<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 1, 1997
-------------------------
-OR-
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-13099
TRISTAR CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3129318
- ------------------------------- -------------------------
(State or other jurisdiction of (I. R. S. Employer
corporation or organization) Identification No.)
12500 SAN PEDRO AVENUE, SUITE 500, SAN ANTONIO, TEXAS 78216
-----------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(210) 402-2200
------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
ON APRIL 14, 1997, THERE WERE OUTSTANDING 16,710,176 SHARES
OF COMMON STOCK, $.01 PAR VALUE, OF THE REGISTRANT.
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TRISTAR CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--March 1, 1997 and August 31, 1996 3
Consolidated statements of operations--thirteen and twenty-six week
periods ended March 1, 1997 and March 2, 1996, respectively 5
Consolidated statements of cash flows--twenty-six week periods ended
March 1, 1997 and March 2, 1996, respectively 6
Notes to consolidated financial statements--March 1, 1997 7
Independent Accountants' Review Report 11
Item 2. Management's Discussion and Analysis of Financial Condition and 12
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 1,
1997 August 31,
ASSETS (unaudited) 1996 *
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<S> <C> <C>
Current assets:
Cash $ 149,000 $ 233,000
Accounts receivable, less allowance for doubtful accounts
of $1,011,000 and $850,000, respectively 13,342,000 9,522,000
Accounts receivable - related parties - net 748,000 1,518,000
Inventories 13,658,000 12,691,000
Prepaid expenses 798,000 258,000
------------ ------------
Total current assets 28,695,000 24,222,000
------------ ------------
Property, plant and equipment, less accumulated depreciation
of $6,283,000 and $5,391,000 7,985,000 8,532,000
------------ ------------
Other assets:
Warrant valuation, less accumulated amortization
of $1,747,000 and $1,436,000, respectively 342,000 653,000
Other assets 455,000 360,000
------------ ------------
Total other assets 797,000 1,013,000
------------ ------------
Total assets $ 37,477,000 $ 33,767,000
============ ============
</TABLE>
* Prepared from audited financial statements for the year ended August 31,
1996.
See notes to unaudited consolidated financial statements.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
MARCH 1,
1997 August 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED) 1996 *
------------ ------------
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 10,653,000 $ 9,319,000
Accounts payable--trade 7,139,000 5,233,000
Accounts payable--related parties - net 3,098,000 2,900,000
Accrued bonuses 214,000 202,000
Accrued interest expense-subordinated debt 1,433,000 1,174,000
Other accrued expenses 929,000 847,000
Accrued preferred stock dividends 29,000 --
Income taxes payable 10,000 85,000
Current portion of capital lease obligations 40,000 38,000
Current portion of long-term obligations 2,817,000 3,134,000
------------ ------------
Total current liabilities 26,362,000 22,932,000
Long-term debt, less current portion -- 3,000
Obligations under capital leases, less current portion 59,000 59,000
Subordinated long term debt - related parties, less current portion 4,500,000 12,666,000
------------ ------------
Total liabilities 30,921,000 35,660,000
------------ ------------
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, $.05 par value; authorized 1,000,000 shares;
Series A, 666,529 shares issued and outstanding 4,666,000 --
Series B, 120,690 shares issued and outstanding 4,511,000 --
Common stock, $.01 par value; authorized 30,000,000 shares;
issued and outstanding 16,710,176 shares and
16,650,176 shares, respectively 167,000 167,000
Additional paid-in-capital 10,493,000 10,354,000
Accumulated deficit (13,281,000) (12,414,000)
------------ ------------
Total shareholders' equity (deficit) 6,556,000 (1,893,000)
------------ ------------
Total liabilities and shareholders' equity $ 37,477,000 $ 33,767,000
============ ============
</TABLE>
* Prepared from audited financial statements for the year ended August 31,
1996.
