U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 1
Form 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS Under
Section 12(b) or 12 (g) of the Securities Act of 1934
SILHOUETTE BRANDS, INC.
___________________________
(Name of Small Business Issuer in its charter)
Delaware 22-3279105
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(State of Incorporation) (I.R.S. Employer I.D. Number)
159 Foxhill Court, Matawan, New Jersey 07747
_______________________________________________________
(Address of principal executive offices) (Zip Code)
Issuer telephone number 732-583-3005.
-------------
Securities to be registered under Section 12 (b) of the Act:
Title of each class Name of exchange on which
to be registered each class is to be registered
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
FORWARD LOOKING STATEMENTS
In this registration statement references to "Silhouette" or "Company," means
Silhouette Brands, Inc. This Form 10-SB contains certain forward looking
statements. For this purpose, any statements contained in this Form 10-SB
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "estimate" or "continue" or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and
actual results may differ materially depending on a variety of factors, many
of which are not within the Company's control. These factors include but are
not limited to economic conditions generally and in t he industry in which the
Company participates; and competition within the Company's chosen industry,
including competition from much larger competitors.
RISK FACTORS
Certain risks exist with respect to the Company and its business. Accordingly,
investors and shareholders should consider the following risk factors along
with other information contained in this Registration Statement including the
financial statements and the notes thereto.
1. Substantial Reliance Upon One Distributor. The Company distributes its
product principally through the Dreyer's distribution system. The Dreyer's
distribution system is considered one of the premier distribution systems in
the ice cream industry. Moreover, Dreyer's has assisted in the expansion of
the Company's products to a large number of geographical markets as discussed
below. If Dreyer's terminates its distribution arrangement with the Company,
the Company's operations may be materially impaired.
2. Need For Additional Capital. The Company may require additional capital
in the future to pay for slotting fees resulting from greater than anticipated
expansion. At the present time, the Company has no arrangements for such
additional capital. The inability to pay slotting fees in new markets may
inhibit future sales.
3. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the SEC. Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ System). The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information regarding penny stocks and the
nature and level of risks in the penny stock market. The brokerdealer also
must provide the customer with current bid and offer quotations for the
penny stock, and the compensation of the broker-dealer, and its salesperson
must disclose this fact and the broker-dealer's presumed control over the
market, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, brokerdealers
who sell such securities to persons other than established customers
and accredited investors, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level
of activity, if any, in the market for the Company's common stock.
Part I
ITEM 1. DESCRIPTION OF BUSINESS.
Introduction.
Silhouette Brands, Inc. ("Silhouette" or "Company") was organized under the
laws of the State of Delaware on January 27, 1994.
The Company manufactures and sells fat free, novelty ice cream under the
trade name "Silhouette" with the Skinny Cow (r) logo. Its ice cream is
packaged as a low fat ice cream sandwich and a reduced fat "Bongo" bar,
that are designed to appeal to the health conscious or weight conscious
consumer.
Following its inception, the Company commenced the manufacturing and sale
of its ice cream products in the New York metropolitan area during 1994.
Distribution of the Company's products has grown from a limited number of
outlets in the New York metro area to over 75 supermarkets chains and other
retail outlets located in 26 states. The Company's products are distributed
principally through an arrangement with Dreyer's Grand Ice Cream, Inc. The
Company manufactures its product under a co-packing agreement with an ice
cream manufacturer located in Lakewood, New Jersey.
The Company's executive offices are located at 159 Foxhill Court, Matawan,
New Jersey 07747, and its telephone number is 732-583-3005 and web-site is
www.skinnycow.com.
Skinny Cow Products.
The Company is the pioneer of high quality, low fat and reduced fat,
novelty ice cream products. Its proprietary ice cream, while fat-free,
delivers a rich taste and creamy texture. These characteristics are a
result of, its proprietary mix, the quality of the ingredients in the mix,
and the fact that each unit is hand made. Hand made ice cream can be
soft-served at higher temperatures enabling greater flavor retention. The
low fat, ice cream sandwich, the Company's original product, remains
its flagship product comprising approximately 72% of total sales during
fiscal 1999. Two low fat chocolate or vanilla cookies compliment the no-
fat ice cream to create the ice cream sandwich. The Bongo bar, introduced
in 1998, consists of the no-fat ice cream hand served on a stick, and
dipped in rich milk chocolate or dark chocolate. The ice cream sandwich
contains 2 grams of fat per serving, while the Bongo bar contains 8 grams
of fat per serving. The fat content of both products is contained in either
the cookies or the chocolate coating. The Company's products are sold under
the Silhouette trade name with the Skinny Cow (r) logo. Its products are
currently available in more than 3,500 stores principally throughout the
New England, Mid-Atlantic and Southeastern regions, and Texas and southern
California. Of the total store count, approximately 2,100 of these
locations were opened in year 2000.
The Company promotes brand recognition by packaging its products in
a Unique and distinctive manner. Each package prominently displays
the Silhouette trade name and Skinny Cow (r) logo together with a
quirky "workout regime" for its cows. The ice cream sandwiches are
packaged in clear plastic sealed trays in packages of six. The trays are
shrink-wrapped in a clear polywrap for freshness and product protection.
Flavor combinations are: vanilla/chocolate, vanilla/mint, vanilla/
strawberry, vanilla/coffee, all vanilla, and all chocolate packs. In
addition, during May, 2000, the Company introduced a caramel flavored
sandwich called "Dulce De Leche" in the New York market. The reduced fat,
Bongo bar contains three individually wrapped bars per box. Bongo flavor
combinations are vanilla ice cream dipped in rich milk chocolate, and
chocolate ice cream dipped in rich dark chocolate. During the fourth
quarter of 2000, the Company intends to introduce two new flavors of its
ice cream sandwich, a chocolate/peanut butter flavor, and a chocolate/
coffee flavor.
Markets.
The Company participates in the ice cream market which is part of a
broader frozen dessert market. The Company's ice cream sandwich and Bongo
bar are considered novelty ice cream products. Novelty items are separately
packaged single servings of a frozen dessert that may or may not contain
dairy ingredients. The Food and Drug Administration, which regulates the
standards for many foods, has set labeling requirements concerning fat
content in ice cream. Based upon these requirements, the Company's ice
cream sandwich falls with the "low fat" ice cream category, while the Bongo
bar is a "reduced fat" product. Low fat ice cream contains a maximum of
three grams of fat per service. Reduced fat ice cream contains at least 25%
less total fat that the preferred product (either an average of leading
brands, or the company's own brand).
Industry data indicates that over 1.6 billion gallons of ice cream and
related frozen dessert were produced in 1999. Of that amount, reduced fat,
light and low-fat products accounted for 13% of the market. (Source:
International Ice Cream Association).
Sales and Distribution.
The Company sells its products principally to supermarkets, and to a lesser
extent to convenience and other foods stores. Distribution is made through
independent distributors and commissioned food brokers. As of June 30,
2000, the Company's products were sold at approximately 3,500 retail
outlets located in 26 states. The Company's markets its products
principally through a non-exclusive distribution arrangement with Dreyer's
Grand Ice Cream, Inc. ("Dreyer's), a publicly held company. The Company
commenced distribution through Dreyer's in October 1998. Since that time,
Dreyer's has accounted for distribution to approximately 3,000 supermarket
locations in 20 states. For fiscal year ended December 31, 1999 and for
the six month period ended June 30,2000, sales through Dreyer's accounted
for 80% and 72%, respectively, of total sales. During the first half of
2000, the Company expanded its distribution to approximately 2,100 new
supermarket locations throughout the Eastern region of the United States,
and in Texas and southern California.
The Company believes its business generally experience highest volumes
during the winter and spring months and lowest volumes during the late
summer and fall months.
The Company generally enters a new market usually with two flavors of its
ice cream sandwich. Thereafter, dependent upon the level of sales from
the introduced product and available cash for slotting fees, additional
products may be introduced to the existing market. The Company has
experienced strong product demand and loyalty in each geographical market
that it has entered. The Company believes that product demand is generated
principally by word of mouth, its unique product packaging, and in store
promotions. The Company understands that its products are recommended
in preferred menus of organized weight loss groups. The Company also
believes that its proprietary mix, which delivers a rich and creamy taste
with no fat content, creates strong customer loyalty. Historically, the
Company has conducted limited product advertising and marketing in each
market.
Advertising and marketing generally has been in the form of coupons or
advertisements in supermarket flyers. Coupons offering a $0.50 discount
also are available through the Company's website.
The Company attracts new markets through the independent efforts of its
principal officers, and through the collective efforts of its officers and
the Dreyer's distribution channel. In each new market, the Company
generally will be required to pay slotting fees to the supermarket for
shelf space. These fees are common in most segments of the food industry
and vary from chain to chain. Supermarket chains generally are reluctant to
give up shelf space to new products when existing products are performing.
During the six months ended June 30, 2000, the Company paid approximately
$151,445 (or 6% of gross revenues) in slotting fees. Consequently, the
expansion of the Company to new markets, if any, may be constrained by cash
available to pay for slotting fees.
The Company participates in Dreyer's direct store distribution system.
Under this system, the Company's products are distributed directly to the
retail ice cream cabinet by either Dreyer's own personnel or independent
distributors who primarily distribute Dreyer's products. This store level
distribution allows service to be tailored to the needs of each store. The
Company believes this service ensures proper product handling, quality
control, flavor selection and retail display. The implementation of this
system has resulted in an ice cream distribution network capable of
providing frequent direct service to grocery stores in every market where
the Company's products are sold. At this time, the Company does not have
written agreement with Dreyer's regarding its product distribution.
Manufacturing Process.
The Company products are manufactured through a co-packing arrangement
With Mr. Cookie Face, Inc., of Lakewood, New Jersey. Each individual
product unit is hand served, and for the Bongo bar, hand dipped, and all
are hand packed by the manufacturer. For quality assurance purposes,
the Company's product is tested by the manufacturer every week. The
Company believes that the manufacturer's capacity will meet the Company
projected production requirements for the foreseeable future. Although the
Company uses only one manufacturer, its arrangement with the manufacturer
is not exclusive, and the Company believes that it could use other
manufacturers if necessary or advantageous. Under its contract, the Company
pays the manufacturer a fixed fee per case for manufacturing and packing
the product. The Company may cancel the agreement on 30 days' notice at
any time. The Company purchases all of its raw materials and packaging
supplies from single sources; however, it believes that alternate supply
sources are available throughout the country at competitive prices. The
Company has not experienced shortages in the procurement of raw materials
or packaging.
During fiscal year ending December 31, 1999, the Company did not expend any
amounts on research and development costs.
Regulation.
The Company is subject to regulation by various governmental agencies,
including the U.S. Food and Drug Administration and the U. S. Department of
Agriculture. The Company's manufacturer must comply with federal and
Local environmental laws and regulations relating to air quality, waste
management and other related land use matters. The FDA also regulates
finished products by requiring disclosure of ingredients and nutritional
information. The FDA can audit the Company or its manufacturer to determine
the accuracy of our disclosure. State laws may also impose additional
health and cleanliness regulations on our manufacturers.
The Company believes that it and its manufacturer are currently in
compliance with these laws and regulations and has passed all regulatory
inspections necessary for its to sell its product in its current markets.
The Company believes that the cost of compliance with applicable governmental
laws and regulations is not material to its business.
Competition.
The Company's business is highly competitive. The Company's products
Compete on the basis of brand image, quality, breadth of flavor selection,
price, and amount of fat content. Most ice cream manufacturers, including
full line dairies, the major grocery chains and the other independent ice
cream processors, are capable of manufacturing and marketing high quality,
low fat or reduced fat ice creams. Furthermore, there are relatively few
barriers to new entrants in the ice cream business. Existing competition
includes low fat or reduced fat novelty products offered by Healthy
Choice and Weight Watchers, as well as "private label" brands produced by
or for the major supermarket chains. In addition, the Company also competes
with frozen desserts such as frozen yogurt and sorbet manufactured by
Dannon, Healthy Choice and others. Many of these competitive products are
manufactured by large national or international food companies, with
significantly greater resources than that of the Company. The Company
expects strong competition to continue in the form of price, competition
for adequate distribution and limited shelf space. However, despite these
factors, the Company believes that the taste and quality of its products,
and its unique product packaging will enable it to effectively compete in
its market.
Product Liability.
The Company is engaged in a business that could expose it to possible
Claims for personal injury resulting from contamination of its ice cream.
While the Company believes that through regular product testing the quality
of its products are carefully monitored, it may be subject to liability
due to customer or distributor misuse or storage. The Company maintains
product liability insurance against certain types of claims in amounts
which it believes to be adequate. The Company also maintains an umbrella
insurance policy that it believes to be adequate to cover claims made above
the limits of its product liability insurance. Although no claims have
been made against the Company or its distributors to date and the Company
believes its current level of insurance to be adequate for its present
business operations, there can be no assurances that such claims will not
arise in the future or this the Company's policies will be sufficient to
pay for such claims.
Proprietary Rights.
The Company owns the registered trade name Silhouette Low Fat Sandwich (r)
And the trademark Skinny Cow (r). In addition, the Company relies on trade
secrets to protect its proprietary mix formulation.
Employees.
As of June 30, 2000, the Company's officers are its only employees. The
Company has no collective bargaining agreements with its employees and
believes its relations with its employees are good.
Facilities.
The Company's executive offices are located at 159 Foxhill Court, Matawan,
New Jersey 07747, on premises owned by an officer of the Company. The
premises are used on a rent-free basis. The parties anticipate that this
arrangement will continue through fiscal year 2000.
SILHOUETTE CAFE.
The Company entered into a loan agreement and a license agreement with a
limited liability company that owns and will open a cafe called the
"Silhouette Cafe". The cafe is located in Rockville Centre, New York and
is expected to open in September 2000. Under the license agreement, the
licensed the use of the trademark Skinny Cow(r) and trade name Silhouette
in exchange for a royalty of one percent of gross sales from the cafe.
Under the loan agreement, the Company agreed to advance the sum of $140,000
as a loan. The loan will bear interest at the rate of five percent per annum
and will be amortized and paid in 36 equal payments of principal and
interest. As additional consideration for the loan, the Company will receive
10% of the net profits from the operations of the cafe. Messrs. Wexler and
Pugliese each own 25% of the limited liability company and each will receive
a 20% net profits interest from the operations of the cafe. The agreements
between the Company and the limited liability company were not a result of
arms length negotiations between the parties. In addition, although the
principals of the Company may devote their time and attention to the affairs
of the cafe, such time and attention is not expected to interfere with their
responsibilities to the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The following discusses the financial results and position of the
consolidated accounts of the Company for the periods indicated.
Results of Operations.
Six-month period ended June 30, 2000 compared with the six-month period
ended June 30, 1999.
Revenues for the six-month period ended June 30, 2000 were $2,348,194
representing an increase of 156% or $1,432,229 from revenues of $915,965
for the comparable period in 1999. The increase for the 2000 period
is a result of greater market penetration in existing markets and the
expansion of product distribution to new geographical markets. Of the
total revenues for the both periods, $1,692,939 or 72% of total revenues
for the 2000 period, and $843,196 or 92% of total revenues for the 1999,
represent sales through the Dreyer's distribution system.
Cost of goods sold for the 2000 period totaled $1,770,212 which
represents an increase of $1,085,310 or 158% from $684,902 for the prior
period. This increase is due to costs associated with increased sales
for the 2000 period. Cost of goods sold as a percentage of sales for
the six-month periods in 2000 and 1999 remained relatively constant at
75.37% and 74.77%, respectively. Cost of goods sold for the 2000 period
consisted of, $1,713,106 in manufacturing, raw materials, packing and
related costs (an increase of $1,056,586 or 161% from $656,520 for the
prior period), $60,331 in freight expense (an increase of $44,610 or 289%
from $15,523 for the prior period), and $46,067 in food broker expenses
(an increase of $12,067 or 35.49% from $34,000 for the prior period).
Gross profit for the six-month period in 2000 was $577,982 which
represents an increase of $364,919 or 150% from $231,063 for the prior
period.
