )
):SS
COUNTY OF ______ )
The foregoing instrument was acknowledged before me this _______ day of
November, 1997, by
____________________________________________________________________, who is/are
personally known to me or who has/have produced __________ as identification and
who did/did not take an oath.
------------------------------
(SEAL) NOTARY PUBLIC
------------------------------
Print Name of Notary
47
<PAGE>
STATE OF FLORIDA )
):SS
COUNTY OF ______ )
The foregoing instrument was acknowledged before me this _______ day of
_____________, 1997, by Saul Maia, who is personally known to me or who has
produced __________ as identification and who did/did not take an oath.
----------------------------
(SEAL) NOTARY PUBLIC
-----------------------------
Print Name of Notary
48
<PAGE>
STATE OF FLORIDA )
):SS
COUNTY OF ______ )
The foregoing instrument was acknowledged before me this _______ day of
_____________, 1997, by William Klein, who is personally known to me or who has
produced __________ as identification and who did/did not take an oath.
------------------------------
(SEAL) NOTARY PUBLIC
------------------------------
Print Name of Notary
49
<PAGE>
COUNTRY OF BRAZIL )
):SS
PROVINCE OF _______ )
The foregoing instrument was acknowledged before me this _______ day of
November, 1997, by
___________________________________________________________________, who is/are
personally known to me or who has/have produced ________________ as
identification and who did/did not take an oath.
------------------------------
(SEAL) NOTARY PUBLIC
------------------------------
Print Name of Notary
50
<PAGE>
EXHIBITS
Exhibit A Defined Terms
Exhibit B Employment Agreement with Carlos Maia
Exhibit C Opinion of Counsel Rendered to Seaton Regarding UIS & UIS Brazil
Exhibit D Opinion of Counsel Rendered to UIS Brazil Regarding Seaton
Exhibit E Escrow Agreement with Seaton, Hay and Thompson
Exhibit F Escrow Agreement with Seaton and Maia
SCHEDULES
Schedule A Shareholders
Schedule B Shareholders
Schedule 3.3 Violations
Schedule 3.4 Financial Statements
Schedule 3.5 Conduct since date of Financial Statements
Schedule 3.6 Encumbrances on Assets
Schedule 3.7 Lease of real property
Schedule 3.8 Indebtedness
Schedule 3.9 Liabilities
Schedule 3.11 Assets
Schedule 3.12 Customers
Schedule 3.13 Other Contracts
Schedule 3.16 Taxes
Schedule 3.19 Permits
Schedule 3.24 Labor Agreements
Schedule 3.26 Potential Conflicts of Interest
Schedule 3.29 Employees, Contractors & Agents
Schedule 3.30 Insurance
Schedule 3.31 Transactions with Related Parties
Schedule 3.32 Suppliers
Schedule 3.33 Intangibles
Schedule 3.34 Accounts
Schedule 3.35 Accounts Receivable
Schedule 3.36 Accounts Payable
Schedule 3.39 Capitalization
Schedule 3.40 Tax Exempt Status of UIS Brazil
Schedule 3.41 Projections
Schedule 4.3 No Violations
Schedule 4.8 Financial Statements
Schedule 4.9 Encumbrances on Assets
Schedule 4.10 Assets
Schedule 4.12 Indebtedness
Schedule 4.13 Liabilities
<PAGE>
Schedule 4.15 Customers
Schedule 4.19 Taxes
Schedule 4.22 Permits
Schedule 4.26 Labor Agreements
Schedule 4.28 Potential Conflicts of Interest
Schedule 4.31 Employees, Contractors and Agents
Schedule 4.32 Insurance
Schedule 4.33 Related Parties Transactions
Schedule 4.34 Suppliers
Schedule 4.35 Intangibles
Schedule 4.36 Accounts
Schedule 4.37 Accounts Receivable
Schedule 4.38 Accounts Payable
<PAGE>
SCHEDULE A
SHAREHOLDERS
NAME NUMBER OF EXCHANGE SHARES
---- -------------------------
Jorge Miguel Maia(1) 2,906,334(3)
Jose Flavio Pereira de Araujo(1) 190,000(3)
Maria Rosilene S. de Oliveira(1) 38,000(3)
Carlos Maia(2) 1,530,000(4)
William Cuervo(2) 55,000(4)
Odilon Velho(2) 55,000(4)
William Klein(2) 10,000(4)
Saul Maia(2) 817,000(4)
-------
TOTAL 5,601,334
(1) UIS Brazil Shareholders
(2) UIS Shareholder
(3) In exchange for the UIS Brazil Stock
(4) In exchange for the UIS Stock
<PAGE>
SCHEDULE B
NAME NUMBER OF SHARES
- ---- ----------------
Maria Rosilene S. de Oliveira 38,000
William Cuervo 55,000
Odilon Velho 55,000
William Klein 10,000
Jose Flavio Pereira de Araujo 90,000
<PAGE>
EXHIBIT A
DEFINED TERMS
All defined terms used in this Agreement and not specifically defined
in context are as defined in this Exhibit A.
"Accounts Receivable" means any right to payment for goods sold,
leased or licensed or for services rendered whether or not it has been earned by
performance, any note receivable, and any other receivable or right to payment
of any nature whatsoever.
"Assets" shall have the meaning set forth in Section 3.1 of this
Agreement.
"Asset" means any real, personal, mixed, tangible or intangible
property of any nature whatsoever, including, without limitation, Real Property,
Leases, Equipment, Accounts Receivable, Inventory, Permits, Intangibles and
Contract Rights.
"Liabilities" shall have the meaning set forth in Section 3.4 of this
Agreement.
"Balance Sheet" shall have the meaning set forth in Section 3.4 of
this Agreement.
"Business" shall have the meaning set forth in the recitals to this
Agreement.
"Closing" shall have the meaning set forth in Section 2.3 of this
Agreement.
"Consent" means any consent, approval, order or authorization of, or
any declaration, filing or registration with, or any application or report to,
or any waiver by, or any other action (whether similar or dissimilar to any of
the foregoing) of, by or with, any person, which is necessary in order to take a
specified action or actions, in a specified manner and/or to achieve a specific
result.
"Contract" means any written or oral contract, agreement, order or
commitment of any nature whatsoever, including, without limitation, any sales
order, purchase order, lease, sublease, license agreement, loan agreement,
mortgage, security agreement, guarantee, management contract, employment
agreement, consulting agreement, partnership agreement, buy-sell agreement,
option, warrant, subscription, call or put.
"Contract Right" means any right, power or remedy under any Contract,
including, without limitation, any right to receive goods or services or
otherwise derive benefit from the payment, satisfaction or performance of
another party's Obligations, and right to demand that another party accept goods
or services or take any other action, and any right to pursue or exercise any
remedy or option.
<PAGE>
"Convertible Debentures" means the aggregate of $330,000 of 5% 1 year
Convertible Debentures, (1) a $230,000 Convertible Debenture dated October 15,
1997, having a conversion price of (a) $.5427 per share in the event the
transaction between UIS, the UIS Shareholder, UIS Brazil, the UIS Brazil
Shareholders and Seaton ("Acquisition") is consummated; or (b) $0.05 per share
in the event the Acquisition is not consummated within thirty (30) days of from
the date of the Debentures, and (2) a $100,000 Convertible Debenture dated
September 30, 1997, having a conversion price of (a) $.3090 per share in the
event the Acquisition is consummated; or (b) $0.05 per share in the event the
Acquisition is not consummated within sixty (60) days of from the date of the
Debentures. In the event the Acquisition is not consummated within sixty (60)
days from the date of the Debenture, the Debenture shall become immediately due
and payable. The Debentures also give the debenture holders registration rights,
including piggyback registration rights, for the shares of Common Stock issuable
upon conversion of the Debenture within thirty (30) days after the date the
Acquisition is consummated. The Debentures are also secured by certain
collateral of Seaton listed in a UCC-1 financing statement executed concurrently
with the Debentures.
"Documents" shall mean notes, bills of lading, date contracts,
warehouse receipts or order for delivery of goods and also any other documents
which in the regular course of business or financing is treated as adequately
evidencing that the person in possession of it is entitled to receive, hold and
dispose of the document and the goods its covers.
"Employee Benefit Plan" means any bonus, severance, hospitalization,
vacation, deferred compensation, pension, profit sharing, retirement, payroll
savings, stock option, group insurance, death benefit or welfare plan, or any
other employee benefit plan or fringe benefit arrangement of any nature
whatsoever, including, but not limited to, "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder.
"Encumbrance" means any lien, security interest, pledge, mortgage,
easement, leasehold, assessment, covenant, restriction, reservation, conditional
sale, prior assignment, or any other encumbrance, claim, burden or charge of any
nature whatsoever.
"Equipment" means any equipment, machinery, fixtures, furniture,
leasehold improvements, vehicles, vessels, office equipment, office supplies or
other tangible personal property of any nature whatsoever, but not any such item
which constitutes Inventory.
"Financial Statements" shall have the meaning set forth in Section 3.4
of this Agreement.
"Fiscal Year" shall mean the fiscal year for the applicable entity
ended December 31.
"Indebtedness" as applied to any Person (as defined in this Exhibit
A), (a) all indebtedness of such Person for borrowed money, whether current or
funded, or secured or unsecured, (b) all indebtedness of such Person for the
deferred purchase price of property or services represented by a note or other
security, (c) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of UIS Brazil or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all indebtedness of such Person secured by a
purchase money mortgage or other lien to secure all or part of the purchase
price of property subject to such mortgage or lien, (e) all obligations
2
<PAGE>
under leases which shall have been or must be, in accordance with generally
accepted accounting principles, recorded as capital leases in respect of which
such Person is liable as lessee, (f) any liability of such Person in respect of
banker's acceptances or letters of credit, and (g) all indebtedness referred to
in clause (a), (b), (c), (d), (e) or (f) above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
"Intangible" means any name, corporate name, partnership name,
fictitious name, trademark, trademark application, trade name, brand name,
slogan, trade secret, know-how, patent, patent application, copyright, copyright
application, design, formula, invention, blueprint, product right, software
right, license, franchise, authorization or any other intangible property of any
nature whatsoever.
"Inventory" means any raw materials, supplies, work in process,
finished goods, or any other inventory of any nature whatsoever, and other items
held for sale or lease in the ordinary course of business and all computer
software and data systems held for sale or license in the ordinary course of
business.
"Judgment" means any order, writ, injunction, fine, citation, award,
decree, or any other judgment of any nature whatsoever of any foreign, federal,
state or local court, any governmental, administrative or regulatory authority,
or any arbitration tribunal.
"Law" means any provision of any law, statute, ordinance,
constitution, charter, treaty, rule or regulation of any foreign, federal, state
or local governmental, administrative or regulatory authority.
"Leases" means all leases for real or personal property.
"Market Price" of the Stock shall mean the average of the closing
prices of the Stock's sales on all domestic securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" will be the fair value thereof
determined jointly by Seaton and UIS Brazil; provided that if such parties are
unable to reach agreement within a reasonable period of time, such fair value
will be determined by an appraiser jointly selected by Seaton and UIS Brazil.
The determination of such appraiser will be final and binding on Seaton and UIS
Brazil, and the fees and expenses of such appraiser will be paid by Seaton.
"Obligation" means any debt, liability or obligation of any nature
whatsoever, whether secured, unsecured, recourse, nonrecourse, liquidated,
unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained,
known, unknown or obligations under executory Contracts.
3
<PAGE>
"Permit" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature whatsoever, granted, issued,
approved or allowed by any foreign, federal, state or local governmental,
administrative or regulatory authority.
"Person" means any individual, sole proprietorship, joint venture,
partnership, corporation, association, cooperation, trust, estate, government
(or any branch, subdivision or agency thereof), governmental, administrative or
regulatory authority, or any other entity of any nature whatsoever.
"Proceeding" means any demand, claim, suit, action, litigation,
investigation, study, arbitration, administrative hearing, or any other
proceeding of any nature whatsoever.
"Real Property" means any real estate, land, building, structure,
improvement, fixture or other real property of any nature whatsoever, including,
but not limited to fee and leasehold interests.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder.
"Securities Laws" Means the Securities Act, the Securities Exchange
Act of 1934, as amended, the Investment Parent Act of 1940, as amended, and all
state or other applicable securities laws, and all rules and regulations
promulgated under each of these laws, collectively.
"UIS Brazil's Disclosures" shall have the meaning as set forth in
Section 6.4.
"Stock Issuance Agreements" means any contracts which relate to the
issuance, sale, right to purchase, redemption, pledge or other disposition of
any capital stock of UIS Brazil or any other securities or Obligations of UIS
Brazil.
"Tax" means (a) any foreign, federal, state or local income, profits,
gross receipts, franchise, sales, use, occupancy, general property, real
property, personal property, intangible property, transfer, fuel, excise,
accumulated earnings, personal holding Parent, unemployment compensation, social
security, withholding taxes, payroll taxes, or any other tax of any nature
whatsoever, (b) any foreign, federal, state or local organization fee,
qualification fee, annual report fee, filing fee, occupation fee, assessment,
rent, or any other fee or charge of any nature whatsoever, or (c) any
deficiency, interest or penalty imposed with respect to any of the foregoing.
4
<PAGE>
Schedule 4.3
No Violations
None.
<PAGE>
Schedule 4.8
Financial Statements
<PAGE>
Schedule 4.9
Encumbrances on Assets
None.
<PAGE>
Schedule 4.10
Title to Assets
None.
<PAGE>
Schedule 4.12
Indebtedness
Convertible Debentures.
<PAGE>
Schedule 4.15
Customers
None.
<PAGE>
Schedule 4.16
Other Contracts
None.
<PAGE>
Schedule 4.19
Taxes
None.
<PAGE>
Schedule 4.22
Permits
None.
<PAGE>
Schedule 4.26
Labor Agreements
None.
<PAGE>
Schedule 4.28
Potential Conflicts of Interest
None.
<PAGE>
Schedule 4.31
Employees, Contractors and Agents
None.
<PAGE>
Schedule 4.32
Insurance
None.
<PAGE>
Schedule 4.33
Related Parties Transactions
None.
<PAGE>
Schedule 4.34
Suppliers
None.
<PAGE>
Schedule 4.35
Intangibles
None.
<PAGE>
Schedule 4.36
Accounts
None.
<PAGE>
Schedule 4.37
Accounts Receivable
None.
<PAGE>
Schedule 4.38
Accounts Payable
None.
AMENDMENT NO. 1
TO THE
REORGANIZATION AGREEMENT
THIS Amendment to the REORGANIZATION AGREEMENT dated November 17,
1997 (the "Agreement") is made and entered into as of the 21st day of
November, 1997, by and among SEATON GROUP, INC., a Delaware corporation
("Seaton"), UNITED INFORMATION SYSTEMS, INC., a Florida corporation ("UIS"),
UIS INDUSTRIAL LTDA., a company organized under the laws of Brazil ("UIS
Brazil"), and the shareholders of UIS Brazil ("UIS Brazil Shareholders") and
UIS ("UIS Shareholder") whose names are set forth on Schedule A attached
thereto (the UIS Shareholders and UIS Brazil Shareholders are sometimes
collectively hereinafter referred to as "Shareholders"). UIS Brazil and the
UIS Brazil Shareholders shall be jointly and severally liable (under United
States and Brazilian laws) hereunder with respect to any representations and
warranties hereunder made by UIS Brazil and the UIS Brazil Shareholders. UIS
and the UIS Shareholder shall be jointly and severally liable hereunder with
respect to any representations and warranties hereunder made by UIS and the
UIS Shareholders.
W I T N E S S E T H:
WHEREAS, UIS, UIS Brazil, the Shareholders and Seaton entered into
the Agreement on November 17, 1997; and
WHEREAS, as a condition to closing, Seaton was required to have cash
on hand as of closing of not less than $2,200,000 under the terms of the
Agreement (the "Funds"); and
WHEREAS, UIS, UIS Brazil and the Shareholders wish to amend the
Agreement and waive any obligation or representation made by Seaton regarding
amount of Funds.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as
follows:
1. The obligation of Seaton set forth in paragraphs 2.2(c) and 4.6(c) of the
Agreement, is hereby waived. The undersigned certifies that aforementioned
provision is being waived at the request of the UIS, UIS Brazil and the
Shareholders, for the purpose of closing.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date and year set forth above.
WITNESSES: SEATON:
SEATON GROUP, INC., a Delaware
corporation
- ----------------------------
By: /s/ Angus Hay
- ---------------------------- ----------------------------
Angus Hay, President
UIS:
UNITED INFORMATION SYSTEMS,
INC., a Florida corporation
- ----------------------------
By:
-----------------------------
- ----------------------------
UIS BRAZIL:
UIS INDUSTRIAL LTDA., a company
organized under the laws of Brazil
- ----------------------------
By:
------------------------------
- ----------------------------
SHAREHOLDERS:
- ---------------------------- /s/ Carlos Maia
- ---------------------------- ---------------------------------
Carlos Maia
- ---------------------------- /s/ Jorge Miguel Maia
- ---------------------------- ---------------------------------
Jorge Miguel Maia
- ---------------------------- /s/ Jose Flavio Pereira de Araujo
- ---------------------------- ---------------------------------
Jose Flavio Pereira de Araujo
- ---------------------------- /s/ Maria Rosilene S. de Oliveira
- ---------------------------- ---------------------------------
Maria Rosilene S. de Oliveira
2
<PAGE>
SHAREHOLDERS SIGNATURES (con't.)
WITNESSES: SHAREHOLDERS:
/s/ William Cuervo
- ---------------------------- ---------------------------------
William Cuervo
- ----------------------------
/s/ Odilon Velho
- ---------------------------- ---------------------------------
Odilon Velho
- ----------------------------
/s/ Saul Maia
- ---------------------------- ---------------------------------
Saul Maia
- ----------------------------
/s/ William Klein
- ---------------------------- ---------------------------------
William Klein
- ----------------------------
3
ARTICLES OF INCORPORATION
OF
THE OCEANIA GROUP, INC.
The undersigned, in order to form a corporation for the purposes
hereinafter stated under and pursuant to the general corporation law of the
State of Delaware do hereby certify as follows:
ARTICLE I
Name
The name of this corporation is The Oceania Group, Inc.
ARTICLE II
Duration
The duration of this corporation is perpetual.
ARTICLE III
Purposes
The purpose or purposes for which this corporation is organized are:
(a) To engage in any lawful act or activity for which the corporation
may be organized under the general corporation law of Delaware.
(b) To do each and every thing necessary suitable or proper for the
accomplishment of any of the purposes or the attainment of any one or more of
the subjects herein enumerated or which at any time may appear conducive to or
expedient for the protection or benefit of this corporation and to do said
acts as fully and to the same extent as natural persons might or could do in
any part of the world as principals, agents,
<PAGE>
partners, trustees or otherwise, either alone or in conjunction with any other
person, association or corporation.
ARTICLE IV
Stock
The Corporation shall have the authority to issue an aggregate of
Fifty Million (50,000,000) shares common stock having a one tenth of one cent
($.001) par value each.
ARTICLE V
Amendment
These Articles of Incorporation may be amended by the affirmative
vote of a majority of the shares entitled to vote on each such amendment.
ARTICLE VI
Shareholder Rights
The authorized and treasury stock of this corporation may be issued
at such time, upon such terms and conditions and for such consideration as the
Board of Directors shall determine. Shareholders shall not have pre-emptive
rights to acquire unissued shares of the stock of this corporation and
cumulative voting is denied.
ARTICLE VII
Initial Office and Agent
The address of the initial registered office of the corporation is
1209 Orange Street, Wilmington, Delaware 19801, Newcastle County and the name
of the corporation's initial registered agent at such address is Corporation
Trust Company.
ARTICLE VIII
2
<PAGE>
Directors
The number of Directors constituting the initial Board of Directors
of this corporation is three. The names and addresses of persons who are to
serve as directors until the first annual meeting of stockholders, or until
their successors are elected and qualified are:
Charles E. Hayden
3245 Tyler Avenue
Ogden, Utah 84403
Scott McElhaney
28128 Pacific Coast Highway #164
Malibu, CA 90265
Marsha D. Hayden
3245 Tyler Avenue
Ogden, Utah 84403
ARTICLE IX
Incorporators
The name and address of each incorporator is:
Charles E. Hayden
3245 Tyler Avenue
Ogden, Utah 84403
Maria L. Booth
50 West Broadway, Suite 701
Salt Lake City, Utah 84101
Robert J. Nielson
50 West Broadway, Suite 701
Salt Lake City, Utah 84101
3
<PAGE>
ARTICLE X
Common Directors - Transactions Between Corporations
No contract or other transaction between this corporation and one or
more of its directors or any other corporation, firm, association or entity in
which one or more of its directors or officers are financially interested,
shall be either void or voidable because of such relation or interest, or
because such director or directors are present at the meeting of the Board of
Directors, or a committee thereof which authorizes, approves or ratifies such
contract or transaction, or because his or their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves, or
ratifies this contract or transaction by vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors;
or (b) the fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or (c) the contract or
transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or committee
thereof which authorizes, approves or ratifies such contract or transaction.
DATED this 8th day of February, 1986.
/s/ Charles E. Hayden
-------------------------------------
Charles E. Hayden
/s/ Maria L. Booth
-------------------------------------
Maria L. Booth
/s/ Robert J. Nielson
-------------------------------------
Robert J. Nielson
4
<PAGE>
STATE OF UTAH )
)SS
COUNTY OF SALT LAKE )
I hereby certify that on the 8th day of February, 1986, Charles E.
Hayden, Maria L. Booth and Robert J. Nielson, personally appeared before me
who, being by me first duly sworn, severally declared that they are the
incorporators and that the statements therein contained are true.
DATED this 8th day of February, 1986.
-------------------------------------
NOTARY PUBLIC
Residing in:
-------------------------
My Commission Expires:
- --------------------------------
5
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION OF
THE OCEANIA GROUP, INC.
Pursuant to Section 242 of Title 8 of the General Corporation Law of
the State of Delaware, the undersigned corporation hereby adopts the following
Certificate of Amendment to its Certificate of Incorporation:
FIRST: The name of the corporation is The Oceania Group, Inc.
SECOND: The following amendment to the Certificate of Incorporation
of The Oceania Group, Inc., were duly adopted by the shareholders of the
corporation at a meeting held March 20, 1992, in the manner prescribed by the
General Corporation Law of the State of Delaware, to wit:
Article I - Name
The name of this corporation is CLASSIC VIDEO THEATRE, INC.
