PROSPECTUS
UNITED SERVICES ADVISORS, INC.
PREFERRED STOCK
1,000,000 shares
$.05 par value
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This Prospectus relates to shares of Preferred Stock, $.05 par value (the
"Preferred Stock"), of United Services Advisors, Inc. ("USAI" or the "Company")
which may be offered by the stockholder named herein (the "Selling
Stockholder"). The shares offered hereby (the "Shares") include 1,000,000 shares
of Preferred Stock.
USAI will not receive any of the proceeds from sale of the Shares offered
by the Selling Stockholder.
The Selling Stockholder and any broker-dealers who participate in the sale
of the Shares may be deemed to be underwriters and any commissions paid in
connection with such sale may be deemed to be an underwriting discount or
commission. See "PLAN OF DISTRIBUTION" at Page 11.
This prospectus contains a Risk Factor Section. See "RISK FACTORS" at page
3.
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USAI's Preferred Stock is traded in the over-the-counter market and
reported on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") under the trading symbol "USVSP." On February 13, 1996 the
last reported sales price of the Preferred Stock as reported by the NASDAQ was
$2.75 per share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is February 14, 1996
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in, or incorporated by
reference in, this Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by USAI or the
Selling Stockholder. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities 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 made hereunder shall, under any circumstances, create any implication
that the information herein is correct as of any time subsequent to the date
hereof or that there has been no change in the affairs of USAI since that date.
AVAILABLE INFORMATION
USAI is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission" or "SEC"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the following Regional Offices of the Commission -- Chicago
Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and New York Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by USAI with the Commission under the Securities Act of 1933
(the "Securities Act"), with respect to the Shares offered hereby. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to USAI and the Shares offered hereby. Any statements
contained herein concerning the provision of any document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission or
incorporated by reference herein are not necessarily complete, and in each
instance reference is made to the copy of such document for a more complete
description of the matter involved. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K for the year ended June 30, 1995, the
Quarterly Report on Form 10-Q for the quarters ended September 30, 1995, and
December 31, 1995, the January 4, 1996 Current Report on Form 8-K, and the
October 25, 1985 Form 8-A filed with the Commission by USAI (Commission File
Number 0-13928) pursuant to Section 13 of the Exchange Act are incorporated
herein by reference.
Each document filed by USAI pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Shares pursuant hereto shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of filing
of such document. Any statement contained herein or in a document all or a
portion of which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
USAI will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to Legal Division, United
Services Advisors, Inc., at its principal executive offices, 7900 Callaghan
Road, San Antonio, Texas 78229 (telephone: 210/308-1234).
BUSINESS OF USAI
United Services Advisors, Inc., a Texas corporation organized in 1968, and
its wholly-owned subsidiaries provide four types of services: (1) investment
adviser to institutions (namely, investment companies) and other persons; (2)
transfer agency and record keeping; (3) mailings; and (4) custodial services for
IRAs and other types of retirement plans. The provision of investment advisory,
transfer agent and custodial services are the primary sources of USAI's revenue.
The Company is a registered investment adviser under the Investment
Advisers Act of 1940 and is principally engaged in the business of rendering
investment advisory and other services to United Services Funds, a Massachusetts
business trust ("USF"). USF is a no-load, open-end, diversified management
investment company which issues redeemable securities, interests in numerous
separate subtrusts or series (commonly referred to as mutual funds).
RISK FACTORS
Investment in the shares of Preferred Stock offered hereby involves special
risks. Prospective investors should carefully consider the matters set forth in
Company disclosure documents including, in particular, the matters set forth
below.
RELATIONSHIP WITH FUNDS
As required by the Investment Company Act of 1940, the advisory agreements
between USAI and the funds managed by USAI are terminable upon 60 days notice.
In the event any of the management or investment company services agreements
were canceled or not renewed pursuant to the terms thereof, the Company would be
adversely affected. The Company and its subsidiaries consider their
relationships with USF to be good and they have no reason to believe that their
management and service contracts will not be renewed in the future; however,
there is no assurance that USF will choose to continue its relationships with
the Company.
DIVIDENDS ON PREFERRED STOCK
The Company has not paid cash dividends on its Common Stock during the last
ten fiscal years, and has never paid cash dividends on its Preferred Stock.
Payment of cash dividends is within the discretion of the Company's Board of
Directors and is dependent upon earnings, operations, capital requirements,
general financial condition of the Company and general business conditions.