Sales and marketing expenses, which include slotting fees payable
to supermarkets, for the six-month period ended June 30, 2000 totaled
$172,559 representing an increase of $106,154 or 160% from $66,405 for the
prior six-month period. The increase reflects the Company's expanded
product distribution. The Company anticipates that payment of slotting
fees will continue in the future commensurate with its expanded
distribution. Salaries and benefits for the six-month period in 2000
totaled $122,178 representing an increase of $70,050 or 134% from $52,128
for the prior period. The increase reflects increased compensation paid
to the two principal officers during the 2000 period. Other general
and administrative expenses totaled $70,391 representing an increase of
$51,837 or 279% from $18,554 for the prior period. The increase is
principally a result of increase travel and entertainment, as well as
postage and related costs associated with the Company's expanded product
distribution.
Total investment income, which consists primarily of securities
transactions, and interest on available cash, for the six-month period
in 2000 totaled $81,302 representing an increase of $65,898 or 428% from
$15,404 for the prior period.
Fiscal year ended 1999 compared with fiscal year ended 1998.
Revenues for fiscal year ended December 31, 1999 were $1,873,849
representing an increase of 140% or $1,094,006 from revenues of $779,843
for the comparable period in 1998. The increase for the 1999 period is a
result of greater market penetration in existing markets and the expansion
of product distribution to new geographical markets. Of the total revenues
for the both periods, $1,492,190 or 80% of total revenues for the 1999
period, and $175,991 or 23% of total revenues for the 1998 period,
represents sales through the Dreyer's distribution system.
Cost of goods sold for the 1999 year end period totaled $1,457,165
which represents an increase of $862,206 or 145% from $594,959 for the
prior period. This increase is due to costs associated with increased
sales for the 1999 period. Cost of goods sold as a percentage of sales
for the year end periods in 1999 and 1998 were at 77.76% and 76.29%,
respectively. Cost of goods sold for the 1999 period consisted of,
$1,323,653 in manufacturing, raw materials, packing and related costs
(an increase of $727,512 or 122% from $596,141 for the prior period),
$36,787 in freight expense (an increase of $19,650 or 115% from $17,137
for the prior period), and $117,866 in food broker expenses (which
contrasts with no such expense for the prior period). Gross profit for
the 1999 period was $416,684 which represents an increase of $231,800 or
125% from $184,884 for the prior period.
Sales and marketing expenses, which includes slotting fees payable to
supermarkets, for the year end period in 1999 totaled $227,816
representing an increase of $118,976 or 109% from $108,840 for the prior
six-month period. The increase reflects the Company's expanded product
distribution. Cost of customer list in 1999 was $0 compared with a one-
time charge in 1998 of $110,000. Salaries and benefits for the 1999
period totaled $127,059 representing an increase of $46,552 or 57.82%
from $80,507 for the prior period. The increase reflects increased
compensation paid to the two principal officers during the 1999
period. Other general and administrative expenses totaled $106,120
representing an increase of $53,158 or 100% from $52,962 for the prior
period. The increase is a result of increased travel and entertainment,
as well as printing and postage costs associated with its expanded product
distribution.
Total investment income, which consists primarily of primarily of
securities transactions and interest on available cash, for the 1999
period totaled $120,370 representing an increase of $109,940 or 1057%
from $10,403 for the prior period.
Liquidity and Capital Resources.
During 1998, the Company raised approximately $953,500 in gross proceeds
from the private placement of its common stock. In addition, as of June
30, 2000, the Company has three revolving lines of credit. Two lines
of credit are with Fleet Bank for $25,000 and $50,000, bearing interest
at 3% over prime and 4% over prime, respectively. Interest is paid monthly
and principal is paid upon demand. As of June 30, 2000, $24,305 was drawn
on the $25,000 facility, while the entire balance on the $50,000 facility
was available at such date. Both lines are secured by the Company's assets
and the personal guarantees of the officers. The third revolving line of
credit is with First Union National Bank in the amount of $35,000.
Interest is 3% over prime and interest is paid monthly and principal is
paid on demand. The loan is unsecured. As of June 30, 2000, $32,050 was
drawn on the $35,000 facility. The Company used the private placement
proceeds and the lines of credit to fund its overall operations including
the payment of slotting fees to supermarkets.
For the six-month period ended June 30, 2000, the Company recorded a net
profit of $222,680, and as of the end of the six-month period, the
Company had working capital of $396,931. The Company believes that its
current cash position and cash flow will be sufficient to meet its
operating needs for the next 12 months. However, the Company may seek to
raise funds during such 12 month period in order to respond to increased
slotting fees resulting from greater than anticipated market expansion.
The Company has no commitments for any such financing. No assurances can
be given that any financing will be available to the Company on favorable
terms, or at all.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's maintains its offices at 159 Foxhill Court, Matawan, New
Jersey 07747 on premises owned by the president of the Company. As of
June 30, 2000, the arrangement between the parties has been rent-free.
The parties anticipate that this arrangement will continue through fiscal
year 2000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table will identify, as of August 18, 2000, the number and
percentage of outstanding shares of common stock and preferred stock of
the Company owned by (i) each person known to the Company who owns more
than five percent of the outstanding common stock and preferred stock,(ii)
each officer and director, and (iii) and officers and directors of the
Company as a group:
Title Name and Address Amount and nature Percent
of Class of Beneficial Owner Beneficial Ownership(1) of Class
---------------- ------------------------ ------------------------ ---------
Common Stock Marc Wexler(2) 852,000 28.88%
Common Stock Saverio Pugliese(2) 852,000 28.88%
Common Stock Northport Holdings, Inc.(3) 170,000 5.76%
Common Stock Officers and Directors 1,704,000 57.77%
as a group (2 persons)
Voting Preferred
Stock (4) Marc Wexler(2) 150,000 47.62%
Voting Preferred
Stock (4) Saverio Pugliese(2) 150,000 47.62%
Voting Preferred
Stock (4) Officers and Directors 300,000 95.24%
as a group (2 persons)
________________________________________________________________________________
(1). "Beneficial ownership" means having or sharing, directly or indirectly
(i) voting power, which includes the power to vote or to direct
the voting, or (ii) investment power, which includes the power
to dispose or to direct the disposition, of shares of the common
stock of an issuer. The definition of beneficial ownership includes
shares underlying options or warrants to purchase common stock,
or other securities convertible into common stock, that currently are
exercisable or convertible or that will become exercisable or
convertible within 60 days. Unless otherwise indicated, the beneficial
owner has sole voting and investment power.
(2). The address for each individual is 159 Foxhill Court, Matawan, New
Jersey 07747, the address of the Company.
(3). The address for such party is 39 Broadway, Suite 930, New York, New
York 10006.
(4). The Voting Preferred Stock contains 10 for 1 voting rights on all
matters brought for shareholder vote (see "Item 8. Description of
Securities-Preferred Stock").
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers of the Company, their ages, and the
positions they hold are set forth below. The directors of the Company hold
office until the next annual meeting of stockholders of the Company and
until their successors in office are elected and qualified. All officers
serve at the discretion of the Board of Directors.
Director/
Officer
Name Age Since Position
______________ _____ __________ ____________________
Marc Wexler 38 1994 Chairman, Secretary
and Treasurer
Saverio Pugliese 34 1994 President and
Director
___________________________________________________________________________
Marc Wexler - Mr. Wexler is a co-founder of the Company, and has
been its Chairman, Secretary and Treasurer since its
inception. Mr. Wexler received a B. A. degree in
economics from Rutgers University in 1984.
Saverio Pugliese - Mr. Pugliese is a co-founder of the Company and has
been its President and a director since inception.
Prior to founding the Company, Mr. Saverio was the
founder and president of an ice cream company
located in Fairfield, New Jersey.
ITEM 6. EXECUTIVE COMPENSATION.
The compensation for all directors and officers individually for services
rendered to the Company for the fiscal years ended December 31, 1999, 1998
and 1997, respectively:
SUMMARY COMPENSATION
Annual Compensation(1)
Principal Salary Bonus Other
Position Year ($) ($) ($)(2)
_________________ ______ __________ _________ ___________
Marc Wexler 1999 57,550 -0- 6,833
President and 1998 38,150 -0- 2,450
Chairman 1997 3,450 -0- -0-
Saverio Pugliese 1999 57,550 -0- 7,377
President and 1998 30,450 -0- 2,448
Director 1997 700 -0- -0-
___________________________________________________________________________
(1). The compensation provided in the table above does not include
dividends payable to each individual as a holder of the Company's
Voting Preferred Stock (see "Item 8. Description of Securities-
Preferred Stock").
(2). Represents an automobile allowance for such officers.
Other than as indicated above, the Company does not have any other form of
compensation payable to its officers or directors, including any stock
option plans, stock appreciation rights, or long term incentive plan awards
for the periods indicated in the table.
The Company's directors received no fees for their services as a director,
however, they are reimbursed for expenses incurred by them in connection
with the Company's business.
In August 2000, the Board of Directors and shareholders approved
The Company's 2000 Stock Option Plan (the "Plan"). Pursuant to the Plan,
the Company may grant options to purchase an aggregate of 200,000 shares
of common stock to key employees, directors, and other persons who have or
are contributing to the success of the Company. The exercise price of the
options granted under the Plan will be established by the board of
directors, however, it shall not be less than 15% the fair market value at
the time of grant. Fair market value is the mean between the high and low
sale price for the common stock reported on such date. The options granted
pursuant to the Plan are non-qualified options. The Plan is administered by
the board of directors. As of August 31, 2000, no options have been granted
under the terms of the Plan.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In October 1998, the Company purchased an ice cream mix, a list of
Customers and the Skinny Cow logo for the sum of $110,000 from Skinny Cow,
Inc. Skinny Cow, Inc. was owned equally by Messrs. Pugliese and Wexler.
Messrs. Wexler and Pugliese each own 150,000 shares of Voting Preferred
Stock of the Company. This class of preferred stock has 10 for 1 voting
rights per share on all matters brought for a shareholder vote, a
liquidation preference per share of $5.00, and an annual dividend per
share equal to 5% of the liquidation preference. Dividends are cumulative
and payable annually in arrears. The holder has a right to waive any cash
dividend and receive the dividend in the form of common stock at a
price per share equal to fifty percent of the closing price of the common
stock on the last trading day of the preceding calendar year. If funds are
not legally available, the dividend must be paid in the form of common
stock of the Company at the stated discount. The preferred stock is not
convertible into common stock, however, has a preference over common
stockholders upon liquidation equal to the liquidation preference per
share. Messrs. Wexler and Pugliese each received, as a dividend on the
Voting Preferred Stock; cash in the amount of $5,000 and 52,000 shares of
common stock during fiscal 1998, and cash in the amount of $15,000 during
fiscal 1999, and cash in the amount of $120,000 during the six month period
ended June 30, 2000 (see "Item 8. Description of Securities-Preferred
Stock").
The Company entered into a loan agreement and a license agreement with
a limited liability company that owns and will open a cafe called the
"Silhouette Cafe". The cafe is located in Rockville Centre, New York
and is expected to open in September 2000. Under the license agreement,
the Company licensed the use of the trademark Skinny Cow (r) and trade name
Silhouette in exchange for a royalty of one percent of gross sales from the
cafe. Under the loan agreement, the Company agreed to advance the sum of
$130,000 as a loan. The loan will bear interest at the rate of five percent
per annum with will be amortized and paid in 36 equal payments of principal
and interest. As additional consideration, the Company will receive 10% of
the net profits from the operations of the cafe. Messrs. Wexler and
Pugliese each own 25% of the limited liability company and each will
receive a 20% net profits interest from the operations of the cafe. The
agreements between the Company and the limited liability company were
not a result of arms length negotiations between the parties. In addition,
although the principals of the Company may devote their time and attention
to the affairs of the cafe, such time and attention is not expected to
interfere with their responsibilities to the Company.
ITEM 8. DESCRIPTION OF SECURITIES.
Capital Stock.
The Certificate of Incorporation of the Company authorizes the issuance of
10,000,000 shares of common stock, $0.0001 par value, and 1,000,000 shares
of preferred stock, $0.0001 par value.
Common Stock.
As of June 30, 2000, 2,949,635 shares of common stock are issued and
outstanding.
The common stock carries no pre-emptive, conversion or subscription rights
and is not redeemable. In addition, each share of common stock is entitled
to one vote on all matters submitted to a vote of stockholders. On
matters submitted to a shareholder vote,a majority vote of shareholders is
required to be actionable. Cumulative voting in the election of directors
is denied. All shares of common stock are entitled to participate equally
in dividends and rank equally upon liquidation. All shares of common stock
when issued are fully paid and non-assessable by the Company. There are
no restrictions on repurchases of common stock by the Company relating
to dividend or sinking fund installment arrearage.
Preferred Stock.
As of June 30, 2000, 315,000 shares of its preferred stock are issued and
outstanding.
The issued and outstanding shares of preferred stock consist of the %5
Voting Preferred Stock. This class of preferred stock has 10 for 1 voting
rights per share on all matters brought for a shareholder vote, a
liquidation preference per share of $5.00, and an annual dividend per
share equal to 5% of the liquidation preference. Dividends are cumulative
and payable annually in arrears. The holder has a right to waive any cash
dividend and receive the dividend in the form of common stock at a
price per share equal to fifty percent of the closing price of the common
stock on the last trading day of the preceding calendar year. If funds are
not legally available, the dividend must be paid in the form of common
stock of the Company at the stated discount. The preferred stock is not
convertible into common stock, however, has a preference over common
stockholders upon liquidation equal to the liquidation preference per
share.
As provided in the Company's Amended and Restated Certificate of
Incorporation, the remaining authorized but unissued shares of preferred
stock can be issued the under the "blank check" provisions therein. These
provisions authorize the issuance of "blank check" preferred stock in one
or more classes or series with such designations, rights, preferences
and restrictions as may be determined from time to time by the Board
of Directors. Accordingly, the Board of Directors may, without prior
shareholder approval, issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the
relative voting power or other rights of the holders of the preferred
stock or the common stock.
Delaware Anti-Takeover Law.
The Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law regulating corporate takeovers. This
section prevents certain Delaware corporations, under certain circumstances,
from engaging in a "business combination" with: (i) a stockholder who owns
15% or more of the outstanding voting stock (known as an "interested
stockholder"); (ii) an affiliate of an interested stockholder; or (iii) an
associate of an interested stockholder, for three years following the
date that the stockholder became an "interested stockholder." A "business
combination" includes a merger or sale of more than 10% of the assets.
However, the above provisions of Section 203 do not apply if: (i) the
Company's board approves the transaction that made the stockholder an
"interested stockholder," prior to the date of that transaction; (ii)
after the completion of the transaction that resulted in the stockholder
becoming an "interested stockholder," the stockholder owned at least 85%
of the Company's voting stock outstanding at the time the transaction
began, excluding shares owned by persons who are our officers and
directors; or (iii) on or subsequent to the date of the transaction,
the business combination is approved by our board and authorized at a
meeting of our stockholders by an affirmative vote of at least 2/3 of
the outstanding voting stock not owned by the "interested stockholder."
The provisions of this statute could prohibit or delay mergers or other
change and control attempts, and thus may discourage attempts to acquire
the Company.
Part II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The table below sets forth the high and low bid prices of the common
stock of the Company as reported in the "pink sheet-over the counter
market" by Pink Sheets LLC, formerly known as National Quotation Bureau.
The quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commissions and may not necessarily represent actual
transactions. Since October 1999, the Company's common stock has been
listed in the "pink sheets" under the symbol "SHIB". Upon the
effectiveness of this Form 10-SB, the Company intends to file with the
National Association of Securities Dealers, Inc. (NASD) for listings on
the NASD OTC-BB market. There is an absence of an established trading
market for the Company's common stock, as the market is limited, sporadic
and highly volatile. The absence of an active market may have an effect
upon the high and low price as reported.
1999 Low Bid High Bid
______________ ___________ ___________
4th Quarter $ 2.00 $ 4.00
2000 Low Bid High Bid
_____________ ___________ ___________
1st Quarter $ 0.50 $ 2.00
2nd Quarter 0.50 1.50
As of August 18, 2000, there are 117 shareholders of record of the
Company's common stock. Although there are no restrictions on the
Company's ability to declare or pay dividends, the Company has not
declared or paid any dividends since its inception and does not anticipate
paying dividends in the future.