Article IV - Capital Stock Classes
The total number of shares of all classes of capital stock which the
Corporation has the authority to issue is 55,000,000 shares which are divided
into two classes as follows:
5,000,000 shares of Preferred Stock (Preferred Stock) $.01
par value per share, and
50,000,000 shares of Common Stock (Common Stock) $.001 par
value per share.
The designations, voting powers, preferences and relative,
participating, optional or other special rights, and qualification,
limitations or restrictions of the above classes of stock are as follows:
Preferred Stock
1. Issuance in Series. Shares of Preferred Stock may be
issued in one or more series at such time or times, and for such
consideration or considerations as the Board of Directors may
determine. All shares of any one series of Preferred Stock will be
identical with each other in all respects, except that shares of one
<PAGE>
series issued at different times may differ as to dates from which
dividends thereon may be cumulative. All series will rank equally and
be identical in all respects, except as permitted by the following
provisions of paragraph 2.
2. Authority of the Board with Respect to Series. The Board
of Directors is authorized, at any time and from time to time, to
provide for the issuance of shares of Preferred Stock in one or more
series with such designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof as are stated and expressed in
the resolution or resolutions providing for the issue thereof adopted
by the Board of Directors, and as are not stated and expressed in
these Articles of Incorporation or any amendment thereto including,
but not limited to, determination of any of the following:
(a) the distinctive serial designation and the
number of shares constituting a series;
(b) the dividend rate or rates, whether dividends
are cumulative and, if so, from which date, the payment date
or dates for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) the voting powers, full or limited, if any, of
the shares of the series;
(d) whether the shares are redeemable and, if so,
the price or prices at which, and the terms and conditions
on which, the shares may be redeemed;
(e) the amount or amounts payable upon the shares
in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation prior to any
payment or distribution of the assets of the Corporation to
any class or classes of stock of the Corporation ranking
junior to the Preferred Stock;
(f) whether the shares are entitled to the benefit
of a sinking or retirement fund to be applied to the
purchase or redemption of shares of a series and, if so
entitled, the amount of the fund and the manner of its
application, including the price or prices at which the
shares may be redeemed or purchased through the application
of the fund;
(g) whether the shares are convertible into, or
exchangeable for, shares of any other class or classes of
stock of the Corporation and, if so convertible or
exchangeable, the conversion price or prices, or the rates of
2
<PAGE>
exchange, and the adjustments thereof, if any, at which
the conversion or exchange may be made, and any other terms
and conditions of the conversion or exchange; and
(h) any other preferences, privileges and powers,
and relating participating, optional or other special
rights, and qualifications, limitations or restrictions of a
series, as the Board of Directors may deem advisable and as
are not inconsistent with the provisions of this Certificate
of Incorporation.
3. Dividends. Before any dividends on any class or classes
of stock of the Corporation ranking junior to the Preferred Stock
(other than dividends payable in shares of any class or classes of
stock of the corporation ranking junior to the Preferred Stock) may
be declared or paid or set apart for payment, the holders of shares
of Preferred Stock of each series are entitled to such cash
dividends, but only when and as declared by the Board of Directors
out of funds legally available therefor, as they may be adopted by
the Board of Directors providing for the issue of the series, payable
on such dates in each year as may be fixed in the resolution or
resolutions. The term "class or classes of stock of the Corporation
ranking junior to the Preferred Stock" means the Common Stock and any
other class or classes of stock of the Corporation hereafter
authorized which rank junior to the Preferred Stock as to dividends
or upon liquidation.
4. Reacquired Shares. Shares of Preferred Stock which have
been issued and reacquired in any manner by the Corporation
(excluding, until the corporation elects to retire them, shares which
are held as treasury shares but including shares redeemed, shares
purchased and retired and shares which have been converted into
shares of Common Stock) will have the status of authorized and
unissued shares of Preferred Stock and may be reissued.
5. Voting Rights. Unless and except to the extent otherwise
required by law or provided in the resolution or resolutions of the
Board of Directors creating any series of Preferred Stock the holders
of the Preferred Stock shall have no voting power with respect to any
matter whatsoever.
Common Stock
1. Dividends. Subject to the preferential rights of the
Preferred Stock, the holders of the Common Stock are entitled to
receive, to the extent permitted by law, such dividends as may be
declared from time to time by the Board of Directors.
2. Liquidation. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
Corporation, after distribution in full of the preferential amounts,
if any, to be distributed to the holders of shares
3
<PAGE>
of Preferred Stock, holders of Common Stock shall be entitled to
receive all of the remaining assets of the Corporation of whatever
kind available for distribution to Stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively. The Board of Directors may distribute in kind to the
holders of Common Stock such remaining assets of the Corporation or
may sell, transfer or otherwise dispose of all or any part of such
remaining assets to any other corporation, trust or other entity and
receive payment therefor in cash, stock or obligations of such other
corporation, trust or other entity, or any combination thereof, and
may sell all or any part of the consideration so received and
distribute any balance thereof in kind to holders of Common Stock.
The merger or consolidation of the Corporation into or with any
other corporation, or the merger or any other corporation into it,
or any purchase or redemption of shares of stock of the Corporation
of any class, shall not be deemed to be a dissolution, liquidation
or winding up of the Corporation for the purposes of this paragraph.
3. Voting Rights. Except as may be otherwise required by law
or this Certificate of Incorporation, each holder of Common Stock has
one vote in respect of each share of stock held by him or record on
the books of the corporation on all matters voted upon by the
Stockholders.
Other Provisions
1. Pre-emptive Rights. No Stockholder shall have
any pre-emptive right to subscribe to an additional issue of
stock of any class or series or to any securities of the
Corporation convertible into such stock.
2. Changes in Authorized Capital Stock. Subject to
the protective conditions and restrictions of any
outstanding Preferred Stock, any amendment to these Articles
of Incorporation which increases or decreases the authorized
capital stock of any class or classes may be adopted by the
affirmative vote of the holders of a majority of the
outstanding shares of the voting stock of the Corporation.
THIRD: The number of shares of the Corporation outstanding at the
time of the adoption of such amendments was 600,000 and the number entitled to
vote thereon was 600,000.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows, to wit:
Class Number of Shares
----- ----------------
Common 600,000
4
<PAGE>
FIFTH: The number of shares voted for such amendments was 334,400,
with -0- opposing and -0- abstaining.
SIXTH: These amendments do not provide for any exchange,
reclassification or cancellation of issued shares.
SEVENTH: These amendments do effect a change in the stated capital of
the corporation as set forth above.
IN WITNESS WHEREOF, the undersigned president and secretary, having
been thereunto duly authorized, have executed the foregoing Certificate of
Amendment to Certificate of Incorporation for the corporation this 20th day of
March, 1992.
THE OCEANIA GROUP, INC.
By:/s/ Darrell L. Scharmann
-------------------------------
Darrell L. Scharmann, President
Attest:
/s/ Dennis Blomquist
- --------------------------------
Dennis Blomquist, Vice President
STATE OF UTAH )
) ss:
COUNTY OF SALT LAKE )
Subscribed and sworn to before me this 20th day of March, 1992, by
Darrell L. Scharmann, President and Dennis Blomquist, Vice President of The
Oceania Group, Inc.
-------------------------------
Notary Public
My Commission Expires:
------------------
Residing at County
----------------------
5
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
CLASSIC VIDEO THEATRE, INC.
Classic Video Theatre, Inc. (the "Company"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State
of Delaware, DOES HEREBY CERTIFY:
FIRST: By the unanimous consent of the Directors of the Company, a
resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said Company, declaring said amendment to be
advisable and seeking the consent of the majority of the stockholders of said
Company to adopt such amendment to the Certificate of Incorporation, pursuant
to Sections 228 and 242 of the Delaware General Corporation Law. The
resolutions setting forth the proposed amendment is as follows:
RESOLVED, that ARTICLE I of the Certificate of Incorporation
of the Company be amended in its entirety to read as follows:
The name of this corporation is SEATON GROUP, INC.
RESOLVED, that ARTICLE IV be amended to read as follows:
The total number of shares of all classes of capital stock
which the Corporation has the authority to issue is 68,000,000
shares, par value $.001 per share.
Effective as of the effective date of this Amendment, each
twenty (20) shares of Common stock, $.001 par value per share,
outstanding before the effective date of the Amendment will be
changed into one (1) fully paid and nonassessable share of Common
Stock, $.001 par value per share; and that after the effective date
of this Amendment, each holder of record of one or more certificates
representing shares of the old Common Stock shall be entitled to
receive one or more certificates representing the proportionate
number of shares of new Common Stock on surrender of a stockholder's
old certificates for cancellation. If a stockholder shall be entitled
to a number of new shares of Common Stock which is not a whole
number, then the number of the new shares of Common Stock issued to
the Stockholder shall be rounded upward to the nearest whole number.
<PAGE>
SECOND: that a majority of the Stockholders have given their written
consent to the above amendments in lieu of a meeting in accordance with the
provisions of Section 228 of the Delaware General Corporation Law;
THIRD: that the aforesaid amendment shall be duly adopted in
accordance with the applicable Section 242 and 228 of the Delaware General
Corporation Law.
FOURTH: that this amendment shall become effective upon its filing in
the office of the Secretary of State of the State of Delaware, and therefore
being, the record date of one (1) for twenty (20) (1:20) reverse split of the
Company's issued and outstanding shares of Common Stock.
IN WITNESS WHEREOF, the Company has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its President and
Secretary, this 2 day of May, 1996.
CLASSIC VIDEO THEATRE, INC.,
a Delaware corporation
By:
--------------------------------
Its: President
By:
--------------------------------
Its: Secretary
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
SEATON GROUP, INC.
Seaton Group, Inc. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: By the unanimous consent of the Directors of the Company, a
resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said Company, declaring said amendment to be
advisable and seeking the consent of the majority of the stockholders of said
Company to adopt such amendment to the Certificate of Incorporation, pursuant
to Sections 228 and 242 of the Delaware General Corporation Law. The
resolutions setting forth the proposed amendment is as follows:
RESOLVED, that ARTICLE IV be amended to read as follows:
The total number of shares of all classes of capital stock which the
Corporation has the authority to issue is 20,000,000 shares, par value $.001
per share.
SECOND: that a majority of the Stockholders have given their written
consent to the above amendment in lieu of a meeting in accordance with the
provisions of Section 228 of the Delaware General Corporation Law.
THIRD: that the aforesaid amendment shall be duly adopted in
accordance with the applicable Section 242 and 228 of the Delaware General
Corporation Law.
FOURTH: that this amendment shall become effective upon its filing in
the office of the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its President and
Secretary, this 2nd day of May, 1996.
SEATON GROUP, INC.
By:
-------------------------------
Its: President
By:
-------------------------------
Its: Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SEATON GROUP, INC.
Seaton Group, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: By the unanimous consent of the directors of the Corporation a
resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and seeking the consent of the majority of
the shareholders of said corporation to adopt such amendment to the
Certificate of Incorporation, pursuant to Sections 228 and 242 of the
Delaware General Corporation Law. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that ARTICLE IV of the Certificate of Incorporation be
amended to include the following provision:
Effective upon the Corporation filing an Amendment to the Certificate
of Incorporation ("Effective Date") in the office of the Secretary of
State of Delaware, each eighteen point six (18.6) shares of Common
Stock, $.001 par value per share, outstanding on the Effective Date
will be changed into one (1) fully paid and nonassessable share of
Common Stock, $.001 par value per share; and that after the effective
date of the Amendment, each holder of record of one or more
certificates representing shares of the old Common Stock shall be
entitled to receive one or more certificates representing the
proportionate number of shares of new Common Stock on surrender of a
stockholder's old certificates for cancellation. If a stockholder
shall be entitled to a number of new shares of Common Stock which is
not a whole number, then the number of new shares of Common Stock
issued to the Stockholder shall be rounded upward to the nearest
whole number.
The total number of shares of all classes of capital stock which the
Corporation has the authority to issue is 20,000,000 shares, par
value $.001 per share, consisting of 19,000,000 shares of Common
Stock and 1,000,000 shares of Preferred Stock.
<PAGE>
Series of the Preferred Stock may be created and issued from time to
time, with such designations, preferences, conversion rights,
cumulative, relative, participating, optional or other rights,
including voting rights, qualifications, limitations or restrictions
thereof as shall be stated and expressed in the resolution or
resolutions providing for the creation and issuance of such series of
preferred stock as adopted by the Board of Directors pursuant to the
authority in this paragraph given.
The Board of Directors of the Corporation desires, pursuant to its
authority as aforesaid, to determine and fix the rights, preferences,
privileges and restrictions relating to a class of said Preferred
Stock to be designated "Series A Preferred Stock" totalling up to
35,000 shares (the "Series A Preferred Stock").
1. Designation and Number of Shares. The Preferred Stock
shall be designated "Series A Convertible Preferred Stock" of a
stated value of $1.00 each, and the number of shares constituting the
Preferred Stock shall be 35,000 shares.
2. Dividend Rights. The Series A Preferred Stock shall not
bear any dividend.
3. Conversion Rights. Holders of the Series A Preferred
Stock will have the right, at their option, to convert each share of
Series A Preferred Stock into 4.3 shares of the Company's Common
Stock, subject to any adjustment as hereafter provided. No fractional
share or scrip representing a fractional share will be issued upon
conversion of the Series A Preferred Stock. In the event of any
reclassification, merger, consolidation or change of shares of the
Series A Preferred Stock and/or the Common Stock of the Company, the
Company shall make adjustments to the conversion ratio which shall be
nearly as equivalent to that stated above as may be practical.
The conversion price will be subject to adjustment in
certain events, including (i) the issuance of capital stock as a
dividend or distribution on Common Stock, (ii) subdivisions,
combinations, reverse stock splits and reclassification of the Common
Stock, (iii) the fixing of a record date for the issuance to all
holders of Common Stock of rights or warrants entitling them (for a
period expiring within 45 days of such record date) to subscribe for
Common Stock and (iv) the fixing of a record date for the
distribution to all holders of Common Stock of evidence of
indebtedness or assets (other than cash dividends) of the Company or
subscription rights or warrants (other than those referred to above).
<PAGE>
Adjustment in the conversion price may be postponed until
the cumulative effect of any adjustments amount to 15% or more of the
conversion price.
4. Redemption. At any time one (1) year from the date of
issuance, the Series A Preferred Stock shall be subject to a right of
redemption on the part of either the Company or the holder of the
Series A Preferred Stock prior to conversion thereof at a redemption
price of $1.00 per share.
5. Voting Rights. Unless the vote or consent of the holders
of a greater number of shares is required by law, the consent of the
holders of at least a majority of all of the Series A Preferred Stock
at the time outstanding shall be necessary to change, alter or revoke
the rights and preferences conferred upon the Series A Preferred
Stock by the Certificate of Incorporation or these resolutions or to
adopt an amendment to the Certificate of Incorporation materially
adversely affecting the rights of the holders of the Series A
Preferred Stock. Except as provided above or by law, the holders of
Series A Preferred Stock shall not be entitled to any voting rights
with respect to their shares of Series A Preferred Stock.
6. Liquidation Rights. In the event of the liquidation,
dissolution or winding up of the Company, holders of the Series A
Preferred Stock shall be entitled to receive, after due payment or
provision for payment of the debts and other liabilities of the
Company, a liquidating distribution before any distribution may be
made to holders of Common Stock of the Company. The holders of the
Series A Preferred Stock outstanding shall be entitled to receive an
amount equal to $1.00 per share whether or not such liquidation,
dissolution or winding up is voluntary or involuntary on the part of
the Company.
SECOND: that a majority of the Stockholders have given their written
consent to the above amendments in lieu of a meeting in accordance
with the provisions of Section 228 of the Delaware General Corporation
Law;
THIRD: that the aforesaid amendment shall be duly adopted in
accordance with the applicable Section 242 and 228 of the Delaware
General Corporation Law.
FOURTH: that the capital of the Corporation shall not be reduced under
or by reason of said amendment.
<PAGE>
FIFTH: that this amendment shall become effective upon its filing in
the office of the Secretary of State of Delaware, and the record date
being October 31, 1997 for the one (1) for eighteen point six (18.6)
(1:18.6) reverse stock split of the Company's issued and outstanding
shares of Common Stock.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be hereunto affixed and this Certificate to be signed by its President and
Secretary, this 18 day of November, 1997.
SEATON GROUP, INC.
Attest:/s/ Linda B. Coviello BY: /s/ Angus M. Hay
----------------------------- -------------------------------
Linda B. Coviello, Secretary Angus M. Hay, President
CERTIFICATE OF DESIGNATION OF RIGHTS
AND PREFERENCES OF PREFERRED STOCK
DESIGNATED "Series C CONVERTIBLE PREFERRED STOCK"
OF
SEATON GROUP, INC
A DELAWARE CORPORATION
(Pursuant to Section 151 of the
General Corporation Law of Delaware)
ANGUS M. HAY, the undersigned President of Seaton Group, Inc.
hereby certifies that:
(i) He is the duly elected and acting President of SEATON GROUP,
INC., a Delaware corporation (the "Company").
(ii) Pursuant to authority given by the Company's Certificate of
Incorporation, the Board of Directors of this Company has duly adopted the
following recitals and resolutions:
"WHEREAS, the Certificate of Incorporation of the Company
provide for a class of shares known as Preferred Stock, $.001 par
value per share, issuable from time to time; and
WHEREAS, the Board of Directors of this Company is
authorized to determine or alter the rights, preferences, privileges
and restrictions granted to or imposed upon any wholly unissued
Preferred Stock, to fix the number of shares constituting any such
class and to determine the designation thereof, or any of them; and
WHEREAS, this Company has not issued any shares of such
Preferred Stock and the Board of Directors of the Company desires,
pursuant to its authority as aforesaid to determine and fix the
rights, preferences, privileges and restrictions relating to a class
of said Preferred Stock to be designated "Series C $1.00 Convertible
Preferred Stock" totalling up to 315,000 shares (the "Series C
Preferred Stock").
<PAGE>
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
fixes and determines the designation of the number of shares constituting, and
the rights, preferences, privileges and restrictions relating to, the
Preferred Stock as follows:
1. Designation and Number of Shares. The Preferred Stock shall be
designated "Series C Convertible Preferred Stock" of a stated value of $1.00
each, and the number of shares constituting the Preferred Stock shall be
315,000 shares.
2. Dividend Rights. The Series C Preferred Stock shall have an annual
dividend of eight percent (8%) which dividends are cumulative.
3. Conversion Rights. Holders of the Series C Preferred Stock will
have the right, at their option, to convert each share of Series C Preferred
Stock into Common Stock of the Company, at $.15 per share of Common Stock,
provided thirty (30) days prior notice is received by the Company. During the
notice period, the Company has the right to pay off the amount being requested
for conversion into Common Stock. No fractional share or scrip representing a
fractional share will be issued upon conversion of the Series C Preferred
Stock. In the event of any reclassification, merger, consolidation or change
of shares of the Series C Preferred Stock and/or the Common Stock of the
Company, the Company shall make adjustments to the conversion ratio which
shall be nearly as equivalent to that stated above as may be practical.
The conversion price will be subject to adjustment in certain events,
including (i) the issuance of capital stock as a dividend or distribution on
Common Stock, (ii) subdivisions, combinations, reverse stock splits and
reclassification of the Common Stock, (iii) the fixing of a record date for
the issuance to all holders of Common Stock of rights or warrants entitling
them (for a period expiring within 45 days of such record date) to subscribe
for Common Stock and (iv) the fixing of a record date for the distribution to
all holders of Common Stock of evidence of indebtedness or assets (other than
cash dividends) of the Company or subscription rights or warrants (other than
those referred to above).
2
<PAGE>
Adjustment in the conversion price may be postponed until the
cumulative effect of any adjustments amount to 15% or more of the conversion
price.
4. Voting Rights. Unless the vote or consent of the holders of a
greater number of shares is required by law, the consent of the holders of at
least a majority of all of the Series C Preferred Stock at the time
outstanding shall be necessary to change, alter or revoke the rights and
preferences conferred upon the Series C Preferred Stock by the Certificate of
Incorporation or these resolutions or to adopt an amendment to the Certificate
of Incorporation materially adversely affecting the rights of the holders of
the Series C Preferred Stock. Except as provided above or by law, the holders
of Series C Preferred Stock shall not be entitled to any voting rights with
respect to their shares of Series C Preferred Stock.
5. Liquidation Rights. In the event of the liquidation, dissolution
or winding up of the Company, holders of the Series C Preferred Stock shall be
entitled to receive, after due payment or provision for payment of the debts
and other liabilities of the Company and subject to the liquidation preference
of the Series A Preferred Stock and the liquidation preference of the Series B
Preferred Stock, a liquidating distribution before any distribution may be
made to holders of Common Stock of the Company. The holders of the Series C
Preferred Stock outstanding shall be entitled to receive an amount equal to
$.15 per share whether or not such liquidation, dissolution or winding up is
voluntary or involuntary on the part of the Company.
6. Miscellaneous. The Series C Preferred Stock has no preemptive
rights. The Series C Preferred Stock and the Common Stock into which such
Series C Preferred Stock is convertible, when issued will be legally issued,
fully paid and nonassessable.
FURTHER RESOLVED, that the President or any Vice President and the
Secretary or any Assistant Secretary of this Company are each authorized to
execute, verify and file a certificate of determination of rights and
preferences in accordance with Delaware law and to take such further action,
make such additions or changes to such certificate and establish any necessary
or appropriate procedures and practices in order to effectuate the intent and
purposes of the foregoing resolutions.
3
<PAGE>
(iii) The authorized number of shares of Series C Preferred Stock of
the Company is 315,000, par value of $.01 each, none of which has been issued.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
November 18, 1997.
/s/ ANGUS M. HAY
------------------------------------
ANGUS M. HAY, President
STATE OF FLORIDA )
:ss
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this 18th day of
November, 1997 by ANGUS M. HAY, President of SEATON GROUP, INC., a Delaware
corporation. He is personally known to me or has produced ________ as
identification and did (did not) take an oath.
-----------------------------------
Notary Public
My Commission Expires:
4
CERTIFICATE OF ELIMINATION OF
SERIES A & C CONVERTIBLE PREFERRED STOCK OF
SEATON GROUP, INC.
The undersigned, Angus M. Hay, hereby certifies that:
I. He is the duly elected and acting President and sole
Director of Seaton Group, Inc., a Delaware corporation (the "Company").