See notes to unaudited consolidated financial statements.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
MARCH 1, March 2, MARCH 1, March 2,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 15,577,000 $ 10,112,000 $ 33,066,000 $ 27,514,000
Cost of sales 11,229,000 8,189,000 23,491,000 21,013,000
------------ ------------ ------------ ------------
Gross profit 4,348,000 1,923,000 9,575,000 6,501,000
Selling, general and administrative expenses 4,070,000 3,865,000 7,838,000 7,265,000
------------ ------------ ------------ ------------
Income (loss) from operations 278,000 (1,942,000) 1,737,000 (764,000)
Other income (expense):
Interest expense (506,000) (589,000) (1,110,000) (1,125,000)
Other expense (366,000) (67,000) (405,000) (385,000)
------------ ------------ ------------ ------------
Income (loss) before provision for income taxes (594,000) (2,598,000) 222,000 (2,274,000)
Provision for income taxes 20,000 (120,000) 50,000 --
------------ ------------ ------------ ------------
Net (loss) income $ (614,000) $ (2,478,000) $ 172,000 $ (2,274,000)
------------ ------------ ------------ ------------
Less:
Preferred stock dividends (29,000) -- (29,000) --
Effect of beneficial conversion feature (1,011,000) -- (1,011,000) --
============ ============ ============ ============
Net (loss) applicable to common stock $ (1,654,000) $ (2,478,000) $ (868,000) $ (2,274,000)
============ ============ ============ ============
Earnings per common share:
Net (loss) applicable to common stock $ (.10) (.15) (.05) (.14)
============ ============ ============ ============
Weighted average shares outstanding 16,714,205 16,635,064 16,695,378 16,633,626
============ ============ ============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
MARCH 1, March 2,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income (loss) $ 172,000 $ (2,274,000)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 892,000 1,065,000
Provision for losses on accounts receivable 493,000 285,000
Provision for inventory allowances 276,000 632,000
Issuance of stock in connection with 401K plan 10,000 30,000
Amortization of warrant valuations 311,000 41,000
Change in operating assets and liabilities:
Accounts receivable (3,307,000) (3,795,000)
Inventories (1,479,000) (2,467,000)
Prepaid expenses (540,000) (76,000)
Income taxes payable (75,000) (117,000)
Accounts payable 2,104,000 2,520,000
Accrued expenses 353,000 187,000
------------ ------------
Net cash used in operating activities (790,000) (3,969,000)
------------ ------------
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
Capital expenditures (345,000) (772,000)
(Increase) decrease in other assets (95,000) (205,000)
------------ ------------
Net cash used in investing activities (440,000) (977,000)
------------ ------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net increase in short term borrowings 1,334,000 4,888,000
Proceeds from long-term debt 29,000 200,000
Principal payments under debt obligations (346,000) (321,000)
Proceeds from exercise of stock options 129,000 --
------------ ------------
Net cash provided by (used in) financing activities 1,146,000 4,767,000
------------ ------------
NET (DECREASE) INCREASE IN CASH (84,000) (179,000)
CASH AT BEGINNING OF PERIOD 233,000 806,000
------------ ------------
CASH AT END OF PERIOD $ 149,000 $ 627,000
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRISTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 1, 1997
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the twenty-six week period ended March 1, 1997, are not
necessarily indicative of the results that may be expected for the year ending
August 30, 1997.
NOTE 2: NET INCOME PER SHARE
The computation of primary earnings (loss) per share is based on the weighted
average number of common shares outstanding during the year plus the dilutive
effect of common stock equivalents consisting of stock options and warrants. In
December 1996 the Company issued 666,529 shares of 7% cumulative convertible
preferred stock ("Series A Preferred") in a private transaction with a related
party and principal stockholder. In a separate transaction in February 1997,
the Company issued 120,690 shares of 7% cumulative convertible preferred stock
(Series B Preferred), in a private transaction with a related party and the
holder of a subordinated promissory note. Each share of the Series A Preferred
is convertible into one share of the Company's common stock, and each share of
the Series B Preferred is convertible into four shares of the Company's common
stock. Earnings (loss) per common share have been adjusted for dividend
requirements on the preferred stock and for the beneficial conversion feature
of the Series B preferred stock as described in Note 7: Shareholders' Equity
(Deficit). Fully diluted earnings (loss) per share is not less than the primary
earnings (loss) per share for the thirteen and twenty-six week periods ended
March 1, 1997, and March 2, 1996, respectively.
NOTE 3: INVENTORIES
Inventory is stated at the lower of cost or market.
<TABLE>
<CAPTION>
- ---------------------------------------------------
March 1, August 31,
1997 1996
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<S> <C> <C>
Raw materials $ 7,364,000 $ 6,598,000
Work-in-process 311,000 469,000
Finished goods 8,112,000 7,710,000
------------ ------------
15,787,000 14,777,000
Inventory allowances (2,129,000) (2,086,000)
------------ ------------
$ 13,658,000 $ 12,691,000
============ ============
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</TABLE>
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NOTE 4: SHORT-TERM BORROWING
The Company's line of credit which expires July 7, 1997, provides for maximum
borrowings of $15,500,000 at prime rate (8.25%) plus two percentage points per
annum, with additional fees approximating a percentage point per annum.
Borrowing capability is based on eligible domestic and foreign accounts
receivable, and on eligible finished goods and manufacturing inventories,
within limits established under the agreement.
This facility is secured by substantially all of the assets of the Company. The
agreement contains material adverse change provisions, as well as certain
restrictions and conditions among which are limitations on cash dividends,
capital expenditures, maximum levels of accounts receivable from related
parties, and repayments of a prior financing arrangement with a related party.
The Company has been advised by its lender that the existing revolving line of
credit and term loan will not be renewed upon the expiration of the credit
agreements in July 1997 as a result of a change in lending strategies by the
lender. The Company is in discussions with potential new lenders and management
believes that a similar or improved line of credit will be put in place by the
July 1997 expiration date.