NON-VOTING SHARES
On most matters affecting the Company, only the holders of Class A Common
Stock will be able to vote. The Company's management is the beneficial owner of
more than 68% of the Class A Common Stock and will, therefore, have the rights
to elect a majority of the directors and otherwise control the management and
affairs of the Company. The shares of Preferred Stock being offered hereby are
non-voting shares, and the owners thereof generally have no power to vote at any
meeting of the shareholders of the Company. See "Description of Securities."
COMPETITION
The mutual fund industry is highly competitive. The Company competes with
other mutual fund managers and investment advisers and with the many investment
alternatives offered by insurance companies, banks, securities dealers, and
other financial institutions, some of whom offer federally insured accounts. A
number of competing mutual fund groups are significantly larger than the
Company, offer a greater variety of investment objectives and have more
experience and greater resources to promote the sale of investments therein. See
the Company's annual and quarterly reports.
DEBT OBLIGATIONS
The Company has approximately $68.7 million in debt related to the purchase
of certain adjustable rate notes financed primarily by third party
broker-dealers under reverse repurchase agreements. The Company must bear the
risk of the interest rate spread between the interest paid to the brokers on the
reverse repurchase agreements and the interest received from the notes. While
the Company has covered this interest spread to date, and management believes
the Company has the ability to continue to cover this spread, there is no
assurance that the Company will be able to do so until the notes mature. See the
Company's annual and quarterly reports.
In light of the foregoing debt, from time to time the Company purchases
Eurodollar put options to hedge its exposure to interest rate changes. These
contracts are simple, straightforward, exchange-traded options. The Company's
risk of loss related to such contracts is limited to the initial premiums paid
for the options.
VOLATILITY IN ASSET VALUE OF THE FUNDS
Certain of the funds managed by the Company are highly volatile. The
advisory fees paid by the funds, from which substantially all the Company's
earnings are derived, are based on varying percentages of the aggregate amount
of assets under management. A diminution in the value of these assets resulting
from a decline in the market value of securities owned by the funds adversely
affects the Company's revenues. See the Company's annual and quarterly reports.
SELLING STOCKHOLDER
SHARES OFFERED
The following table sets forth as of January 24, 1996 the name of the
Selling Stockholder, the number of shares of Preferred Stock which may be
regarded as beneficially owned by such person, the number of shares being
offered for sale, the number of shares to be owned after the sale contemplated
hereby, and the percentage of ownership of the outstanding shares of Preferred
Stock after the sale.
SHARES TO PERCENT OF
SHARES TO BE OWNED SHARES OWNED
SELLING STOCKHOLDER SHARES OWNED BE SOLD AFTER SALE AFTER SALE
- ------------------- ------------ ------- ---------- ----------
Marleau, Lemire Inc. 1,000,000 1,000,000 0 0%
120,000 120,000 0 (1) 0%
(1) A Post-Effective Amendment to a Registration Statement on Form S-3 (No.
33-90518) with respect to the offering of the 120,000 shares of Preferred Stock
was declared effective on February 5, 1996.
MARLEAU, LEMIRE INC.
Marleau, Lemire Inc. ("ML"), a public company whose shares are traded on
the Toronto Stock Exchange and the Montreal Exchange (Symbol "MRM"), is an
investment dealer in the small and mid-cap Canadian market. Through its
operating subsidiaries, it operates out of offices in Montreal, Toronto,
Vancouver, Victoria and Switzerland.
The 120,000 shares of Preferred Stock offered hereby were acquired by ML in
connection with joint venture and other negotiations during the summer of 1994.
ML and USAI have agreed to be joint venturers in connection with managing mutual
funds and distributing their shares in Canada. Subsequent to the issuance of the
120,000 shares and as a result of separate negotiations, USAI and ML entered
into a letter of intent pursuant to which ML would purchase a significant
ownership interest in USAI. These negotiations and the resulting agreement are
not related to the joint venture agreement.
DECEMBER 1994 TRANSACTION
On December 7, 1994, USAI and ML entered into an agreement whereby USAI
issued to ML one million shares of a new class of convertible non-voting common
stock (Class B) at $5.00 per share and a warrant to purchase an additional one
million shares of capital stock at $6.00 per share in consideration of an
investment of US $5 million. The market price for USAI's preferred stock on
December 7, 1994 was $3.25 per share.
The Class B stock was convertible into either one million shares of voting
stock (Class A) or one million shares of USAI's existing preferred stock if and
when mutual fund shareholder and/or USAI preferred shareholder approvals are
obtained. As part of the transaction, Mr. Frank Holmes, Chairman and CEO of
USAI, exchanged 72,720 shares of USAI's Class A common stock for 164,347 shares
of ML common stock. In addition, subject to certain conditions, including
obtaining mutual fund shareholder approvals in the future, Mr. Holmes was to
exchange an additional 177,280 Class A shares for 400,653 shares of ML. ML would
have, if it converted its Class B shares to Class A shares after mutual fund
shareholder approval, owned more than 50% of the issued and outstanding voting
shares of USAI. Mr. Holmes would then have owned approximately 3% of the total
outstanding common shares of ML. The agreement provided, if shareholder
approvals were not obtained, that ML could opt, during prescribed periods in
1996 and 1997, to convert its investment into a US $5 million debenture payable
by USAI over a two year period from the date of ML's conversion.