II. The Certificate of Incorporation of the Company
authorizes 1,000,000 shares of preferred stock, par value $.001 per share, of
which 35,000 shares have been designated as Series A, of which none are issued
and outstanding, and 315,000 have been designated as Series C, of which none
are issued and outstanding.
III. The following is a true and correct copy of resolutions
duly adopted by the Board of Directors and majority of the Shareholders of the
Company by written consent dated November 14, 1997, which constituted all
requisite action on the part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, that the Board of Directors and a majority of the
Shareholders deem it to be in the best interest of the Company to eliminate
the authorized "A" and "C" Series of Preferred Stock.
NOW BE IT RESOLVED, that all authorized Series A and C preferred
stock shall be eliminated, and such shares of preferred stock shall after such
elimination have the status of authorized but unissued shares of undesignated
preferred stock.
BE IT FURTHER RESOLVED, that the proper officers of the Company be
and they hereby are duly authorized and empowered to authorize the necessary
documents to effectuate the foregoing resolutions and to certify the passage
thereof.
/s/ Angus M. Hay
--------------------------------------
Angus M. Hay, President and sole Director
Dated: November 18, 1997
--------------------------------
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
SEATON GROUP, INC.
Pursuant to Section 242 of the General Corporation Law of the State
of Delaware, the undersigned, Chief Executive Officer of Seaton Group, Inc., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify:
First: That pursuant to Written Consent of the Board of Directors and
a Majority of the Shareholders of said Corporation dated November 17, 1997,
the Directors and Shareholders approved the amendment to the Corporation's
Certificate of Incorporation as follows:
Article I of the Certificate of Incorporation of this Corporation is
amended to read in its entirety as follows:
ARTICLE I
NAME
The name of the company is "United Information Systems, Inc."
The foregoing amendment was adopted by the Board of Directors and a
Majority of the Shareholders of the Corporation pursuant to Written Consent of
the Board of Directors and Majority of the Shareholders of the Corporation
dated November 17, 1997 acting unanimously by Written Consent pursuant to
Section 228 of the General Corporation Law of the State of Delaware.
Therefore, the number of votes cast for the amendment to the Corporation's
Certificate of Incorporation was sufficient for approval.
IN WITNESS WHEREOF, the undersigned, being the Chief Executive
Officer of this Corporation, has executed these Articles of Amendment as of
November 17, 1997.
Seaton Group, Inc.
By: /s/ Saul Maia
---------------------------------
Saul Maia, President
BYLAWS
OF
THE OCEANIA GROUP,INC.
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the board of directors or the president or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meetings. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting, shall be held on the second Tuesday of
the fourth month after the end of the Corporation's fiscal year or at such
other time as fixed by the board of directors or the president. If this date
shall fall upon a legal holiday, then such meeting shall be held on the next
succeeding business day at the same hour. If no annual meeting is held in
accordance with the foregoing provisions, the board of directors shall cause
the meeting to be held as soon thereafter as convenient or a special meeting
may be held in lieu of the annual meeting, and any action taken at that
special meeting shall have the same effect as if it had been taken at the
annual meeting, and in such case all references in these Bylaws to the annual
meeting of the stockholders shall be deemed to refer to such special meeting.
1.3 Special Meetings. Special meetings of stockholders may be called
at any time by the chairman of the board of directors, by the board of
directors or by the holders of not less than one fourth (1/4) of all the
shares entitled to vote at the meeting. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the
meeting is called.
1.5 Voting List. The officer who has charge of the stock ledger of
the Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the
<PAGE>
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares
registered in the name of each stockholder.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding are entitled to vote
at the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be
held under these Bylaws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no
stockholder is present, by any officer entitled to preside at or to act as
secretary of such meeting. If the adjournment is for more than 30 days, or if
after the adjournment, a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At the adjourned meeting, the Corporation may
transact any business which might have been transacted at the original
meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise
provided in the Certificate of Incorporation. Each stockholder of record
entitled to vote at a meeting of stockholders, or to express consent or
dissent to corporate action in writing without a meeting, may vote or express
such consent or dissent in person or may authorize another person or persons
to vote or act for him by written proxy executed by the stockholder or his
authorized agent and delivered to the secretary of the Corporation. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. No proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a
matter (or if there are two or more classes of stock entitled to vote as
separate classes, then in the case of each such class, the holders of a
majority of the stock of that class present or represented and voting on a
matter) shall decide any matter to be voted upon by the stockholders at such
meeting, except when a different vote is required by express provision of law,
the Certificate of Incorporation or these Bylaws. Any election by stockholders
shall be determined by a plurality of the votes cast by the stockholders
entitled to vote at the election.
1.10 Action Without Meeting. Any action required or permitted to be
taken at any annual or special meeting of stockholders of the Corporation may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the
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action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote on such action
were present and voted. Prompt notice of the taking of corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the Corporation shall
be managed by or under the direction of a board of directors, who may exercise
all of the powers of the Corporation except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws. In the event of a vacancy on the
board of directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full board of directors until the vacancy
is filled.
2.2 Number; Election and Qualification. The number of directors which
shall constitute the whole board of directors shall be determined by
resolution of the stockholders or the board of directors, but in no event
shall be less than three. The number of directors may be decreased at any time
and from time to time either by the stockholders or by a majority of the
directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of
stockholders by such stockholders as have the right to vote in such election.
Directors need not be stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be
increased at any time and from time to time by the stockholders or by a
majority of the directors then in office.
2.4 Tenure. Each director shall hold office until the next annual
meeting and until such time as his successor is elected and qualified, or
until his earlier death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any
vacancy in the board of directors, however occurring, including a vacancy
resulting from an increase in the number of directors, may be filled by vote
of a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office, and a director
chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next annual meeting or stockholders and
until his successor is elected and qualified, or until his earlier death,
resignation or removal.
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2.6 Resignation. Any director may resign by delivering his written
resignation to the Corporation at its principal office or to the secretary.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
2.7 Regular Meetings. Regular meetings of the board of directors may
be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the board of
directors, provided that any director who is absent when such a determination
is made shall be given notice of the determination. A regular meeting of the
board of directors may be held without notice immediately after and at the
same place as the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the board of directors may
be held at any time and place, within or without the State of Delaware,
designated in a call by the chairman of the Board, president or two or more
directors, or by one director in the event that there is only a single
director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the secretary or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 48 hours
in advance of the meeting, (ii) by sending a telegram or telex, or delivering
written notice by hand to his last known business or home address at least 48
hours in advance of the meeting, or (iii) by mailing written notice to his
last known business or home address at least 72 hours in advance of the
meeting. A notice or waiver of notice of a meeting of the board of directors
need not specify the purpose of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members
of any committee designated by the directors may participate in a meeting of
the board of directors or such committee by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation by such means shall
constitute presence in person at such meeting.
2.11 Quorum. A majority of the whole board of directors shall
constitute a quorum at all meetings of the board of directors. In the event
one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each such director so
disqualified; provided, however, that in no case shall less than one-third
(1/3) of the whole board of directors constitute a quorum. In the absence of a
quorum at any such meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice other than announcement
at the meeting, until a quorum shall be present.
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2.12 Action at Meeting. At any meeting of the board of directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law,
the Certificate of Incorporation or these Bylaws.
2.13 Action by Consent. Any action required or permitted to be taken
at any meeting of the board of directors or of any committee of the board of
directors may be taken without a meeting, if all members of the board of
directors or committee, as the case may be, consent to the action in writing,
and the written consents are filed with the minutes of proceedings of the
board of directors or committee.
2.14 Removal. Any one or more or all of the directors may be removed,
with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except that (i) the directors
elected by the holders of a particular class or series of stock may be removed
without cause only by vote of the holders of a majority of the outstanding
shares of such class or series and (ii) in the case of a corporation having
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the
entire board of directors.
2.15 Committees. The board of directors may, by resolution passed by
a majority of the whole board of directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member of any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation (except
that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in subsection (a) of Section 151 of the General
Corporation Law of the State of Delaware, fix the designations and any of the
preferences of rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize
the increase or decrease of the shares of any series), adopting an
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agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the Bylaws of the
Corporation; and, unless the resolution, Bylaws or Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Each such committee shall keep
minutes and make such reports as the board of directors may from time to time
request. Except as the board of directors may otherwise determine, any
committee may make rules for the conduct of its business, but unless otherwise
provided by the directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these Bylaws for the
board of directors.
2.16 Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the board of directors may from time to time
determine. No such payment shall preclude any director from serving the
Corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - Officers
3.1 General. The officers of the Corporation shall consist of a
chairman of the board, a president, a secretary, a treasurer and such other
officers with such other titles as the board of directors may determine,
including a vice chairman of the board, and one or more vice presidents,
assistant treasurers, and assistant secretaries. The board of directors may
appoint such other officers with such other powers and duties as it may deem
appropriate.
3.2 Election. The chairman of the board, president, treasurer and
secretary shall be elected annually by the board of directors at its first
meeting following the annual meeting of stockholders. Other officers may be
appointed by the board of directors at such meeting or at any other meeting.
3.3 Qualification. No officer need by a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate
of Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in
the vote choosing or appointing him, or until his earlier death, resignation
or removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the Corporation at its principal office or to the
president or secretary. Such
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resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Any officer may be removed at any time, with or without cause, by
vote of a majority of the entire number of directors then in office.
Except as the board of directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an
officer for any period following his resignation or removal, or any right to
damages on account of such removal, whether his compensation be by the month
or by the year or otherwise, unless such compensation is expressly provided in
a duly authorized written agreement with the corporation.
3.6 Vacancies. The board of directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled for
such period as it may determine any offices other than those of president,
treasurer and secretary. Each such successor shall hold office for the
unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The
chairman of the board of directors shall be the chief executive officer of the
Corporation. Subject to the direction of the board of directors, the chairman
of the board of directors shall have general charge and supervision of the
business of the Corporation, and shall have full authority to take all lawful
actions necessary to implement corporate and business policy established by
the board of directors. In addition, the chairman of the board of directors
shall perform such duties and possess such other powers as are assigned to him
by the board of directors. Unless otherwise provided by the board of
directors, the chairman of the board of directors shall preside at all
meetings of the stockholders and the board of directors. The board of
directors may appoint a vice chairman of the board of directors who may, in
the absence or disability of the chairman, perform the duties and exercise and
powers of the chairman and perform such other duties and possess such other
powers as from time to time are authorized by the board of directors.
3.8 President. The president shall be the chief operating officer of
the Corporation and shall have charge and supervision of the day to day
business operations of the Corporation, subject to the authority of the
chairman of the board of directors and of the board of directors. Unless the
board of directors or chairman of the board of directors shall otherwise
direct, all executive officers of the Corporation shall report, directly or
through their immediate superior officers, to the president. The president
shall perform such other duties and shall have such other powers as the board
of directors may from time to time prescribe.
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3.9 Vice Presidents. The vice president shall perform such duties and
shall have such powers as the board of directors, chairman of the board of
directors or the president may from time to time prescribe. The vice president
shall discharge the duties of the president when the president, for any
reason, cannot discharge the duties of his office. He shall have such other
powers and perform such other duties as shall be prescribed by the directors.
Any assistant vice presidents shall perform such duties and possess
such powers as the board of directors, the chairman of the board of directors,
the president or the vice president may from time to time prescribe.
3.10 Secretary and Assistant Secretaries. The secretary shall perform
such duties and shall have such powers as the board of directors, chairman of
the board of directors or the president may from time to time prescribe. In
addition, the secretary shall perform such duties and have such powers as are
incident to the office of the secretary, including without limitation, the
duty and power to give notices of all meetings of stockholders and special
meetings of the board of directors, to attend all meetings of stockholders and
the board of directors and keep a record of the proceedings, to maintain a
stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal, if any,
and to affix and attest to the same on documents.
Any assistant secretary shall perform such duties and possess such
powers as the board of directors, the chairman of the board of directors, the
president or the secretary may from time to time prescribe. In the event of
the absence, inability or refusal to act of the secretary, the assistant
secretary (or if there be more than one, the assistant secretaries in the
order determined by the board of directors) shall perform the duties and
exercise the powers of the secretary.
In the absence of the secretary or any assistant secretary at any
meeting of stockholders or directors, the person presiding at the meeting
shall designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The treasurer shall perform
such duties and shall have such powers as from time to time be assigned to him
by the board of directors, the chairman of the board of directors or the
president. In addition, the treasurer shall perform such duties and have such
powers as are incident to the office of treasurer, including without
limitation the duty and power to keep and be responsible for all funds and
securities of the Corporation, to deposit funds of the Corporation in
depositories selected in accordance with these Bylaws, to disburse such funds
as ordered by the board of directors, the chairman of the board of directors,
the president or any vice president of the Corporation so authorized to act by
specific authorization of the board of directors or chairman of the Directors,
to make proper accounts of such funds, and to render, as
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required by the board of directors, chairman of the board of directors or
president, statements of all such transactions and of the financial condition
of the Corporation.
The assistant treasurers shall perform such duties and possess such
powers as the board of directors, the chairman of the board of directors, the
president or the treasurer may from time to time prescribe. In the event of
the absence, inability or refusal to act of the treasurer, the assistant
treasurer (or if there shall be more than one, the assistant treasurers in the
order determined by the board of directors) shall perform the duties and
exercise the powers of the treasurer.
3.12 Salaries. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the board of directors.
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
Corporation or the whole or any part of any unissued balance of the authorized
capital stock of the Corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by vote of the board of directors in such
manner, for such consideration and on such terms as the board of directors may
determine.
4.2 Certificates of Stock. Every holder of stock of the Corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the board of directors, certifying the number and class of shares
owned by him in the Corporation. Each such certificate shall be signed by, or
in the name of the Corporation by the chairman or vice chairman, if any, of
the board of directors, or the president or a vice president, and the
treasurer or an assistant treasurer, or the secretary or an assistant
secretary of the Corporation. Any or all of the signatures on the certificate
may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Bylaws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the Corporation shall have
conspicuously noted on the face or back of the certificate either the full
text of the restriction or a statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and
regulations adopted by the board of directors, and subject to applicable laws,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with
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such proof of authority or the authenticity of signature as the Corporation or
its transfer agent may reasonable require. Except as may be otherwise required
by law, by the Certificate of Incorporation or by these Bylaws, the
Corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment
of dividends and the right to vote with respect to such stock, regardless of
any transfer, pledge or other disposition of such stock until the shares have
been transferred on the books of the Corporation in accordance with the
requirements of these Bylaws.
4.4 Lost, Stolen or Destroyed Certificates. The Corporation may issue
a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen or destroyed, upon such terms and conditions
as the board of directors may prescribe, including the presentation of
reasonable evidence of such loss, theft or destruction and the giving such
indemnity as the board of directors may require for the protection of the
Corporation or any transfer agent or registrar.
4.5 Record Date. The board of directors may fix in advance a date as
a record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders or to express consent (or dissent)
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action. Such record date shall not be more than 60 days prior
to any other action to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day before the day on which notice is
given, or, if notice is waived, at the close of business on the day before the
day on which the meeting is held. The record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day
on which the first written consent is expressed. The record date for
determining stockholders for any other purpose shall be at the close of
business on the date on which the board of directors adopts the resolution
relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE 5 - Indemnification
The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as that Section may
be amended and supplemented from time to time, indemnify any director, officer
or trustee which it shall
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have power to indemnify under that Section against any expenses, liabilities
or other matters referred to in or covered by that Section. The
indemnification provided for in this Article (i) shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any
bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) shall continue as to a person
who has ceased to be a director, officer or trustee, and (iii) shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation's obligation to provide indemnification under this Article shall
be offset to the extent of any other source of indemnification or any
otherwise applicable insurance coverage under a policy maintained by the
Corporation or any other person.
ARTICLE 6 - General Provisions
6.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by the board of directors.
6.2 Corporate Seal. The corporate seal, if any, shall be in such form
as shall be approved by the board of directors.
6.3 Written Notice of Meetings. Whenever written notice is required
to be given to any person pursuant to law, the Certificate of Incorporation or
these Bylaws, it may be given to such person, either personally or by sending
a copy thereof by first class mail, or by telegram, charges prepaid, to his
address appearing on the books of the Corporation, or to his business or other
address supplied by him to the Corporation for the purpose of notice. If the
notice is sent by first class mail or by telegraph, it shall be deemed to have
been given to the person entitled thereto when deposited in the United States
mail or with a telegraph office for transmission to such person. Such notice
shall specify the place, day and hour of the meeting and, in case of a special
meeting of the shareholders, the general nature of the business to be
transacted.
6.4 Waiver of Notice. Whenever any notice whatsoever is required to
be given by law, by the Certificate of Incorporation or by these Bylaws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or
any other available method, whether before, at or after the time stated in
such waiver, or the appearance of such person or persons at such meeting in
person or by proxy, shall be deemed equivalent to such notice.
6.5 Voting of Securities. Except as the directors may otherwise
designate, the president or treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
Corporation (with or without power of substitution) at any meeting of
stockholders or shareholders of any other Corporation or organization, the
securities of which may be held by this Corporation.
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6.6 Evidence of Authority. A certificate by the secretary, or an
assistant secretary, or a temporary secretary, as to any action taken by the
stockholders, directors, a committee or any officer of representative of the
Corporation shall as to all persons who rely on the certificate in good faith
be conclusive evidence of such action.
6.7 Certificate of Incorporation. All references in these Bylaws to
the Certificate of Incorporation shall be deemed to refer to the certificate
of Incorporation of the Corporation, as amended and in effect from time to
time.
6.8 Transactions with Interested Parties. No contract or transaction
between the Corporation and one or more of the directors or officers, or
between the Corporation and any other corporation, partnership, association or
other organization in which one or more of the directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present
at or participates in the meeting of the board of directors or a committee of
the board of directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest as
to the contract or transaction are disclosed or are known to the
board of directors or the committee, and the board of directors or
committee in good faith authorized the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum;
(2) The material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by
the board of directors, a committee of the board of directors, or the
stockholders,
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
6.9 Severability. Any determination that any provision of these
Bylaws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these Bylaws.
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6.10 Pronouns. All pronouns used in these Bylaws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
ARTICLE 7 - Amendments
7.1 By the Board of Directors. These Bylaws may be altered, amended
or repealed or new Bylaws may be adopted by the affirmative vote of a majority
of the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
7.2 By the Stockholders. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the affirmative vote of the holders
of a majority of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alternation,
amendment, repeal or adoption of new Bylaws shall have been stated in the
notice of such special meeting.
ADOPTED THIS 7th day of July, 1991.
/s/ Darrell L. Scharmann
------------------------------------
President
ATTEST:
/s/ Larry Aoki
- ---------------------------------
Secretary
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CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned does hereby
certify that the undersigned is the secretary of the aforesaid Corporation,
duly organized and existing under and by virtue of the laws of the State of
Delaware; that the above and foregoing Bylaws of said Corporation were duly
and regularly adopted as such by the board of directors of said Corporation by
unanimous consent.
DATED this 7th day of July, 1991.
/s/ Larry Aoki
--------------------------------
Secretary
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AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 17th of
November, 1997, by and among SEATON GROUP, INC., a Delaware corporation
("Seaton"), HIREL HOLDINGS, INC., a Delaware corporation ("Hirel") and HIREL
MARKETING, INC., a Florida corporation ("Marketing").
W I T N E S S E T H:
WHEREAS, Seaton is engaged in negotiations to acquire all of the
issued and outstanding shares of UNITED INFORMATION SYSTEMS, INC., a Florida
corporation, and UIS INDUSTRIAL LTDA, a Brazilian corporation (collectively
hereinafter referred to as "UIS"); and
WHEREAS, Hirel, for itself and its wholly-owned subsidiary,
Marketing, had previously engaged in substantial negotiations with UIS in
connection with the proposed acquisition by Hirel, Marketing or their assigns
of UIS; and
WHEREAS, UIS has advised Hirel that in lieu of proceeding with the
proposed transaction with Hirel, UIS intends to enter into a transaction with,
and be acquired by, Seaton; and
WHEREAS, in exchange for the "Seaton Stock" (as hereinafter defined),
Hirel has agreed to release Seaton and UIS from and against any and all rights
or claims Hirel may have with respect to its proposed acquisition of UIS.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Recitals. The foregoing recitals are true and correct and are
incorporated herein by this reference.
2. Seaton Stock. Simultaneous with the closing by Seaton with its
proposed acquisition of UIS, and in exchange for the general release from
Hirel and Marketing pursuant to Section 3 hereof, Seaton shall pay to Hirel
the sum of $80,000, payable by issuance to Hirel of 200,000 shares of the
common stock of Seaton, par value .001 ("Seaton Stock"). The Seaton Stock
shall not be registered as of the date of transfer, but shall be subject to
registration as hereafter provided. Hirel is entitled to registration rights,
including piggyback registration rights, for the Seaton Stock when Seaton
proposes to file a registration statement under the Securities Act of 1933, as
amended, with respect to an offering for its own account of any class of
security (other than in connection with a merger pursuant to a Form S-3) or
for the account of Seaton's shareholders. Seaton will bear all expenses of
such registration. Seaton agrees to file a registration statement not later
than January 1, 1998. In addition to the foregoing, and in recognition of the
substantial legal fees and costs incurred by Hirel in connection with its
extended negotiations and efforts with UIS, Seaton shall also issue to Ruden,
McClosky, Smith, Schuster & Russell, P.A., counsel for Hirel, on behalf of and
for the benefit of Hirel, 10,000 shares of the common stock of Seaton, which is
agreed to to have a value
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of $4,000 (which shares, for all purposes hereunder, shall be included within
the definition of Seaton Stock).
3. Hirel and Marketing General Release and Cooperation. Hirel and
Marketing hereby acknowledge and agree that they have no rights with respect
to the acquisition of UIS. Hirel and Marketing hereby agree to provide to
Seaton all information they have acquired with respect to the assets and
operations of UIS. Hirel and Marketing hereby remise, release, acquit,
satisfy, and forever discharge Seaton and UIS of and from all, and all manner
of action and actions, cause and causes of action, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, claims and demands whatsoever, in law or in equity,
which Hirel or Marketing ever had, now has, or which any successor or assign
of Hirel or Marketing, hereafter can, shall or may have, against Seaton or
UIS, for, upon or by reason of any matter, cause or thing whatsoever, from the
beginning of the world to the day of these presents.