Remaining availability under the line as of March 1, 1997, was $594,000, based
on the borrowing formulas.
NOTE 5: LITIGATION AND CONTINGENCIES
FREITAS AND KENNER
In October 1994, a suit was filed in Florida state court against the Company,
and two of its directors by Ross Freitas, Carolyn Kenner, Rose Freitas and
Melissa Freitas. The complaint alleged causes of action by two plaintiffs for
libel and sought indemnification of legal costs incurred by two plaintiffs in
suits and proceedings arising from the facts which were the subject of the
investigation conducted by the Special Committee of the Board of Directors in
1992. The complaint also alleged, on behalf of all four plaintiffs, that the
Company's disclosures relating to the Core Sheth Families' holding of Company
stock and other matters were fraudulent or negligently misrepresented. In April
1995, the court dismissed the complaint without prejudice, in part due to the
plaintiffs' failure to state a claim for relief. In May 1995 the plaintiffs
refiled the complaint, asserting many of the same claims, and in June 1996,
amended their complaint yet again, naming only the Company and one of its
directors as defendants. The Company intends to dispute these allegations
vigorously and believes that ultimate disposition of the case will not have a
material adverse effect on its business, financial condition or results of
operations.
PROCEEDS OF AN EXECUTIVE LIABILITY AND INDEMNIFICATION POLICY
In November 1994 and June 1995, the United States District Court for the
District of South Carolina approved the disbursement of $1.25 and $0.75
million, respectively, to the Company from the proceeds of an executive
liability and indemnification policy owned by the Company. Two other claimants
under the policy have sought reconsideration of the latter court-approved
disbursement.
INTERNAL REVENUE SERVICE EXAMINATION
In February 1997, the Internal Revenue Service ("the IRS") concluded their
examination of the Company's tax returns submitted for fiscal years 1993, 1994
and 1995. The IRS proposed adjustments disallowing the deductions of payments
made in the settlement of the class action litigation and certain related legal
and professional fees. The Company is in discussions with the IRS on these
issues and will appeal the
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proposed adjustments if necessary. If the Company is unsuccessful in its
discussions or ultimately in an appeal, the effect is not anticipated to be
material to current financial results or the Company's cash flow. However, if
unsuccessful, the Company could lose a significant amount of its existing net
operating loss carryforward benefits.
The Company is subject to ordinary and routine litigation arising out of the
conduct of its business. Management believes that the ultimate disposition of
these proceedings will not have a material adverse effect on the Company's
financial condition.
NOTE 6: RELATED PARTY TRANSACTIONS:
Certain suppliers of fragrance product components and the primary suppliers of
cosmetic products are affiliates of the Core Sheth families who beneficially
own 78% of the Company's outstanding common stock. Related party accounts
payable result from the purchase of products from those vendors. Related party
accounts receivable result from the sale of products to those affiliates. The
payables and receivables balances are offset for presentation purposes and the
net balance of accounts receivable or accounts payable is presented on the
balance sheet. Related party payables also include payables due members of the
Company's Board of Directors which result, in the normal course of business,
from expenses associated with Board and related committee meetings. The
following summarizes the presentations at March 1, 1997 and August 31, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MARCH 1, AUGUST 31,
1997 1996
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<S> <C> <C>
ACCOUNTS RECEIVABLE:
Total accounts receivable-related parties $ 1,356,000 1,679,000
Offset amount (608,000) (161,000)
------------ ---------
Net related parties receivables $ 748,000 1,518,000
============ =========
ACCOUNTS PAYABLE:
Total accounts payable-related parties $ 3,706,000 3,061,000
============ =========
Offset amount (608,000) (161,000)
------------ ---------
Net related parties payables $ 3,098,000 2,900,000
============ =========
- -------------------------------------------------------------------------------
</TABLE>
The Company purchases finished goods and fragrance product components from Core
Sheth Families affiliates. During the twenty-six week period ended March 1,
1997, and for the respective period in fiscal 1996, the Company purchased
approximately $3,162,000 and $2,384,000, respectively.
During the twenty-six week period ended March 1, 1997, and for the respective
period in fiscal 1996, the Company sold products to Core Sheth Families
affiliates in the amounts of approximately $1,841,000 and $865,000,
respectively.