The warrant allowed ML, at its option, to purchase either one million
shares of Class A common stock or, subject to preferred stockholder approval,
one million shares of USAI's existing preferred stock at a price of $6.00 per
share during the six month period between October 1, 1997 and March 31, 1998. In
addition, an existing US $6 million debenture of USAI held by ML was amended so
as to be convertible at the option of ML into existing preferred shares of USAI
at a price of $7.00 per share if and when preferred shareholder approval was
obtained.
Pursuant to the Shareholders' Agreement dated December 7, 1994, among USAI,
Frank E. Holmes, F. E. Holmes Organization Inc., and ML, both Mr. Holmes
(individually and for his holding company) and ML agreed not to sell or transfer
in any manner any of the shares either party owned directly or beneficially
without obtaining the prior written consent of the other party. In the event one
party received an offer from a third party to purchase any of its shares, the
other party has thirty (30) days to either purchase the securities subject to
the offer at the same price and under the same terms or to join with the other
party to sell all but not less than all of its shares to the third party under
the same terms and conditions in the offer.
Additionally, in the event of the death or disability of Mr. Holmes, then
each of Mr. Holmes and F. E. Holmes Organization Inc. were to be deemed to have
made an offer to sell the shares owned by both persons to the Company and the
Company was obligated to buy such shares. Furthermore, if a change of control in
ML was to occur after it had voting control of USAI, USAI was to be deemed to
have made an offer to purchase the shares, options and warrants owned by Mr.
Holmes and F. E. Holmes Organization Inc.
In connection with ML's investment in USAI, USAI's Board of Directors was
expanded from five to nine and included two ML representatives; and, Mr. Holmes
was elected to ML's Board of Directors. Richard Renaud, an independent outside
director for ML, was appointed as a ML representative on USAI's Board. In
addition, the agreements provided, among other things, for bylaw amendments
providing for ML representation on Board committees, an employment agreement for
Mr. Holmes, and registration rights so that certain shares acquired by ML may be
sold in public offerings. The employment agreement between Mr. Holmes and the
Company contained standard terms such as requiring Mr. Holmes to perform the
same duties which are normally accomplished and done by persons having similar
duties and\or occupying similar positions within businesses comparable to that
of the Company. The agreement contained a non-compete clause prohibiting Mr.
Holmes from directly or indirectly becoming involved in any manner with
businesses or individuals of which a significant portion of the activities are
similar with the Company's. The agreement was to expire on October 31, 1997 and
provided that it could be renewed for successive one-year terms.
DECEMBER 1995 TRANSACTION
USAI and ML closed a transaction on December 29, 1995 covering the issuance
of preferred stock and the repurchase of convertible non-voting common stock and
closely related items as discussed below. Pursuant to the agreement: (1) ML no
longer has a right to return its one million shares of Class B common stock to
the Company at its original purchase price of $5,000,000; (2) in this connection
the Company eliminated any future interest costs it might have borne had ML
converted its investment to debt; and, (3) the Company canceled ML's warrants
and options to acquire additional shares, thus reducing future dilution by
approximately 1.65 million shares.
In connection with the December 1995 transaction, ML received $2,500,000
cash and 1,000,000 shares of Preferred Stock in exchange for ML canceling (a)
1,000,000 shares of USAI's Class B Common Shares, (b) warrants giving ML the
right to acquire 1,000,000 shares of USAI's voting Class A Common Stock or
Preferred Stock, (c) the option to convert the remaining balance of its
subordinated debenture into approximately 648,000 shares of USAI's Preferred
Stock, and (d) other rights under the December 1994 agreements relating to ML's
original purchase, including its right to obtain voting control of USAI.