As of August 18, 2000, (i) there are no outstanding warrants or options
to purchase,or securities convertible into common stock of the Company and
(ii) there are 2,775,975 shares of common stock which can be sold pursuant
to Rule 144.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During 1998, the following common stock transactions occurred:
- 451,575 units were issued in connection with two private placement
offerings by the Company. Each unit consisted of one share of
common stock and one common stock purchase warrant. The Company
received $953,500 gross proceeds from these offerings and incurred
$355,286 in offering related costs.
- 108,400 shares of common stock were issued to the holders of the
Company's Voting Preferred Stock (which includes the Company's two
principal officers) as a dividend on such security.
- 320,000 shares of common stock were issued to a third party in
exchange for corporate finance, business management and marketing
services.
During 1999, the following common stock transactions occurred:
- 117,950 shares of common stock were issued in connection with the
exercise of outstanding warrants from a prior private placement
offering. The Company received $194,938 gross proceeds from the
warrant exercise and incurred $17,645 in offering related costs.
- A total of 9,000 shares of common stock were issued to outside
consultants. Of the total amount, 3,000 shares of common stock were
issued in exchange for product marketing services, 4,000 shares
were issued in exchange for legal services, and 2,000 shares were
issued for general business consulting services.
During 2000, the following common stock transactions occurred:
- 40,410 shares of common stock were issued in connection with the
exercise of outstanding warrants from a prior private placement
offering. The Company received $55,512 gross proceeds from the
warrant exercise.
- A total of 9,000 shares of common stock were issued to outside
consultants, all for product marketing services.
The above offerings were exempt from registration pursuant to Section 3(b)
and 4(2) of the Securities Act of 1933, as amended (the "Act"), including
Rule 504 of Regulation D promulgated under the Act. Each recipient of
securities in each such transaction represented his or her intentions to
acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and, where applicable,
appropriate legends were affixed to the share certificates issued in such
transactions.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Certificate of Incorporation indemnifies
each person who is or was a director or officer of the Company against all
expenses, liabilities, and loss actually and reasonably incurred in
connection with any civil, criminal, administrative or investigative
proceeding brought by reason of the fact that such person is or was a
director or officer of the Company or is or was serving at our request in
certain other capacities, to the extent such indemnification is not
prohibited by law. Under the Delaware General Corporation Law (DGCL), the
Company may indemnify such persons if they acted in good faith and in a
manner which they 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 their conduct was unlawful.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law, (iii) under Section 174 of the DGCL,
or (iv) for any transaction from which the director derived an improper
personal benefit.
In so far as indemnification for liability arising from the Securities Act
of 1933, as amended ("Act") may be permitted to directors, officers or
persons controlling the Company, it 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.
Part F/S Page
- Independent Auditors' Report.......................................F-1
- Balance Sheets as of December 31, 1999 (audited),
December 31, 1998 (audited) and June 30, 2000 (unaudited).........F-2
- Statements of Operations for Fiscal Years Ended
December 31, 1999 (audited), December 31, 1998 (audited)
and six months ended June 30, 2000 and June 30, 1999
(unaudited).......................................................F-3
- Statements of Cash Flows for Fiscal Years Ended
December 31, 1999 (audited), December 31, 1998 (audited)
and Six Month Ended June 30, 2000 and June 30, 1999
(unaudited).......................................................F-4
- Statements of Changes in Shareholders' Equity
For the Years Ended December 31, 1999 and 1998
(audited) and For the Six Month Period Ended
June 30, 2000 (unaudited).........................................F-5
- Notes to Financial Statements......................................F-6
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Silhouette Brands, Inc.
We have audited the accompanying balance sheets of Silhouette Brands,
Inc. at December 31, 1999 and 1998 and the related statements of
operations, changes in shareholders' equity, and cash flows for the
years then ended. 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 audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Silhouette
Brands, Inc. at December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Van Buren & Hauke LLL.
__________________________
May 18, 2000
PAGE F-1
SILHOUETTE BRANDS, INC.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998 (AUDITED)
AND JUNE 30, 2000 (UNAUDITED)
December 31, June 30,
---------------------- -------------
1999 1998 2000
--------- ---------- ----------
ASSETS (unaudited)
Current Assets:
Cash and equivalents $ 281,863 $ 122,342 $ 157,772
Accounts receivable 86,548 50,657 256,773
Inventory 42,019 20,878 91,311
Marketable equity securities 36,563 149,839 116,450
Officer advance - - 19,550
Loan receivable 5,000 - 5,000
----------- ---------- ----------
Total Current Assets 451,993 343,716 646,856
----------- ---------- ----------
Furniture and equipment, net 6,295 7,940 9,170
----------- ---------- ----------
Investment in private placement (cost) 10,000 10,000 10,000
Advance Silhouette Cafe - - 65,000
----------- ----------- ----------
Total Assets $ 468,288 $ 361,656 $ 731,026
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 76,942 $ 56,703 $ 176,829
Accrued liabilities 30,529 19,858 8,241
Dividends payable 89,126 40,375 8,500
Bank lines of credit 35,775 18,600 56,355
----------- ---------- -----------
Total Current Liabilities 232,372 135,536 249,925
----------- ---------- -----------
Contingencies
Shareholders' Equity:
Preferred stock, voting, cumulative,
non-convertible; $0.0001 par value;
$5 liquidation preference; 1,000,000
shares authorized; 315,000 issued and
outstanding in 1999, 1998 and 2000,
respectively 32 32 32
Common stock, $0.0001 par value,
10,000,000 shares authorized;
2,899,925, 2,775,975, and
2,949,635 shares issued and
outstanding in 1999, 1998 and
2000, respectively 291 278 296
Paid-in capital 826,359 705,330 848,859
Retained (deficit) (583,266) (479,520) (360,586)
Less: Treasury stock (7,500) - (7,500)
------------ ---------- -----------
Total Shareholders' Equity 235,916 226,120 481,101
----------- ---------- -----------
Total Liabilities and
Shareholders' Equity $ 468,288 $ 361,656 $ 731,026
----------- ---------- -----------
See accompanying notes.
F-2
SILHOUETTE BRANDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (AUDITED)
AND
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
Year Ended Six Months Ended
December 31, June 30,
----------------------- ------------------------
1999 1998 2000 1999
---------- ----------- ----------- -----------
(unaudited)
Revenues:
Product sales (net) $ 1,873,849 $ 2,348,194 $ 779,843 $ 915,965
---------- ---------- ----------- -----------
Cost of Goods Sold:
Beginning inventory 20,878 2,559 42,019 20,878
Purchases 1,323,653 596,141 1,713,106 656,520
Freight 36,787 17,137 60,331 15,523
Food brokers 117,866 - 46,067 34,000
Less: ending inventory (42,019) (20,878) (91,311) (42,019)
---------- ---------- ------------ -----------
Cost of Goods Sold (1,457,165) (594,959) (1,770,212) (684,902)
----------- ---------- ------------ -----------
Gross Profit 416,684 184,884 577,982 231,063
----------- ---------- ------------ -----------
Costs and Expenses:
Sales and marketing
expense 227,816 108,840 172,559 66,405
Advertising 96,742 65,988 22,267 4,196
Cost of customer list - 110,000 - -
Salaries and benefits 127,059 80,507 122,178 52,128
Accounting and legal 53,644 38,924 34,159 20,043
Consulting Fees - 78,400
Telephone 12,270 11,455 5,346 5,859
Insurance 10,775 8,674 5,127 5,553
Other general and
administrative expenses 106,120 52,962 70,391 18,554
Depreciation and
amortization 1,643 1,338 820 822
Interest expense 4,731 8,062 3,757 1,850
(Loss)on disposal of
assets - 15,917 - -
--------- ----------- ------------ ---------
640,800 581,067 436,604 175,410
--------- ----------- ------------ ---------
Income (Loss) From
Operations (224,116) (396,183) 141,378 55,653
--------- ----------- ------------ ---------
Investment Income:
Realized investment income 118,742 9,127 57,251 20,222
Unrealized investment
(loss)/income (3,255) - 22,621 (7,813)
Dividends and interest 4,883 1,276 1,430 2,995
--------- ----------- ----------- ---------
Total Investment Income 120,370 10,403 81,302 15,404
--------- ----------- ----------- ---------
Net Income (Loss) $(103,746) $(385,780) $222,680 $ 71,057
========== =========== =========== =========
Weighted Average Number of
Common Shares Outstanding 2,894,791 1,960,926 2,946,978 2,774,547
=========== =========== =========== ==========
Net Income (Loss) Per
Common Share $ (0.04) $ (0.20) $ 0.08 $ 0.03
=========== =========== =========== ==========
See accompanying notes.
F-3
SILHOUETTE BRANDS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (AUDITED) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
December 31, June 30,
---------------------- ----------------
1999 1998 2000 1999
--------- ---------- ------- --------
(unaudited)
Cash Flows from Operating Activities:
Net income (loss) $ (103,746) $(385,780) $222,680 $ 71,057
Depreciation and amortization 1,643 1,338 820 822
Common Stock issued for services 22,500 78,400 9,300 -
Realized gain on marketable
Securities (118,742) (9,127) (57,251) (20,222)
Unrealized(gain)loss on marketable
securities 3,255 - (22,621) 7,813
Loss on equipment sale - 15,917 - -
Accounts receivable (35,891) (23,802) (170,225) (58,429)
Inventory (21,141) (18,319) (49,292) (21,983)
Accounts payable and accrued
liabilities 30,910 8,417 77,599 (21,422)
----------- ----------- ----------- ----------
Cash Provided(Used)by Operating
Activities (221,212) (332,956) 11,010 (42,364)
----------- ----------- ----------- ----------
Cash Flows from Investing
Activities:
Purchase of property and equipment - (3,049) (3,695) -
Proceeds from equipment sale - 10,000 - -
Proceeds from sale of
marketable securities 2,755,519 - 2,302,340 1,057,517
Purchase of marketable
securities (2,526,755) (150,712) (2,302,357) (994,707)
Security deposits - 2,530 - -
---------- ----------- ----------- ----------
Cash Provided (Used) by
Investing Activities 228,764 (141,231) (3,712) 62,810
----------- ----------- ----------- ----------
Cash Flows from Financing
Activities:
Proceeds from loans 100,626 - 68,080 87,850
Principal payments on debt (83,450) (98,180) (47,500) (57,450)
Increase in advance loan
receivable (5,000) - (84,550) (5,530)
Principal payment to officers - (15,194) - -
Proceeds from sale of common stock 177,293 702,204 55,513 -
Purchase of treasury stock (7,500) - (2,932) (5,000)
Preferred stock dividends (30,000) (10,000) (120,000) (31,500)
Cash Provided (Used) by
Financing Activities 151,969 578,830 (131,389) (11,630)
---------- ----------- ----------- ----------
Net Increase (Decrease) in Cash 159,521 104,643 (124,091) 8,816
Cash and Equivalents, Beginning
of Period 122,342 17,689 281,863 122,342
---------- ----------- ----------- ----------
Cash and Equivalents, Ending of
Period $ 281,863 $ 122,332 $157,772 $131,158
=========== =========== =========== ==========
Cash Paid for Interest $ 4,731 $ 8,062 $ 3,757 $ 1,850
See accompanying notes.
F-4
SILHOUETTE BRANDS, INC.
STATEMENTS OF CHANGES IN SHAEHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (AUDITED) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
PAGE 1 OF 2
Preferred Common Treasury Preferred
Shares Shares Stock Par Value
---------- ----------- --------- ----------
Balances at
December 31, 1997
- as reported 315,000 1,896,000 $ - $ 32
Prior period adjustment
- slotting fees
--------- ------------ -------- ----------
Balances at
December 31, 1997
- as restated 315,000 1,896,000 32
Private placement 451,575
For services 160,000
Offering related costs 160,000
For preferred dividends 108,400
Offering related costs
Net (loss) for the period
--------- ------------ -------- ----------
Balances,
December 31, 1998 315,000 2,775,975 - 32
--------- ------------ -------- ----------
Treasury shares
purchased (2,000) (5,000)
For preferred dividends
Net income for the period
--------- ----------- --------- ----------
Balances at June 30, 1999 315,000 2,773,975 (5,000) 32
Treasury shares purchased (1,000) (2,500)
For services 9,000
For preferred dividends
Warrant Exercise 117,950
Warrant Exercise costs
Net (loss) for the period
---------- ---------- ---------- ---------
Balances,
December 31, 1999 315,000 2,899,925 (7,500) 32
--------- ---------- ---------- ---------
For services 9,300
For preferred dividends
Warrant exercise 40,410
Unexercised warrant costs
Net income for the period
--------- ---------- ---------- ---------
Balances at
June 30, 2000 315,000 2,949,635 $(7,500) $ 32
========= ========== ========== ========
SILHOUETTE BRANDS, INC.
STATEMENTS OF CHANGES IN SHAEHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (AUDITED)
AND
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED
PAGE 2 OF 2
Common Paid-in Retained
Par Value Capital (Deficit) Totals
--------- --------- ----------- ---------
Balances at
December 31, 1997
- as reported $ 190 $ 779 $ (41,501) $(40,500)
Prior period adjustment
- slotting fees (52,239) $(52,239)
------ -------- ---------- ---------
Balances at
December 31, 1997
- as restated 190 779 (93,740) (92,739)
Private placement 45 953,455 953,500
For services 16 78,384 78,400
Offering related costs 16 78,384 78,400
For preferred dividends 11 (50,386) (50,375)
Offering related costs (355,286) (355,386)
Net (loss) for the period (385,780) (771,560)
------ --------- ---------- ---------
Balances,
December 31, 1998 278 705,330 (479,520) 226,120
------ --------- ---------- ---------
Treasury shares
Purchased (5,000)
For preferred dividends (31,500) (31,500)
Net income for the period 71,057 71,057
------ --------- ---------- ---------
Balances at
June 30, 1999 278 673,830 (408,463) 260,677
------ --------- ---------- ---------
Treasury shares purchased (2,500)
For services 1 22,499 22,500
For preferred dividends (47,251) (47,251)
Warrant Exercise 12 194,926 194,938
Warrant Exercise costs (17,645) (17,645)
Net (loss) for the period (174,803) (174,803)
------- --------- ---------- ---------
Balances,
December 31, 1999 291 826,359 (583,266) 235,916
------- --------- ---------- ---------
For services 1 9,299 9,300
For preferred dividends (39,374) (39,374)
Warrant exercise 4 55,508 55,512
Unexercised warrant costs (2,933) (2,933)
Net income for the period 222,680 222,680
------- --------- ---------- ---------
Balances at
June 30, 2000 $ 296 $ 848,859 $(360,586) $481,101
======== ========= ========== ==========
See accompanying notes.
PAGE F-5
1. ORGANIZATION AND NATURE OF OPERATIONS
Silhouette Brands, Inc. (Company), a Delaware Corporation, was founded in
January 1994 for the intended purpose of manufacturing and marketing low-
fat ice cream and other health conscious frozen desserts. In November
1997, the Company amended its Certificate of Incorporation to reflect an
increase in the total authorized shares of common stock to 10,000,000 and
to authorize the Company to issue 1,000,000 shares of preferred stock
having a par value of $0.0001 per share. In July 2000, the Company
restated its Certificate of Incorporation. In that same month, the
Company also filed a Certificate of Designation to clarify and identify
the powers, preferences and rights of the preferred stock.
The Company manufacturers (from a proprietary mix) and distributes its
low-fat ice cream products through the use of independent parties.
Currently, the Company's products, sandwiches and ice cream on a stick,
are sold in twenty-two states, principally the Mid-Atlantic States,
but also in the majority of large market states throughout the country.
The Company relies on one contract manufacturer and one distributor for
all of the manufacture and for substantially all distribution of its
products. As such, risks and uncertainties associated with a Company
dependent on key manufacturing and distribution relationships.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
Assets, liabilities, revenues, and expenses are recognized on the accrual
method of accounting for financial statement presentation and for federal
income tax purposes.
Use of Estimates in Preparation of Financial Statements
The preparation of the accompanying financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that directly affect the amounts reported in
financial statements and accompanying notes. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
Substantially all of the Company's assets and liabilities are carried
at fair value or contracted amounts which approximate fair value.