NOTE 7: SHAREHOLDERS' EQUITY (DEFICIT)
To strengthen the financial position of the Company, effective December 11,
1996, Transvit Manufacturing Corporation ("Transvit"), a related party and
principal stockholder, agreed to convert a $4,666,000 subordinated note payable
into 666,529 shares of the Company's Series A convertible non-voting preferred
stock. The preferred stock has cumulative preferred dividends of $0.315 per
share and a preferred distribution of $7.00 per share plus accrued and unpaid
dividends. Each share of the Series A preferred
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stock is convertible, at the option of Transvit, into one share of the
Company's common stock. The Company can redeem the shares of Series A preferred
stock at any time for cash of $7 per share, plus all accrued and unpaid
dividends. The conversion price approximated the closing bid price of the
Company's common stock as reported by the NASDAQ on the date of this
transaction
In a subsequent transaction effective February 21, 1997, Nevell Investments,
S.A. ("Nevell"), the holder of a subordinated long-term promissory note in the
principal amount of $4,000,000, converted $3,500,000 of that note into 120,690
shares of the Company's Series B convertible non-voting preferred stock. The
Series B preferred stock has cumulative preferred dividends of $2.03 per share
and a preferred distribution of $29.00 per share plus accrued and unpaid
dividends. Each share of the Series B preferred stock is convertible, at the
option of Nevell, into four shares of the Company's common stock. The Company
can redeem the shares of Series B preferred stock at any time for cash of $29
per share ($7.25 per common share), plus all accrued and unpaid dividends.
On February 21, 1997, the closing bid price of the Company's common stock as
reported by the NASDAQ was $9 11/32. At that date, the Series B preferred stock
carried a "beneficial conversion feature" of $2 3/32, the difference between
the conversion price and the closing bid price. Based on a recent announcement
by the Securities and Exchange Commission staff, the value of the beneficial
conversion feature must be reflected in the financial statements of the Company
as a dividend to the preferred shareholder. Accordingly, the Company has
recorded a charge to retained earnings and an increase to the value of the
Series B preferred stock in the amount of $1,011,000. Additionally as a result
of the conversion the company recognized $270,000 of increased warrant
amortization.
The treatment of the beneficial conversion feature results in an adjustment to
the computation of the earnings per share applicable to the common stock
shareholder and is accordingly reflected on the Company's consolidated
statement of operations.
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Independent Accountants' Review Report
The Board of Directors and Shareholders
Tristar Corporation:
We have reviewed the condensed consolidated balance sheet of Tristar
Corporation and subsidiaries as of March 1, 1997, and the related condensed
consolidated statements of operations for the thirteen week and twenty-six week
periods ended March 1, 1997 and March 2, 1996, and the consolidated statements
of cash flows for the twenty-six week periods ended March 1, 1997 and March 2,
1996. These condensed consolidated financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Tristar Corporation and
subsidiaries as of August 31, 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated December 11, 1996, which referred to
other auditors, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of August 31, 1996, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
KPMG Peat Marwick LLP
San Antonio, Texas
April 10, 1997
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED MARCH
1, 1997, AND MARCH 2, 1996.
For the thirteen week period ended March 1, 1997 the Company recorded a net
loss of $614,000 compared to a net loss of $2,478,000 for the thirteen week
period ended March 2, 1996. For the twenty-six week period ended March 1, 1997
the Company recorded net income of $172,000 compared to a net loss of $
2,274,000 for the twenty-six week period ended March 2, 1996.
On February 21, 1997, the Company entered into a transaction whereby it
converted $3,500,000 of subordinated debt into Series B preferred stock. The
conversion feature of this transaction allows the conversion of the preferred
stock into the Company's common stock at a price of $7.25 per common share. On
the date of the transaction, the closing bid price of the Company's common
stock as reported by NASDAQ was $9 11/32. Based on a recent announcement by the
Securities and Exchange Commission staff, the difference between the conversion
price and the closing bid price on the date of the transaction must be
accounted for as a dividend to the preferred shareholder. This amount, a
non-cash item of $1,011,000, and accrued dividends on the preferred stock are
reflected on the Consolidated Statement of Operations as a reduction of the net
(loss) income line and are considered in computing the net loss applicable to
each share of common stock. Net loss applicable per share of common stock
calculations as adjusted for these items ($0.06 per share) were $0.10 and $0.15
for the thirteen weeks and $0.05 and $0.14 for the twenty-six weeks ended March
1, 1997 and March 2, 1996, respectively.
NET SALES
Net sales of $15,577,000 for the thirteen weeks ended March 1, 1997, were 54%
greater than the net sales of $10,112,000 for the thirteen weeks ended March 2,
1996. For the twenty-six weeks ended March 1, 1997, sales were $33,066,000, an
increase of 20% over the twenty-six weeks ended March 2, 1996 ($27,514,000).
The increase over the prior fiscal period can be primarily attributed to growth
in sales in the wholesale and Latin America markets as a result of the
successful introduction of the Royal Selections fragrance line in September
1996.
NET SALES - CHANNELS OF DISTRIBUTION
The Company markets and distributes products to wholesalers, distributors,
chain stores, mass merchandisers, and independent retail channels in various
markets throughout North and South America.