4. Seaton General Release. Seaton hereby remises, releases, acquits,
satisfies, and forever discharges Hirel and Marketing of and from all, and all
manner of action and actions, cause and causes of action, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses,
damages, judgments, executions, claims and demands whatsoever, in law or in
equity, which Seaton ever had, now has, or which any successor or assign of
Seaton, hereafter can, shall or may have, against Hirel or Marketing, for,
upon or by reason of any matter, cause or thing whatsoever, from the beginning
of the world to the day of these presents.
5. Notices. All notices, demands and other communications given
hereunder shall be in writing and shall be deemed to have been duly given (a)
upon hand delivery thereof, (b) upon telefax and written confirmation of
receipt, (c) upon receipt of any overnight deliveries, or (d) on the third
(3rd) business day after mailing United States registered or certified mail,
return receipt requested, postage prepaid, to the addresses set forth below
their respective signatures, or to such other address or to such other person
as any party shall designate to the others for such purposes in the manner
hereinabove set forth.
6. Further Assurances. The parties will execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
7. Successors and Assigns. This Agreement and any amendments hereto
shall be binding upon and, to the extent expressly permitted by the provisions
hereof, shall inure to the benefit of the parties, their respective successors
and assigns.
8. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida. This Agreement is
intended to be performed in accordance with, and only to the extent permitted
by, all applicable laws, ordinances, rules, and regulations of the
jurisdiction in which the Partnership does business.
2
<PAGE>
9. Entire Agreement. This Agreement sets forth all (and is intended
by all parties hereto to be an integration of all) of the promises,
agreements, conditions, understandings, warranties and representations among
the parties hereto with respect to the Partnership, the Partnership business
and the Partnership assets, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, express or
implied, except as set forth herein. In the event of any conflict between the
terms of this Agreement and the Shareholders Agreement, the terms of the
Shareholders Agreement shall govern.
10. Counterparts. This Agreement and any amendments hereto may be
executed in counterparts, each of which shall be deemed an original, and such
counterparts shall constitute but one and the same instrument.
11. Gender. Whenever the context requires, any pronoun used herein
may be deemed to mean the corresponding masculine, feminine or neuter in form
thereof and the singular form of any nouns and pronouns herein may be deemed
to mean the corresponding plural and vice versa as the case may require.
12. Arbitration. Any controversy, dispute, disagreement or claim
arising out of or related to any provision of this Agreement, or any alleged
breach of provisions relating thereto, other than with respect to any
provision hereunder for which injunctive or other equitable relief is
specifically provided for hereunder, shall be settled exclusively by binding
arbitration, which shall be conducted in Palm Beach County, Florida before a
panel of three arbitrators in accordance with the Commercial Arbitration Rules
of the American Arbitration Association as in effect from time to time, except
as modified by the agreement of all of the parties to this Agreement. The
arbitrator(s) shall use their best efforts to conduct the arbitration so that
a final result, determination, finding, judgment and/or award (the "Final
Determination") is made or rendered no later than ninety (90) business days
after the delivery of the notice of arbitration nor later than twenty (20)
days following conclusion of the arbitration hearing. The Final Determination
must be signed by the arbitrator. The Final Determination shall be final and
binding on all parties and there shall be no appeal from or reexamination of
the Final Determination, except for fraud, perjury, evident partiality or
misconduct by an arbitrator prejudicing the rights of any party and to correct
manifest clerical errors. The parties to such arbitration may enforce any
Final Determination in any state or federal court having jurisdiction over the
dispute.
13. Remedies. Each of the parties acknowledge and agree that in the
event that a party hereto shall violate any of the restrictions or fail to
perform any of the obligations hereunder, the other parties will be without
adequate remedy at law and will therefore be entitled to enforce such
restrictions or obligations by temporary or permanent injunctive or mandatory
relief obtained in an action or proceeding instituted in any court of
competent jurisdiction without the necessity of proving damages and without
prejudice to any other remedies it may have at law or in equity.
14. No Third Party Beneficiary. This Agreement is made solely and
specifically among and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person shall have any rights,
interest or claims hereunder or be entitled to any benefits under or on
account of this
3
<PAGE>
Agreement as a third party beneficiary or otherwise; provided, however, that
the provisions of Section 3 hereof shall inure to the benefit of UIS.
15. No Recordation. Neither this Agreement nor any memorandum thereof
shall be recorded amongst the public records of any governmental authority
without the prior written consent of all of the parties hereto.
16. Time of the Essence. Time is of the essence as to all time
periods set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have made and entered into
this Agreement as of the date first above written.
SEATON GROUP, INC.
By:
----------------------------------
Address: 1900 Corporate Boulevard
Suite 305 West
Boca Raton, Florida 33431
HIREL HOLDINGS, INC.
By:
----------------------------------
Address: 650 S.W. 16th Terrace
Pompano Beach, FL 33069
Attention: President
HIREL MARKETING, INC.
By:
----------------------------------
Address: 650 S.W. 16th Terrace
Pompano Beach, FL 33069
Attention: President
4
AMENDMENT TO AGREEMENT
AMENDMENT TO AGREEMENT (this "Amendment") is made and entered into
this __ day of April, 1998 by and among UNITED INFORMATION SYSTEMS, INC., a
Delaware corporation, f/k/a Seaton Group, Inc. ("UIS"), HIREL HOLDINGS, INC.,
a Florida corporation ("Hirel"), and HIREL MARKETING, INC., a Florida
corporation ("Marketing").
W I T N E S S E T H:
WHEREAS, UIS, Hirel and Marketing entered into that certain Agreement
dated November 17, 1997 (the "Agreement");
WHEREAS, pursuant to Section 2 of the Agreement, Hirel was issued
200,000 shares of common stock, $.001 par value per share, of UIS (the
"Shares"); and
WHEREAS, the parties desire to amend the terms of the Agreement with
respect to the circumstances under which the Shares may be transferred by
Hirel.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, act intending to be legally bound, hereby
agree as follows:
1. Incorporation of Recitals. The foregoing recitals are true and
correct and are hereby incorporated herein by this reference.
2. Amendment. Section 2 of the Agreement is hereby amended and
restated as follows:
Seaton Stock. Simultaneous with the closing by Seaton of its
proposed acquisition of UIS, and in consideration of the receipt of
the general release of Seaton by Hirel and Market as provided
pursuant to Section 3 hereof, Seaton shall pay to Hirel the sum of
$80,000, payable by the issuance to Hirel of 200,000 shares (the
"Seaton Stock") of the common stock, par value $.001 per share, of
Seaton (the "Common Stock"). The Seaton Stock may not be sold,
transferred, assigned, pledged, hypothecated, encumbered or
otherwise, directly or indirectly, disposed of for a period of
twenty-four months following the date hereof without the prior
written consent of a majority of the members of the Oversight
Committee of 2M Capital Corp. (the "Committee"); provided, however,
that 100,000 shares of the Seaton Stock may be transferred without
the prior written consent of the Committee upon the effectiveness of
a registration statement filed by UIS under the Securities Act of
1933, as amended (the "Securities Act"), as hereinafter contemplated
by this Section 2. The Seaton Stock shall not be
<PAGE>
registered as of the date of transfer to Hirel, but shall be
registered under the Securities Act as hereinafter provided. Hirel
is entitled to registration rights, including piggyback registration
rights, for the Seaton Stock with respect to any registration
statement filed by Seaton under the Securities Act with respect to
an offering for its own account of any class of security (other than
securities issued in connection with a merger registered on a Form
S-4) or for the account of Seaton's shareholders. Seaton will bear
all expenses of such registration. Seaton agrees to file a
registration statement registering the Seaton Stock not later than
April 30, 1998. In addition to the foregoing, and in recognition of
the substantial legal fees and costs incurred by Hirel in connection
with its extended negotiations and efforts with UIS, Seaton shall
also issue to Ruden, McClosky, Smith, Schuster & Russell, P.A.,
counsel for Hirel, on behalf of and for the benefit of Hirel, and as
additional consideration for the general release given by Hirel
pursuant to this Agreement, 10,000 shares of the Common Stock, which
is agreed to have a value of $4,000 and which shall also enjoy
registration rights granted with respect to the Seaton Stock
hereunder, including, but not limited to, the right to include its
shares of Common Stock in the registration statement to be filed by
Seaton under the Securities Act not later than April 30, 1998 as
contemplated hereby.
3. Controlling Terms. In the event of any inconsistencies between
the Agreement and this Amendment, the terms of this Amendment shall control.
4. Ratification. As amended hereby, the Agreement is hereby ratified
and confirmed.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first written above.
UNITED INFORMATION SERVICES, INC.
(f/k/a Seaton Group, Inc.), a Delaware corporation
By: /s/ William Cuervo
-------------------------------------------
Name: William Cuervo
------------------------------------
Title: C.F.O.
------------------------------------
HIREL HOLDINGS, INC.,
a Florida corporation
By: /s/ Vince Monteleone
-------------------------------------------
Name: Vince Monteleone
------------------------------------
Title: Chairman
------------------------------------
3
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 17th day
of November, 1997, by and between SEATON GROUP, INC., a Delaware corporation
("Seaton"), HIREL HOLDINGS, INC., a Delaware corporation ("Hirel") and VINCENT
MONTELIONE ("Montelione").
W I T N E S S E T H:
WHEREAS, Seaton is engaged in negotiations to acquire all of the
issued and outstanding shares of UNITED INFORMATION SYSTEMS, INC., a Florida
corporation, and UIS INDUSTRIAL LTDA, a Brazilian corporation (collectively
hereinafter referred to as "UIS"); and
WHEREAS, UIS is in the business of assembling, manufacturing,
distributing and selling Windows-based computer parts, components and
accessories, with sales of completed goods primarily to the Latin American
market ("UIS Business"), and
WHEREAS, Hirel, through the "Mac-in-Stock" division of its
wholly-owned subsidiary, Hirel Marketing, Inc., is engaged in the sale of
personal computers and accessories manufactured by or for use with personal
computers manufactured by Apple Computer Company ("Mac-in- Stock Business");
and
WHEREAS, Montelione, the president of Hirel, has extensive experience
in the structuring and operation of businesses engaged in computer sales and
computer sales related activities; and
WHEREAS, UIS desires to retain 2M Capital Corp., a Florida
corporation ("2M") in which Montelione is a shareholder, in order for 2M, by
and through its employees (including Montelione) to provide certain consulting
services to UIS; and
WHEREAS, Montelione and Hirel entered into that certain Employment
Agreement dated May 2, 1996 ("Employment Agreement"), which Employment
Agreement provided certain restrictions on the ability of Montelione, directly
or indirectly through a corporation in which he may be a shareholder, from
providing consulting services to third parties; and
WHEREAS, in order to induce Hirel to amend the Employment Agreement
with Montelione so as to enable Seaton to enter into a Consulting Agreement
with 2M, Seaton has agreed to transfer the "Seaton Stock" (as hereinafter
defined) to Hirel.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Recitals. The foregoing recitals are true and correct and are
incorporated herein by this reference.
1
<PAGE>
2. Seaton Stock. Simultaneous with the closing by Seaton with its
proposed acquisition of UIS, and in exchange for the agreement by Hirel to
modify its Employment Agreement with Montelione as provided pursuant to
Section 3 hereof, Seaton shall pay to Hirel the sum of $80,000, payable by
issuance to Hirel of 200,000 shares of the common stock of Seaton, par value
.001 ("Seaton Stock"). One hundred thousand (100,000) shares of the Seaton
Stock may not be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise directly or indirectly disposed of for a period of
twenty-four months following the date hereof without the prior written consent
of a majority of the members of the Oversight Committee of 2M Capital Corp.
(the "Restricted Shares"), while the remaining one hundred thousand (100,000)
shares of the Seaton Stock shall not be subject to such restrictions on
transfer (the "Unrestricted Shares"). The Restricted Shares may not be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise directly
or indirectly disposed of for a period of twenty-four months following the
date hereof without the prior written consent of a majority of the members of
the Oversight Committee of 2M Capital Corp. The Seaton Stock shall not be
registered as of the date of transfer, but shall be subject to registration as
hereafter provided. Hirel is entitled to registration rights, including
piggyback registration rights, for the Seaton Stock when Seaton proposes to
file a registration statement under the Securities Act of 1933, as amended,
with respect to an offering for its own account of any class of security
(other than in connection with a merger pursuant to a Form S-3) or for the
account of Seaton's shareholders. Seaton will bear all expenses of such
registration. Seaton agrees to file a registration statement not later than
January 1, 1998.
3. Consulting Agreement. In consideration of the Seaton Stock, Hirel
and Montelione hereby agree to terminate the Employment Agreement, and in lieu
thereof to enter into the Consulting Agreement in the form attached hereto and
made a part hereof as Exhibit A ("Consulting Agreement"). The Consulting
Agreement shall be entered into at the Seaton Closing, and the Employment
Agreement shall remain in full force and effect until the Seaton Closing. In
the event that the Seaton Closing shall not occur on or before December 31,
1997, this Agreement shall be null and void and of no further force and
effect, the Employment Agreement shall continue in full force and effect, and
the Seaton Stock shall not be transferred to Hirel.
4. Release of Covenants. Hirel hereby agrees that the operations of
its Mac-in-Stock division consist solely of the sale of personal computers and
accessories manufactured by Apple Computer Company ("Apple"), and that it is
not engaged in the manufacture, sale or distribution of personal computers in
Latin America, other than those manufactured by Apple. Accordingly, Hirel
hereby agrees that it does not have, and shall not have, any cause or causes
of action against Seaton, UIS or Montelione by virtue of any covenants against
competition that may have previously been executed by Montelione with Hirel,
or pursuant to the Consulting Agreement. Hirel further acknowledges and agrees
that Montelione does not have any "confidential information," as such term is
defined under the Employment Agreement, that does or could relate to the UIS
business, and accordingly Hirel agrees that it has no cause or causes of
action that may be brought against Seaton or Montelione as a result of the
services to be provided by 2M to Seaton under the 2M Consulting Agreement.
5. Indemnification. Hirel hereby agrees to defend, indemnify and hold
Seaton harmless from and against any and all liability, expense or damage
incurred or sustained by reason of any
2
<PAGE>
claims against Seaton arising out of or resulting from the contractual
relationship between Hirel and Montelione, including, but not limited to, the
release by Hirel from the Employment Agreement.
6. Notices. All notices, demands and other communications given
hereunder shall be in writing and shall be deemed to have been duly given (a)
upon hand delivery thereof, (b) upon telefax and written confirmation of
receipt, (c) upon receipt of any overnight deliveries, or (d) on the third
(3rd) business day after mailing United States registered or certified mail,
return receipt requested, postage prepaid, to the addresses set forth below
their respective signatures, or to such other address or to such other person
as any party shall designate to the others for such purposes in the manner
hereinabove set forth.
7. Further Assurances. The parties will execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
8. Successors and Assigns. This Agreement and any amendments hereto
shall be binding upon and, to the extent expressly permitted by the provisions
hereof, shall inure to the benefit of the parties, their respective successors
and assigns.
9. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida. This Agreement is
intended to be performed in accordance with, and only to the extent permitted
by, all applicable laws, ordinances, rules, and regulations of the
jurisdiction in which the Partnership does business.
10. Entire Agreement. This Agreement sets forth all (and is intended
by all parties hereto to be an integration of all) of the promises,
agreements, conditions, understandings, warranties and representations among
the parties hereto with respect to the Partnership, the Partnership business
and the Partnership assets, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, express or
implied, except as set forth herein. In the event of any conflict between the
terms of this Agreement and the Shareholders Agreement, the terms of the
Shareholders Agreement shall govern.
11. Counterparts. This Agreement and any amendments hereto may be
executed in counterparts, each of which shall be deemed an original, and such
counterparts shall constitute but one and the same instrument.
12. Gender. Whenever the context requires, any pronoun used herein
may be deemed to mean the corresponding masculine, feminine or neuter in form
thereof and the singular form of any nouns and pronouns herein may be deemed
to mean the corresponding plural and vice versa as the case may require.
13. Arbitration. Any controversy, dispute, disagreement or claim
arising out of or related to any provision of this Agreement, or any alleged
breach of provisions relating thereto, other than with respect to any
provision hereunder for which injunctive or other equitable relief is
specifically provided for hereunder, shall be settled exclusively by binding
arbitration, which shall be conducted
3
<PAGE>
in Palm Beach County, Florida before a panel of three arbitrators in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time, except as modified by the
agreement of all of the parties to this Agreement. The arbitrator(s) shall use
their best efforts to conduct the arbitration so that a final result,
determination, finding, judgment and/or award (the "Final Determination") is
made or rendered no later than ninety (90) business days after the delivery of
the notice of arbitration nor later than twenty (20) days following conclusion
of the arbitration hearing. The Final Determination must be signed by the
arbitrator. The Final Determination shall be final and binding on all parties
and there shall be no appeal from or reexamination of the Final Determination,
except for fraud, perjury, evident partiality or misconduct by an arbitrator
prejudicing the rights of any party and to correct manifest clerical errors.
The parties to such arbitration may enforce any Final Determination in any
state or federal court having jurisdiction over the dispute.
14. Remedies. Each of the parties acknowledge and agree that in the
event that a party hereto shall violate any of the restrictions or fail to
perform any of the obligations hereunder, the other parties will be without
adequate remedy at law and will therefore be entitled to enforce such
restrictions or obligations by temporary or permanent injunctive or mandatory
relief obtained in an action or proceeding instituted in any court of
competent jurisdiction without the necessity of proving damages and without
prejudice to any other remedies it may have at law or in equity.
15. No Third Party Beneficiary. This Agreement is made solely and
specifically among and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person shall have any rights,
interest or claims hereunder or be entitled to any benefits under or on
account of this Agreement as a third party beneficiary or otherwise; provided,
however, that the provisions of Section 3 hereof shall inure to the benefit of
UIS.
16. No Recordation. Neither this Agreement nor any memorandum thereof
shall be recorded amongst the public records of any governmental authority
without the prior written consent of all of the parties hereto.
17. Time of the Essence. Time is of the essence as to all time
periods set forth in this Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and entered into
this Agreement as of the date first above written.
SEATON GROUP, INC.
By:
___________________________________
Address: 1900 Corporate Boulevard
Suite 305 West
Boca Raton, FL 33431
HIREL HOLDINGS, INC.
By:
___________________________________
Address: 650 S.W. 16th Terrace
Pompano Beach, FL 33069
Attention: President
/s/ VINCENT MONTELIONE
---------------------------------------
VINCENT MONTELIONE, individually
Address:
5
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into this
17th day of November, 1997, by and between SEATON GROUP, INC., a Delaware
corporation ("Seaton") and 2M CAPITAL CORP., a Florida corporation
("Consultant").
W I T N E S S E T H:
WHEREAS, Seaton, by and through its wholly-owned subsidiaries UNITED
INFORMATION SYSTEMS, INC., a Florida corporation, and UIS INDUSTRIAL LTDA, a
Brazilian corporation (collectively hereinafter referred to as "UIS"), is in
the business of assembling, manufacturing, distributing and selling computer
parts, components and accessories in Brazil ("Business"); and
WHEREAS, subject to the terms and conditions hereinafter set forth,
Seaton desires to retain Consultant and Consultant desires to be retained by
Seaton.
WHEREAS, Consultant has experience in the Business, in the management
of companies whose securities are traded in the United States markets and in
strategic planning and investor relations programs.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Seaton and Consultant hereby agree as
follows:
1. Recitals. The foregoing recitals are true and correct and are
incorporated herein by this reference.
2. Employment. In exchange for the Consultant Compensation (as
hereinafter defined) and subject to the other terms and conditions hereinafter
set forth, Seaton hereby retains Consultant to perform the Consultant Duties
(as hereinafter defined) and those duties provided by Consultant through the
Oversight Committee pursuant to sections 3(b) and 3(c) and Consultant hereby
agrees to provide such services. The parties hereby agree that Consultant
shall be treated for all purposes as an independent contractor and not as an
employee of Seaton, and Consultant agrees to report the Consultant
Compensation in his income and be solely responsible for payment of all
withholding and social security taxes thereon.
3. Consultant Duties; Indemnification.
(a) The "Consultant Duties" shall include reasonably assisting Seaton
in (i) implementing and monitoring an investor relations program with
investors, investment advisors, market makers and brokers, including but not
limited to meeting with the foregoing and arranging for principal
<PAGE>
officers of Seaton to meet with the foregoing (the "Investor Relations Duties");
and (ii) implementing and monitoring a strategic planning process for Seaton.
(b) In addition to the Consultant Duties set forth above, Seaton
hereby agrees that Consultant, by and through a committee comprised of Vincent
Montelione, Monte Frenkel and Milton Barbarosh ("Oversight Committee"), shall
have the right and obligation to consider and authorize, in its discretion,
"Release Requests" (as hereinafter defined). Certain shareholders of Seaton
("Seaton Shareholders") have shares of stock of Seaton ("Seaton Shares") that
are subject to contractual restrictions against the sale, transfer,
assignment, pledge, hypothecation, encumbrance or other direct or indirect
disposition of shares of stock of Seaton ("Restrictions"). All requests by the
Seaton Shareholders for a release of such Restrictions with respect to any or
all of such Seaton Shares shall be made in writing to the Oversight Committee
at the address of Consultant, with a copy of such request to the President of
Seaton ("Release Request"). The Oversight Committee shall consider all Release
Requests, taking into account such factors as the Oversight Committee shall
deem appropriate, which factors may include, but shall not be limited to,
communications with investment bankers, market makers, and executive officers
of Seaton. The Oversight Committee may grant or deny Release Requests, in
whole or in part, in its sole discretion. All decisions of the Oversight
Committee shall be by majority vote. The Oversight Committee shall respond to
a Release Request within 14 days of the receipt of a Release Request.
Consultant may change the number and members of the Oversight Committee with
the prior consent of Seaton, which consent shall not be unreasonably withheld.
Consultant may adopt such rules not inconsistent with the provisions of this
paragraph for the administration of its obligations hereunder.
(c) Seaton acknowledges and agrees that the ability of Consultant to
perform the Investor Relations Duties is, in part, dependent upon a stable
supply of the securities of Seaton. Seaton further acknowledges that the
issuance and/or registration of additional securities by Seaton in the future
may adversely impact upon the market for the securities of Seaton, thus
impairing the ability of Consultant to perform the Investor Relations Duties.