Unaudited Interim Financial Statements
The unaudited interim financial statements as of June 30, 2000 and for
the six months ended June 30, 2000 and 1999 have been prepared on the
same basis as the audited financial statements included herein. In the
opinion of management, such unaudited interim financial statements
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the results for such periods. The operating
results for the six months ended June 30, 2000 are not necessarily
indicative of the operating results to be expected for the full fiscal
year or for any future period.
Cash and Equivalents
The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents.
PAGE F-6
Accounts Receivable
The Company, in the normal course of business, extends credit to its
customers, who are, primarily, well-established companies. The Company
uses the allowance method for uncollectible accounts. Management
believes that accounts receivable for all periods presented were fully
collectible. Therefore, no allowance for doubtful accounts was
recorded.
Inventory
In all periods presented, inventory consists of component raw materials,
such as proprietary mix, wrappers, etc., and is valued at the lower of
cost (on a first-in, first-out basis) or market.
Marketable Equity Securities
Marketable securities consist of equity securities that have a readily
determinable fair market value. Since the Company intends to sell these
securities in the near term, they are classified as "trading" and
accordingly, are carried at fair value, with unrealized gains and
losses reported as a separate component within the other income/expense
section of the statements of operations.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109.
Pursuant to SFAS No. 109, deferred tax assets and liabilities are
recorded for temporary differences, which enter into the determination
of taxable income in different periods for financial reporting and
income tax purposes. The Company has not recorded a deferred tax asset
or liability for federal and state tax purposes due to the immaterial
effect on the financial statements. At December 31, 1999, the Company
had federal net operating loss (NOL's) carryforwards of approximately
$700,000. Primarily as a result of these NOL's, the Company had a net
deferred tax asset which was fully offset by a valuation allowance due
to uncertainties as to whether the results of future operations will
enable the Company to realize the tax benefits arising from these NOL's.
The NOL's expire in various amounts through the years 2019.
Cost of Customer List
In October 1998, the Company purchased from Skinny Cow, Inc. its only
assets, the proprietary ice cream mix that was sold and marketed
independently to retailers, its customer list, and its logo for
$110,000. Messrs. Wexler and Pugliese, the Chairman of the Board
and President, respectively, owned Skinny Cow, Inc. Management has
determined that there is no accurate method of valuing the purchased
items and has charged the amount to expense in 1998.
Sales and Marketing Expense
Included in the costs of "Sales and Marketing Expense" are the costs
paid to retailers for placement of product on the shelves. These fees,
charged to operations when paid, are typically paid for the product to
enter the retail establishment and, at times, again when a better
location is desired. These fees are not standardized within the
industry but generally are within a retail chain. These costs, called
"slotting fees" were $150,279 and $83,503 in 1999 and 1998,
respectively, and $151,445 and $14,348 for the six months ended June 30,
2000 and 1999, respectively.
Discounts and Coupons
The Company accounts for the redemption and administrative costs of any
discounts from coupons or other promotional programs monthly on an as
incurred basis. Discounts and coupon redemptions are cleared through
the distributor with the Company charging sales as those amounts are
paid to the distributor. In all periods presented, these amounts are
immaterial to the financial statements.
Net Income/(Loss) Per Common Share Outstanding Basic net income/(loss)
per share is computed using the weighted average number of common
shares outstanding during the periods. Diluted net earnings per share
is not applicable.
PAGE F-7
3. SIGNIFICANT FINANCIAL AND ACCOUNTING DEVELOPMENTS
Prior to January 1, 1998, the Company capitalized "slotting fees" and
would amortize them over three years. Management has reevaluated
that approach and has determined that these fees are current marketing
expenses and should be charged to operations as incurred. Following
this analysis, the Company concluded that it would restate its 1997
financial statements to reflect this change.
4. FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation is provided
for by the straight-line method over the useful lives of five and
seven years. Material improvements and betterments will be capitalized,
while maintenance and repairs are charged to operations as incurred.
December 31, June 30,
------------ --------
1999 1998 2000
-------- --------- ------
Office Furniture and Equipment $10,275 $10,275 $13,970
Less: Accumulated Depreciation 3,980 2,335 4,800
-------- --------- --------
Net $ 6,295 $ 7,940 $ 9,170
======== ========= ========
PAGE 8
5. BANK LINES OF CREDIT
At December 31, 1999, the Company had two lines of credit with Fleet
Bank, and during 2000 an additional line of credit with First Union
National Bank was funded. The total outstanding indebtedness at
December 31, 1999 and 1998 was $35,775 and $18,600, respectively, and
$56,355 at June 30, 2000 as outlined in the table below. During the
periods presented, the rates of interest varied from a low of 10.75% to
a high of 12.5%. The interest associated with these lines of credit is
based on 3% or 4% over prime and is paid monthly with principal paid
annually. The rate at both December 31, 1999 and June 30, 2000 was
12.5%.
The following is a summary of current debt as of December 31:
December 31, June 30,
------------------------ -----------
1999 1998 2000
------ ------ ------
Revolving line of credit with Fleet
Bank for $25,000, for cash borrowing,
interest at prime plus 3.0% secured
by substantially all of the Company's
assets as well as personal guarantees
of the officers. $ 9,775 $ 18,600 $ 24,305
Revolving line of credit with Fleet
Bank for $50,000, for cash borrowing,
interest at prime plus 4.0% secured
by substantially all of the Company's
assets as well as personal guarantees
of the officers. 26,000 -- --
Revolving line of credit with First
Union National Bank for $35,000, for
cash borrowing, interest at prime plus
3.0%, the loan is unsecured. -- -- 32,050
-------- --------- --------
TOTAL $ 35,775 $ 18,600 $ 56,355
======== ========= =========
Cash Interest Paid $ 4,731 $ 2,342 $ 3,757
======== ========= =========
PAGE 9
6. SHAREHOLDERS' EQUITY
Common Stock
During 1998, the Company completed two private placements of its
securities. The two private placements were not registered with
the Securities and Exchange Commission under the exemptive
provisions of Rule 504 of Regulation D of the Securities Act of
1933. Total gross proceeds raised from the two private placements
amounted to $953,500 from the sale of 451,575 units, consisting of
common stock and warrants. In connection with both offerings, the
Company incurred offering related costs of $355,286, comprised of
both cash and non-cash compensation. The cash costs were $276,886
and the non-cash costs, consisting of 160,000 common shares of
restricted stock, were valued at $78,400.
Both private placements were sold as units consisting of one
share of common stock and one common stock purchase warrant. The
common stock and the warrants were immediately detachable and
transferable upon closing. The warrants entitled the holder to
purchase, during the exercise period, one share of the common
stock of the Company at a specified exercise price. The exercise
period commenced twelve months from the closing of the offering
and was to continue for a period of twenty-four months, at which
time the warrant would expire automatically. During the exercise
period, each warrant was redeemable by the Company at a price
equal to $0.01 per warrant, by providing the holder of the warrant
not less than thirty days prior written notification.
In 1998, the Company placed 140,375 units of 800,000 units offered
from the first private placement at $1.25 per unit and 311,200
units of 340,000 units offered from the second private placement
at $2.50 per unit. In December 1999, the Company elected to redeem
the outstanding warrants and provided the warrant holders
notification of redemption.
A summary of the warrant exercises and redemptions is as follows.
At December 31, 1999, 117,950 shares were exercised under the
warrant terms, yielding total gross proceeds of $194,938 with
associated costs of $17,645. During the first quarter of 2000,
additional warrants totaling 40,410 were exercised resulting in
$55,512 of gross proceeds. A total of 293,215 warrants were
redeemed and a payment of $0.01 per redeemed warrant ($2,932) was
paid to the holders.
Common Shares Issued for Services
During 1999, the Company issued 9,000 common shares valued at
$22,500 for consulting services. During 1998, the Company issued
160,000 common shares valued at $78,400 for consulting services.
PAGE F-10
Preferred Stock and Dividends
The Company's preferred stock is a 5% voting, cumulative,
nonconvertible preferred, with a liquidation preference of $5.00
per share and 10 for 1 voting rights. The preferred stock, in
respect to dividends and distributions upon the liquidation,
winding-up and dissolution of the Company, shall rank senior to all
classes of common stock of the Company. The preferred stock pays a
cumulative annual dividend equal to five percent of the liquidation
preference of $5.00 per share. The holders of the preferred stock
may elect to receive said annual divident in the form of cash or
restricted common shares. The price of any common shares issued as
payment of the divident shall be equal to one-half of the last
market price executed for the purchase of such shares or one-half
of the price paid in the last private offering.
In 1998, the Company declared preferred dividends from original
issuance of $118,125, paying $10,000 of this amount in cash and
issuing 108,400 common shares to preferred stockholders who
exercised their right to receive restricted common shares in lieu
of cash dividends. In accordance with the terms of the preferred
stock, the shares were valued at fifty percent of the most recent
private placement ($0.625) per share or $67,750. At December 31,
1998, $40,375 remained to be paid.
In 1999, the Company declared preferred dividends of $78,751,
paying $30,000 in cash with a remaining liability for unpaid
dividends of $89,126 at December 31, 1999.
In June 2000, the Company declared preferred dividends of $39,374,
paying $120,000 in cash with a remaining liability for unpaid
dividends of $8,500 at June 30, 2000.
All preferred dividends are charged to paid-in capital in
accordance with state law as the Company has no retained earnings.
7. CONTINGENCIES
The Company is subject to the risks and uncertainties associated
with food distributors and manufacturers, including the possibility
of product liability claims.
8. SUBSEQUENT EVENTS
Related Party Transactions
Presently, the Company is negotiating to license its name and logo
for use in a casual cafe for a term to be negotiated in return for a
royalty fee of 1% of gross revenues. The Company also advanced
$65,000 to the venture, receiving a note with interest at 5% per
annum, payable in 36 equal annual installments beginning the 1st day
of the fifth month after the cafe is opened. The Company has agreed
to advance the cafe up to $140,000. The Company's President and
Chairman of the Board are 50% holders of the Limited Liability
Company that owns the cafe. The Company will also receive a 10%
interest in the venture's net profits.
PAGE F-11
Part III
Item 1. Index to Exhibits
3.(i)(a). Certificate of Incorporation of the Company.*
3.(i)(b). Certificate of Amendment of Certificate of Incorporation.*
3.(i)(c). Amended and Restated Articles of Incorporation of the Company.*
3.(ii). Amended and Restated By-Laws of the Company.*
4.(i). Certificate of Designations of 5% Voting Preferred Stock-
$5.00 Liquidation Preference.*
10.(i). 2000 Stock Option Plan*
21.(i). Subsidiaries of the Registrant*
27.1 Financial Data Schedule*
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Form 10-SB to be signed
on its behalf by the undersigned, thereunto duly authorized.
Silhouette Brands, Inc.
/s/ Marc Wexler September 20, 2000
________________ ___________________
Marc Wexler Date
Chairman, Treasurer
And Principal Financial Officer
Index to Exhibits
3.(i)(a). Certificate of Incorporation of the Company.*
3.(1)(b). Certificate of Amendment of Certificate of Incorporation.*
3.(i)(c). Amended and Restated Articles of Incorporation of the Company.*
3.(ii). Amended and Restated By-Laws of the Company.*
4.(i). Certificate of Designations of 5% Voting Preferred Stock
$5.00 Liquidation Preference.*
10.(i). 2000 Stock Option Plan.*
21.(i). Subsidiaries of the Registrant*
27.1. Financial Data Schedule*
* Filed herewith.
EXHIBIT 3.(i)(a)
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF
CORPORATION FILED
9:00 01/27/94
944008570-2372348
CERTIFICATE OF
INCORPORATION OF
Silhouette Brands
Inc.
FIRST: The name of this corporation is Silhouette Brands Inc.
SECOND: Its registered office in the state of Delaware is to
be located at Three Christina Centre, 201 N. Walnut Street,
Wilmington DE 13601, New Castle County. The registered agent
in charge thereof is The Company Corporation, address "same as
above".
THIRD: The nature of the business and, the objects and purposes
proposed to be transacted promoted and carried on, and to do any
or all the things herein mentioned as fully and to the same extent
as natural persons might or could do, in any part of the word,
viz:
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The amount of the total authorized capital stock of this
corporation is divided into 1000 shares of stock at NO par value.
FIFTH: The name and mailing address of the incorporator is as
follows:
Vanessa Foster Three Christina Centre, 201 N. Walnut Street;
Wilmington DE 19801
SIXTH: The Directors shall have power to make and to alter or amend
The By-Laws; to fix the amount to be reserved as working capital, and
to authorize and cause to be executed, mortgages and liens without
limit as to the upon the property and franchise of the Corporation.
With the consent in writing, and pursuant to a void all the holders of
a majority of the capital stock issued and outstanding, the Directors
shall have the authority to dispose, in any manner, of the whole property
of this corporation. The By-Laws shall determine whether and to what
extent the accounts and books of this corporation, or any of them shall
be open to the inspection of the stockholders; and no stockholder shall
have any right of inspecting any account, or book or document of this
Corporation, except as conferred by the law or the By-Laws, or by
Resolution of the stockholders. The stockholders and directors shall
have power to hold their meetings and keep the books, documents and papers
of this Corporation outside of the State of Delaware, at such places as may
be from time to time designated by the By-Laws or by resolution of
the stockholders or directors, except as otherwise required by the laws of
Delaware. It is the intention that the objects purposes and powers
specified in the Third paragraph hereof shall, except where otherwise
specified in said paragraph, be nowise limited or restricted by reference
to or inference from the terms of any other clause or paragraph in
this certificate or incorporation; that the objects, purposes and powers
specified in the Third paragraph and in each of the clauses or paragraphs
of this charter shall be regarded as independent objects, purposes and
powers.
SEVENTH: Directors of the corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach of
fiduciary duties unless the breach involves: (1) a directors duty of
loyalty to the corporation or its stockholders; (2) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) liability for unlawful payments of dividends or
unlawful stock purchases or redemption by the corporation; or (4) a
transaction from which the director derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the
Laws of the State of Delaware, do make, file, and record this Certificate
and do testify that the facts herein are true; and I have accordingly
hereunto set my hand.
DATED: January 27, 1994 /s/
______________________
Vanessa Foster
EXHIBIT 3.(i)(b)
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
Silhouette Brands, Inc., a corporation organized and existing
under and by virtue or The Central Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
First: That at a meeting of the Board of Directors of Silhouette Brands,
Inc. Resolutions were duly adopted setting forth a proposed amendment of
the Certificate Of Incorporation of said corporation, declaring said
amendment to be advisable and Calling a meeting of the stockholders
of said corporation for consideration thereof. The resolution setting forth
the proposed amendment is as follows:
Resolved, that the Certificate of Incorporation of
this
corporation be amended by Changing the Article numbered "FOURTH"
so that, as amended, said Article shall be Read as follows:
"That the current authorization of capital stock shall be increased from one
thousand (1,000) shares of capital stock to eleven million shares of stock
allocated to one million (1,000,000) shares of preferred stock and ten million
(10,000,000) shares of common stock with all such shares at a par value of .0001
per share."
Second: That thereafter, pursuant to resolution of the Board of Directors,
a special meeting of the stock holders of said corporation was duly
called and held, upon in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by statue were voted in
favor of the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law
of the State of Delaware.
Fourth: That the capital stock of said corporation shall not be reduced
under or by reason of said amendment.
In Witness Whereof, said Board of Directors of Silhouette Brands, Inc. has
caused this certificate to be signed by Sam Pugliese, its President and
Marc Wexler, its Secretary this 29th day of October, 1997
By:_/s/ Sam Pugliese
President
Attest:/s/ Marc Wexler Secretary
STATE OF DELAWARE SECRETARY OF STATE DIVISION OF
CORPORATION FILED 9:00 11/04/97 971374361-2372348
EXHIBIT 3.(i)(c).
SILHOUETTE BRANDS INC. AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
(Pursuant to SS 242 and 245 of the General Corporation Law of the State
of Delaware)
The undersigned, being the Secretary of Silhouette Brands Inc., a
corporation organized and existing under the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify as follows:
A. The name of the Corporation is Silhouette Brands Inc.
B. The date of filing of the original Certificate of Incorporation of the
Corporation with the Secretary of State of the State of Delaware was
January 27, 1994, as amended by that Certificate of Amendment of
Certificate of Incorporation filed with the Secretary of State of the
State of Delaware on November 4, 1997.