For the thirteen and twenty-six week periods ended March 1, 1997, the Company
experienced a growth in the U.S. wholesale and Latin America markets while
experiencing a slight decline in the combined chain, specialty chain and mass
merchandising channels when compared to fiscal 1996. The growth in the
wholesale and Latin America channels is indicative of the successful
introduction of the new Royal Selections fragrance line in September 1996. The
very competitive, both in price and presentation, Royal Selections line,
designed for the wholesale and Latin America markets, has received significant
acceptance in those markets to the extent that the Company was at times unable
to completely satisfy the demand for specific fragrances in that product line.
It is anticipated that demand and availability will equalize in the third
quarter. The Company continues to devote resources to all channels of
distribution in the U.S. and Latin America with programs including, but not
limited to, promotions and limited advertising. In certain Latin America
markets, economic and political conditions continue to restrict growth.
NET SALES - RELATED PARTIES
In the thirteen and twenty-six week periods of fiscal 1997, sales to affiliates
of the Core Sheth Families, the Company's major stockholder, were $1,137,000
and $1,841,000 respectively, as compared to $424,000 and $865,000 respectively,
for the comparable period ended March 2, 1996.
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NET SALES - PRODUCTS PURCHASED FROM RELATED PARTIES
Of the net sales in the twenty-six weeks of fiscal 1997, approximately 9%, or
$2,988,000, resulted from the sale of products purchased from related parties
as finished goods. For the same period in fiscal 1996, comparable numbers were
12%, or $3,222,000. In addition, fragrances and other products manufactured and
sold by the Company included some components that were purchased from related
parties. The cost of those components approximated 4% and 12% of cost of sales
in the same periods of fiscal 1997 and 1996, respectively.
GROSS PROFIT
The Company's gross profit for the thirteen week periods ended March 1, 1997
and March 2, 1996 was $4,348,000, or 28% of sales and $1,923,000 or 19% of
sales, respectively. Gross profit for the twenty-six week periods ended March
1, 1997 and March 2, 1996 were $9,575,000, or 29% of sales and $6,501,000 or
24% of sales, respectively. The improvement in gross profit in fiscal 1997 in
comparison to fiscal 1996 was primarily due to lower manufacturing variances
and improved product margins in fiscal 1997 versus 1996. The improved product
margins reflect a change in the product mix sold in fiscal 1997. Included in
the mix were sales of the higher margin premium DCA line, which was not
introduced until the second quarter of fiscal 1996. Gross profit margins are
expected to remain at the current levels or improve slightly in the remainder
of the fiscal year as production efficiency improvements are expected to
continue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the thirteen and
twenty-six week periods ended March 1, 1997 increased 5% to $4,070,000 and 8%
to $7,838,000, respectively, from $3,865,000 and $7,265,000, respectively, for
the like fiscal 1996 periods ended March 2, 1996. The increase over the
comparable prior fiscal period was due primarily to expenses associated with
the development of the chain markets in the United States.
NON OPERATING INCOME OR EXPENSE
Interest expense decreased slightly when comparing the thirteen and twenty-six
week periods of fiscal 1997 to the same periods of fiscal 1996 as a result of
the conversion of interest bearing subordinated debt into preferred stock. For
the thirteen and twenty-six weeks ending March 1, 1997, other expense was
higher than the comparable period in fiscal 1996 reflecting the increased
warrant amortization expense which resulted from the conversion of subordinated
debt in the second quarter.
POTENTIAL ADVERSE AFFECTS ON RESULTS OF OPERATIONS FOR FUTURE PERIODS
The results for the remainder of fiscal 1997 could be adversely affected by
each or all of the following factors:
1. Mexican Market. The market for the Company's products continues to be
negatively impacted as a result of the devaluation of the Mexican Nuevo
Peso in December 1994 and the subsequent economic and political
instability. These factors sharply reduced the purchasing power of the
Mexican consumer and therefore the demand for the Company's products was
adversely affected. Any future significant deterioration of the Peso's
value would be expected to further adversely affect the Company's sales in
Mexico and also the collectability of accounts receivable. The Company
believes that some of its customers based in the United States sell the
Company's products (as well as the products of other companies) to
purchasers who, in turn, may attempt to import goods into Mexico without
full payment of applicable Mexican taxes and customs duties. Enhanced
enforcement efforts by Mexican authorities may have an adverse effect on
the Company's sales to such customers.
Page 13
<PAGE> 14
2. Latin America Economies. Growth in sales, or even the maintenance of
existing sales levels, in certain Latin American countries depends to a
large extent on the economic health and political stability of those
countries. Any deterioration in the economic or political stability in
such countries could adversely affect sales.
3. Supply of Products. The Company's ability to manufacture and to satisfy
consumer demand for fragrances is dependent on the supply of certain
components from single sources including an affiliate of the Core Sheth
Families. Any inability of these vendors to meet the Company's
requirements could have an adverse effect on the Company's results until
an alternative source could be found and/or developed. In addition, the
Company is dependent on the supply of cosmetic products, other than
cosmetic pencils, from Core Sheth Families affiliates. If such affiliates
were to cease or be unable to supply these cosmetic products, the lack of
these products would have an adverse effect on the Company until a
secondary supplier could be located.