Accordingly, Seaton hereby agrees that during the term of this Agreement,
except with the prior written consent of the Oversight Committee, Seaton shall
not, directly or indirectly, offer, sell, issue or transfer any shares of its
capital stock, or any security exchangeable or exercisable for, or convertible
into, shares of the capital stock of Seaton.
(d) Seaton hereby agrees to defend, indemnify and hold harmless
Consultant from and against any and all liability, expense or damage incurred
or sustained by reason of any act or omission in the conduct of the business
of Seaton, including but not limited to in connection with Release Requests
and the administration of the Oversight Committee, whether prior to or
subsequent to the date hereof, including attorneys' fees and costs; provided,
however, Seaton shall not indemnify Consultant or hold him harmless with
respect to any of the foregoing incurred in connection with the intentional
fraud, willful and wanton misconduct or gross negligence of Consultant.
(e) Seaton hereby acknowledges and agrees that the rights and
obligations of the Oversight Committee, at the Oversight Committee's option,
may be transferred to any underwriter
2
<PAGE>
that underwrites and sells an offering of the securities of Seaton for an amount
in excess of $10,000,000.
4. Term. The term of this Agreement shall be two (2) years, beginning
on the date set forth above ("Term").
5. Consultant Compensation. As compensation in full for Consultant's
performance of its obligations hereunder ("Consultant Compensation"), Seaton
agrees to pay Consultant commencing on the day of Closing and on the same day
of the month thereafter the following: (a) $20,833 for each of the first four
(4) months of the Term; and (b) $500 for each of the remaining twenty (20)
months of the Term.
6. Options. To facilitate the performance of Consultant hereunder,
and as an inducement to retain executive and other employees and consultants,
Consultant shall be granted options ("Options") to purchase 500,000 shares of
Common Stock at $2.22 per share. The options are transferable, exercisable for
a period of two (2) years and can be cancelled by the Chairman of the Company
at any time. In addition, the holders of the Options are entitled to
registration rights, including piggyback registration rights, for shares of
Common Stock issuable upon exercise of the Options (whether or not the the
Options have been exercised at the time the Company files a registration
statement), as adjusted, such rights to be available when the Company files a
registration statement under the Securities Act of 1933, as amended ("33'
Act"), with respect to an offering for its own account of any class of
security (other than in connection with a merger pursuant to a Form S-3) or
for the account of the Company's shareholders. The Company shall file a
registration statement for the shares of Common Stock issuable upon exercise
of the Options within sixty (30) days after the date of the acquisition by the
Company of UIS and UIS Brazil and will use its best efforts to cause such
registration statement to become effective as soon as reasonably possible. The
Company shall in each case give written notice of the proposed filing to the
holder of the Options or shares issued upon exercise of the Options at least
thirty (30) days prior to the anticipated filing date, and such notice shall
offer such holder the opportunity to register such number of shares subject or
issued upon exercise of the Options as such holder may request. The Company
will use its best efforts to cause the underwriter, if any, to permit the
holder of the Options to include such shares of Common Stock on the same terms
and conditions as other shares of Common Stock the Company included therein.
Notwithstanding the foregoing, if the underwriter or underwriters of such
offering delivers a written opinion to the Company that the total number of
securities which such holders the Company or other persons and entities
entitled to include in such offering exceeds the number which can reasonably
be sold in such offering, then the securities to be offered for the account of
the holders of the shares of Common Stock issuable upon exercise of the
Options will be reduced pro rata to the extent necessary to reduce the total
number of securities to be included in such offering to the number recommended
by such underwriter. The Company will bear all expenses of such registration,
except that the holder of the Options shall bear the fees and expenses of any
counsel or other representative attributable to the shares of Common Stock
issued upon exercise of the Options (determined on a pro rata basis).
3
<PAGE>
7. Confidential Information and Competition.
(a) Confidential Information. Consultant hereby acknowledges that, in
conjunction with his performance of the Consultant Duties, it may be making
use of, acquiring and adding to confidential information of a special and
unique nature and value affecting and relating to Seaton and its operations,
including, but not limited to: Seaton's Business, the identity of Seaton's
clients, the prices being charged by Seaton to such clients, Seaton's
contracts, business records and other records, Seaton's and the Seaton's
clients' trade secrets, customer lists, billing forms, methods, and
procedures, trade names, manuals, photographs, samples, literature, sales aids
of every kind, software, advertising methods and strategies, information
regarding advertising locations, style and wording of all advertising, plans
for expansion or marketing strategies, and other similar information relating
to Seaton, Seaton's clients and Seaton's Business (all the foregoing being
hereinafter referred to collectively as "Confidential Information").
Consultant further recognizes and acknowledges that all Confidential
Information is the exclusive property of Seaton, is material and confidential,
and greatly affects the goodwill and the effective and successful conduct of
the business of Seaton. Accordingly, Consultant hereby covenants and agrees
that it will use the Confidential Information only for the benefit of Seaton
and shall not at any time, directly or indirectly, either during the term of
this Agreement or afterwards, divulge, reveal or communicate any Confidential
Information to any person, firm, corporation or entity whatsoever, or use any
Confidential Information for his own benefit or for the benefit of others,
regardless of whether Consultant may have had knowledge, or that others may
have had knowledge, of the Confidential Information prior to the execution of
this Agreement. Upon the Seaton's demand, Consultant shall promptly deliver to
Seaton all materials and media in Consultant's possession that contain
Confidential Information.
(b) Competition. In view of the Confidential Information to be
retained by or disclosed to Consultant as hereinabove set forth and the
irreparable injury which would be caused Seaton if the Consultant were to
compete with Seaton, and as a material consideration and inducement to Seaton
to enter into this Agreement, Consultant hereby covenants and agrees that:
(i) For a period of one (1) year following the end of the
Term, it shall not, in any location, directly or
indirectly, operate, organize, maintain, establish,
manage, own, participate in, or in any manner
whatsoever, individually or through any corporation,
firm or organization of which it shall be affiliated
in any manner whatsoever, have any interest in,
whether as owner, investor, operator, partner,
stockholder, director, trustee, officer, mortgagee,
employee, principal, agent, consultant or otherwise,
any other business or venture which engages in
Seaton's Business, or is otherwise in competition
with Seaton or any assigns of Seaton, unless such
activity shall have been previously agreed to in
writing by Seaton and/or its successors and assigns.
Consultant acknowledges that Seaton's Business is
advertised and conducted throughout the United
States, and accordingly that this covenant against
competition shall extend to the entire United States.
4
<PAGE>
(ii) For a period of one (1) year following the end of the
Term, it shall not, directly or indirectly, divert
business from Seaton or its successors or assigns, or
solicit business from, divert the business of, or
attempt to convert to other methods of using the same
or similar services as are provided by Seaton, any
client or account of Seaton.
(iii) For a period of one (1) year following the end of
the Term, it shall not, directly or indirectly,
solicit for employment, employ or otherwise engage
the services of, any employees or consultants of
Seaton or its successors or assigns.
Notwithstanding the foregoing provisions of this Section 7(b), in the event
that Seaton shall fail for any reason, after thirty days written notice by
Consultant, to pay the Consultant Compensation when due (either directly to
Consultant or into the registry of the court as part of any court proceeding),
or shall otherwise be in default under this Agreement, then the restraints
upon competition contained herein shall be of no further force and effect.
(c) Survival. The terms of this Section 7 shall survive the
termination of this Agreement.
8. Confidentiality. The parties and Milton Barbarosh agree that they
shall keep the terms of this Agreement confidential and shall not disclose
same to third parties, except that either party may disclose same as necessary
to secure legal or tax advice to prevent prosecution of an action or charge in
contravention hereof or as otherwise required by law.
9. Miscellaneous.
(a) Notices. Any notice, payment, or communication required or
permitted to be given by any provision of this Agreement shall be deemed
delivered, whether actually received or not, when deposited in a United States
Postal Service Depository, postage prepaid, registered or certified return
receipt requested, when sent by overnight courier, or by facsimile, if such
facsimile is followed by a hard copy of the facsimilied communication,
addressed to the parties as set forth below, or such other address as shall be
specified by written notice delivered to the other party hereto. Any such
notice shall be deemed to be delivered, given and received as of the date so
delivered.
To Seaton: 1900 Corporate Boulevard
Suite 305 West
Boca Raton, Florida 33431
Attention: President
5
<PAGE>
To Consultant: 231 - 174th Street
Suite 1901
Miami Beach, FL 33160
Attention: President
The time period in which a response to any such notice, demand or request must
be given shall commence to run from the date of receipt on the return receipt
of the notice, demand or request by the addressee thereof or the date of
actual receipt in the case of delivery by other means. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to be receipt of the notice, demand
or request when sent.
(b) Entire Agreement. This Agreement sets forth all the
promises, covenants, agreements, conditions and understandings between the
parties hereto as to Consultant's employment with Seaton, and supersedes all
prior and contemporaneous agreements, understandings, inducements or
conditions as to Consultant's employment with Seaton, expressed or implied,
oral or written, except as herein contained.
(c) Binding Effect; No Assignment. This Agreement shall be
binding upon the parties hereto, their heirs, administrators, successors and
assigns. Except as otherwise provided in Section 3(e) hereof, any assignment
or delegation of duties in violation of this provision shall be null and void.
(d) Amendment. The parties hereby irrevocably agree that no
attempted amendment, modification, termination, discharge or change
(collectively, "Amendment") of this Agreement shall be valid and effective,
unless the parties shall unanimously agree in writing to such Amendment.
(e) No Waiver. No waiver of any provision of this Agreement
shall be effective unless it is in writing and signed by the party against
whom it is asserted, and any such written waiver shall only be applicable to
the specific instance to which it relates and shall not be deemed to be a
continuing or future waiver.
(f) Attorneys' Fees. If any party hereto is required to
engage in litigation against any other party hereto, either as plaintiff or as
defendant, in order to enforce or defend any of its or his rights under this
Agreement, and such litigation results in a final judgment in favor of such
party ("Prevailing Party"), then the party or parties against whom said final
judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred by the Prevailing Party in so
enforcing or defending its or his rights hereunder, including, but not limited
to, all attorneys' fees and court costs and other expenses incurred throughout
all negotiations, trials or appeals undertaken in order to enforce the
Prevailing Party's rights hereunder.
6
<PAGE>
(g) Headings. The article and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of the Agreement.
(h) Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Florida and any proceeding arising
between the parties in any manner pertaining or related to this Agreement
shall, to the extent permitted by law, be held in Broward County, Florida.
(i) Further Assurances. The parties hereto will execute and
deliver such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
(j) Provisions Severable. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations of the jurisdiction in
which the parties do business. If any provision of this Agreement, or the
application thereof to any person or circumstance shall, for any reason or to
any extent, be invalid or unenforceable, the remainder of this Agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, but rather shall be enforced to the greatest extent
permitted by law.
(k) Counterparts. This Agreement and any amendments may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together will constitute one and the same
instrument.
THIS SPACE INTENTIONALLY BLANK
7
<PAGE>
IN WITNESS WHEREOF, Seaton and Consultant have executed this
Agreement as of the date first above written.
Seaton:
SEATON GROUP, INC., a Delaware
corporation
By:
------------------------------------
CONSULTANT:
2M CAPITAL CORP., a Florida corporation
By:
------------------------------------
JOINDER
The undersigned, as all of the shareholders of Consultant, hereby
join in this Agreement for the purpose of agreeing to be bound by the
provisions of Section 6 hereof; provided that this joinder shall not impose or
create any other obligation by the undersigned in favor of Seaton.
/s/ VINCENT MONTELIONE
--------------------------------------------
VINCENT MONTELIONE
/s/ MONTE FRENKEL
--------------------------------------------
MONTE FRENKEL
JOINDER
The undersigned, hereby joins in this Agreement for the purpose of
agreeing to be bound by the provisions of Sections 3(b), 3(c) and 6 hereof;
provided that this joinder shall not impose or create any other obligation by
the undersigned in favor of Seaton.
/s/ MILTON BARBAROSH
--------------------------------------------
MILTON BARBAROSH
8
AMENDMENT TO CONSULTING AGREEMENT
AMENDMENT TO CONSULTING AGREEMENT (this "Amendment") is made and
entered into this _____ day of April, 1998, by and between UNITED INFORMATION
SYSTEMS, INC., a Delaware corporation f/k/a "SEATON GROUP, INC." ("UIS"), and
2M CAPITAL CORP., a Florida corporation ("Consultant").
W I T N E S S E T H:
WHEREAS, UIS and Consultant entered into that certain Consulting
Agreement dated November 17, 1997 (the "Agreement");
WHEREAS, pursuant to Section 6 of the Agreement, Consultant was
granted certain options to purchase shares of common stock of UIS ("Common
Stock"); and
WHEREAS, the parties desire to amend the Agreement with respect to
certain terms of the "Options") (as such term is defined in the Agreement).
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, each intending to be legally bound, hereby
agree as follows:
1. Incorporation of Recitals. The foregoing recitals are true and
correct and hereby incorporated herein by this reference.
2. Amendment. Section 6 of the Agreement is hereby amended in its
entirety to read as follows:
6. Options. To facilitate the performance of Consultant
hereunder, and as an inducement to retain executive and
other employees and consultants, Consultant is hereby
granted options ("Options") to purchase 500,000 shares of
Common Stock at $2.22 per share. The options are
transferable and exercisable for a period of two (2) years
from the date hereof; provided, however, that in no event
may any Options be exercised until the first day of the
month following the effective date of the "Registration
Statement" (as hereinafter defined), nor may Options for
more than 41,666 shares of Common Stock in aggregate be
exercised in any one month. Notwithstanding the foregoing,
in the event that the Registration Statement is not declared
effective on or before October 1, 1998, then in such event,
the Options shall become exercisable in an amount of up to
41,666 shares per month
<PAGE>
commencing on October 1, 1998 through the date of expiration.
Shares of Common Stock issued or issuable upon exercise of
Options ("Option Shares") are entitled to registration rights,
including piggyback registration rights, and may be included
in a registration statement filed by the Company under the
Securities Act of 1933, as amended, with respect to an
offering for its own account of any class of security (other
than the registration of shares in connection with a merger
pursuant to a Form S-4) or for the account of the Company's
shareholders ("Registration Statement"). The Company shall
file a registration statement registering the Option Shares
not later than April 30, 1998 and will use its best efforts
to cause such registration statement to become effective as
soon as reasonably possible. The Company shall in each case
give written notice of the proposed filing of a Registration
Statement to the holder(s) of the Options and/or Option
Shares at least thirty (30) days prior to the anticipated
filing date. Such notice shall provide such holder(s) with
the opportunity to register such number of Option Shares as
such holder may request. The Company will use its best
efforts to cause the underwriter, if any, to permit the
holders of the Options and/or Option Shares to include
Option Shares in any underwritten offering pursuant to the
Registration Statement on the same terms and conditions as
other shares of Common Stock of the Company included
therein. Notwithstanding the foregoing, if the underwriter
or underwriters of such offering delivers a written opinion
to the Company that the total number of Option Shares which
the holders thereof, together with shares of Common Stock of
the Company or other persons and entities entitled to
include shares of Common Stock in such offering exceeds the
number which can reasonably be sold in such offering, then
the Options Shares to be offered for the account of the
holders of the Options and/or Option Shares will be reduced
pro rata to the extent necessary to reduce the total number
of securities to be included in such offering to the number
recommended by such underwriter. The Company will bear all
expenses of such registration, except that the fees and
expenses of any counsel or other representative of the
holders of the Options and/or Option Shares shall be borne
by them on a pro rata basis. In the event that the Options
are transferred to a third party, and upon the reasonable
request of such third party, the Company shall furnish to
such third party further documentation evidencing the grant
of the Options, including,
<PAGE>
but not limited to, a separate option agreement between the
third party and UIS.
3. Controlling Terms. In the event of any inconsistencies between the
Agreement and this Amendment, the terms of this Amendment shall control.
4. Ratification. As amended hereby, the Agreement is hereby ratified
and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
UNITED INFORMATION SYSTEMS, INC. (f/k/a
Seaton Group, Inc.), a Delaware corporation
By:
---------------------------------
Name:
--------------------------------
Title:
-------------------------------
2M CAPITAL CORP., a Florida corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
INDEMNIFICATION AGREEMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, including the willingness and commitment of 5% Convertible
Debenture holders (totalling an aggregate of $330,000) ("Debenture Holders") of
Seaton Group, Inc. ("Seaton") and subscribers to the shares of Common Stock of
Seaton offered in a private offering through a Confidential Term Sheet dated
November 14, 1997 ("Subscribers") (Debenture Holders and Subscribers
collectively referred to as "Indemnitees"), to invest the aggregate of the funds
received from the Debenture Holders and Subscribers ("Indemnification Amount")
in Seaton to be used by Seaton to enter into and consummate a certain
Reorganization Agreement (the "Agreement") dated as of November 17, 1997 between
Seaton and UNITED INFORMATION SYSTEMS, INC. ("UIS"), UIS INDUSTRIAL LTDA ("UIS
Brazil"), and the shareholders of the UIS Companies ("Indemnitors"), Indemnitors
hereby jointly and severally indemnify and hold harmless Indemnitees, for a
period of eighteen months from the date of the Agreement, from and against any
and all claims, actions, causes of actions, judgments, liabilities, loss,
damages, costs or expenses of whatever kind or nature (including attorneys fees
and costs through all negotiations, trials and appellate proceedings) which may
be made, asserted, assessed or entered against any of the Indemnitees,
including, but not limited to a loss or diminution in value of shares of stock
of Section by the Indemnitees, resulting from any matter for which UIS or UIS
Brazil may have liability under Article X of the Agreement.
The indemnification obligations provided hereby shall not, in any
event, exceed the Indemnification Amount, plus any and all attorneys fees and
costs through all negotiation, trials and appellate proceedings incurred in
connection with the enforcement of the rights of Indemnitees hereunder. The
rights hereunder shall be in addition to, and not in lieu of, any rights of
Seaton under the Agreement.
This agreement shall inure to the benefit of, and shall be enforceable
by, each of the Indemnitees as if a named party hereto. This agreement shall be
binding on the successors and assigns of the indemnitors, and shall accrue to
the benefit of the successors and assigns of the Indemnitees.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement this 17 day of November, 1997.
UNITED INFORMATION SEATON GROUP, INC.
SYSTEMS, INC.
By: By:
------------------------------- --------------------------------
<PAGE>
By: By: /s/ Jorge Miguel Maia
------------------------------- --------------------------------
Jorge Miguel Maia
By: /s/ Jose Flavio Pereira De Araujo
--------------------------------
Jose Flavio Pereira De Araujo
By: /s/ Maria Rosilene S. de Oliveria
--------------------------------
Maria Rosilene S. de Oliveria
By: /s/ Carlos Maia
--------------------------------
Carlos Maia
By: /s/ William Cuervo
--------------------------------
William Cuervo
By: /s/ Odilon Velho
--------------------------------
Odilon Velho
By: /s/ William Klein
--------------------------------
William Klein
By: /s/ Saul Maia
--------------------------------
Saul Maia
2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of November 17, 1997, between SEATON GROUP, INC., Delaware
corporation (the "Company"), whose principal place of business is 2201 N.W. 102
Place, Unit 3, Miami, Florida 33172, and CARLOS MAIA (the "Executive"), whose
address is 2201 N.W. 102 Place, Unit 3, Miami, Florida 33172.
RECITALS
A. The Company, through its wholly-owned subsidiaries UNITED INFORMATION
SYSTEMS, INC., a Florida corporation and UIS INDUSTRIAL, LTD., a company
organized under the laws of Brazil, is engaged in the business of assembling,
manufacturing, distributing and selling computers, computer parts, components
and accessories ("Business" or "Business Activities").
B. The Company has established a valuable reputation and goodwill in its
Business, with experience in all aspects of the Company and the Company's
Business.
C. The Executive has extensive experience in the Business.
D. The Executive has been employed by the Company's subsidiaries and wishes to
be employed by the Company and the Company wishes to hire the Executive, subject
to the terms and conditions of this Agreement.
E. The Executive, by virtue of the Executive's employment with the Company's
subsidiaries and now with the Company, is familiar with and possessed with the
manner, methods, trade secrets and other confidential information pertaining to
the Company's Business, including the Company's client base.
F. But for the execution of this Agreement by the Executive and specifically the
execution of the provisions concerning the Covenant Not to Compete and the
Non-Disclosure of Confidential Information, the Company would not enter into
this Agreement with the Executive.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
<PAGE>
2. Employment. The Company hereby employs the Executive in the capacity
of a full-time President and Chief Executive Officer, and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter set forth.
3. Duties During Employment Period. During the "Term" (including any
renewals thereof) as defined in Section 5 of this Agreement, the Executive
a. shall diligently devote the Executive's full time and
efforts to the business and affairs of the Company. The Executive shall have
such duties and powers that are commensurate and consistent with those of a
President and Chief Executive Officer, subject to the authority and direction of
the Company.
b. shall devote full attention and render exclusive, full time
services to the Company and shall be employed solely by the Company according to
the terms and conditions of this Agreement.
4. Compensation and Benefits.
a. Salary. The Executive shall be paid a base salary (the
"Base Salary"), payable monthly, at an annual rate of Three Hundred Thousand
Dollars ($300,000) for the first year.
b. Bonus. As additional compensation, subject to the
discretion of the Board of Directors, the Executive shall be entitled to receive
a bonus ("Bonus") based on performance of the Executive and consistent with
generally accepted industry standards.
c. Employee Benefits. The Executive shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to executives and/or other salaried employees,
including, but not limited to, medical, pension and other retirement plans,
including any 401K Plan, group life insurance, dental, hospitalization, surgical
and major medical coverage, sick leave, salary continuation, vacation and
holidays, long-term disability, and other fringe benefits.
d. Dental and Medical Insurance. The Company shall provide
dental, hospitalization, surgical and major medical coverage for the Executive
and Executive's family.
e. Automobile Expenses. The COmpany shall provide the
Executive with an automobile allowance to be determined by the Board of
Directors. The Company shall also be responsible for all expenses in connection
with such automobile including, but not limited to, maintenance, insurance and
gas.
2
<PAGE>
f. Vacation. During each fiscal year of the Company, the
Executive shall be entitled to four (4) weeks of vacation time to be utilized or
paid for each year, or accrue and carry over into the following year; provided
however, that the Executive shall evidence reasonable judgment with regard to
appropriate vacation scheduling.
g. Business Expense Reimbursement. The Executive shall be
entitled to receive proper reimbursement for all reasonable, out-of-pocket
expenses incurred directly by the Executive (in accordance with the policies and
procedures established by the Company for its senior executive officers), in
performing services hereunder, provided the Executive properly accounts
therefor.