C. This Amended and Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation of the
Corporation, as amended, and was duly adopted by consent of the
stockholders of the Corporation in accordance with Sections 228, 242,
and 245 of the General Corporation Law of the State of Delaware ("DGCL").
D. The Certificate of Incorporation of the Corporation, as amended and
restated hereby (the "Certificate of Incorporation"), shall, upon its
filing with the Secretary of State of the State of Delaware, read in
its entirety as follows:
FIRST: The name of the Corporation is Silhouette Brands, Inc.
SECOND: The registered office of the Corporation in the State of
Delaware is located at 1013 Centre Road, in the City of
Wilmington, County of New Castle, 19805. The name of the
registered agent of the Corporation at such address is the
Company Corporation.
THIRD: The purpose for which the Corporation is organized is to
engage in any and all lawful acts and activities for which
corporations may be organized under the DGCL. The Corporation
will have perpetual existence.
FOURTH: The total number of shares of stock which the Corporation
Shall have authority to issue is 11,000,000 shares of capital
stock, classified as (i) 1,000,000 shares of preferred stock,
par value $.0001 per share ("Preferred Stock"), and (ii)
10,000,000 shares of common stock, par value $.0001 per share
("Common Stock").
STATE OF DELAWARE
SECRETARY OF STATE DIVISION OF CORPORATION
FILED 6:00 PM 07/24/2000
001373574-2372348
The designations and the powers, preferences, rights,
qualifications, limitations, and restrictions of the
Preferred Stock and the Common Stock are as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class
or series to have such designations, preferences, and
relative, participating, optional, or other rights, and
qualifications,limitations, and/or restrictions thereof, as
are stated and expressed herein, in any amendment hereto,
or in the resolution or resolutions providing for the issue
of such class or series adopted by the Board of Directors
of the Corporation (the "Board of Directors") as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested in the
Board of Directors to authorize the issuance of the
Preferred Stock from time to time in one or more classes or
series, and in respect of each class or series of the
Preferred Stock, to fix and state by the resolution or
resolutions from time to time adopted providing for the
issuance thereof the following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without
voting rights, and whether or not such class or series
is to be entitled to vote as a separate class either
alone or together with the holders of one or more other
classes or series of stock;
(ii) the number of shares to constitute the class or series
and the designations thereof;
(iii) the preferences, and relative, participating, optional,
or other special rights,if any, and the qualifications,
limitations, or restrictions thereof, if any,in respect
of any class or series;
(iv) whether or not the shares of any class or series shall
be redeemable at the option of the Corporation or the
holders thereof or upon the happening of any specified
event, and, if redeemable, the redemption price or
prices (which may be payable in the form of cash,
securities, other property, or rights), and the time or
times at which, and the terms and conditions upon which,
such shares shall be redeemable and the manner of
redemption;
(v) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking
funds to be applied to the purchase or redemption of
such shares for retirement, and, if such retirement or
sinking fund or funds are to be established, the annual
or other periodic amount thereof, and the terms and
provisions relative to the operation thereof;
(vi) the dividend rate, if any, whether dividends are
payable in cash, stock of the Corporation, or other
property, the conditions upon which and the times when
such dividends are payable, the preference to or the
relation to the payment of dividends payable on any
other class or classes or series of stock, whether
or not such dividends shall be cumulative or non-
cumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof that
the holders of any class or series thereof shall be
entitled to receive upon the voluntary or involuntary
dissolution or liquidation of, or upon any distribution
of the assets of, the Corporation;
(viii) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof or
upon the happening of any specified event, shall be
convertible into or exchangeable for, the shares of
any other class or classes or of any other series of
the same or any other class or classes of stock,
securities or other property of the Corporation and the
conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with
such adjustments, if any, as shall be stated and
expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective provisions
in respect of any class or series as may to the Board
of Directors deem advisable.
(c) The shares of each class or series of the Preferred Stock may vary
from the shares of any other class or series thereof in any or all
of the foregoing respects. The Board of Directors may increase
the number of shares of the Preferred Stock designated for any
existing class or series by a resolution adding to such class or
series authorized and unissued shares of the Preferred Stock not
designated for any other class or series. The Board of Directors
may decrease the number of shares of the Preferred Stock
designated for any existing class or series by a resolution
subtracting from such class or series authorized and unissued
shares of the Preferred Stock designated for such existing class
or series, and the shares so subtracted shall become authorized,
unissued, and undesignated shares of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall have identical
rights and privileges in every respect. The holders of shares of
Common Stock shall be entitled to vote upon all matters submitted
to a vote of the stockholders of the Corporation and shall be
entitled to one vote for each share of Common Stock held.
(b) The holders of shares of the Common Stock shall be entitled to
receive such dividends (payable in cash, stock, or otherwise) as
may be declared thereon by the Board of Directors at any time and
from time to time out of any funds of the Corporation legally
available therefor.
(c) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, the holders of
shares of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation available for distribution to
its stockholders, ratably in proportion to the number of shares of
the Common Stock held by them. A liquidation, dissolution, or
winding-up of the Corporation, as such terms are used in this
subparagraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or
into any other corporation or corporations or other entity or a
sale,lease, exchange, or conveyance of all or a part of the assets
of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration
(not less than the par value thereof) as may be fixed by the Board
of Directors, which is expressly authorized to fix the same in its
absolute and uncontrolled discretion subject to the foregoing
conditions. Shares so issued for which the consideration shall
have been paid or delivered to the Corporation shall be deemed
fully paid stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights
and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other
securities of the Corporation, and such rights and options shall
be evidenced by instrument(s) approved by the Board of Directors.
The Board of Directors shall be empowered to set the exercise
price, duration, times for exercise, and other terms of such
options or rights by resolution(s); provided, however, that the
consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.
FIFTH: The directors of the Corporation need not be elected by written
ballot unless the bylaws of the Corporation otherwise provide.
SIXTH: The directors of the Corporation shall have the power to adopt,
amend, and repeal the bylaws of the Corporation.
SEVENTH:The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as defined below)
by reason of the fact that he or she
(i) is or was a director or officer of the Corporation or
(ii) while a director or officer ofv thev Corporation, is or was
serving at the request of the Corporation as a director,
officer, partner, venturer, member, proprietor, trustee,
employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture,
limited liability company, sole proprietorship, trust,
employee benefit plan or other enterprise, to the fullest
extent permitted under the DGCL, as the same exists or may
hereafter be amended. Such right shall be a contract right
and as such shall run to the benefit of any director or
officer who is elected and accepts the position of director
or officer of the Corporation or elects to continue to
serve as a director or officer of the Corporation while
this Article SEVENTH is in effect. Any repeal or amendment
of this Article SEVENTH shall be prospective only and shall
not limit the rights of any such director or officer or the
obligations of the Corporation in respect of any claim
arising from or related to the services of such director
or officer in any of the foregoing capacities prior to any
such repeal or amendment to this Article SEVENTH. Such
right shall include the right to be paid by the
Corporation expenses (including attorneys' fees) incurred
in defending any such proceeding in advance of its final
disposition to the maximum extent permitted under the DGCL,
as the same exists or may hereafter be amended. If a
claim for indemnification or advancement of expenses
hereunder is not paid in full by the Corporation within 60
days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount
of the claim, and if successful in whole or in part, the
claimant shall also be entitled to be paid the expenses
of prosecuting such claim. It shall be a defense to any
such action that such indemnification or advancement of
costs of defense are not permitted under the DGCL, but
the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation
(including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to have made
its determination prior to the commencement of such action
that indemnification of, or advancement of costs of defense
to, the claimant is permissible in the circumstances nor
an actual determination by the Corporation (including its
Board of Directors or any committee thereof, independent
legal counsel, or stockholders) that such indemnification
or advancement is not permissible shall be a defense
to the action or create a presumption that such
indemnification or advancement is not permissible. In
the event of the death of any person having a right of
indemnification under the foregoing provisions of this
Article SEVENTH, such right shall inure to the benefit of
his or her heirs, executors, administrators, and personal
representatives. The rights conferred in this Article
SEVENTH shall not be exclusive of any other right that any
Person may have or hereafter acquire under any statute,
bylaw, resolution of stockholders or directors, agreement,
or otherwise. The Corporation may additionally indemnify
any employee or agent of the Corporation to the fullest
extent permitted by law. As used herein, the term
"proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal
in such an action, suit, or proceeding, and any inquiry
or investigation that could lead to such an action, suit,
or proceeding.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders,
(ii) for acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law,
(iii) under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this
Article EIGHTH by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect
any limitation on the personal liability of a director of
the Corporation arising from an act or omission occurring
prior to the time of such repeal or amendment. In addition
to the circumstances in which a director of the
Corporation is not personally liable as set forth in the
foregoing provisions of this Article EIGHTH, a director
shall not be liable to the Corporation or its stockholders
to such further extent as permitted by any law hereafter
enacted, including without limitation any subsequent
amendment to the DGCL.
IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Certificate of Incorporation as of July 24, 2000.
By:/s/ Marc Wexler
---------------------
Marc Wexler
Secretary
EXHIBIT 3.(ii)
AMENDED AND RESTATED BYLAWS OF SILHOUETTE BRANDS, INC.
A Delaware Corporation
PREAMBLE
These Amended and Restated Bylaws (these "Bylaws") are subject to,
and governed by, the General Corporation Law of the State of Delaware
(the "DGCL") and the certificate of incorporation (as amended from
time to time, the "Certificate of Incorporation") of Silhouette Brands,
Inc. (the "Corporation"). In the event of a direct conflict between
the provisions of these Bylaws and the mandatory provisions of the DGCL
or the provisions of the Certificate of Incorporation, such provisions
of the DGCL or the Certificate of Incorporation, as the case may be, will
be controlling.
ARTICLE ONE
OFFICES tc ""
1.1 Registered Office and Agent tc "" . The registered office and
registered agent of the Corporation shall be as designated from time
to time by the appropriate filing by the Corporation in the office
of the Secretary of State of the State of Delaware.
1.2 Other Offices tc "" . The Corporation may also have offices at
such other places, both within and without the State of Delaware, as
the board of directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE TWO
MEETINGS OF STOCKHOLDERS tc ""
2.1 Annual Meeting tc "" . An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at
such time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting or in a duly
executed waiver of notice of such meeting. At such meeting, the
stockholders shall elect directors and transact such other business
as may properly be brought before the meeting.
2.2 Special Meeting tc "" . A special meeting of the stockholders may
be called at any time by the Chairman of the Board, the President,
the board of directors, and shall be called by the President or the
Secretary at the request in writing of the stockholders of record
of not less than ten percent of all shares entitled to vote at such
meeting or as otherwise provided by the Certificate of Incorporation.
A special meeting shall be held on such date and at such time as
shall be designated by the person(s) calling the meeting and stated
in the notice of the meeting or in a duly executed waiver of notice
of such meeting. Only such business shall be transacted at a special
meeting as may be stated or indicated in the notice of such meeting
or in a duly executed waiver of notice of such meeting.
2.3 Place of Meetings tc "" . An annual meeting of stockholders may be
held at any place within or without the State of Delaware designated
by the board of directors. A special meeting of stockholders may be
held at any place within or without the State of Delaware designated
in the notice of the meeting or a duly executed waiver of notice of
such meeting. Meetings of stockholders shall be held at the principal
office of the Corporation unless another place is designated for
meetings in the manner provided herein.
2.4 Notice tc "" . Written or printed notice stating the place, day, and
time of each meeting of the stockholders and, in case of a special
meeting,the purpose or purposes for which the meeting is called shall
be delivered not less than ten nor more than 60 days before the date
of the meeting, either personally or by mail, by or at the direction
of the President, the Secretary, or the officer or person(s) calling
the meeting, to each stockholder of record entitled to vote at such
meeting. If such notice is to be sent by mail, it shall be directed
to such stockholder at his address as it appears on the records of
the Corporation, unless he shall have filed with the Secretary of the
Corporation a written request that notices to him be mailed to some
other address, in which case it shall be directed to him at such
other address. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend such meeting
in person or by proxy and shall not, at the beginning of such
meeting, object to the transaction of any business because the
meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in
person or by proxy.
2.5 Voting List tc "" . At least ten days before each meeting of
stockholders, the Secretary or other officer of the Corporation who
has charge of the Corporation's stock ledger, either directly or
through another officer appointed by him or through a transfer
agent appointed by the board of directors, shall prepare a complete
list of stockholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each stockholder and
number of shares registered in the name of each stockholder. For a
period of ten days prior to such meeting, such list shall be kept
on file at a place within the city where the meeting is to be held,
which place shall be specified in the notice of meeting or a duly
executed waiver of notice of such meeting or, if not so specified,
at the place where the meeting is to be held and shall be open to
examination by any stockholder during ordinary business hours. Such
list shall be produced at such meeting and kept at the meeting at
all times during such meeting and may be inspected by any
stockholder who is present.
2.6 Quorum tc "" . The holders of a majority of the outstanding
shares entitled to vote on a matter, present in person or by proxy,
shall constitute a quorum at any meeting of stockholders, except as
otherwise provided by law, the Certificate of Incorporation, or
these Bylaws. If a quorum shall not be present, in person or by
proxy, at any meeting of stockholders, the stockholders entitled to
vote thereat who are present, in person or by proxy, or, if no
stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without
notice other than announcement at the meeting (unless the board of
directors, after such adjournment, fixes a new record date for the
adjourned meeting), until a quorum shall be present, in person or
by proxy. At any adjourned meeting at which a quorum shall be
present, in person or by proxy, any business may be transacted that
may have been transacted at the original meeting had a quorum been
present; provided, however,that 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
adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum tc "" . When a quorum is
present at any meeting, the vote of the holders of at least a
majority of the outstanding shares entitled to vote who are present,
in person or by proxy, shall decide any question brought before
such meeting, unless the question is one on which, by express
provision of statute, the Certificate of Incorporation, or these
Bylaws, a different vote is required, in which case such express
Provision shall govern and control the decision of such question.
The stockholders present at a duly constituted meeting may continue
To transact business until adjournment, notwithstanding the
Withdrawal of enough stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies tc "" . Except as otherwise provided in
the Certificate of Incorporation or by law, each outstanding share,
regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of
directors need not be by written ballot. At any meeting of
stockholders, every stockholder having the right to vote may vote
either in person or by a proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact. Each such
proxy shall be filed with the Secretary of the Corporation before
or at the time of the meeting. No proxy shall be valid after three
years from the date of its execution, unless otherwise provided in
the proxy. If no date is stated in a proxy, such proxy shall be
presumed to have been executed on the date of the meeting at which
it is to be voted. Each proxy shall be revocable unless expressly
provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless
otherwise made irrevocable by law.
2.9 Record Date tc "" .
(a) For the purpose of determining stockholders entitled to notice
of or to vote at any meeting of stockholders, or any adjournment
thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion, or exchange of
stock or for the purpose of any other lawful action, the board
of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record
date is adopted by the board of directors, for any such
determination of stockholders, such date in any case to be not
more than 60 days and not less than ten days prior to such
meeting nor more than 60 days prior to any other action. If no
record date is fixed:
(i) 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 next preceding the day on which
notice is given or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting
is held.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto.
(iii) 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.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a
meeting, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the
board of directors. If no record date has been fixed by the board
of directors, the record date for determining stockholders
entitled to consent to corporate action in writing without a
meeting, when no prior action by the board of directors is
required by law or these Bylaws, shall be the first date on which
a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery
to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's
registered office in the State of Delaware, principal place of
business,or such officer or agent shall be by hand or by certified
or registered mail, return receipt requested. If no record date
has been fixed by the board of directors and prior action by the
board of directors is required by law or these Bylaws, the record
date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts
the resolution taking such prior action.
2.10 Conduct of Meeting tc "" . The Chairman of the Board, if such
office has been filled, and, if not or if the Chairman of the Board
is absent or otherwise unable to act, the President shall preside
at all meetings of stockholders. The Secretary shall keep the
records of each meeting of stockholders. In the absence or
inability to act of any such officer, such officer's duties shall
be performed by the officer given the authority to act for such
absent or non-acting officer under these Bylaws or by some person
appointed by the meeting.