4. New and Developing Markets. The Company continues in its attempts to
develop and expand sales in Latin America. In the process, the Company
incurs significant expenses in order to establish a marketing presence and
an economically viable amount of sales. There is no assurance that the
Company will be successful in those endeavors nor that it will recover its
initial expenses and start up costs. In addition, certain countries from
time to time impose strict import restrictions, high levels of taxes on
imports, and restrictions on currency transactions, all of which could
affect the success of sales and marketing activities and also affect the
profitability of such activities.
5. Limitations on Working Capital. The Company experienced a limitation of
working capital availability in the latter part of fiscal 1996. The
restricted availability resulted in the maximization of borrowings under
the Company's credit facility and in delaying payments to certain vendors
(primarily affiliates of the Core Sheth families) beyond customary terms.
While management does not anticipate such an event, a severe recurrence in
the future could restrict the Company's ability to purchase components.
The inability to purchase certain components could reduce the Company's
ability to manufacture product with a resultant negative impact on sales
and results of operations.
6. Replacement of the Existing Lines of Credit. The Company has been advised
by its commercial lender that the existing lines of credit will not be
renewed when they expire in July 1997. While management expects that it
will replace the existing lines with similar or improved lines, there can
be no assurance that the Company will be successful. The Company is in
discussions with potential lenders to replace the existing lines.
At this time, it is not known whether, or to what degree, the above factors
will have a material adverse impact on future results.
Page 14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
The Company currently is obtaining its working capital from three primary
sources: a revolving line of credit, cash generated by operations, and from
delaying payments to vendors (primarily related parties) beyond customary
terms.
Operating Activities
Operations in the twenty-six week period ended March 1, 1997, utilized $790,000
in cash primarily due to increased trade accounts receivable ($3,307,000) and
inventories ($1,479,000). Offsetting the usages were a net income of $2,154,000
adjusted for non cash items, an increase in accounts payable ($2,104,000) and
accrued expenses ($353,000).
Accounts receivable grew primarily as a result of increased sales and due to
varying extended financing terms given to customers. Such accounts receivable
increase is comparable to the same period in the prior fiscal year. Inventories
have increased in support of anticipated sales growth. Accounts payable
increased as a reflection of the inventory growth and in support of the
increased sales levels.
Investing Activities
Capital expenditures during the twenty-six week period were $345,000,
consisting primarily of investments in production related machinery and
equipment, facilities related items, and computer equipment. Capital
expenditures for the remainder of the fiscal year are expected to be primarily
for manufacturing equipment, and computer equipment and software with lesser
amounts being invested in equipment for distribution activities.
Financing Activities
During the twenty-six week period ended March 1, 1997, short term borrowings
increased $1,334,000 to $10,653,000 under its revolving line of credit.
Remaining availability under the line as of March 1, 1997, was $594,000 based
on the borrowing formulas.
The Company had at March 1, 1997, a revolving credit agreement, amended as of
October 1, 1996, which provided for $15,500,000 of maximum borrowings at the
prime rate (8.25% at March 1, 1997) plus two percentage points per annum, with
additional fees approximating one percentage point per annum. Borrowings under
this credit agreement are limited to 75% of eligible domestic accounts
receivable, 60% of eligible foreign accounts receivable, 100% of eligible
related party receivables secured by letters of credit, 50% of eligible
finished goods inventories, and 40% of eligible manufacturing inventories.
Eligibility is as defined in the credit agreement. In December 1996, the lender
agreed to extend the expiration date from March 1997 to July 1997 subject to
certain conditions that included a requirement that the Company meet its
budgeted operating results.
The term loan entered into in July 1995 with the same lender as the short term
revolving credit line, provided for borrowings of $3.9 million of which
$2,738,000 were outstanding as of March 1, 1997. This loan is subject to the
same interest rate, fees, and debt restrictions as listed above for the
revolving credit lines. The loan calls for monthly installments assuming a
maturity date in 2002, however, for financial statement presentation purposes,
the entire loan is considered as current reflecting the July 1997 expiration
date of the credit facility with the lender.
The credit lines are secured by substantially all of the assets of the Company.
The agreements contain material adverse change provisions, as well as certain
restrictions and conditions among which are limitations on cash dividends,
capital expenditures and repayments of a prior financing arrangement with a
related party (See Note 4 of the Notes to the Consolidated Financial
Statements).
The Company has been advised by its lender that the existing revolving line of
credit and term loan will not be renewed upon the expiration of the credit
agreements in July 1997 as a result of a change in lending strategies by the
lender. The Company is in discussions with potential new lenders and management
Page 15
<PAGE> 16
believes that a similar or improved line of credit will be put in place by the
July 1997 expiration date. The line of credit, together with cash generated by
operations and the continued ability to delay payments as required to related
party vendors should provide sufficient cash to meet the requirements of the
Company for the balance of fiscal 1997.