As a result of the December 1995 transaction:
1. The Purchase Agreement, the Shareholder's Agreement and the Employment
and Non-competition Agreement, all dated December 7, 1994, were
canceled in their entirety;
2. Messrs. Hubert Marleau and Richard Renaud, ML's representatives,
resigned from USAI's Board of Directors and Frank E. Holmes resigned
from ML's Board of Directors;
3. USAI committed to prepay $50,000 per month toward the principal
balance outstanding on the debenture held by ML in accordance with the
prepayment clause set forth in the USAI-ML Subordinated Debenture
Agreement ("Debenture");
4. The Debenture is being amended to provide that in the event voting
control of USAI changes, the balance owing ML under the Debenture
shall become due and payable prior to closing on the change of control
and that this registration statement containing this prospectus shall
have been declared effective by the SEC prior to said closing;
5. ML has undertaken to transfer, immediately, the assets and the
management contract(s) of ML's Small Cap Fund from ML to United
Services Advisors Canada, Inc. (or one of its designated subsidiaries)
("USACI"), the USAI-ML joint venture, subject to regulatory and
shareholder approvals -- with all revenues generated by ML's Small Cap
Fund, effective January 1, 1996, whether the assets and the management
contracts have been transferred or not, becoming the revenue of USACI;
6. USAI agreed to bear up to the next $ Cdn. 250,000 in costs with
respect to ML's and USAI's joint venture, USACI; and
7. The requirement that Mr. Holmes exchange 177,280 shares of USAI's
Class A Common Shares for 400,633 shares of ML (133,551 consolidated
ML shares based on 1 new for 3 old) pursuant to the terms and
conditions of the Purchase and Shareholders Agreement dated December
7, 1994 was canceled in its entirety; with the understanding, however,
that the 72,720 Class A Common Shares held by ML and the ML shares
held by Mr. Holmes are not subject to this cancellation.
All the foregoing is subject to general market conditions and the absence of any
material adverse conditions or changes to USAI.
SHARES IDENTIFIED/INDEMNIFICATION
Only the 1,000,000 shares acquired by ML in the December 1995 transaction
are part of this offering.
The Shares being offered hereby are owned by the Selling Stockholder. In
connection with the registration of the sale of the Shares, USAI and the Selling
Stockholder have agreed to indemnify each other against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the other may be required to make in respect thereof.
USE OF PROCEEDS
USAI will not receive any of the proceeds from the sale of Shares offered
by the Selling Stockholder.
DESCRIPTION OF SECURITIES
Article Four of Registrant's Restated Articles of Incorporation was
amended on November 22, 1994 to provide for a reclassification of the existing
authorized and outstanding voting Common Stock into a new class of stock to be
called Class "A" Common Stock; and the creation of a new class of stock, Class
"B" Common Stock, which is non-voting common stock convertible to voting Class
"A" Common Stock. The amendment did not change the number of authorized shares
of Common Stock, which remains at 4,000,000. Of these shares, 1,750,000 shares
are designated as Class A shares and 2,250,000 shares are designated as Class B
shares.
Article Four of Registrant's Articles was amended on August 7, 1995 to
increase the number of authorized shares of Preferred Stock from 6,000,000 to
7,000,000.
Registrant's Articles reflect authority to issue one class of Preferred
Stock and two classes of Common Stock all with a par value per share of $0.05.
If and when the conversion right of Class B Common Stock is exercised, the
shares may be exchanged into Class A Common Stock thereby reducing the number of
Class B shares and allowing the total number of shares of Common Stock
authorized and outstanding to remain constant at all times.
All of the Shares being registered pursuant to the Registration Statement
of which this Prospectus is a part are shares of Preferred Stock. No shares of
Common Stock have been registered for public sale. The shares of Preferred Stock
offered hereby have been validly issued, fully paid and are nonassessable.
CLASS A COMMON STOCK
The holders of Class A Common Stock have full voting rights at any annual
or special meeting of the stockholders of USAI, including the right to cumulate
votes at each election for directors by giving one candidate as many votes as
the number of such candidates multiplied by his shares shall equal, or by
distributing such votes on the same principle among any number of such
candidates.
In addition, Texas law entitles holders of Class A Common Stock to vote on
any proposed plan of merger or consolidation; upon the sale, lease, exchange, or
other disposition of all, or substantially all, the property and assets of USAI,
except in the ordinary course of business; and upon any proposed amendment to
the Articles of Incorporation which would: (1) increase or decrease the
aggregate number of authorized shares of Class A Common Stock; (2) increase or
decrease the par value of the shares of Class A Common Stock; (3) effect an
exchange, reclassification, or cancellation of all or part of the Class A Common
Stock; (4) effect an exchange or create a right of exchange, of all or any part
of the shares of another class into shares of Class A Common Stock; (5) change
the designations, preferences, limitations, or relative rights of the Class A
Common Stock; (6) change the shares of Class A Common Stock into the same or a
different number of shares, either with or without par value, of the same class
or another class or classes; (7) create a new class of shares having rights and
preferences equal, prior, or superior to the shares of Class A Common Stock or
increase the rights and preferences of any class having rights and preferences
equal, prior, or superior to the shares of Class A Common Stock; (8) cancel or
otherwise affect dividends on the shares of Class A Common Stock which had
accrued but had not been declared; or (9) include in or delete from the Articles
of Incorporation any provision required or permitted to be included in the
Articles of Incorporation of a close corporation in conformity with Texas law.