2.11 Inspectors tc "" . The board of directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at
such meeting or any adjournment thereof. If any of the inspectors
so appointed shall fail to appear or act, the chairman of the
meeting shall, or if inspectors shall not have been appointed, the
Chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector
at such meeting with strict impartiality and according to the best
of his ability. The inspectors shall determine the number of shares
of capital stock of the Corporation outstanding and the voting
power of each, the number of shares represented at the meeting, the
existence of a quorum, and the validity and effect of proxies and
shall receive votes, ballots, or consents, hear and determine all
challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots, or consents, determine
the results, and do such acts as are proper to conduct the election
or vote with fairness to all stockholders. On request of the
chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request, or matter determined by them and
shall execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as an inspector
of an election of directors. Inspectors need not be stockholders.
ARTICLE THREE
DIRECTORS tc ""
3.1 Management tc "" . The business and affairs of the Corporation
shall be managed by the board of directors. Subject to the
restrictions imposed by law, the Certificate of Incorporation, or
these Bylaws, the board of directors may exercise all the powers
of the Corporation.
3.2 Number; Qualification; Election; Term tc "" .
The number of directors that shall constitute the entire board of
Directors shall be eight. Except as otherwise required by law, the
Certificate of Incorporation, or these Bylaws, the directors shall
be elected at an annual meeting of stockholders at which a quorum
is present. Except as otherwise required by the Certificate of
Incorporation, directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy and
entitled to vote on the election of directors. Each director so
chosen shall hold office until the first annual meeting of
stockholders held after his election and until his successor is
elected and qualified or, if earlier, until his death, resignation,
or removal from office. None of the directors need be a
stockholder of the Corporation or a resident of the State of
Delaware. Each director must have attained the age of majority.
3.3 Change in Number tc "" .
No decrease in the number of directors constituting the entire
board of directors shall have the effect of shortening the term of
any incumbent director.
3.4 Removal tc "" .
Except as otherwise provided in the Certificate of Incorporation
or these Bylaws, at any meeting of stockholders called expressly
for that purpose, any director or the entire board of directors
may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote on the election of
directors.
3.5 Vacancies tc "" .
Except as otherwise provided in the Certificate of Incorporation,
Vacancies and newly-created directorships resulting from any
increase in the authorized number of directors elected by all of
the stockholders having the right to vote as a single class may be
filled by a majority of the directors then in office, although
less than a quorum, or by the sole remaining director, and each
director so chosen shall hold office until the first annual
meeting of stockholders held after his election and until his
successor is elected and qualified or, if earlier, until his death,
resignation, or removal from office. If there are no directors in
office, an election of directors may be held in the manner
provided by statute, subject to any restrictions imposed by the
Certificate of Incorporation. If, at the time of filling any
vacancy or any newly-created directorship, the directors then in
office shall constitute less than a majority of the whole board of
directors (as constituted immediately prior to any such increase),
the Court of Chancery may, upon application of any stockholder
or stockholders holding at least 10% of the total number of the
shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such
vacancies or newly-created directorships or to replace the
directors chosen by the directors then in office. Except as
otherwise provided in the Certificate of Incorporation or these
Bylaws, when one or more directors shall resign from the board of
directors, effective at a future date, a majority of the directors
then in office, including those who have so resigned, shall have
the power to fill such vacancy or vacancies, the vote thereon to
take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as
provided in these Bylaws in respect of the filling of other
vacancies.
3.6 Meetings of Directors tc "" .
The directors may hold their meetings and may have an office and
keep the books of the Corporation, except as otherwise provided by
statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine
or as shall be specified in the notice of such meeting or duly
executed waiver of notice of such meeting.
3.7 First Meeting tc "" .
Each newly elected board of directors may hold its first meeting
for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as
the annual meeting of stockholders, and no notice of such meeting
shall be necessary.
3.8 Election of Officers tc "" .
At the first meeting of the board of directors after each annual
meeting of stockholders at which a quorum shall be present, the
board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings tc "" .
Regular meetings of the board of directors shall be held at such
times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular
meetings shall not be required.
3.10 Special Meetings tc "" .
Special meetings of the board of directors shall be held whenever
Called by the Chairman of the Board, the President, or any
director.
3.11 Notice tc "" .
The Secretary shall give notice of each special meeting to each
director at least 24 hours before the meeting. Notice of any such
meeting need not be given to any director who shall, either before
or after the meeting, submit a signed waiver of notice or who
shall attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him. Neither the business to
be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice
or waiver of notice of such meeting.
3.12 Quorum; Majority Vote tc "" .
At all meetings of the board of directors, a majority of the
directors fixed in the manner provided in these Bylaws shall
constitute a quorum for the transaction of business. If at any
meeting of the board of directors there be less than a quorum
present, a majority of those present or any director solely
present may adjourn the meeting from time to time without further
notice. Unless the act of a greater number is required by law, the
Certificate of Incorporation, or these Bylaws, the act of a
majority of the directors present at a meeting at which a quorum
is in attendance shall be the act of the board of directors. At
any time that the Certificate of Incorporation provides that
directors elected by the holders of a class or series of stock
shall have more or less than one vote per director on any matter,
every reference in these Bylaws to a majority or other proportion
of directors shall refer to a majority or other proportion of the
votes of such directors.
3.13 Procedure tc "" .
At meetings of the board of directors, business shall be
transacted in such order as from time to time the board of
directors may determine. The Chairman of the Board, if such office
has been filled, and, if not or if the Chairman of the Board is
absent or otherwise unable to act, the President shall preside at
all meetings of the board of directors. In the absence or
inability to act of either such officer, a chairman shall be
chosen by the board of directors from among the directors present.
The Secretary of the Corporation shall act as the secretary of
each meeting of the board of directors unless the board of
directors appoints another person to act as secretary of the
meeting. The board of directors shall keep regular minutes of its
proceedings which shall be placed in the minute book of the
Corporation.
3.14 Presumption of Assent tc "" .
A director of the Corporation who is present at the meeting of the
board of directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless
he shall file his written dissent to such action with the person
acting as secretary of the meeting before the adjournment thereof
or shall forward any dissent by certified or registered mail to
the Secretary of the Corporation immediately after the adjournment
of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
3.15 Compensation tc "" .
Subject to any restrictions imposed by the Certificate of
Incorporation, the board of directors shall have the authority
to fix the compensation, including fees and reimbursement of
expenses, paid to directors for attendance at regular or special
meetings of the board of directors or any committee thereof;
provided, however, that nothing contained herein shall be
construed to preclude any director from serving the Corporation
in any other capacity or receiving compensation therefor.
ARTICLE FOUR
COMMITTEES tc ""
4.1 Designation tc "" .
The board of directors may, by resolution adopted by a majority
of the entire board of directors, designate one or more
committees.
4.2 Number; Qualification; Term tc "" .
Except as may be otherwise required by the Certificate of
Incorporation, each committee shall consist of one or more
directors appointed by resolution adopted by a majority of the
entire board of directors. The number of committee members may be
increased or decreased from time to time by resolution adopted by
a majority of the entire board of directors. Each committee
member shall serve as such until the earliest of
(i) the expiration of his term as director,
(ii) his resignation as a committee member or as a director, or
(iii) his removal as a committee member or as a director.
4.3 Authority tc "" .
Each committee, to the extent expressly provided in the
Resolution establishing such committee, shall have and may
exercise all of the power and authority of the board of
directors in the management of the business and affairs of the
Corporation except to the extent expressly restricted by law,
The Certificate of Incorporation, or these Bylaws.
4.4 Committee Changes tc "" .
Subject to any restrictions imposed by the Certificate of
Incorporation, the board of directors shall have the power at
any time to fill vacancies in, to change the membership of, and
to discharge any committee.
4.5 Alternate Members of Committees tc "" .
Subject to any restrictions imposed by the Certificate of
Incorporation,
(a) the board of directors may designate one or more directors
as alternate members of any committee, and
(b) any such alternate member may replace any absent or
disqualified member at any meeting of the committee.
Subject to any restrictions imposed by the Certificate of
Incorporation, if no alternate committee members have
been so appointed to a committee or each such alternate
committee member is absent or disqualified, the member or
members of such 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.
4.6 Regular Meetings tc "" .
Regular meetings of any committee may be held without notice at
such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings tc "" .
Special meetings of any committee may be held whenever called by
any committee member. The committee member calling any special
meeting shall cause notice of such special meeting, including
therein the time and place of such special meeting, to be given
to each committee member at least two days before such special
meeting. Neither the business to be transacted at, nor the
purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special
meeting.
4.8 Quorum; Majority Vote tc "" .
At meetings of any committee, a majority of the number of
Members designated by the board of directors shall constitute a
quorum for the transaction of business. If a quorum is not
present at a meeting of any committee, a majority of the members
present may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a quorum
is present. The act of a majority of the members present at any
meeting at which a quorum is in attendance shall be the act of a
committee, unless the act of a greater number is required by law,
the Certificate of Incorporation, or these Bylaws.
4.9 Minutes tc "" .
Each committee shall cause minutes of its proceedings to be
prepared and shall report the same to the board of directors
upon the request of the board of directors. The minutes of the
proceedings of each committee shall be delivered to the
Secretary of the Corporation for placement in the minute books
Of the Corporation.
4.10 Compensation tc "" .
Subject to any restrictions imposed by the Certificate of
Incorporation, committee members may, by resolution of the board
of directors, be allowed a fixed sum and expenses of attendance,
if any, for attending any committee meetings or a stated salary.
4.11 Responsibility tc "" .
The designation of any committee and the delegation of authority
to it shall not operate to relieve the board of directors or any
director of any responsibility imposed upon it or such director
by law.
ARTICLE FIVE
NOTICE tc ""
5.1 Method tc "" .
Whenever by statute, the Certificate of Incorporation, or these
Bylaws, notice is required to be given to any committee member,
director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be
required and any such notice may be given
(a) in writing, by mail, postage prepaid, addressed to such
committee member, director, or stockholder at his address as it
appears on the books or (in the case of a stockholder) the
stock transfer records of the Corporation, or
(b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, or
telefax). Any notice required or permitted to be given by mail
shall be deemed to be delivered and given at the time when the
same is deposited in the United States mail as aforesaid. Any
notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time
delivered to such service with all charges prepaid and
addressed as aforesaid. Any notice required or permitted to be
given by telegram, telex, or telefax shall be deemed to be
delivered and given at the time transmitted with all charges
prepaid and addressed as aforesaid.
5.2 Waiver tc "" .
Whenever any notice is required to be given to any stockholder,
director, or committee member of the Corporation by statute,
the Certificate of Incorporation, or these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein,
shall be equivalent to the giving of such notice. Attendance
of a stockholder, director, or committee member at a meeting
shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting
to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
ARTICLE SIX
OFFICERS tc ""
6.1 Number; Titles; Term of Office tc "" .
The officers of the Corporation shall be a President, a
Secretary, and such other officers as the board of directors
may from time to time elect or appoint, including a Chairman
of the Board, one or more Vice Presidents (with each Vice
President to have such descriptive title, if any, as the board
of directors shall determine), and a Treasurer. Each officer
shall hold office until his successor shall have been duly
elected and shall have qualified, until his death, or until
he shall resign or shall have been removed in the manner
hereinafter provided. Any two or more offices may be held by
the same person. None of the officers need be a stockholder
or a director of the Corporation or a resident of the State
of Delaware.
6.2 Removal tc "" .
Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever
in its judgment the best interest of the Corporation will be
served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of
itself create contract rights.
6.3 Vacancies tc "" .
Any vacancy occurring in any office of the Corporation (by
death, resignation, removal, or otherwise) may be filled by
the board of directors.
6.4 Authority tc "" .
Officers shall have such authority and perform such duties in
the management of the Corporation as are provided in these
Bylaws or as may be determined by resolution of the board of
directors not inconsistent with these Bylaws.
6.5 Compensation tc "" .
Subject to any restrictions imposed by the Certificate of
Incorporation, the compensation, if any, of officers and
Agents shall be fixed from time to time by the board of
directors; provided, however, that the board of directors may
delegate the power to determine the compensation of any
officer and agent (other than the officer to whom such power
is delegated) to the Chairman of the Board or the President.
6.6 Chairman of the Board tc "" .
The Chairman of the Board, if elected by the board of
directors, shall have such powers and duties as may be
prescribed by the board of directors. Such officer shall
preside at all meetings of the stockholders and of the board
of directors. Such officer may sign all certificates for
shares of stock of the Corporation.
6.7 President tc "" .
The President shall be the chief executive officer of the
Corporation and, subject to the board of directors, he shall
have general executive charge, management, and control of the
properties and operations of the Corporation in the ordinary
course of its business, with all such powers in respect of
such properties and operations as may be reasonably incident
to such responsibilities. If the board of directors has
not elected a Chairman of the Board or in the absence or
inability to act of the Chairman of the Board, the President
shall exercise all of the powers and discharge all of the
duties of the Chairman of the Board. As between the
Corporation and third parties, any action taken by the
President in the performance of the duties of the Chairman
of the Board shall be conclusive evidence that there is no
Chairman of the Board or that the Chairman of the Board is
absent or unable to act.
6.8 Vice Presidents tc "" .
Each Vice President shall have such powers and duties as
may be assigned to him by the board of directors, the
Chairman of the Board, or the President, and (in order of
their seniority as determined by the board of directors or,
in the absence of such determination, as determined by the
length of time they h ave held the office of Vice President)
shall exercise the powers of the President during that
officer's absence or inability to act. As between the
Corporation and third parties, any action taken by a
Vice President in the performance of the duties of the
President shall be conclusive evidence of the absence or
inability to act of the President at the time such action
was taken.
6.9 Treasurer tc "" .
The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of
receipts and disbursements, shall deposit all monies and
valuable effects in the name and to the credit of
the Corporation in such depository or depositories as may
be designated by the board of directors, and shall perform
such other duties as may be prescribed by the board of
directors, the Chairman of the Board, or the President.
6.10 Assistant Treasurers tc "" .
Each Assistant Treasurer shall have such powers and duties
as may be assigned to him by the board of directors,
the Chairman of the Board, or the President. The Assistant
Treasurers (in the order of their seniority as determined
by the board of directors or, in the absence of such a
determination, as determined by the length of time they have
held the office of Assistant Treasurer) shall exercise the
powers of the Treasurer during that officer's absence or
inability to act.
6.11 Secretary tc "" .
Except as otherwise provided in these Bylaws, the Secretary
shall keep the minutes of all meetings of the board of
directors and of the stockholders in books provided for
that purpose, and he shall attend to the giving and service
of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation,
all contracts of the Corporation and affix the seal of the
Corporation thereto. He may sign with the Chairman of the
Board or the President all certificates for shares of stock
of the Corporation, and he shall have charge of the
certificate books, transfer books, and stock papers as the
board of directors may direct, all of which shall at all
reasonable times be open to inspection by any director upon
application at the office of the Corporation during business
hours. He shall in general perform all duties incident to the
office of the Secretary, subject to the control of the board
of directors, the Chairman of the Board, and the President.
6.12 Assistant Secretaries tc "" .
Each Assistant Secretary shall have such powers and duties as
may be assigned to him by the board of directors, the Chairman
of the Board, or the President. The Assistant Secretaries (in
the order of their seniority as determined by the board of
directors or, in the absence of such a determination, as
determined by the length of time they have held the office of
Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.
ARTICLE SEVEN
CERTIFICATES AND SHAREHOLDERS tc ""
7.1 Certificates for Shares tc "" .
Certificates for shares of stock of the Corporation shall be
in such form as shall be approved by the board of directors.
The certificates shall be signed by the Chairman of the Board
or the President or a Vice President and also by the Secretary
or an Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any and all signatures on the certificate may be a
facsimile and may be sealed with the seal of the Corporation
or a facsimile thereof. If any officer, transfer agent, or
registrar who has signed, or whose facsimile signature has
been placed upon, a certificate has ceased to be such officer,
transfer agent, or registrar before such certificate is
issued, such certificate may be issued by the Corporation
with the same effect as if he were such officer, transfer
agent, or registrar at the date of issue. The certificates
shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued and shall exhibit
the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates tc "" .