As of the close of the previous quarter, November 30, 1996, the Company was
indebted in the amount of $4.7 million to a Core Sheth Families affiliate under
a loan agreement entered into in August 1993. The note, which was subordinated
to the commercial lender, bore interest at the rate of 4.5% per annum. On
December 11, 1996, the $4.7 million of subordinated debt was converted into the
Company's Series A convertible preferred stock (See Note 7 of the Notes to the
Consolidated Financial Statements). The Company remains indebted to the
affiliate for delinquent interest payments ($567,000) on the converted debt.
The settlement of the stockholder class action litigation recorded in May 1993
($9.5 million) resulted in a material change to the Company's long-term debt to
equity ratio. As of the close of the previous quarter, November 30, 1996, the
Company had outstanding subordinated long-term debt to a Core Sheth Families
affiliate of $8 million related to that settlement. On February 21, 1997, $3.5
million of this debt was converted into the Company's Series B convertible
preferred stock (See Note 7 of the Notes to the Consolidated Financial
Statements). The remaining debt, $4.5 million, bears interest at rates of 6.36%
to 8.23% per annum. The Company remains indebted to the affiliate for
delinquent interest payments of $315,000 on the converted debt ($3.5 million).
Repayments of the remaining debt will begin in the year 2001. Due to the
subordination of the debt to senior lenders, the long-term nature of the debt,
and the conversion of $3.5 million to preferred stock, the Company does not
believe that the ratio of long-term debt to equity has an adverse effect on the
Company.
As of March 1, 1997, the Company's financial statements reflect accrued
interest of $1,433,000 due on the above related party debt including the
delinquent amounts due on debt converted to preferred stock. A payment waiver
has been obtained from the related party for delinquent interest payments.
The Company also purchases certain equipment, primarily office furniture,
computer equipment and software, under long-term purchase agreements. These are
not material to the Company's cash flow.
The Company does not have any plans to pay any cash dividends on the Common
Stock in the foreseeable future. Further, payments of such dividends are
subject to restrictions imposed by the Company's commercial lender in
connection with the existing revolving lines of credit.
Page 16
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Effective December 11, 1996, Transvit Manufacturing Corporation ("Transvit"), a
related party and principal stockholder, agreed to convert a $4,666,000
subordinated note payable into 666,529 shares of the Company's Series A
convertible non-voting preferred stock. The preferred stock has cumulative
preferred dividends of $0.315 per share and a preferred distribution of $7.00
per share plus accrued and unpaid dividends. Each share of the Series A
preferred stock is convertible, at the option of Transvit, into one share of
the Company's common stock. The Company can redeem the shares of Series A
preferred stock at any time for cash of $7 per share plus all accrued and
unpaid dividends..
In a subsequent transaction effective February 21, 1997, Nevell Investments,
S.A. ("Nevell"), the holder of a subordinated long-term promissory note in the
principal amount of $4,000,000, converted $3,500,000 of that note into 120,690
shares of the Company's Series B convertible non-voting preferred stock. The
Series B preferred stock has cumulative preferred dividends of $2.03 per share
and a preferred distribution of $29.00 per share plus accrued and unpaid
dividends. Each share of the Series B preferred stock is convertible, at the
option of Nevell, into four shares of the Company's common stock. The Company
can redeem the shares of Series B preferred stock at any time for cash of
$29.00 per share plus all accrued and unpaid dividends.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of Stockholders was held on February 21, 1997
at the Company's corporate offices in San Antonio, Texas.
b) The following directors were elected to serve until the next
Annual Meeting of Stockholders or until their successors have
been elected and qualified:
Richard P. Rifenburgh Jay J. Sheth
Robert R. Sparacino Viren S. Sheth
Aaron Zutler
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<PAGE> 18
(1) Of the 16,271,179 shares represented at the meeting, the directors named
in (b) above were elected by the following votes:
<TABLE>
<CAPTION>
- ---------------------------- ----------------------------------
NAME NO. OF VOTES RECEIVED
- ---------------------------- ----------------------------------
<S> <C>
Aaron Zutler 16,234,289
Robert R. Sparacino 16,234,089
Richard P. Rifenburgh 16,234,021
Jay J. Sheth 16,232,289
Viren S. Sheth 16,232,289
- ---------------------------- ----------------------------------
</TABLE>
(2) Of the 16,271,179 shares voting at the meeting, 16,236,187 voted for
the ratification of the appointment of the accounting firm of KPMG
Peat Marwick LLP as the Company's independent public accountants for
its 1997 fiscal year. The number of shares that voted against the
ratification was 33,600 and the holders of 1,392 shares abstained
from voting.