5. Term. The Term of employment hereunder will commence on the date
hereof and end three (3) years from the Effective Date ("Term"), unless
terminated pursuant to Section 6 of this Agreement, provided that the Executive
may renew this Agreement for an additional three (3) year term ("Renewal Term").
The Executive may renew this Agreement by providing the Company with notice
thereof prior to the thirty (30) day period immediately preceding the end of the
Term or Renewal Term, as the case may be.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Executive during
the Term or Renewal Term of the Agreement, the Company shall also be obligated
to pay to the Executive's estate or heirs, as the case may be, any accrued
salary and the amount of accrued Bonus based upon (i) the formula set forth in
Section 4(b) of this Agreement for the fiscal year in which the death of the
Executive occurred; (ii) divided by twelve (12); and (iii) then multiplied the
number of completed months the Executive was employed by the Company just prior
to the Executive's death. Other death benefits will be determined in accordance
with the terms of the Company's benefit programs and plans.
b. Termination by the Company for Cause.
(1) Nothing herein shall prevent the Company from
terminating Employment for "Cause," as hereinafter defined. The
Executive shall continue to receive salary only for the period ending
with the date of such termination as provided in this Section 6(b). Any
rights and benefits the Executive may have in respect of any other
compensation shall be determined in accordance with the terms of such
other compensation arrangements or such plans or programs.
(2) "Cause" shall mean (A) committing or
participating in an injurious act of fraud, gross neglect,
misrepresentation, embezzlement or dishonesty against the Company; (B)
conviction of a felony resulting in the incarceration of Executive; (C)
any assignment of this Agreement by the Executive
3
<PAGE>
in violation of Section 19 of this Agreement; or (D) the death or
permanent disability of the Executive.
(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 the
Executive a notice of termination stating that the Executive committed
one of the types of conduct set forth in this Section 6(b) contained in
this Agreement and specifying the particulars thereof and the Executive
shall be given a thirty (30) day period to cure such conduct set forth
in Section 6(c)(ii)(E)(II).
a. Termination by the Company Other than for Cause.
(1) The foregoing notwithstanding, the Company may
terminate the Executive's employment for whatever reason it deems
appropriate; provided, however, that in the event such termination is
not based on Cause, as provided in Section 6(b) above, or if
Executive's employment is terminated under Section 6(f) hereof, the
Company shall continue to be obligated to pay to Executive all Salary
and benefits through the end of the then current term.
(2) In the event that the Executive's employment with
the Company is terminated pursuant to this Section 6(c), Section 6(e)
or Section 6(f), then Section 6(a) of this Agreement and all references
thereto shall be inapplicable as to the Executive and the Company.
b. Voluntary Termination. In the event the Executive
terminates the Executive's employment on the Executive's own volition (except as
provided in Section 6(e) and/or Section 6(f)) prior to the expiration of the
Term or Renewal Term of this Agreement, including any renewals thereof, such
termination shall constitute a voluntary termination and in such event the
Executive shall be limited to the same rights and benefits as provided in
connection with Section 6(a).
c. Constructive Termination of Employment. A termination by
the Company without Cause under Section 6(c) shall be deemed to have occurred
upon the occurrence of one or more of the following events without the express
written consent of the Executive:
(1) a significant change in the nature or scope of
the authorities, powers, functions, duties or responsibilities attached
to Executive's position as described in Section 3; or
(2) a change in Executive's principal office to a
location outside the Palm Beach-Broward-Dade County, Florida area; or
4
<PAGE>
(3) a material breach of the Agreement by the
Company; or
(4) a material reduction of the Executive's benefits
under any employee benefit plan, program or arrangement (for Executive
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 situated employees of the
Company; or
(5) failure by a successor company to assume the
obligations under the Agreement.
Anything herein to the contrary notwithstanding, the Executive shall give
written notice to the Board of Directors of the Company that the Executive
believes an event has occurred which would result in a Constructive Termination
of the Executive's employment under this Section 6(e), which written notice
shall specify the particular act or acts, on the basis of which the Executive
intends to so terminate the Executive's employment, and the Company shall then
be given the opportunity, within fifteen (15) days of its receipt of such notice
to cure said event; provided, however, there shall be no period permitted to
cure a second occurrence of the same event and in no event will there be a
required period to cure following the occurrence of two events as described in
this Section 6(e).
d. Termination Following a Change of Control.
(1) In the event that a "Change in Control," as
hereinafter defined, of the Company shall occur at any time during the
Term or Renewal Term hereof, the Executive shall have the right to
terminate the Executive's employment under this Agreement upon thirty
(30) days written notice given at any time within one year after the
occurrence of such event, and such termination of the Executive's
employment with the Company pursuant to this Section 6(f)(1), then, in
any such event, such termination shall be deemed to be a Termination by
the Company Other than for Cause and the Executive shall be entitled to
such Compensation and Benefits as set forth in Subsection 6(c) of this
Agreement.
(2) For purposes of this Agreement, a "Change in
Control" of the Company shall mean a change in control (A) as set forth
in Section 280G of the Internal Revenue Code or (B) of a nature that
would be required to be reported in response to Item 1 of the current
report on Form 8K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"); provided that, without limitation, such a change in control
shall be deemed to have occurred at such time as:
(A) any "person", other than the Executive,
(as such term is used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the
5
<PAGE>
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the
combined voting power of the Company's outstanding securities
then having the right to vote at elections of directors; or,
(B) the individuals who at the commencement
date of the Agreement constitute the Board of Directors cease
for any reason to constitute a majority thereof unless the
election, or nomination for election, of each new director was
approved by a vote of at least two thirds of the directors
then in office who were directors at the commencement of the
Agreement; or
(C) there is a failure to elect three or
more (or such number of directors as would constitute a
majority of the Board of Directors) candidates nominated by
management of the Company to the Board of Directors; or
(D) the business of the Company for which
the Executive's services are principally performed is disposed
of by the Company pursuant to a partial or complete
liquidation of the Company, a sale of assets (including stock
of a subsidiary of the Company) or otherwise.
Anything herein to the contrary notwithstanding, this Section 6(f)(2) will not
apply where the Executive gives the Executive's explicit written waiver stating
that for the purposes of this Section a Change in Control shall not be deemed to
have occurred. The Executive's participation in any negotiations or other
matters in relation to a Change in Control shall in no way constitute such a
waiver which can only be given by an explicit written waiver as provided in the
preceding sentence.
An "Attempted Change in Control" shall be deemed to have
occurred if any substantial attempt, accompanied by significant work efforts and
expenditures of money, is made to accomplish a Change in Control, as described
in subparagraphs (A), (B), (C) or (D) above whether or not such attempt is made
with the approval of a majority of the then current members of the Board of
Directors.
(3) In the event that, within twelve (12) months of
any Change in Control of the Company or any Attempted Change
in Control of the Company, the Company terminates the
employment of the Executive under this Agreement, for any
reason other than for Cause as defined in Section 6(b), or the
Executive's employment is constructively terminated as defined
in Section 6(f)(4), then, in any such event, such termination
shall be deemed to be a Termination by the Company Other than
for Cause and the Executive
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shall be entitled to such compensation and benefits as set
forth in Subsection 6(d) of this Agreement.
(4) For purposes of this Section 6(f), the
Executive's employment shall be deemed constructively
terminated in the event one or more of the following events
occurs without the express written consent of the Executive:
(A) Significant change in the nature or
scope of the authorities, powers, functions, duties or
responsibilities attached to Executive's position as
described in Section 3; or
(B) A Five Percent (5%) reduction in the
Executive's salary below the salary in effect immediately
prior to such reduction or a reduction in the target bonus
participation under Section 5(d) as a percentage of salary;
or
(C) Material breach of the Agreement by the
Company; or
(D) Material reduction of the Executive's
benefits under any employee benefit plan, program or
arrangement (for Executive individually or as part of a group)
of the Company as then in effect or as in effect on the
effective date or the Agreement, which reduction shall not be
effectuated for similarly situated employees of the Company;
or
(E) Failure by a successor company to assume
the obligations under the Agreement; or
(F) Change in the Executive's principal
office to a location outside the Palm Beach-Broward-Dade
County, Florida area.
(5) Anything in this Section 6(f) to the contrary
notwithstanding, in no event will any action or non-action by the
Executive at any time prior to the first anniversary date of the
applicable Change in Control or Attempted Change in Control (including
any action or non-action prior to the effective date of this Agreement)
be deemed consent to any of the events described in this Section 6(f).
(6) Anything herein to the contrary notwithstanding,
in the event the circumstances giving rise to an Attempted Change in
Control are included in those circumstances giving rise to an actual
Change in Control the twelve (12) month period under this Section 6
will be deemed to have recommenced on the date the actual Change in
Control occurred.
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7. Covenant Not to Compete. Executive acknowledges and recognizes the
highly competitive nature of Company's Business and that the goodwill, continued
patronage, and specifically the names and addresses of the Company's Clients
which includes any persons, partnerships, corporations, professional
associations or other organizations for whom the Company has performed Business
Activities (the "Company Clients") constitute a substantial asset of the Company
having been acquired through considerable time, money and effort. Executive
further acknowledges and recognizes that during the course of the Executive's
employment, Executive will receive specialized training, specific knowledge of
Company's Business, access to trade secrets and Confidential Information, as
defined in Section 8, participate in business and hiring decisions, and that it
would be impossible for Executive to work for a competitor without using and
divulging this valuable confidential information. That Executive acknowledges
that Company is without an adequate remedy at law in the event this covenant is
violated. Executive further acknowledges that this covenant not to compete is an
independent covenant within this Agreement. This covenant shall survive this
Agreement and shall be treated as an independent covenant for the purposes of
enforcement; provided, however, that the provisions of this Section 7 shall not
apply if Executive's employment is terminated without cause as provided in
Section 6(b) above, or if Executive's employment is terminated under Sections
6(e) or 6(f) hereof. The Executive recognizes that the terms of this covenant
are reasonable and necessary for the protection of the Company's business
because the value of Executive's services will be enhanced by his association
with Company. Accordingly, Executive agrees to the following:
a. that for a period of twenty four (24) months after
termination of the Executive's employment under this Agreement or any renewal or
extension thereof (the "Restricted Period"), for whatever reason and anywhere
within 100 miles of any Point of Presence (POP) of the Company (the "Restricted
Area"), Executive will not, individually or in conjunction with others, directly
or indirectly, engage in any Business Activities other than on behalf of the
Company and as agreed by the Company and Executive, whether as an officer,
director, proprietor, employer, employee, partner, independent contractor,
investor (other than as a holder of less than 10% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise.
b. That during the Restricted Period and within the Restricted
Area, Executive will not, indirectly or directly, compete with the Company by
soliciting, inducing or influencing any of the Company's Clients which have a
business relationship with the Company at any time during the Restricted Period
to discontinue or reduce the extent of such relationship with the Company.
c. That during the Restricted Period and within the Restricted
Area, Executive will not (a) directly or indirectly recruit or solicit any
employee or agent of the Company to discontinue such employment or agency
relationship with the Company, or (b) employ or seek to employ, or cause or
permit any business which competes directly or
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indirectly with the Business of the Company (the "Competitive Business") to
employ or seek to employ for any Competitive Business any person who is then (or
was at any time within six (6) months prior to the date Executive or the
Competitive Business employs or seeks to employ such person) employed by the
Company.
d. That during the Restricted Period, Executive will not
interfere with, disrupt or attempt to disrupt any past, present or prospective
relationship, contractual or otherwise, between the Company and any Company's
Clients, Employees or Agents.
8. Non-Disclosure of Confidential Information.
a. Executive acknowledges that the Company's trade secrets,
private or secret processes, methods and ideas, as they exist from time to time,
customer lists and information concerning the Company's products, services,
business records and plans, inventions, product design information, price
structure and pricing, discounts, costs, computer programs and listings, source
code and/or subject code, copyright, trademark, proprietary information,
formulae, protocols, forms, procedures, training methods, development, technical
information, know-how, show-how, new product and service development,
advertising budgets, past, present and future marketing, activities and
procedures, method for operating the Company's Business, credit and financial
data concerning the Company and the Company's Clients and client lists, which
client lists shall not only mean one or more of the names and addresses of the
clients of the Company but it shall also encompass any and all information
whatsoever regarding them, including their needs, and marketing, advertising,
promotional and sales strategies, sales presentations, research information,
revenues, acquisitions, practices and plans and information which is embodied in
written or otherwise recorded form, and other information of a confidential
nature not known publicly or by other companies selling to the same markets and
specifically including information which is mental, not physical (collectively,
the "Confidential Information") are valuable, special and unique assets of the
Company, access to and knowledge of which have been provided to Executive by
virtue of Executive's association with the Company. In light of the highly
competitive nature of the industry in which the Company's business is conducted,
Executive agrees that all Confidential Information, heretofore or in the future
obtained by Executive as a result of Executive's association with the Company
shall be considered confidential.
b. The Executive agrees that the Executive shall (1) hold in
confidence and not disclose or make available to any third party any such
Confidential Information obtained directly or constructively from the Company,
unless so authorized in writing by the Company; (2) exercise all reasonable
efforts to prevent third parties from gaining access to the Confidential
Information; (3) not use, directly or indirectly, the Confidential Information
in any respect of its business, except as necessary to evaluate the information
in order to perform the Executive's duties and responsibilities to the Company;
(4) restrict the disclosure or availability of the Confidential Information to
those who have read and
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understand this Agreement and who have a need to know the information in
order to achieve the purposes of this Agreement without the prior consent of the
Company; (5) not copy or modify any Confidential Information without prior
written consent of the Company; provided, however, that such copy or
modification of any Confidential Information does not include any modifications
or copying which would otherwise prevent the Executive from performing his/her
duties and responsibilities to the Company; (6) take such other protective
measures as may be reasonably necessary to preserve the confidentiality of the
Confidential Information; and (7) relinquish and require all of its employees to
relinquish all rights it may have in any matter, such as drawings, documents,
models, samples, photographs, patterns, templates, molds, tools or prototypes,
which may contain, embody or make use of the Confidential Information; promptly
deliver to the Company any such matter as the Company may direct at any time;
and not retain any copies or other reproductions thereof.
c. Executive further agrees (1) that Executive shall promptly
disclose in writing to the Company all ideas, inventions, improvements and
discoveries which may be conceived, made or acquired by Executive as the direct
or indirect result of the disclosure by the Company of the Confidential
Information to Executive; (2) that all such ideas, inventions, improvements and
discoveries conceived, made or acquired by Executive alone or with the
assistance of others, relating to the Confidential Information, shall be the
property of the Company and shall be treated as Confidential Information in
accordance with the provisions hereof and that Executive shall not acquire any
intellectual property rights under this Agreement except the limited right to
use set forth in this Agreement; (3) that Executive shall assist in the
preparation and execution of all applications, assignments and other documents
which the Company may deem necessary to obtain patents, copyrights and the like
in the United States and in jurisdictions foreign thereto, and to otherwise
protect the Company.
d. Excluded from the Confidential Information, and therefore
not subject to the provisions of this Agreement, shall be any information which
the Executive can show (1) at the time of disclosure, is in the public domain as
evidenced by printed publications; (2) after the disclosure, enters the public
domain by way of printed publication through no fault of the Executive; (3) by
written documentation was in its possession at the time of disclosure and which
was not acquired directly or indirectly from the Company; or (4) by written
documentation was acquired, after disclosure, from a third party who did not
receive it from the Company, and who had the right to disclose the information
without any obligation to hold such information confidential. The foregoing
exceptions shall apply only from and after the date that the information becomes
generally available to the public or is disclosed to the Executive by a third
party, respectively. Specific information shall not be deemed to be within the
foregoing exceptions merely because it is embraced by more general information
in the public domain. Additionally, any combination of features shall not be
deemed to be within the foregoing exceptions merely because individual features
are in the public domain. If the Executive intends to avail himself/herself of
any of the
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<PAGE>
foregoing exceptions, the Executive shall notify the Company in writing of
his/her intention to do so and the basis for claiming the exception.
e. Upon written request of the Company, Executive shall return
to the Company all written materials containing the Confidential Information.
Executive shall also deliver to the Company written statements signed by
Executive certifying all materials have been returned within five (5) days of
receipt of the request.
9. Covenants as Essential Elements of this Agreement: Survival of
Covenants. It is understood by and between the parties hereto that the foregoing
covenants by Executive contained in Sections 7 and 8 of this Agreement shall be
construed to be agreements independent of any other element of Executive's
relationship with the Company. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties, shall not
constitute a defense to the enforcement of the covenants in this Agreement
against Executive.
10. Remedies and Enforcement.
a. Executive acknowledges and agrees that the Company's remedy
at law for a breach or threatened breach of any of the provisions of Sections 7
or 8 herein would be inadequate and the breach shall be per se deemed as causing
irreparable harm to the Company. In recognition of this fact, in the event of a
breach by Executive of any of the provisions of Sections 7 or 8, Executive
agrees that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, the Company, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available to the Company.
b. If Executive violates the restrictions set forth in this
Agreement, then the duration of the restrictions under Sections 7 or 8 shall be
extended for an amount of time equal to the number of days that Executive
violated the Agreement until the date that the Company obtains an order
enjoining the Executive from said violation.
c. In the event that, despite the express agreement of
Executive and Company, any provision stated herein shall be determined by any
court or other tribunal of competent jurisdiction to be unenforceable for any
reason whatsoever, the parties agree that the provision shall be interpreted to
extend only over the maximum period of time for which it may be enforceable;
and/or over the maximum geographical area as to which it may be enforceable,
and/or to the maximum extent in any and all other respects as to which it may be
enforceable, all as determined by such court or tribunal.
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d. In the event that Executive challenges this Agreement and
an injunction is issued staying the implementation of the restrictions imposed
herein, the time remaining on the restrictions shall be tolled until the
challenge is resolved by final adjudication, settlement or otherwise, except
that the time remaining on the restrictions shall not be tolled during any
period in which Executive is unemployed. If a court finds in favor of Company,
the restrictions will be imposed for the amount of time that remains on the
restrictions at the time they were tolled, or at the time of the court's
decision of the restrictions were not tolled, as the case may be.
e. The provisions of Sections 7 and 8 of this Agreement, as
well as the period of time, geographical areas and types and scope of
restrictions of Executive's activities specified herein are intended to be
divisible; and, in the event any provision herein shall be deemed invalid or
unenforceable in any respect, as to any one or more periods of time,
geographical areas, business or activities, the remaining provisions shall not
thereby be affected but shall remain in full force and effect; and this
Agreement shall be deemed to be amended without further action by the parties
hereto to the extent necessary to render it valid and enforceable.
f. The Executive further acknowledges and agrees that in the
event of a breach, or threatened breach of the provisions of Sections 7 or 8,
the Company will suffer immediate and irreparable harm which said harm is
presumed to occur, and that Company shall be entitled to receive from a court of
competent jurisdiction, a temporary restraining order with or without notice to
Executive, as well as the entry of a preliminary and permanent injunction. Said
right to an injunction shall be in addition to and not in limitation of any
other rights or remedies Company may have for damages or otherwise.
g. It is further expressly understood and agreed that the
provisions of this Agreement shall apply whether this Agreement is terminated by
Company or Executive or upon its expiration or termination.
h. If the Executive breaches this provision and the Company
seeks an injunction or other legal remedy to interpret or enforce this covenant,
then the Executive agrees to pay all reasonable attorneys' fees and costs of the
Company both for the trial and any appeal.
i. Nothing herein contained shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach or
threatened breach.
11. Litigation-Attorneys' Fees. In connection with any litigation
arising out of the enforcement of this Agreement or for its interpretation, the
prevailing party shall be entitled to recover its costs, including reasonable
attorneys' fees, at the trial and all appellate levels from the other party
hereto, who was the adverse party to such litigation.
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12. Freedom to Contract. The Executive represents and warrants that the
Executive has the right to negotiate and enter into this Agreement, and the
grant of the rights herein granted and that this Agreement does not breach,
interfere with or conflict with any other contractual agreement, covenant not to
compete, option, right of first refusal, or other existing business
relationship. Executive acknowledges that this representation is a material
inducement to Company entering into this Agreement and in the event Executive
breaches this warranty, Executive agrees to indemnify and hold harmless Company
from any and all claims, actions, losses, damages, including but not limited to,
reasonable attorneys' fees and costs.
13. Works for Hire. Executive acknowledges that, as between the Company
and Executive, the Confidential Information and any and all rights and
privileges provided under the trademark, copyright, trade secret and other laws
of the United States, the individual states thereof, and jurisdictions foreign
thereto, and the goodwill associated therewith, and specifically including any
modifications thereto, are and at all times will be the property of the Company.
To the extent that any of the Confidential Information or rights and privileges
described in the first sentence of this Section 13 and created by the Executive
during the term of the Executive's employment with the Company (any renewal
thereof) is determined not to be a work for hire, in consideration of the
payment of One Hundred Dollars ($ 100.00) and other valuable and legally
sufficient consideration, the receipt and sufficiency of which are hereby
acknowledged, Executive does hereby assign and transfer to Company any and all
rights and privileges provided under the copyright, trademark and other laws of
the United States, the individual states thereof and jurisdictions foreign
thereto with respect to the Work, together with any and all renewals thereof,
the goodwill associated therewith, and the right to bring suit for past
infringements thereof (hereinafter the "Rights"). The Executive does hereby also
agree, without further consideration, to execute any additional documents and
take such additional action as may be requested in order to vest in the Company
good, valid and marketable title to the Rights.
14. Effect on Prior Agreements. This Agreement supersedes any and all
prior or written agreements in their entirety between the parties, which shall
be void and of no further force and effect after the date of this Agreement.
15. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested, by overnight
delivery, by courier; or by confirmed telecopy, in the case of the Executive to
the Executive's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office as set forth
in the introductory paragraph, or such other place as it may designate.
16. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any
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provision hereof be taken or held to be a waiver of any other preceding or
succeeding breach of any term or provision of this Agreement. No extension of
time for the performance of any obligation or act shall be deemed to be an
extension of time for the performance of any other obligation or act hereunder.