The board of directors may direct a new certificate or
Certificates to be issued in place of a certificate or
certificates theretofore issued by the Corporation and
alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming
the certificate or certificates representing shares to be
lost, stolen, or destroyed. When authorizing such issue of a
new certificate or certificates the board of directors may,
in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen,
or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it
shall require and/or to give the Corporation a bond with
a surety or sureties satisfactory to The Corporation in such
sum as it may direct as indemnity against any claim, or
expense resulting from a claim, that may be made against the
Corporation in respect of the certificate or certificates
alleged to have been lost, stolen, or destroyed.
7.3 Transfer of Shares tc "" .
Shares of stock of the Corporation shall be transferable only
On the books of the Corporation by the holders thereof
in person or by their duly authorized attorneys or
legal representatives. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate
representing shares duly endorsed or accompanied by proper
evidence of succession, assignment, or authority to transfer,
the Corporation or its transfer agent shall issue a new
certificate to the person entitled thereto, cancel the old
certificate, and record the transaction upon its books.
7.4 Registered Stockholders tc "" .
The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations tc "" .
The board of directors shall have the power and authority
to make all such rules and regulations as they may deem
expedient concerning the issue, transfer, and registration
or the replacement of certificates for shares of stock of
the Corporation.
7.6 Legends tc "" .
The board of directors shall have the power and authority to
Provide that certificates representing shares of stock bear
such legends as the board of directors deems appropriate to
assure that the Corporation does not become liable for
violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT
MISCELLANEOUS PROVISIONS tc ""
8.1 Dividends tc "" .
Subject to provisions of law and the Certificate of
Incorporation, dividends may be declared by the board of directors
At any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such
declaration and payment shall be at the discretion of the board of
directors.
8.2 Reserves tc "" .
There may be created by the board of directors out of funds of the
Corporation legally available therefor such reserve or reserves as
The directors from time to time, in their discretion, consider
proper to provide for contingencies, to equalize dividends, or to
repair or maintain any property of the Corporation, or for such
other purpose as the board of directors shall consider beneficial
to the Corporation, and the board of directors may modify or
abolish any such reserve in the manner in which it was created.
8.3 Books and Records tc "" .
The Corporation shall keep correct and complete books and
records of account, shall keep minutes of the proceedings of
its stockholders and board of directors and shall keep at
its registered office or principal place of business, or at the
office of its transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders
and the number and class of the shares held by each.
8.4 Fiscal Year tc "" .
The fiscal year of the Corporation shall be fixed by the board of
directors; provided, however, that if such fiscal year is not
fixed by the board of directors and the selection of the fiscal
year is not expressly deferred by the board of directors, the
fiscal year shall be the calendar year.
8.5 Seal tc "" .
The seal of the Corporation shall be such as from time to time may
be approved by the board of directors.
8.6 Resignations tc "" .
Any director, committee member, or officer may resign by so
stating at any meeting of the board of directors or by giving
written notice to the board of directors, the Chairman of the
Board, the President, or the Secretary. Such resignation shall
take effect at the time specified therein or, if no time is
specified therein, immediately upon its receipt. Unless otherwise
specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
8.7 Securities of Other Corporations tc "" .
The Chairman of the Board, the President, or any Vice President of
the Corporation shall have the power and authority to transfer,
endorse for transfer, vote, consent, or take any other action in
respect of any securities of another issuer that may be held or
owned by the Corporation and to make, execute, and deliver any
waiver, proxy, or consent in respect of any such securities.
8.8 Telephone Meetings tc "" .
Stockholders (acting for themselves or through a proxy), members
of the board of directors, and members of a committee of the board
of directors may participate in and hold a meeting of such
stockholders, board of directors, or committee by means of a
conference telephone or similar communications equipment by means
of which persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this section shall
constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
8.9 Action Without a Meeting tc "" .
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by the DGCL to be taken at
any annual or special meeting of the stockholders, or any
action that may be taken at any annual or special meeting of
the stockholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the
holders (acting for themselves or through a proxy) 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 the holders of all shares entitled to
vote thereon were present and voted and shall be delivered to
the Corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an
officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded.
Every written consent of stockholders shall bear the date of
signature of each stockholder who signs the consent and no
written consent shall be effective to take the corporate action
referred to therein unless, within 60 days of the earliest
dated consent delivered in the manner required by this Section
8.9 (a) to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to
the Corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an
officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded.
Delivery made to the Corporation's registered office, principal
place of business, or such officer or agent shall be by hand
or by certified or registered mail, return receipt requested.
(b) Unless otherwise restricted by the Certificate of
Incorporation or by these Bylaws, any action required or
Permitted to be taken at a meeting of the board of directors,
or of any committee of the board of directors, may be taken
without a meeting if a consent or consents in writing, setting
forth the action so taken, shall be signed by all the directors
or all the committee members, as the case may be, entitled to
vote in respect of the subject matter thereof, and such consent
shall have the same force and effect as a vote of such directors
or committee members, as the case may be, and may be stated
as such in any certificate or document filed with the Secretary
of State of the State of Delaware or in any certificate
delivered to any person. Such consent or consents shall be
filed with the minutes of proceedings of the board or committee,
as the case may be.
8.10 Invalid Provisions tc "" .
If any part of these Bylaws shall be held invalid or
inoperative for any reason, the remaining parts, so far as it
is possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. tc ""
In respect of any deed, deed of trust, mortgage, or other
Instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such
execution by the Secretary of the Corporation shall not be
necessary to constitute such deed, deed of trust, mortgage, or
other instrument a valid and binding obligation against the
Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such
attestation is necessary.
8.12 Headings tc "" .
The headings used in these Bylaws have been inserted for
Administrative convenience only and do not constitute matter
to be construed in interpretation.
8.13 References tc "" .
Whenever herein the singular number is used, the same shall
include the plural where appropriate, and words of any gender
should include each other gender where appropriate.
8.14 Amendments tc "" .
Subject to any restrictions imposed by the Certificate of
Incorporation, these Bylaws may be altered, amended, or
repealed or new bylaws may be adopted by the stockholders or
by the board of directors at any regular meeting of the
stockholders or the board of directors or at any special
meeting of the stockholders or the board of directors if notice
of such alteration, amendment, repeal, or adoption of new
bylaws be contained in the notice of such special meeting.
EXHIBIT 4.(i)
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATION
FILED 4:04 PM
8/01/2000
001388791-2372348
SILHOUETTE BRANDS, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL
RIGHTS OF
5% VOTING PREFERRED STOCK-$5.00 LIQUIDATION PREFERENCE
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
_______________________________________________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_______________________________________________________________
Silhouette Brands Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the board of
directors of the Corporation (the "Board of Directors") by its Certificate
of Incorporation, as amended (hereinafter referred to as the "Certificate
of Incorporation"), and pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, said Board of Directors,
by unanimous written consent dated August 1, 2000, duly approved and
adopted the following resolution (this "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, as amended, the Board of
Directors does hereby create, authorize, and provide for the issuance of
the 5% Voting Preferred Stock, par value $0.0001 per share, with a
Liquidation Preference of $5.00 per share, consisting initially of 315,000
shares, having the designations, preferences, relative, participating,
optional, and other special rights and the qualifications, limitations,
and restrictions thereof that are set forth in the Certificate of
Incorporation and in this Resolution as follows:
Section I. Designation.
There is hereby created out of the authorized and unissued shares of
Preferred Stock of the Corporation a class of Preferred Stock designated
as "5% Voting Preferred Stock - $5.00 Liquidation Preference" ("5% Voting
Preferred Stock") and the number of shares constituting such class shall
be 315,000.
Section II. Rank.
The 5% Voting Preferred Stock, in respect of dividends and distributions
upon the liquidation, winding-up, and dissolution of the Corporation, shall
rank senior to all classes of common stock of the Corporation, and each
other class of Capital Stock or series of Preferred Stock hereafter created
that does not expressly provide that it ranks senior to, or on a parity
with, the 5% Voting Preferred Stock as to dividends and distributions upon
the liquidation, winding-up, and dissolution of the Corporation ("Junior
Stock"). The 5% Voting Preferred Stock shall, in respect of dividends and
distributions upon the liquidation, winding-up, and dissolution of the
Corporation, rank on a parity with any class of Capital Stock or series of
Preferred Stock hereafter created that expressly provides that it ranks on
a parity with the 5% Voting Preferred Stock as to dividends and
distributions upon the liquidation, winding-up, and dissolution of the
Corporation ("Parity Stock"); provided, however, that any such Parity Stock
that was not approved in writing by the majority of the Holders shall be
deemed to be Junior Stock and not Parity Stock. The 5% Voting Preferred
Stock shall,in respect of dividends and distributions upon the liquidation,
winding-up, and dissolution of the Corporation, rank junior to each class
of Capital Stock or series of Preferred Stock hereafter created that
has been approved in writing by the majority of the Holders and that
expressly provides that it ranks senior to the 5% Voting Preferred
Stock as to dividends or distributions upon the liquidation, winding-up,
and dissolution of the Corporation ("Senior Stock").
Section III. Dividends.
(i) Beginning on the day next following the Issue Date, the Holders
of the outstanding shares of 5% Voting Preferred Stock being issued on such
Issue Date shall be entitled to receive, when, as, and if declared by the
Board of Directors, out of funds legally available therefore, distributions
in the form of cash dividends on each share of 5% Voting Preferred Stock,
at the rate of 5% per annum (the "Dividend Rate"), multiplied by the
Liquidation Preference per share of the 5% Voting Preferred Stock.
Dividends shall accrue at the Dividend Rate, and shall be cumulative,
whether or not earned or declared, however, shall not compound. Dividends
shall be payable in arrears on each Dividend Payment Date, commencing on
the first Dividend Payment Date after the applicable Issue Date. Each
dividend shall be payable to Holders of record as they appear on the stock
books of the Corporation on the Dividend Record Date immediately preceding
the related Dividend Payment Date.
(ii) All dividends paid in respect of shares of the 5% Voting
Preferred Stock pursuant to Section III(c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) No full dividends shall be declared by the Board of Directors
or paid or set apart for payment by the Corporation on any Parity Stock for
any period unless full cumulative dividends have been or contemporaneously
are declared and paid in full, or declared and, if payable in cash, a sum
in cash set apart sufficient for such payment on the 5% Voting Preferred
Stock for all Dividend Periods terminating on or prior to the date of
payment of such full dividends on such Parity Stock. If any dividends are
not so paid, all dividends declared upon shares of the 5% Voting Preferred
Stock and any Parity Stock shall be declared pro rata so that the amount of
dividends declared per share on the 5% Voting Preferred Stock and such
Parity Stock shall in all cases bear to each other the same ratio that
Accrued dividends per share on the 5% Voting Preferred Stock and such
Parity Stock bear to each other.
(iv) (A) Holders of shares of the 5% Voting Preferred Stock shall
be entitled to receive the dividends provided for in paragraph (i) hereof
in preference to and in priority over any dividends upon any Junior Stock.
(B) So long as any share of the 5% Voting Preferred Stock is
outstanding, the Corporation shall not declare, pay, or set apart for
payment any dividend on any of the Junior Stock or make any payment on
account of, or set apart for payment money for a sinking or other similar
fund for, the purchase, redemption, conversion, or other retirement of, any
Junior Stock or any warrants, rights, calls, or options exercisable for or
convertible into any Junior Stock whether in cash, obligations, or shares
of the Corporation or other property (other than dividends paid in Junior
Stock to the holders of Junior Stock), and shall not permit any corporation
or other entity directly or indirectly controlled by the Corporation to
purchase or redeem any of the Junior Stock or any such warrants, rights,
calls, or options, unless full cumulative dividends determined in
accordance herewith on the 5% Voting Preferred Stock have been paid in
full.
(C) So long as any share of the 5% Voting Preferred Stock is
outstanding, the Corporation shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for,
the purchase, redemption, conversion, or other retirement of, any of the
Parity Stock or any warrants, rights, calls, or options exercisable for
or convertible into any of the Parity Stock, and shall not permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the Parity Stock or any such
warrants, rights, calls, or options, unless full cumulative dividends
determined in accordance herewith on the 5% Voting Preferred Stock have
been paid in full.
(v) Dividends payable on the 5% Voting Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the period for which
payable.
(vi) Notwithstanding anything contained herein to the contrary,
(a) if funds are not legally available for the payment of any
dividend during any Dividend Period, such dividend must be
declared and paid in the form of Common Stock as provided
hereinbelow, and
(b) if funds are legally available for the payment of any
dividend,
Holder nonetheless at its sole discretion may elect prior to any Dividend
Payment Date for a respective Dividend Period to receive all or part of
dividend in the form of Common Stock as provided hereinbelow. In any case,
a dividend either in the form of cash or Common Stock will be paid to each
Holder on the Dividend Payment Date for the applicable Dividend Period. The
number of shares of Common Stock to be received as a dividend ("Dividend
Shares") by a Holder for each Dividend Period shall equal: the Dividend
Rate multiplied by $5.00 multiplied by the number of shares of $5.00 Voting
Preferred Stock held by the Holder (less any shares for which a dividend in
cash has been paid to the holder for such Dividend Period) divided by the
product of the following; the "Market Value per Share of the Common Stock"
(as defined in the following sentence) multiplied by fifty percent (50%).
Market Value per Share of the Common Stock shall equal the closing price
per share of the Common Stock of the Corporation on the last trading day
of each Dividend Period as quoted on any regulated securities
market, electronic bulletin board, "pink sheet" market, or other
third party market, or if no such market for the Common Stock exists,
then the last price paid by an unaffiliated third party in a private
placement transaction. No fractional shares shall be issued in connection
with the Dividend Shares, and the number of shares of Common Stock to be
issued shall be rounded up or down to the nearest whole share. The
effective date of ownership of the Dividend Shares shall be the Record Date
and holder shall be deemed a shareholder of record of the Corporation for
the Dividend Shares as of such date. The Corporation at all times shall
reserve and keep available out of its authorized but unissued shares of its
Common Stock, solely for the purpose of effecting the dividend, such number
of its shares of Common Stock as from time to time shall be sufficient
to effect the dividend; and if at any time the number of authorized
but unissued shares of Common Stock shall be insufficient to effect
the dividend, the Corporation shall take such corporate action necessary to
increase the number of its authorized but unissued shares of its Common
Stock to effect such dividend, including without limitation employing its
best efforts to obtain requisite shareholder approval.
(vii) On theIssue Date, the Holders of the 5% Voting Preferred Stock,
collectively, shall be entitled to receive a one-time, mandatory
dividend of the Corporation that equals ("Mandatory Dividend"):
(i) a cash amount of One Hundred and Seventy-Five Thousand and Seven
Hundred and Eighteen Dollars and Seventy Five Cents ($175,718.75) and
(ii) One Hundred and Eight Thousand Four Hundred (108,400) shares of
common stock, $0.0001 par value, of the Corporation. The Mandatory
Dividend will be pro rata to the Holders entitled thereto, and will
be in addition to any other dividend provided in this Resolution. Any
reference in this Resolution to the terms Dividend, Dividend Payment
Date, Dividend Period, Dividend Rate, Dividend Record Date, Dividend
Shares shall exclude the Mandatory Dividend.
Section IV. Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Corporation,
the Holders of shares of 5% Voting Preferred Stock then
outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its
stockholders an amount in cash equal to the Liquidation
Preference for each share of the 5% Voting Preferred Stock
held by such Holder, plus, without duplication, an amount in
cash equal to accumulated and unpaid dividends thereon to the
date fixed for liquidation, dissolution, or winding up
(including an amount equal to a prorated dividend for the
period from the last Dividend Payment Date to the date fixed
for liquidation, dissolution, or winding up) before any
payment shall be made or any assets distributed to the
holders of any of the Junior Stock including, without
limitation, the Common Stock. Except as provided in the
preceding sentence, holders of 5% Voting Preferred Stock
shall not be entitled to any distribution in the event of
any liquidation, dissolution, or winding up of the affairs of
the Corporation. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to
the Holders of outstanding shares of the 5% Voting Preferred
Stock and all Parity Stock, then the holders of all such
shares shall share equally and ratably in such distribution
of assets in proportion to the full Liquidation Preference,
including, without duplication, all accrued and unpaid
dividends to which each is entitled.