Any of the proposed amendments mentioned above would require approval by
two-thirds of each class of stock affected by the proposed amendment.
Class A Common Stock has no preemptive or conversion rights, or sinking
fund or redemption provisions. With one exception, there is no restriction with
respect to the repurchase of outstanding shares in accordance with law, by
public or private transaction. This exception prohibits USAI from purchasing its
Common Stock in any fiscal year unless cash dividends shall have been paid
during such year on outstanding Preferred Stock in an amount of at least 5% of
USAI's after-tax net earnings for its prior fiscal year.
Holders of the outstanding shares of the Preferred Stock are entitled to
receive, when and as declared by USAI's Board of Directors, a non-cumulative
cash dividend equal in the aggregate to 5% of USAI's after-tax net earnings for
its prior fiscal year. After such dividend has been paid, the holders of the
outstanding shares of Class A and Class B Common Stock are entitled to receive,
when and as declared by USAI's Board of Directors, cash dividends per share
equal to the cash dividends per shares paid to the holders of the Preferred
Stock. Thereafter, if the Board of Directors determines to pay additional cash
dividends, such dividends are paid simultaneously on a pro rata basis to holders
of Preferred Stock, Class A Common Stock and Class B Common Stock.
In the event of the dissolution, liquidation or winding up of USAI, holders
of the outstanding shares of the Preferred Stock are entitled to receive $.05
per share. Thereafter, holders of the outstanding shares of the Class A and
Class B Common Stock are entitled to receive $.05 per share. All remaining
assets will be distributed pro rata among the holders of the Preferred, the
Class A Common Stock and Class B Common Stock.
There is no market for shares of USAI Common Stock and shares of Common
Stock would probably be sold in a private placement, not pursuant to Rule 144
under the Securities Act of 1933. The Company acts as transfer agent for its
Common Stock.
CLASS B COMMON STOCK
Class B Common Stock was added to USAI's Articles in connection with the
December 1994 transaction between USAI and ML.
Holders of shares of Class B Common Stock have the right to require the
Registrant from its 1995 fiscal year to its 1997 fiscal year to validly call and
hold meetings of the holders of each class of stock, at least once during each
such fiscal year until the consents and approvals of such holders have been
obtained so that there shall exist such number of authorized shares of Preferred
Stock as is equal to the aggregate of (i) the issued and outstanding shares of
Preferred Stock at the time of such consents and approvals and (ii) the number
of shares of Preferred Stock as may be issuable pursuant to any outstanding
subscriptions, calls, options, warrants, or other agreements or rights to sell,
purchase or subscribe for any shares of Preferred Stock or convert any
obligations into shares of Preferred Stock.
The holders of the shares of Class B Common Stock shall have the right to
convert Class B Common Stock shares into Class A Common Stock shares on a
one-to-one ratio on such date as the Registrant's Board of Directors shall
establish by affirmative vote of a majority of the Board. Pending Board of
Director action, the conversion date for Class B Common Stock to be issued is
October 1, 1997. The holders of shares of Class B Common Stock shares shall have
the right to convert Class B Common Stock shares into shares of Preferred Stock,
on a one-for-one basis, at any time after October 1, 1997, provided the company
shareholders, including the holders of shares of Preferred Stock, voting
separately as a class, have approved an increase in the authorized number of
shares of Preferred Stock.
The holders of Class B Common Stock have no power to vote at any meeting of
the stockholders of USAI except as required by the Texas Business Corporation
Act, and on most matters affecting USAI, only the holders of Class A Common
Stock will be able to vote. Texas law entitles holders of Class B Common Stock
vote on any proposed plan of merger or consolidation; upon the sale, lease,
exchange, or other disposition of all, or substantially all, the property and
assets of USAI, except in the ordinary course of business; and upon any proposed
amendment to the Articles of Incorporation which would: (1) increase or decrease
the aggregate number of authorized shares of Class B Common Stock; (2) increase
or decrease the par value of the shares of Class B Common Stock; (3) effect an
exchange, reclassification, or cancellation of all or part of the Class B Common
Stock; (4) effect an exchange or create a right of exchange, of all or any part
of the shares of another class into shares of Class B Common Stock; (5) change
the designations, preferences, limitations, or relative rights of the Class B
Common Stock; (6) change the shares of Class B Common Stock into the same or a
different number of shares, either with or without par value, of the same class
or another class or classes; (7) create a new class of shares having rights and
preferences equal, prior, or superior to the shares of Class B Common Stock or
increase the rights and preferences of any class having rights and preferences
equal, prior, or superior to the shares of Class B Common Stock; (8) cancel or
otherwise affect dividends on the shares of Class B Common Stock which had
accrued but had not been declared; or (9) include in or delete from the Articles
of Incorporation any provision required or permitted to be included in the
Articles of Incorporation of a close corporation in conformity with Texas law.