17. Complete Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the contents hereof and supersedes
all prior agreements and understandings between the parties with respect to such
matters, whether written or oral. Neither this Agreement nor any term or
provision hereof of may be changed, waived, discharged or amended in any manner
other than by an instrument in writing, signed by the party against which the
enforcement of the change, waiver, discharge or amendment is sought.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one agreement.
19. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Executive but shall be assignable by
the Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
20. Governing Law, Venue, Waiver of Jury Trial. This Agreement shall
become valid when executed and accepted by Company at its offices in Dade
County, Florida. The parties agree that it shall be deemed made and entered into
in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida without giving effect to any
principles of conflicts of law. Company and Executive acknowledge and agree that
the U.S. District for the Southern District of Florida, as if such court lacks
jurisdiction, the 17th Judicial Circuit (or its successor) in and for Dade
County, Florida, shall be the exclusive venue and proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts. The parties further agree and hereby waive and release any right to a
trial by jury in any action arising out of the interpretation, enforcement or
breach of this Agreement. Executive further agrees that he must bring an action
arising out of this Agreement within six (6) months from the date of accrual of
cause of action or forever be barred from bringing said action.
21. Headings. The headings of the sections are for convenience only
and shall not control or affect the meaning or construction or limit the scope
or intent of any of the provisions of this Agreement.
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22. Survival. Any termination of this Agreement shall not affect the
ongoing provisions of this Agreement which shall survive such termination in
accordance with their terms.
23. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any court
determines that any provision of Sections 7 or 8 hereof is unenforceable because
of the duration or scope of such provision, such court shall have the power to
reduce the scope or duration of such provision, as the case may be, and, in its
reduced form, such provision shall then be enforceable.
24. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS AND
CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF
THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written in Dade County, Florida.
SEATON GROUP, INC.
By:
------------------------------
EXECUTIVE:
/s/ Carlos Maia
----------------------------------
Carlos Maia
15
CONSULTING AGREEMENT
AGREEMENT made this 13th day of April, 1998, by and between UNITED
INFORMATION SYSTEMS, INC., a Delaware corporation ("UISI"), and PREFERRED
SECURITIES GROUP, INC. ("PSC").
NOW, THEREFORE, in consideration of the premises and the obligations
undertaken by the parties pursuant hereto, the parties agree:
I. RECITALS
1.1 UISI. UISI is engaged in the manufacture and sale of
computers and related products in Brazil.
1.2 PSC. PSC is a broker-dealer registered with the Securities
and Exchange Commission ("SEC") and a member of the National
Association of Securities Dealers ("NASD"). PSC also
provides consulting services including rendering advice on
matters related to corporate finance and other matters.
II. RETENTION, SERVICES AND DUTIES
2.1 Retention. UISI hereby retains PSC on a non-exclusive basis
and PSC hereby accepts agrees to provide consulting services
to UISI on corporate finance and other financial matters,
subject to all the provisions hereof.
2.2 Duties. During the term of this agreement, PSC shall provide
UISI with such regular and customary consulting services as
are reasonably requested by UISI, provided that PSC shall
not be required to undertake duties not reasonably within
the scope of consulting services in which it is engaged
generally. PSC's duties may include, but will not
necessarily be limited to the following consulting services:
2.2.1 Disseminating permissible information about UISI to
the investment community at large.
2.2.2 Rendering advice and assistance in connection with
the preparation of annual and interim reports and
press releases.
2.2.3 Attempting to assist in UISI's financial public
relations.
2.2.4 Attempting to assist in, on behalf of UISI, at
appropriate times, meetings with securities
analysts or various investment banking firms.
<PAGE>
2.2.4.1 Providing advice and analysis with
respect to trading in UISI's
securities and other market
conditions generally.
2.3 Confidentiality. PSC will use its best efforts not to
disclose or otherwise use in an authorized manner
confidential business and documents of UISI without the
express written consent of UISI while this Agreement is in
effect or after this Agreement is terminated.
III. COMPENSATION
3.1 Consulting Fee. PSC will be entitled to receive a consulting
fee of $120,000 per annum, to be paid $10,000 on the 1st of
each month for 12 months.
3.2. Warrants. Concurrently with signing of this agreement, PSC
shall irrevocably receive two-year warrants ("warrants") to
purchase 225,000 shares of Common Stock Exercisable on the
date of vesting (see 3.2.2) with exercise prices at $6.50
per share.
3.2.1 The warrants and the shares of Common Stock
underlying all of the warrants shall be registered
in the next registration statement to be filed by
UISI, which UISI represents will be filed within
the next 30 days and UISI will use its best efforts
to have the registration statement declared
effective as promptly as possible. It will be
considered a breach of this agreement if the
registration statement is not filed within 3 months
of the date of this agreement. PSC will supply to
UISI a form of warrant. All of such warrants, at
the option of PSC, shall be exercisable on a "net
exercise basis."
3.2.2 Vesting of Warrants. PSC will vest one-tenth
(1/10th) of the 225,000 warrants per month for 10
months beginning 90 days from the signing of this
agreement. PSC will therefore be entitled to
receive 22,500 warrants per month for 10 months.
IV. TERM OF AGREEMENT
4.1 Term. This agreement will terminate on the first anniversary of
the date of this agreement, unless terminated by either party as
hereinafter provided.
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4.2 Termination by UIS. UISI shall have the right upon sixty (60)
days prior written notice to terminate this Agreement if PSC shall
apply for or consent to the appointment of a receiver, trustee, or
liquidator of all or part of its assets, file a voluntary petition in
bankruptcy, admit in writing its inability to pay its debts as they
become due, make a general assignment for the benefit of creditors,
or file a petition or an answer seeking reorganization or an
arrangement with creditors; or if any order, judgment, or decree
shall be entered by a court of competent jurisdiction adjudicating
PSC as bankrupt or insolvent, or approving a petition seeking
reorganization, or appointing a receiver, trustee or liquidator of
PSC or of a substantial part of its assets, and such order, judgment
or decree shall continue unstayed and in effect for a period of sixty
(60) consecutive days.
4.3 Termination by PSC. PSC shall have the right upon ninety (90)
days prior written notice to terminate this Agreement.
4.4 Termination By Either Party. In addition, and without prejudice
to any other rights it may have to terminate this Agreement or to
seek other available remedies for breach of contract, either party
shall have the right at anytime, by giving written notice to the
other party, to terminate this Agreement upon a date specified
therein, which shall not be less than thirty (30) days from the date
notice is given, upon the occurrence of any of the following events
of default:
4.1.1 If the other party shall fail to make any payment
which it is obligated to make pursuant to the terms of this Agreement
and such failure shall continue for a period of thirty (30) days
after notice thereof to the defaulting party.
4.4.2 If the party shall fail to keep, observe or perform
any material covenant, agreement, term or provision of this
Agreement, other than an obligation to pay money, to be kept,
observed or performed by such party, and such failure shall continue
for a period of thirty (30) days after written notice thereof to the
defaulting party.
4.5 Payment Upon Termination. If this Agreement is terminated by
either party, the current and accrued consulting fee due PSC pursuant
to Section 3.1 shall be paid to PSC by UISI within ten (10) days of
such termination.
V. MISCELLANEOUS
5.1 Indemnification. PSC will have no liability whatever for damages
suffered by any person or entity on account of the dishonesty, willful
misconduct or negligence of any employee of UISI. UISI agrees to indemnify PSC
and hold it harmless from any and all liability, including reasonable
attorney's fees, caused by or resulting from the negligent or intentional acts
or omissions of UISI, or any officer, director, or employee thereof, or of any
employee or agent of UIS.
5.2 Indemnification by PSC. PSC shall be liable to UISI for, and
agrees to indemnify and hold it harmless from, and all liability, including
reasonable attorney's fees,
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caused by or resulting from the willful negligent or intentional acts or
omissions of any officer, director, partner or employee of PSC.
5.3 Successors. All the provisions herein contained shall be binding
upon and inure to the benefit of the successors (including resulting
corporations in a merger, consolidation or other reorganization) and assigns
of PSC and UISI to the same extent as if each such successor and assign where
in each case named as a party to this Agreement.
5.4 Restriction on Assignment. Neither party hereto may assign its
interest in or delegate the performance of its obligation under this Agreement
to any person without obtaining the prior written consent of the other party.
5.5 Rights Cumulative; No Waiver. No right or remedy herein conferred
upon or reserved to either of the parties hereto is intended to be exclusive
of any other right or remedy, and each and every right and remedy shall be
cumulative and in addition to any other right and remedy given hereunder, or
now and hereafter legally existing upon the occurrence of an event of default
hereunder. The failure to either party to insist at any time upon the strict
observance or performance of any of the provisions of this Agreement or to
exercise any right or remedy as provided in this Agreement, shall not impair
any such right or remedy, or be construed as a waiver or relinquishment
thereof with respect to subsequent defaults. Every right and remedy given by
this Agreement to the parties hereto may be exercised from time to time and as
often as may be deemed expedient by the parties, as the case may be.
5.6 Headings. The headings to the various sections of this Agreement
have been inserted for convenience of reference only and shall not modify,
define, limit or expand the express provisions of this Agreement.
5.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each counterpart shall
together constitute but one and the same agreement.
5.8 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, if
by hand delivered, upon receipt thereof, or if mailed by certified or
registered mail, postage prepared, three (3) days following deposit in the
U.S. Mail and, in any event, to be addressed as follows:
If to PSC:
C/O Victor Lessinger
Preferred Securities Group, Inc.
5301 N. Federal Highway
Suite 150
Boca Raton, Florida 33487
4
<PAGE>
If to UISI:
2201 Northwest 102nd Place
Unit 3
Miami, Florida 33172
C/O President
Or to such other person and address as the parties may designate in writing.
5.9 Effect on Invalidity. Should any part of this Agreement, for any
reason be declared invalid, such decision shall not effect the validity of any
remaining portion, which remaining portion shall remain in full force an
effect as if this Agreement had been executed with the invalid portion thereof
eliminated.
5.10 Authorization for Agreement. The execution and performance of
this Agreement by UISI and PSC have duly authorized by all necessary
resolutions or corporate or partnership action, and this Agreement constitutes
a valid and binding obligation of UISI and PSC, enforceable against each of
them in accordance with its terms.
5.11 Notice of Claims. Any party shall immediately give notice of any
claim against it to any party from whom it intends to seek indemnity pursuant
to Section 5.1 or 5.2 hereof.
5.12 This agreement supersedes prior contractual agreement signed
March 1998.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
UNITED INFORMATION SERVICES, INC.
By: /s/ William Cuervo Date: 4-22, 1998
----------------------------------- ------
Name: William Cuervo
---------------------------------
Title: CFO
--------------------------------
5
<PAGE>
PREFERRED SECURITIES GROUP, INC.
By:_______________________________ Date: _____________, 1998
Name:_____________________________
Title:____________________________
6
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement"), effective as of January 5, 1998
is entered into by and between United Information Systems Inc., a Delaware
Corporation (herein referred to as the "Company") and Capital Communications
Ltd., a Nevada Corporation (herein referred to as the "Consultant").
RECITALS
WHEREAS, Company is a publicly held corporation with its common stock
traded on the OCT/BB; and
WHEREAS, Consultant has experience in the area of investor
communications and financial and investor public relations; and
WHEREAS, Company desires to engage the services of Consultant to
assist and consult to the Company in matters concerning investor relations and
to represent the company in investors' communications and public relations
with existing shareholders and brokers, dealers and other investment
professionals as to the Company's current and proposed activities;
NOW THEREFORE, in consideration of the promises and the mutual
covenants and agreements hereinafter set forth, the parties hereto covenant
and agree as follows:
1. Term of Consultancy. Company hereby agrees to retain the Consultant
to act in a consulting capacity to the Company, and the Consultant
hereby agrees to provide services to the Company, for a term of
twelve months commencing on January 5, 1998 and ending on February
28, 1999.
2. Duties of Consultant. The Consultant agrees to provide the following
specified consulting services during the term specified in Section
1.:
(a) Advise and assist the Company in developing and implementing
appropriate plans and materials for presenting the Company and its
business plans, strategy and personnel to the financial community,
establishing an image for the Company in the financial community, and
creating the foundation for subsequent financial public relations
efforts;
(b) Introduce the Company to the financial community;
(c) With the cooperation of the Company, maintain an awareness during the
term of this Agreement of the Company's plans, strategy and
personnel, as they may evolve during such period, and advise and
assist the Company in communicating appropriate information regarding
such plans, strategy and personnel to the financial community;
<PAGE>
(d) Assist and advise the Company with respect to its (i) stockholder and
investor relations, (ii) relations with brokers, dealers, analysts
and other investment professionals, and (iii) financial public
relations generally;
(e) Perform the functions generally assigned to investor/stockholder
relations and public relations departments in major corporations,
including responding to telephone and written inquires; reviewing
press releases, reports and other communications with or to
shareholders, the investment community and the general public;
advising with respect to the timing, form, distribution and other
matters related to such releases, reports and communications; and
consulting with respect to corporate symbols, logos, names, the
presentation of such symbols, logos and names, and other matters
relating to corporate image;
(f) Disseminate information regarding the Company to brokers, dealers,
other investment community professionals and the general investment
public;
(g) Conduct meetings, in person or by telephone, with brokers, dealers,
analysts and other investment professionals to advise them of the
Company's plans, goals and activities, and assist the Company in
preparing for press conferences and other forums involving the media,
investment community professionals and the general investment public;
(h) At the Company's request, review business plans, strategies, mission
statements budgets, proposed transactions and other plans for the
purpose of advising the Company of the investment community
implications thereof;
(i) Otherwise perform as the Company's financial relations and public
relations consultant; and,
(j) Make public communications and disclosures regarding the Company only
within the scope of the authorizations conferred by the Company and
not make any such communications or disclosures of information not
provided or authorized by the Company.
3. Allocation of Time and Energies. The Consultant hereby promises to
perform and discharge well and faithfully the responsibilities which
may be assigned to the Consultant from time to time by the officers
and duly authorized representatives of the Company in connection with
the conduct of its financial and investor public relations and
communications activities, so long as such activities are in
compliance with applicable securities laws and regulations.
Consultant shall diligently and thoroughly provide the consulting
services required hereunder. Although no specific hours-per-day
requirement will by required, Consultant and the Company agree that
Consultant will perform the duties set forth hereinabove in a
diligent and professional manner. The parties acknowledge and agree
that a disproportionately large amount of the effort to be expended
and the costs to be incurred by the Consultant are expected to occur
upon and shortly after, and in any event, within the first several
months of this Agreement.
4. Remuneration. As full and complete compensation for services
described in this
2
<PAGE>
Agreement, the Company shall compensate Consultant as follows:
4.1 Company agrees to pay Consultant a retainer of Two Thousand (2,000)
Dollars per month, payable on the first day of each month and
continuing each month thereafter for the duration of this Agreement.
4.2 For undertaking this engagement and for other good and valuable
consideration, the Company agrees to issue and deliver to the
Consultant a "Commencement Bonus" payable in the form of One Hundred
Twenty-five Thousand (125,000), unregistered, restricted shares of
the Company's Common Stock (the "Common Stock"). This Commencement
Bonus shall be issued to the Consultant promptly following execution
of this Agreement and shall, when issued and delivered to Consultant,
be fully paid and non-assessable. The Company understands and agrees
that Consultant has foregone significant opportunities to accept this
engagement. The 125,000 shares issued as a Commencement Bonus,
therefore, constitutes payment for Consultant's agreement to
represent the Company, and are a non-refundable, non-apportionable,
and non-ratable retainer; such shares are not a prepayment for future
services. If the Company decides to terminate this Agreement prior to
February 28, 1999 for any reason whatsoever, it is agreed and
understood that Consultant will not be requested or demanded by the
Company to return any of the shares paid to it hereunder. All shares
issued pursuant to this Agreement shall be evidenced by stock
certificates issued to Capital Communications Ltd., or its
designee(s). The shares will have piggyback registration rights and
will be included in the next appropriate registration done by the
Company, including any S-8 registration statements, which shall be no
later than February 28, 1999. In the event of registration,
Consultant agrees not to sell any shares until March 1, 1999 or the
termination of the Consulting Agreement without the prior consent of
the Company. All registration costs shall be borne solely by the
Company.
4.3 Consultant acknowledges that the shares issuable pursuant to this
Agreement (the "Shares") have not been registered under the
Securities Act of 1933, and accordingly are "restricted securities"
within the meaning of Rule 144 of the Act. As such, the Shares may
not be resold or transferred unless the Company has received an
opinion of counsel reasonably satisfactory to the Company that such
resale or transfer is exempt from the registration requirements of
that Act.
4.4 In connection with the acquisition of Shares hereunder, the
Consultant represents and warrants to the Company as follows:
(a) Consultant acknowledges that the Consultant has been afforded the
opportunity to ask questions of and receive answers from duly
authorized officers or other
3
<PAGE>
representatives of the Company concerning an investment in the
Shares, and any additional information which the Consultant requested.
(b) Consultant has had experience in investments in restricted and
publicly traded securities, and Consultant has had experience in
investments in speculative securities and other investments which
involve the risk of loss of investment. Consultant acknowledges that
an investment in the Shares is speculative and involves the risk of
loss. Consultant can afford the risk of loss of his entire investment
in the Shares.
(c) Consultant is acquiring the Shares for long-term investment and not
with a view toward resale or distribution thereof except in
accordance with applicable securities laws.
5. Expenses. Consultant agrees to pay for all its own expenses (phone,
labor, etc.), other than extraordinary items (travel required by/or
specifically requested by the Company, luncheons or dinners to large
groups of investment professionals, mass faxing to a sizable
percentage of the Company's constituents, investor conference calls,
etc.) approved by the Company prior to its incurring an obligation
for reimbursement. The Company agrees to mail due diligence and
investor materials at the request of Consultant at the sole expense
of the Company.
6. Indemnification. The Company warrants and represents that all oral
communications, written documents or materials, furnished to
Consultant by the Company with respect to financial affairs,
operations, profitability and strategic planning of the Company are
accurate and Consultant may rely upon the accuracy thereof without
independent investigation. The Company will protect, indemnify and
hold harmless Consultant against any claims or litigation including
any damages, liability, cost and reasonable attorney's fees with
respect thereto resulting from Consultant's communication or
dissemination of any said information, documents or materials not
designated by the Company to the Consultant as "confidential" or
"company private", excluding any such claims or litigation resulting
from Consultant's communication or dissemination of information not
provided or authorized by the Company.
7. Representations. Consultant represents that he is not required to
maintain any licenses and registrations under federal or any state
regulations necessary to perform the services set forth herein.
Consultant acknowledges that, to the best of his knowledge, the
performance of the services set forth under this Agreement will not
violate any rule or provision of any regulatory agency having
jurisdiction over Consultant. Consultant acknowledges that, to the
best of his knowledge, Consultant is not the subject of any
investigation, claim, decree or judgment involving any violation of
the SEC or securities laws. Consultant further acknowledges that he
is not a securities Broker Dealer or a registered investment advisor,
and therefore is not required to communicate directly with
shareholders or private investors.
4
<PAGE>
8. Legal Representation. The Company acknowledges that it has been
represented by independent legal counsel in the preparation of this
Agreement. Consultant represents that he has consulted with
independent legal counsel and/or tax, financial and business
advisors, to the extent the Consultant deemed necessary.
9. Status as Independent Contractor. Consultant's engagement pursuant to
this Agreement shall be as independent contractor, and not as an
employee, officer or other agent of the Company. Neither party to
this Agreement shall represent or hold itself out to be the employer
or employee of the other. Consultant further acknowledges the
consideration provided hereinabove is a gross amount of consideration
and that the Company will not withhold from such consideration any
amounts as to income taxes, social security payments or any other
payroll taxes. All such income taxes and other such payment shall be
made or provided for by Consultant and the Company shall have no
responsibility or duties regarding such matters. Neither the Company
or the Consultant possess the authority to bind each other in any
agreements without the express written consent of the entity to be
bound.
10. Attorney's Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement or interpretation of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with or related to this Agreement,
the successful or prevailing party shall be entitled to recover
reasonable attorney's fees and other costs in connection with that
action or proceeding, in addition to any other relief to which it or
they may be entitled.
11. Waiver. The waiver by either party of a breach of any provision of
this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party.
12. Notices. All notices, requests, and other communications hereunder
shall be deemed to be duly given if sent by U.S. mail, postage
prepaid, addressed to the other party at the address as set forth
herein below:
To the Company: Mr. Carlos Maia, CEO
United Information Systems Inc.
2201 N.W. 102nd Place, Unit 3
Miami, Fl 33172
To the Consultant: Mr. Nicholas D. Rau
Capital Communications
415 Natoma Street
Folsom, CA 95630
5
<PAGE>
It is understood that either party may change the address to which notices for
is shall be addressed by providing notice of such change to the other party in
the manner set forth in this paragraph.
13. Choice of Law, Jurisdiction and Venue. This Agreement shall be
governed by, construed and enforced in accordance with the laws of
the State of California. The parties agree that Placer County,
California will be the venue of any dispute and will have
jurisdiction over all parties.
14. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the alleged breach thereof, or relating to
Consultant's activities or remuneration under this Agreement, shall
be settled by binding arbitration in California, in accordance with
the applicable rules of the American Arbitration Association, and
judgment on the award rendered by the arbitrator(s) shall be binding
on the parties and may be entered in any court having jurisdiction
thereof. The provisions of Title 9 of part 3 of the California Code
of Civil Procedure, including Section 1283.05, and successor
statutes, permitting expanded discovery proceedings shall be
applicable to all disputes that are arbitrated under this paragraph.
15. Assignment. This Agreement may be assigned to a corporation, limited
liability company, partnership or unincorporated organization owned
or controlled by Consultant, at the sole discretion of Consultant,
any time during the term of the Agreement, without the consent of the
Company.
16. Complete Agreement. This Agreement instrument contains the entire
agreement of the parties relating to the subject matter hereof. This
Agreement and its terms may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
AGREED TO:
"Company" UNITED INFORMATION SYSTEMS INC.