(ii) For the purposes of this Section IV,` neither the sale,
conveyance, exchange, or transfer (for cash, shares of stock,
securities, or other consideration) of all or substantially
all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into one
or more entities shall be deemed to be a liquidation,
dissolution, or winding up of the affairs of the Corporation.
Section V. Voting Rights.
Holders of $5.00 Preferred Stock shall be entitled to cast ten (10)
votes for each share held of the 5% Voting Preferred Stock on all
matters presented to the shareholders of the Company for shareholder
vote.
Section VII. Other Powers, Preferences, or Rights.
Except as set forth herein, the 5% Voting Preferred Stock shall have no
other powers, preferences, or relative, participating, optional and
other special rights.
Section VIII. Preferred Stock Agreement.
Notwithstanding anything contained herein to the contrary, the terms and
provision of this Certificate of Designations, including the Mandatory
Dividend, is subject to the terms and conditions of that certain
Preferred Stock Agreement dated of even date herewith by and between the
Corporation and Marc Wexler, Saverio Pugliese and Louis Elwell III.
Section IX. Definitions.
As used in herein, the following terms shall have the following meanings
(with terms defined in the singular having comparable meanings when used
in the plural and vice versa), unless the context otherwise requires:
"Capital Stock" means any and all shares, interests, participations, or
other equivalents (however designated) of capital stock of the Corporation.
"Common Stock" means any and all shares of the Corporations $0.0001 par
value common stock.
"Corporation" means Silhouette Brands, Inc., a Delaware corporation, and
its successors.
"Dividend Payment Date" means March 31 following the relevant Dividend
Period commencing with the first to occur after the initial Issue Date.
"Dividend Period" means a calendar year, pro-rated for any partial
calendar year.
"Dividend Rate" has the meaning ascribed to such term in Section III (i)
hereof.
"Dividend Record Date" means December 31 of the relevant Dividend Period.
"Dividend Shares" has the meaning ascribed to such term in Section III
(vi) hereof.
"5% Voting Preferred Stock" has the meaning ascribed to it in Section I
hereof.
"Holder" means a holder of a share or shares of 5% Voting Preferred Stock
as reflected in the stock books of the Corporation.
"Issue Date" means the date of original issuance of the applicable shares
of 5% Voting Preferred Stock which date shall not precede the date that
this Certificate of Designation is filed and effective with the Secretary
of State of the State of Delaware.
"Junior Stock" has the meaning ascribed to it in Section II hereof.
"Liquidation Preference" means $5.00 per share of the 5% Voting Preferred
Stock.
"Mandatory Dividend" has the meaning ascribed to such term in Section III
(vii) hereof.
"Parity Stock" has the meaning ascribed to it in Section II hereof.
"Preferred Stock" means any Capital Stock of the Corporation that has
preferential rights over any other Capital Stock of the Corporation in
respect of dividends, conversions, or redemptions or upon liquidation.
"Senior Stock" has the meaning ascribed to it in Section II hereof.
IN WITNESS WHEREOF, Silhouette Brands Inc. has caused this Certificate to
be signed by the undersigned, its Secretary, this 1st day of August 2000.
SILHOUETTE BRANDS INC..
By: /s/ Marc Wexler
-------------------
Marc Wexler
Secretary
EXHIBIT 10.(i).
2000 STOCK OPTION PLAN
2000 STOCK OPTION PLAN
OF
SILHOUETTE BRANDS, INC.
1. Purpose. The purpose of this Stock Option Plan is to advance the interests
of the Corporation by encouraging and enabling the acquisition of a larger
personal proprietary interests in the Corporation by employees and directors
of, and consultants to, the Corporation upon whose judgment and keen interest
the Corporation is largely dependent for the successful conduct of its
operation and by providing such employees, directors and consultants with
incentives to put forth maximum effort for the success of the Corporation's
business. It is anticipated that the incentives will stimulate the efforts of
such employees, directors and consultants on behalf of the Corporation and
its Subsidiaries, and strengthen their desire to remain with the Corporation
and its Subsidiaries. It also is expected that such incentives and the
opportunity to acquire such a proprietary interest will enable the
Corporation and its Subsidiaries to attract desirable personnel.
2. Definitions. When used in this Plan, unless the context otherwise requires:
(a). "Board of Directors" or "Board" shall mean the Board of Directors
of the Corporation, as constituted at any time.
(b). "Chairman of Board" shall mean the person who at the time shall
be Chairman of the Board of Directors.
(c). "Corporation" shall mean Silhouette Brands, Inc.
(d). "Eligible Persons" shall mean those person described in Section 4
who are potential recipients of Options.
(e). "Fair Market Value" on a specified date shall mean
(A) the mean between the high and low sale price reported on such
date on any regulated securities market, electronic bulletin
board, "pink sheet" market, or other third party market, including
the National Association Securities Dealers, Inc.'s OTCBB market,
if any, on which Shares are primarily traded, but if no Shares
were traded on such date, then on the last previous date on which
any Share was so traded, or
(B) if the Shares are not listed on any stock exchange or market,
than the value as established by the Board for such date using any
reasonable method of valuation.
(f). "Options" shall mean the Stock Options granted pursuant to this
Plan.
(g). "Plan" shall mean this 2000 Stock Option Plan of Silhouette
Brands Inc., as adopted by the Board on August 15, 2000, as the
Plan from time to time may be amended.
(h). "President" shall mean the person who at the time shall be the
President of the Corporation.
(i). "Shares" shall mean a share of common stock, $0.0001 par value,
of the Corporation.
(j). "Subsidiary" shall mean wholly owned subsidiary of the Corporation,
if any.
3. Administration. The Plan shall be administered by the Board of
Directors as provided herein. Determination of the Board as to any
question which may arise with respect to the interpretation of the
provisions of the Plan and Options shall be final. The Board may
authorize and establish such rules, regulations and revisions thereof
not inconsistent with the provisions of the Plan, as it may been
advisable to make the Plan and Options effective or provide for their
administration, and may take such other action with regard to the Plan
and Options as it shall deem advisable to effectuate their purpose.
4. Participants. All employees and directors of, and consultants to,
the Corporation or a Subsidiary, as determined by the Board, shall be
eligible to receive Options under the Plan. The parties to whom Options
are granted under this Plan, and the number of Shares subject to each
such Option, shall be determined by the Board, in its sole discretion,
subject to however, to the terms and conditions of this Plan. Employees
to whom Options may be granted include employees who are also directors
of a Subsidiary.
5. Shares. Subject to the provisions of Section 13 hereof, the Board
may grant Options with respect to an aggregate of up to 200,000 Shares,
all of which Shares may be either Shares held in treasury or authorized
but unissued Shares. If the Shares that would be issued or transferred
pursuant to any Option are not issued or transferred and cease to be
issuable or transferable for any reason, the number of Shares subject
to such Option will no longer be charged against the limitation
provided herein and may again be made subject to Options.
6. Grant of Options. The number of any Options to be granted to any
Eligible Person shall be determined by the Board in its sole discretion.
Options may be granted to the same person at different times. The form
of the Option shall be determined from time to time by the Board. A
certificate of Option signed by the Chairman of the Board or President
or a Vice President of the Corporation, shall be issued to each person
to whom an Option is granted.
7. Purchase Price. The purchase price per Share for the Shares
purchased pursuant to the exercise of an Option shall be fixed by the
Board at the time of grant of the Option but shall not be less than
fifteen percent (15%) of the Fair Market Value on the date of such
grant; provided, however, that the purchase price per share for the
Shares to be purchased shall not be less than the par value for share.
8. Duration of Options. The duration of each Option shall be determined
by the Board at the time of grant; provided however that the duration
of any Option shall not be more than five years from the date of grant.
9. Exercise of Options. Except as otherwise provided herein, options,
after the grant hereof, shall be exercisable by the holder at such
rate and times as may be fixed by the board at the time of grant.
Notwithstanding the foregoing, all or part of any remaining unexercised
Options grated to any person may be exercised upon the occurrence of
such special circumstances or event as in the opinion of the Board
merits special consideration, but in no event prior to the approval of
the Plan by shareholders as provided in Section 18.
An Option shall be exercised by the delivery of a written notice duly
Signed by the holder thereof to such effect, together with the Option
certificate and the full purchase price of the Shares purchased
pursuant to the exercise of the Option, to the President or officer of
the Corporation appointed by the President for the purchase of
receiving same. Payment of the full purchase price shall be made as
follows; by delivery in cash, or by check payable to the order of the
Corporation; or by any other method discretion may permit.
Within a reasonable time after the exercise of an Option, the
Corporation shall cause to be delivered to the person entitled thereto,
a certificate for the Shares purchased pursuant to the exercise of
the Option. If the Option shall have been exercised with respect to
less than all of the Shares subject to the Option, the Corporation
shall also cause to be delivered to the person entitled to a new
Option certificate in replacement of the certificate surrendered at the
time of the exercise of the Option, indicating the number of shares
with respect to which the Option remains available for exercise, or
the original Option certificate shall be endorsed to give effect
to the partial exercise thereof.
Notwithstanding any other provision of the Plan or Option, no Option
Granted pursuant to the Plan may be exercised at any time when
the Option or the granting or exercise thereof violates any law or
governmental order or ruling.
10. Consideration for Options. The Corporation shall obtain consideration
for the grant of an Option as the Board in its discretion may determine.
11. Restrictions on Transferability of Options. Options shall not be
transferable, except as authorized in writing by the Board of Directors
in its sole discretion.
12. Termination of Options. All or part of any Option, to the extent
unexercised, shall terminate immediately upon the death of an holder,
or the termination or cessation for any reason of the holder's
employment by, or service with, the Corporation or any Subsidiary,
except that the holder shall have six months following the cessation of
employment or service, and no longer, to exercise any unexercised
Option that could have been exercised on the date on which such
employment or service terminated; provided, however, that such exercise
must be accomplished prior to the expiration of the term of such Option.
13. Adjustment Provision. If prior to the complete exercise of the any
Option there shall be declared and paid a stock dividend upon the
Shares or if the Shares shall be spilt up, converted, exchanged,
reclassified, or in any way substituted for, then the Option, to the
extent that it has not been exercised, shall entitle the holder thereof
upon future exercise of the Option t o such number and kind of
securities or cash or other property subject to the terms of the Option
to which he would have been entitled had he actually owned the Shares
subject to the unexercised portion of the Option at the time of the
occurrence of such stock dividend, split-up, conversion, exchange,
reclassification or substitution, and the aggregate purchase price upon
future exercise of the Option shall be the same as if the originally
optioned Shares were being purchased thereunder. If any such event
should occur, the number of Shares with respect to which Options remain
to be issued, or with respect to which Options may be reissued, shall
be adjusted in a similar manner.
Notwithstanding any other provision of the Plan, in the event of a
recapitalization, rights offering, separation, reorganization, or any
Other change in the corporate structure or outstanding Shares, the
Board may make such equitable adjustments to the number of Shares and
class of shares available hereunder to any outstanding Options as it
shall deem appropriate to prevent dilution or enlargement of rights.
Subject to any required action of shareholders, if the Corporation
shall be the surviving company in any merger or consolidation, any
Options granted hereunder shall cover the securities to which a holder
of the number of Shares covered by the unexercised portion of the
Option would have been entitled pursuant to the terms of the merger
or consolidation.
Unless otherwise provided by the Board, upon any merger or
consolidation in which the Corporation is not the surviving company, a
dissolution or liquidation of the Corporation or a sale of substantially
all or all of its assets, all Options outstanding hereunder shall
terminate, except that the surviving corporation may grant an option or
options to purchase its shares on such terms and conditions, both as to
the number of shares and otherwise, which shall substantially preserve
the rights and benefits of any Option then outstanding hereunder.
Any fractional shares or securities issuable upon the exercise of an
Option as a result of any of the foregoing adjustments, may, in the
discretion of the Board, be eliminated or payable in cash based upon
the Fair Market Value of such shares or securities at the time of such
exercise.
14. Issuance of Shares and Compliance with Securities Act. The
Corporation may postpone the issuance and delivery of the Shares
pursuant to the grant or exercise of any Option until
(a) the admission of such Shares to listing on any stock exchange
on which the Shares of the Corporation of the same class are
then listed, and
(b) the completion of such registration or other qualification of
such Shares under any State or Federal law, rule,
requirements or regulation as the Corporation shall determine
to be necessary or advisable.
Any holder of an Option shall make such representations and furnish
such information as may, in the opinion of counsel for the
Corporation, be appropriate to permit the Corporation, in light of
the then existence or non-existence with respect to such Shares of
an effective Registration Statement under the Securities Act of 1933,
as amended (the "Act"), to issue Shares in compliance with the
provisions of the Act or any comparable act. The Corporation shall
have the right,in its sole discretion,to legend any Shares which may
be issued pursuant to the grant or exercise of any Option, or may
issue stop respect thereof.
15. Income Tax Withholding. If the Corporation or a Subsidiary is
required to withhold any amounts by reason of any federal, state,
provincial or local tax rules or regulations in respect of the
issuance of Shares pursuant to the exercise of the Option, the
Corporation or the Subsidiary shall be entitled to deduct and
withhold such amounts from any cash or payment to be made to the
holder of the Option. In any event, the holder shall make available
to the Corporation or such Subsidiary, promptly when requested by
the Corporation or such Subsidiary; and the Corporation or
Subsidiary shall be entitled to take and authorize such steps as it
deems necessary in order to have such funds made available to the
Corporation or Subsidiary out of funds or property due or to become
due to the holder of such Option
16. Amendment to the Plan. Except as hereinafter provided, the Board
may at any time withdraw or from time to time amend the Plan as it
relates to, the terms and conditions of, any Option not therefore
granted, and the Board, with the consent of the affected holder of
any Option, may at any time withdraw or from time to time amend the
Plan as it relates to, the terms and conditions of, any outstanding
Option.
Notwithstanding the foregoing, any amendment by the Board which
Would increase the number of Shares issuable under the Plan or
Change the class of Eligible Persons shall be subject to the
approval of the shareholders of the Corporation within one (1) year
from date of adoption of such amendment.
17. No Right of Employment or Service. Nothing contained herein or
in an Option shall be construed to confer upon any employee or
consultant any right to be continued in the employ or service of the
Corporation or any Subsidiary or mitigate any right of the
Corporation or any Subsidiary to retire, request the resignation of
or discharge or otherwise cease its services arrangement with any
employee or consultant at any time, with or without cause.
18. Effective Date. The Plan is condition upon its approval by the
shareholders of the Corporation on or before August 31, 2000, at any
annual or special meeting of shareholders of the Corporation, except
that this Plan is adopted and approved by the Board effective August
15, 2000, to permit the grant of Option prior to the approval of the
Plan by the shareholders of the corporation as aforesaid. In the
event the Plan is not approved by the shareholders of the
Corporation as aforesaid, this Plan and any Options granted
hereunder shall be void and of no force and effect.
19. Final Issuance Date. No Option shall be granted under the Plan
after August 15, 2005.
EXHIBIT 21.(i).
SUBSIDIARIES OF THE REGISTRANT
None
EXHIBIT 27.1
FINANCIAL DATA SCHEDULE
ART.5 FDS FOR 2nd QUARTER 10-Q
Multiplier 1,000
PERIOD TYPE 6 MONTHS
FISCAL YEAR END DEC-31
PERIOD END JUN-30-2000
CASH 158
SECURITIES 116
RECEIVABLES 257
ALLOWANCES 0
INVENTORY 91
CURRENT-ASSETS 647
PP&E 14
DEPRECIATION 5
TOTAL ASSETS 731
CURRENT-LIABILITIES 177
BONDS 0
COMMON 0
PREFERRED-MANDATORY 0
PREFERRED 0
OTHER-SE 849
TOTAL-LIABILITIES-AND-EQUITY 731
SALES 2,348
TOTAL-REVENUES 2,348
CGS 1,770
TOTAL-COST 2,206
OTHER-EXPENSES (81)
LOSS-PROVISION 0
INTEREST-EXPENSE 4
INCOME-PRETAX 223
INCOME-TAX 0
INCOME-CONTINUING 223
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 223
EPS-PRIMARY .08
EPS-DILUTED .08