Any of the proposed amendments mentioned above would require approval by
two-thirds of each class of stock affected by the proposed amendment.
Class B Common Stock has no preemptive rights, or sinking fund or
redemption provisions. With one exception, there is no restriction with respect
to the repurchase of outstanding shares in accordance with law, by public or
private transaction. This exception prohibits the Company from purchasing its
Common Stock in any fiscal year unless cash dividends shall have been paid
during such year on outstanding Preferred Stock in an amount of at least 5% of
the Company's after-tax net earnings for its prior fiscal year.
Holders of the outstanding shares of the Preferred Stock are entitled to
receive, when and as declared by USAI's Board of Directors, a non-cumulative
cash dividend equal in the aggregate to 5% of USAI's after-tax net earnings for
its prior fiscal year. After such dividend has been paid, the holders of the
outstanding shares of Class A and Class B Common Stock are entitled to receive,
when and as declared by USAI's Board of Directors, cash dividends per share
equal to the cash dividends per shares paid to the holders of the Preferred
Stock. Thereafter, if the Board of Directors determines to pay additional cash
dividends, such dividends are paid simultaneously on a pro rata basis to holders
of Preferred Stock, Class A Common Stock and Class B Common Stock.
In the event of the dissolution, liquidation or winding up of USAI, holders
of the outstanding shares of the Preferred Stock are entitled to receive $.05
per share. Thereafter, holders of the outstanding shares of the Class A Common
Stock and Class B Common Stock are entitled to receive $.05 per share. All
remaining assets will be distributed pro rata among the holders of the
Preferred, the Class A Common Stock and Class B Common Stock.
There is no market for shares of USAI Common Stock and shares of Common
Stock would probably be sold in a private placement, not pursuant to Rule 144
under the Securities Act of 1933.
As a result of the December 1995 transaction between USAI and ML, no shares
of Class B Common Stock are outstanding.
PREFERRED STOCK
Preferred Stock has no preemptive or conversion rights, or sinking fund or
redemption provisions. With one exception, there is no restriction with respect
to the repurchase of outstanding shares in accordance with law, by public or
private transaction. This exception prohibits the Company from purchasing its
Common Stock in any fiscal year unless cash dividends shall have been paid
during such year on outstanding Preferred Stock in an amount of at least 5% of
the Company's after-tax net earnings for its prior fiscal year.
The holders of Preferred Stock have no power to vote at any meeting of the
stockholders of USAI except as required by the Texas Business Corporation Act,
and on most matters affecting USAI, only the holders of Class A Common Stock
will be able to vote. Texas law entitles holders of Preferred Stock vote on any
proposed plan of merger or consolidation; upon the sale, lease, exchange, or
other disposition of all, or substantially all, the property and assets of USAI,
except in the ordinary course of business; and upon any proposed amendment to
the Articles of Incorporation which would: (1) increase or decrease the
aggregate number of authorized shares of Preferred Stock; (2) increase or
decrease the par value of the shares of Preferred Stock; (3) effect an exchange,
reclassification, or cancellation of all or part of the Preferred Stock; (4)
effect an exchange or create a right of exchange, of all or any part of the
shares of another class into shares of Preferred Stock; (5) change the
designations, preferences, limitations, or relative rights of the Preferred
Stock; (6) change the shares of Preferred Stock into the same or a different
number of shares, either with or without par value, of the same class or another
class or classes; (7) create a new class of shares having rights and preferences
equal, prior, or superior to the shares of Preferred Stock or increase the
rights and preferences of any class having rights and preferences equal, prior,
or superior to the shares of Preferred Stock; (8) cancel or otherwise affect
dividends on the shares of Preferred Stock which had accrued but had not been
declared; or (9) include in or delete from the Articles of Incorporation any
provision required or permitted to be included in the Articles of Incorporation
of a close corporation in conformity with Texas law. Any of the proposed
amendments mentioned above would require approval by two-thirds of each class of
stock affected by the proposed amendment.