Date: 1-5-98 By: /s/ WILLIAM CUERVO
----------------- -----------------------------
Its: CFO
"Consultant" CAPITAL COMMUNICATIONS
Date: 1-5-98 /s/ Nicholas D. Rau
----------------- ---------------------------------
Nicholas D. Rau
Date: 1-5-98 /s/ Don R. Odle
----------------- ---------------------------------
Don R. Odle
6
-------------------------
CONTINENTAL
CAPITAL
& EQUITY
CORPORATION
------------------------
195 Wekiva Springs Road
Suite 200
Longwood, Florida 32779
PHONE
(407) 682-2001
FAX
(407) 682-2544
<PAGE>
CLIENT SERVICE AGREEMENT
THIS AGREEMENT is made and entered into this 8th day of April, 1998
between CONTINENTAL CAPITAL & EQUITY CORPORATION, located at 195 Wekiva
Springs Road, Suite 200, Longwood, FL 32779, hereinafter sometimes referred to
as (CCEC) and UNITED INFORMATION SYSTEMS, INC., located at 2201 N.W. 102
Place, Unit 3, Miami, Florida 33172, hereinafter sometimes referred to as (the
"Company").
WITNESSETH:
WHEREAS, CCEC is a public relations and direct marketing advertising firm
specializing in the dissemination of information about publicly traded
companies, and
WHEREAS, the Company is publicly held with its common stock trading on one or
more stock exchanges and/or over the counter or on NASDAQ, and
WHEREAS, the Company desires to publicize itself with the intention of making
its name and business better known to its shareholders, investors, and
brokerage houses, and
WHEREAS, CCEC is willing to accept the Company as a client.
NOW THEREFORE, in consideration of the mutual covenants herein contained, it
is agreed:
1. ENGAGEMENT: The Company hereby engages CCEC to publicize the Company to
brokers, prospective investors and shareholders described in Section 2 of this
agreement, and subject to the further provisions of this Agreement. CCEC
hereby accepts the Company as a client and agrees to publicize it as described
in Section 2 of this agreement, but subject to the further provisions of this
Agreement.
2. MARKETING PROGRAM: Consists of the following components:
(A) CCEC will review and analyze all aspects of the Company's goals
and make recommendations on feasibility and achievement of desired
goals.
(B) CCEC will review all of the general information and recent
filings from the company and produce and mail a 50,000 piece direct
mail package to include an 11" x 17" self mailer and an ample number
of corporate profiles so as to allow for one profile for each
respondent to the original mailing. Profiles will be prepared in
brokerage style format, both items to be approved by the Company
prior to circulation.
(C) CCEC will provide through their Broker Relations Department,
firms and brokers interested in participating and schedule and
conduct the necessary due diligence and obtain the required approvals
for those firms to participate. CCEC will also interview and make
determinations on any firms or brokers referred by the Company with
regard to their participation. CCEC will also place fast fact sheet
and other associated information on CCEC's web site,
www.brokerdata.com for use by the brokerage industry.
PAGE 1 OF 5
<PAGE>
(D) CCEC will create a due diligence package for dissemination to the
investment community, including those brokerage firms, analysis and
fund managers within CCEC's network. All information disseminated by
CCEC on behalf of the Company will be approved in writing by the
Company prior to its dissemination.
(E) CCEC will use its fax broadcast network, composed of brokers,
analysts, fund managers and accredited investors, to deliver news and
pertinent information about the Company.
(F) CCEC will provide Internet exposure for the Company on CCEC's
website, www.insidewallstreet.com, and handle all associated e-mail
requests and responses.
(G) CCEC will handle investor call-ins which are referred to by the
Company or directed to CCEC by the financial media.
(H) CCEC will coordinate tele-conference(s) with the brokerage
community.
(I) CCEC will arrange due diligence meetings with various
broker-dealers and, if requested, attend said meeting at the
Company's expense.
(J) CCEC will use its best efforts to distribute information to the
financial media.
(K) CCEC will assist in the release and distribution of all Company
press releases.
(L) CCEC will facilitate the Company's invitation to attend various
financial conferences at the Company's expense.
(M) CCEC will publicize the Company in CCEC's quarterly newsletter
which features multiple client companies.
(N) CCEC will endeavor to obtain the Company formal analyst
sponsorship.
3. TIME OF PERFORMANCE: Services to be performed under this Agreement shall
commence upon execution of this Agreement and shall continue for not less than
12 months.
4. FEES AND EXPENSES: In consideration of the services to be performed by
CCEC, the Company agrees to pay compensation to CCEC as follows:
(A) $250,000 payable in 40,000 free trading shares of the Company's
common stock and due upon execution of this Agreement.
(B) An option to purchase 100,000 shares of common stock valued as
follows:
1) 50,000 shares valued at $9.00.
2) 50,000 shares valued at $12.00.
PAGE 2 OF 5
<PAGE>
CCEC's right to purchase shares of the Company's Common Stock
pursuant to this option will expire one (1) year to the day that the
Registration Statement registering the underlying shares is deemed
effective.
CCEC may exercise its right to purchase shares of the Company's
common stock pursuant to this option in whole or in part, in minimum
increments of 10,000 shares.
It is understood that the shares of Common Stock underlying this
option will initially be unregistered. However, the Company agrees to
register these shares at such time as other shares are registered on
any appropriate Registration Statement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY: The Company represents and
warrants to CCEC, each such representation and warranty being deemed to be
material that:
(A) The Company will cooperate fully and timely with CCEC to
enable CCEC to perform its obligations under this Agreement.
(B) The execution and performance of this Agreement by the
Company has been duly authorized by the Board of Directors of
the Company in accordance with applicable law, and, to the
extent required, by the requisite number of shareholders of the
Company;
(C) The performance by the Company of this Agreement will not
violate any applicable court decree, law or regulation, nor will
it violate any provisions of the organizational documents of the
Company or any contractual obligation by which the Company may
be bound.
(D) The Company will promptly deliver to CCEC a complete due
diligence package to include latest 10K, latest 10Q, last 6
months of press releases and all other relevant materials,
including but not limited to corporate reports, brochures, etc.
(E) The Company will promptly deliver to CCEC a list of names
and addresses of all shareholders of the Company which it is
aware.
(F) The Company will promptly deliver to CCEC a list of brokers
and market makers of the Company's securities which have been
following the Company.
(G) Because CCEC will rely on such information to be supplied it
by the Company, all such information shall be true, accurate,
complete and not misleading, in all respects.
(H) The Company will act diligently and promptly in reviewing
materials submitted to it by CCEC to enhance timely distribution
of the materials and will inform CCEC of any inaccuracies
contained therein prior to the projected publication date.
6. DISCLAIMER BY CCEC: CCEC WILL BE THE PREPARER OF CERTAIN PROMOTIONAL
MATERIALS. CCEC MAKES NO REPRESENTATION THAT (A) ITS SERVICE WILL RESULT IN
ANY ENHANCEMENT OF THE COMPANY (B) THE PRICE OF THE COMPANY'S PUBLICLY TRADED
SECURITIES WILL INCREASE, (C) ANY PERSON WILL PURCHASE SECURITIES IN THE
COMPANY, OR (D) ANY INVESTOR WILL LEND MONEY TO OR INVEST IN OR WITH THE
COMPANY.
7. EARLY TERMINATION: If the Company fails to cooperate with CCEC, or fails to
make timely payment of the compensation set forth in section 4 of this
agreement CCEC shall have the right to terminate any further performance under
this Agreement. In such event all compensation shall become immediately due
and payable and/or deliverable, and CCEC shall be entitled to
PAGE 3 OF 5
<PAGE>
receive and retain the same as liquidated damages, and not as a penalty, in
lieu of all other remedies, the parties acknowledging and agreeing that it
would be too difficult currently to determine the exact extent of CCEC's
damage, but that the receipt and retention of such compensation is reasonable
present estimate of such damage.
8. LIMITATION OF CCEC LIABILITY: If CCEC fails to perform its services
hereunder, its entire liability to the Company shall not exceed the lessor of
(a) the amount of cash compensation CCEC has received from the Company under
Section 4 of this agreement or (b) the actual damage to the Company as a
result of such non-performance. IN NO EVENT WILL CCEC BE LIABLE FOR ANY
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES NOR FOR ANY CLAIM AGAINST THE
COMPANY BY ANY PERSON OR ENTITY ARISING FROM OR IN ANY WAY RELATED TO THIS
AGREEMENT, UNLESS SUCH DAMAGES RESULT FROM THE USE, BY CCEC, OF INFORMATION
NOT AUTHORIZED BY THE COMPANY.
9. OWNERSHIP OF MATERIALS: All right, title and interest in and to materials
to be produced by CCEC in connection with the contract and other services to
be rendered under this Agreement shall be and remain the sole and exclusive
property of CCEC, except that if the Company performs fully and timely its
obligations hereunder, it shall be entitled to receive upon written request,
one hundred (100) copies of all such materials.
10. CONFIDENTIALITY: Until such time as the same may become publicly known,
CCEC agrees that any confidential nature will not be revealed or disclosed to
any person or entity, except in the performance of this Agreement, and upon
completion of its services and upon written request of the Company all
materials, original documentation provided by the Company will be returned to
it. CCEC will, however, require Confidentiality Agreements from its own
employees and from contractors CCEC reasonably believes will come in contact
with confidential material.
11. NOTICES: All notices hereunder shall be in writing and addressed to the
party at the address herein set forth, or at such other address as to which
notice pursuant to this section may be given, and shall be given by personal
delivery, by certified mail, express mail or by national overnight courier
services. Notices will be deemed given upon the earlier of actual receipt or
three (3) business days after being mailed or delivered to such courier
service.
Notices shall be addressed to CCEC at
Suite 200
195 Wekiva Springs Road
Longwood, FL 32779
and to the Company at:
2201 N.W. 102 Place
Unit 3
Miami, FL 33172
Any notices to be given hereunder will be effective if executed by and sent by
the attorneys for the parties giving such notice, and in connection therewith
the parties and their respective counsel agree that in giving such notice such
counsel may communicate directly in writing with such parties to the extent
necessary to give such notice.
PAGE 4 OF 5
<PAGE>
12. SEPARABILITY: If one or more of the provisions of this Agreement shall be
held invalid, illegal, or unenforceable in any respect, such provision, to the
extent invalid, illegal, or unenforceable, and provided that such provision is
not essential to the transaction provided for by this Agreement, shall not
affect any other provision hereof, and the Agreement shall be construed as if
such provision had never been contained herein.
13. ARBITRATION: Any controversy or claim arising out of or relating to the
Agent Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the commercial arbitration rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
14. MISCELLANEOUS:
(A) EFFECTIVE DATE OF REPRESENTATIONS: shall be no later than the
date CCEC is prepared to distribute letters and/or brochures pursuant
to the contract.
(B) GOVERNING LAW: This Agreement shall be governed by and
interpreted under the laws of the State of Florida where CCEC has
been organized and this Agreement has been accepted by CCEC.
(C) CURRENCY: In all instances, references to dollars shall be deemed
to be United States Dollars.
(D) MULTIPLE COUNTERPARTS: This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original.
Executed as a sealed instrument as of the last day and year shown hereunder.
CONFIRMED AND AGREED ON THE ___ DAY OF __________, 1998.
CONTINENTAL CAPITAL & EQUITY CORPORATION
By:
------------------------------- -------------------------------
CCEC Representative CCEC Officer
------------------------------- -------------------------------
Witness Witness
CONFIRMED AND AGREED ON THE ___ DAY OF __________, 1998.
UNITED INFORMATION SYSTEMS, INC.
By:
------------------------------- -------------------------------
Duly Authorized Witness
PAGE 5 OF 5
<PAGE>
ADDENDUM TO
CLIENT SERVICE AGREEMENT
April 23, 1998
Mr. William Cuervo
Chief Financial Officer
UNITED INFORMATION SYSTEMS, INC.
2201 N.W. 102 Place
Unit 3
Miami, Florida 33172
Dear William:
Let it be understood that the Client Service Agreement, dated April 8, 1998
and executed on April 22, 1998, between Continental Capital & Equity
Corporation (CCEC) and United Information Systems, Inc. (the Company) is
formally amended as follows:
Section 4, Fees and Expenses, is superseded in its entirety with the
following:
4. In consideration of the services to be performed by CCEC, the Company
agrees to pay compensation to CCEC as follows:
(A) 40,000 restricted Common Shares of the Company; plus
(B) An option to purchase 100,000 shares of common stock
valued as follows:
1) 50,000 shares valued at $9.00.
2) 50,000 shares valued at $12.00.
CCEC's right to purchase shares of the Company's Common Stock
pursuant to this option will expire one (1) year to the day that the
Registration Statement registering the underlying shares is deemed
effective.
CCEC may exercise its right to purchase shares of the Company common
stock pursuant to this option in whole or in part, in minimum
increments of 10,000 shares.
(C) The Company agrees to use its best efforts to register such
Common Shares as referenced in (A) and (B) above for resale by CCEC
pursuant to an SEC Registration Statement on its Form S-1, or such
other applicable form as may be appropriate, as currently scheduled
for filing within the two weeks with the U.S. Securities & Exchange
Commission.
If this is also your understanding, please so indicate in the space provided
below.
<PAGE>
Sincerely,
CONTINENTAL CAPITAL & EQUITY CORPORATION
/s/ Dodi B. Zirkle
- ------------------------------------------------------
Dodi B. Zirkle
Vice President
ACCEPTED AND AGREED TO ON THIS 24 DAY OF APRIL, 1998:
/s/ William Cuervo
- ------------------------------------------------------
William Cuervo, CFO, United Information Systems, Inc.
cc: Mark Chavez, Preferred Securities Group
JCA INVESTMENT BANKING
March 12, 1998
ENGAGEMENT LETTER
Mr. William Cuervo
United Information Systems, Inc.
2201 N.W. 102 Place, Unit 3
Miami, Florida 33172
Dear Mr. Cuervo:
This Engagement Letter shall serve to set forth the terms upon which
JCA Investment Banking ("JCA") will render to United Information Systems, Inc.
(the "United Information Systems, Inc.") certain investment banking services. On
the basis of discussions held between JCA and the United Information Systems,
Inc.'s respective representatives, subject to the terms and conditions of
paragraph 10 hereafter, JCA agrees to act as the United Information Systems,
Inc.'s Placement Agent to assist the United Information Systems, Inc. in a
Private Placement Financing on a "best efforts" basis, pursuant to the following
terms and conditions.
1. Investment Banking Services. JCA shall act as the United
Information Systems, Inc.'s Placement Agent and investment
banker with respect to matters related to the financing of the
United Information Systems, Inc.'s businesses,
recapitalizations, mergers and acquisitions. The United
Information Systems, Inc. proposes to hire JCA as its
investment banker and to issue a Private Placement Financing
Request for a minimum of $5,000,000 and up to a maximum of
$15,000,000 (the "Private Placement") through JCA.
2. Term. The investment banking relationship shall commence upon
the execution of this Engagement Letter and expire upon
consummation of the transaction contemplated herein, unless
terminated earlier pursuant to section 3 below.
<PAGE>
United Information Systems, Inc.
May 12, 1998
Page 2
3. Termination
a. The United Information Systems, Inc.
upon 30 days written notice to JCA
may terminate this engagement. In
the event of termination, JCA will
be entitled to all items of
compensation payable to JCA pursuant
hereto as of the date of
termination.
b. JCA may terminate this agreement at
any time, without notice.
c. If the placement is not completed
within 90 days from the signing of
this agreement, UIS may terminate
this agreement with no obligations
due to JCA that are not described in
this agreement.
4. Investment Banking Compensation to JCA. The payment for
investment banking services shall begin upon the closing of
the private placement and shall include all amounts in
arrears. The United Information Systems, Inc. agrees to retain
the Placement Agent for a period of 12 months for $5,000 per
month and five percent (5%) of the company's outstanding
shares in five-year warrants at one hundred percent (100%) of
the market closing bid price on the closing date of the
Private Placement, at a price of $0.001 per warrant. The
shares underlying the warrants will have standard demand and
piggyback registration rights and anti-dilution provisions for
stock splits, stock dividends, recombinations and
reorganizations as the underlying shares from this placement.
The shares underlying the warrants will be registered with the
Convertible Debt, Preferred Shares or Common Shares of this
financing.
5. Placement Compensation to JCA. JCA shall receive the following
items of compensation for the services rendered hereunder.
a. At the closing of the Placement, JCA shall be
entitled to a placement fee equal to five percent
(5%) of the funds raised in the Placement.
<PAGE>
United Information Systems, Inc.
May 12, 1998
Page 3
b. In return for undertaking the Private Placement, the
United Information Systems, Inc. agrees that at the
closing of the Private Placement, or any part
thereof, the United Information Systems, Inc. shall
sell to JCA 10% of the amount of shares sold in this
placement to the purchasers in five-year warrants at
one hundred percent (100%) of the market closing bid
price on the closing date of the Private Placement,
at a price of $0.001 per warrant. The shares
underlying the warrants will have standard demand and
piggyback registration rights and anti-dilution
provisions for stock splits, stock dividends,
recombinations and reorganizations as the underlying
shares from this placement. The shares underlying the
warrants will be registered with the Convertible
Debt, Preferred Shares or Common Shares of this
financing.
6. Expenses. The United Information Systems, Inc. is responsible
for all costs associated with the preparation of the Private
Placement Financing Request, including printing, legal,
background checks and accounting expenses, as well as Blue Sky
filing and registration fees.
a. JCA will incur expenses in connection with this
offering including counsel, accounting and other
expenditures. In consideration of the undertaking by
JCA to use its best efforts herein, the United
Information Systems, Inc. agrees to reimburse JCA for
its expenses in an amount equal to one percent (1%)
of the total amount raised for which JCA shall not be
required to account.
b. United Information Systems, Inc. shall reimburse JCA
for all reasonable travel and due diligence expenses
incurred in the marketing of this offering. United
Information Systems, Inc. shall forward $20,000 to
JCA as a travel retainer at the signing of this
agreement.
7. Exclusive Agency. Unless waived in writing by JCA, JCA shall
be the United Information Systems, Inc.'s exclusive agent with
respect to investment
<PAGE>
United Information Systems, Inc.
May 12, 1998
Page 4
banking services relating to any equity or debt financing
contemplated by the United Information Systems, Inc. during
the term of this Investment Banking Engagement. The United
Information Systems, Inc. hereby agrees, during the term of
this Investment Banking Engagement, not to engage another
investment banking firm or financial intermediary or to
directly contact institutions that provide financing. During
the term of this Investment Banking Engagement, if the United
Information Systems, Inc. accomplishes an equity or debt
financing directly or through a source not introduced to the
United Information Systems, Inc. by JCA, the United
Information Systems, Inc. will be obligated to pay the
Compensation to JCA as set forth in paragraphs 4 and 5 above.
Any transactions completed during the twenty-four (24) months
following the termination of this agreement between the United
Information Systems, Inc. and any institution or third party
introduced to this transaction directly or indirectly by JCA,
will obligate the United Information Systems, Inc. to pay the
Compensation to JCA in the amounts set forth herein. JCA will
retain First Right of Refusal on Public and Private Financings
for United Information Systems, Inc. for 12 months following
the placement. JCA will have ten business days to reply to a
registered letter from the Company concerning JCA's first
right of refusal.
8. Representations & Indemnification. The United Information
Systems, Inc. represents and warrants to JCA that: the United
Information Systems, Inc. will not cause or knowingly permit
any action to be taken in connection with the Private
Placement which violates the Securities Act of 1933 or any
state securities laws; the United Information Systems, Inc.
will cooperate with JCA so as to permit the Private Placement
to be conducted in a manner consistent with the applicable
state and federal securities laws; that all information and
statements provided by the United Information Systems, Inc. in
the Private Placement Financing Request will be true and
correct; that the Private Placement Financing Request will not
be misleading or violative of the anti-fraud provisions of the
Securities and Exchange Act of 1934; current United
Information Systems, Inc. management, as disclosed to JCA,
will continue in place after the Private Offering for a
reasonable period of time; there will be included in the
Private Placement Financing Request financial statements of
the United Information Systems, Inc. for the last three fiscal
<PAGE>
United Information Systems, Inc.
May 12, 1998
Page 5
years or for such shorter period as the United Information
Systems, Inc. was in existence and the latest unaudited
comparative quarterly or other interim financial statements;
the financial statements will fairly reflect the financial
condition of the United Information Systems, Inc. and the
results of its operations at a time and for the periods
covered by such financial statements, and such statements will
be substantially as heretofore represented to the undersigned;
the United Information Systems, Inc. does not know of any
facts adversely affecting the Private Placement Financing
Request; the United Information Systems, Inc. has prepared and
delivered to the undersigned its most recent estimate of
sales, earnings, and cash flow and agrees to update those
estimates on a monthly basis during the pendency of the
Private Offering. The United Information Systems, Inc. agrees
to indemnify and hold JCA and its attorneys, accountants,
agents and employees, officers and directors, free and
harmless from any liability, cost and expense, including
attorneys' fees in the event of a breach of this
representation and warranty.
9. Choice of Laws and Arbitration. This engagement letter shall
be construed pursuant to the laws of the State of Florida. Any
controversy arising hereunder shall be resolved by arbitration
pursuant to the rule of the American Arbitration Association.
10. Conditions of Performance by JCA. Notwithstanding anything on the
contrary hereinabove set forth, the performance of the obligations of JCA as
provided in this Engagement Letter is specifically subject to and conditioned
upon the following:
a. Successful completion of in depth investigative
procedures to be conducted by JCA in respect to the
United Information Systems, Inc., its operations and
general performance as well as its officers and
directors (commonly referred to as "due diligence"
procedures); and
b. Results of the due diligence procedures employed by
JCA satisfactory to JCA in its sole determination.
If this Engagement Letter correctly sets forth our agreement, please
so indicate by
<PAGE>
United Information Systems, Inc.
May 12, 1998
Page 6
signing and returning the enclosed copy of this letter.
Very truly yours,
JCA INVESTMENT BANKING
By: /s/ Richard A. Rappaport
---------------------------------
Richard A. Rappaport
Accepted and Agreed
this 12 day of March, 1998
United Information Systems, Inc.
By: /s/ William Cuervo
---------------------------------
William Cuervo
Chief Financial Officer
SUBSIDIARIES
1. United Information Systems, Inc., a Florida corporation
2. UIS Industrial Ltda., a corporation formed under the laws of Brazil
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Form S-1 filed under the Securities Act of
1933 by United Information Systems, Inc. of our report dated March 23, 1998,
relating to our examinations of the financial statements of United Information
Systems, Inc. as of December 31, 1997 and 1996. We also consent to the reference
to our firm appearing under the caption "Experts" in the Form S-1.
SPEAR, SAFER, HARMON & CO.
Miami, Florida
May 13, 1998
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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0
0
<COMMON> 8,223
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