Holders of the outstanding shares of the Preferred Stock are entitled to
receive, when and as declared by USAI's Board of Directors, a non-cumulative
cash dividend equal in the aggregate to 5% of USAI's after-tax net earnings for
its prior fiscal year. After such dividend has been paid, the holders of the
outstanding shares of Class A Common Stock and Class B Common Stock are entitled
to receive, when and as declared by USAI's Board of Directors, cash dividends
per share equal to the cash dividends per shares paid to the holders of the
Preferred Stock. Thereafter, if the Board of Directors determines to pay
additional cash dividends, such dividends are paid simultaneously on a pro rata
basis to holders of Preferred Stock, Class A Common Stock and Class B Common
Stock. The holders of the Preferred Stock are protected in certain instances
against dilution of the dividend amount payable to such holders.
In the event of the dissolution, liquidation or winding up of USAI, holders
of the outstanding shares of the Preferred Stock are entitled to receive $.05
per share. Thereafter, holders of the outstanding shares of the Class A Common
Stock and Class B Common Stock are entitled to receive $.05 per share. All
remaining assets will be distributed pro rata among the holders of the
Preferred, the Class A Common Stock and Class B Common Stock.
TRANSFER AGENT AND REGISTRAR
The Bank of New York has been appointed to act as transfer agent and
registrar of the Preferred Stock. USAI serves as transfer agent of both classes
of Common Stock.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth USAI's ratios of earnings to fixed charges
for the periods indicated. Earnings are defined as income (loss) from continuing
operations before provision for income taxes. In calculating the ratios,
earnings have been adjusted by adding fixed charges, excluding capitalized
interest. Fixed charges consist of interest expense, capitalized interest and
the portion of rental expense deemed representative of an interest factor. There
is no provision for preferred dividends because, as discussed above, USAI is not
obligated to pay and has never paid cash dividends on the Preferred Stock.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
SIX MONTHS ENDED --------------------------------------------
DECEMBER 31, 1995 1995 1994 1993 1992 1991 1990
------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS 1.50 (a) 5.12 1.51 (b) 2.39 4.53
<FN>
(a) Earnings for the year ended June 30, 1995 were inadequate to cover fixed charges by $5,895,860.
(b) Earnings for the year ended June 30, 1992 were inadequate to cover fixed charges by $426,334.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
USAI has been advised that the Shares being offered hereby may be sold by
or on behalf of the Selling Stockholder through one or more broker-dealers,
through underwriters, directly to investors pursuant to this Prospectus or in
transactions that are exempt from the requirements of registration under the
Securities Act, at a fixed price or prices (which may be changed from time to
time), at market prices prevailing at the time of such sale, at prices related
to such market prices or at negotiated prices, and in connection therewith
distributors' or sellers' commissions may be paid or allowed, which will not
exceed those customary in the types of transactions involved. Broker-dealers may
act as agent for the Selling Stockholder or may purchase shares from the Selling
Stockholder as principal, and thereafter resell such shares from time to time in
or through one or more transactions (which may involve block transactions).
Any such broker-dealers or underwriters may receive compensation from the
Selling Stockholder in the form of underwriting discounts or commissions and may
receive commissions from purchases of the Shares for whom they may act as agent.
If any such broker-dealers purchase any of the Shares as principal, they may
effect resales of such Shares from time to time to or through other
broker-dealers, and such other broker-dealers may receive compensation in the
form of concessions or commissions from the Selling Stockholder or from
purchasers of such Shares for whom they may act as agent. USAI and the Selling
Stockholder may agree to indemnify any such broker-dealers or underwriters
against certain civil liabilities, including liabilities under the Securities
Act.
To the extent required, the names of the specific managing underwriter or
underwriters, as well as certain other information, will be set forth in a
supplement to this Prospectus. In such event, the discounts and commissions to
be allowed or paid to the underwriters, if any, and the discounts and
commissions to be allowed or paid to dealers or agents, if any, will be set
forth in, or may be calculated from, a supplement to this Prospectus.
Any underwriters, brokers, dealers and agents who participate in any such
sale may also be customers of, engage in transactions with, or perform services
for USAI or the Selling Stockholder in the ordinary course of business.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 2.02(16) of the Texas Business Corporation Act (the "TBCA") empowers
USAI to indemnify directors, officers, employees and agents of USAI and to
purchase liability insurance for those persons to the extent permitted by
Article 2.02-1 of the TBCA.
Article 2.02-1 of the TBCA in part provides that a corporation may indemnify
its officers and directors for any liability if it is determined that such
officer or director (i) conducted himself in good faith, (ii) reasonably
believes, in the case of conduct in his official capacity as an officer or
director, that his conduct was in the corporation's best interest, and in all
other cases, that his conduct was at least not opposed to the corporation's best
interest, and (iii) in the case of any criminal proceeding, had no reasonable
cause to believe that his conduct was unlawful. These determinations must be
made (i) by a majority vote of a quorum consisting of the directors who at the
time of the vote are not named defendants or respondents in the proceeding, (ii)
if such a quorum cannot be obtained, by a majority vote of a committee of the
Board of Directors, designated to act in the matter by a majority vote of all
directors, consisting solely of two or more directors who, at the time of the
vote, are not named defendants or respondents in the proceeding, (iii) by
special legal counsel selected by the Board of Directors or a committee of the
Board by a vote as set forth in (i) or (ii) above, or, if such a quorum cannot
be obtained and such a committee vote cannot be established, by a majority vote
of all directors, or (iv) by the shareholders in a vote that excludes the shares
that are held by directors and officers who are named defendants or respondents
in the proceeding.
Under Article 2.02-1 of the TBCA, an officer or a director may be
indemnified against judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable expenses actually incurred by the officer or
director in connection with the proceeding, but if the officer or director is
found liable to the corporation or is found liable on the basis that personal
benefit was improperly received by the officer or director, the indemnification
(i) is limited to reasonable expenses actually incurred by the officer or
director in connection with the proceeding, and (ii) shall not be made in
respect of any proceeding in which the officer or director shall have been found
liable for willful or intentional misconduct in the performance of his duty to
the corporation. The termination of a proceeding by judgment, order, settlement,
or conviction, or upon a plea nolo contendere or its equivalent is not of itself
determinative that the officer or director did not meet the requirements set
forth above. An officer or director shall be deemed to have been found liable in
respect of any claim, issue or matter only after the officer or director shall
have been so adjudicated by a court of competent jurisdiction after exhaustion
of all appeals therefrom.
Article 2.02-1 of the TBCA further authorizes a corporation to pay the
reasonable expenses incurred by an officer or director in advance of the final
disposition of such proceeding if the corporation receives a written affirmation
by the officer or director of his good faith belief that he has met the standard
of conduct necessary for indemnification as well as a written undertaking to
repay the amount paid by the corporation if it is ultimately determined that the
officer or director has not met the requirements for indemnification. In
addition, Article 2.02-1 of the TBCA empowers a corporation to indemnify and
advance reasonable expenses to an employee, agent and certain other persons to
the same extent it may indemnify in advance expenses to officers and directors.
Finally, Article 2.02-1 of the TBCA empowers a corporation to purchase and
maintain insurance on behalf of directors, officers, employees, agents and
certain other persons against any liability asserted against such persons,
whether or not the corporation would have the power to indemnify such persons
against that liability under Article 2.02-1 of the TBCA.
Under USAI's Bylaws, USAI shall, to the fullest extent to which it is
empowered to do so by the TBCA or any other applicable laws as may from time to
time be in effect, indemnify any person who was, is 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 is or was a director or officer of USAI or is or was serving at the
request of USAI as a director, officer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding.
USAI's obligations under its Bylaws include, but are not limited to, the
convening of a meeting and the consideration of any matter thereby, required by
statute in order to determine the eligibility of an officer or director for
indemnification. USAI's obligation to indemnify and prepay expenses under its
Bylaws shall arise, and all rights granted to directors, officers, employees or
agents thereunder shall vest, at the time of the occurrence of the transaction
or event to which such action, suit or proceeding relates, or at the time that
the action or contact to which such action, suit or proceeding relates was first
taken or engaged in (or omitted to be taken or engaged in), regardless of when
such action, suit or proceeding is first threatened, commenced or completed.
Accordingly, under USAI's Bylaws, no action taken by USAI, either by
amendment of its Bylaws or its Articles of Incorporation or otherwise, shall
diminish or adversely affect any rights to indemnification or prepayment of
expenses granted under USAI's Bylaws which have become vested prior to the date
that such amendment or corporation action is taken. Further, under USAI's Bylaws
the Board of Directors has the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not USAI would have the power to indemnify him against such liability
under the provisions of the TBCA, USAI's Article of Incorporation or USAI's
Bylaws.
USAI has purchased liability insurance policies covering its directors and
officers to provide protection where USAI cannot legally indemnify a director or
officer and where a claim arises under the Employee Retirement Income Security
Act of 1974 against a director or officer based on an alleged breach of
fiduciary duty or other wrongful act.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
LEGAL MATTERS
The validity of the shares of Preferred Stock offered by this Prospectus
will be passed upon for USAI by Charles W. Lutter, Jr., Attorney, San Antonio,
Texas.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of USAI for the year ended June 30,
1995 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