(3) Of the 16,271,179 shares voting at the meeting, 15,855,085 voted for
the ratification of a Stock Option Agreement for Viren Sheth. The
number of shares that voted against the ratification was 49,778, the
number of shares that did not vote was 361,126 and 5,190 shares
abstained.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
3.1 Certificate of Incorporation of the Registrant, as amended.
10.32 Incentive Stock Option between the Company and Peter C. Liman
dated January 27, 1997.
10.33 Termination of Employment Agreement between the Company and
Joseph DeKama dated February 13, 1997.
10.34 Letter Agreement with Nevell Investments S.A. converting
Subordinated Debt Promissory Note to 120,690 shares of Series B
Convertible Preferred Stock dated February 21, 1997.
10.35 Third Amendment to Consolidated and Restated Loan and Security
Agreement dated February 22, 1997, between the Company and
Fremont Financial Corporation.
23 Awareness Letter of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
b) REPORTS ON FORM 8-K
1. The Company filed a Current Report on Form 8-K dated
February 28, 1997, filing under item 5 a consolidated balance
sheet of Tristar Corporation in connection with a change in
the Company's NASDAQ listing from the National Market System
to the SmallCap Market.
Page 18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRISTAR CORPORATION
(Registrant)
Date: April 14, 1997 /s/ Viren S. Sheth
------------------ ---------------------------------------------
Viren S. Sheth
President and Chief Executive Officer
(Principal Executive Officer)
Date: April 14, 1997 /s/ Loren M. Eltiste
------------------ ---------------------------------------------
Loren M. Eltiste
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Certificate of Incorporation of the Registrant, as amended.
10.32 Incentive Stock Option between the Company and Peter C. Liman dated
January 27, 1997.
10.33 Termination of Employment Agreement between the Company and Joseph
DeKama dated February 13, 1997.
10.34 Letter Agreement with Nevell Investments S.A. converting Subordinated
Debt Promissory Note to 120,690 shares of Series B Convertible Preferred
Stock dated February 21, 1997.
10.35 Third Amendment to Consolidated and Restated Loan and Security Agreement
dated February 22, 1997, between the Company and Fremont Financial
Corporation.
23 Awareness Letter of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK
OF
TRISTAR CORPORATION
TRISTAR CORPORATION (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Law"), does hereby certify:
A. The Certificate of Incorporation of the Corporation fixes the
total number of shares of all classes of capital stock which the Corporation
shall have the authority to issue at 31,000,000 shares, of which 1,000,000
shares shall be shares of Preferred Stock, par value $.05 per share ("Preferred
Stock"), and 30,000,000 shares shall be shares of Common Stock, par value $.01
per share ("Common Stock").
B. Pursuant to authority expressly conferred upon the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation, said Board of Directors (the "Board") has duly authorized and
adopted the following resolution providing for an issue of a series of the
Preferred Stock to be designated "Series B Convertible Preferred Stock":
RESOLVED, that an issue of a series of the Preferred Stock of the
Corporation is hereby provided for, the designation of which shall be "Series B
Convertible Preferred Stock" (the "Series B Preferred Stock"). The number of
shares of Series B Preferred Stock shall be 120,690.
FURTHER RESOLVED, that the preferences and relative participating,
optional and other special rights, and qualifications, limitations and
restrictions thereof, of the Series B Preferred Stock are hereby fixed as
follows:
SECTION 1. DIVIDENDS
1.1 The holders of shares of outstanding Series B Preferred Stock
shall be entitled to receive in any fiscal year, when and as declared by the
Board, out of assets of the Corporation legally available therefor,
distributions (as defined below) on a pro rata basis in cash at the annual rate
of $2.03 per share (subject to appropriate adjustment for stock splits, stock
combinations, stock dividends, reclassifications and similar other events
affecting the Series B Preferred Stock). Such distributions shall accrue from
day to day, whether or not earned or declared, and shall be cumulative from
February 21, 1997, and shall be payable quarterly or otherwise as the Board may
from time to time determine. Distributions may be declared and paid upon Common
Stock and other shares of the Corporation ranking junior to the Series B
Preferred Stock as to distributions in any fiscal year of the Corporation, only
if full cumulative distributions shall have been paid to or declared upon and
set apart for all shares of Series B Preferred Stock at such annual rate
through the date of distribution. With respect to distributions declared and
paid upon Common Stock, the Series B Preferred Stock shall also be entitled to
participate in and receive distributions on an "as-if-converted" basis. For
purposes of the distributions provided for by this SECTION 1, the Corporation's
Series A Convertible Preferred Stock, $.05 par value per share (the "Series A
Preferred Stock") shall be considered equal to, and not senior or junior to,
the Series B Preferred Stock and shall be entitled to distributions with the
Series B Preferred Stock in proportion to the relative amounts of dividends
accrued on the Series A Preferred Stock. Any holder of shares of Series B
Preferred Stock whose shares of Series B Preferred Stock are converted pursuant
to SECTION 3 hereof shall, upon such conversion, forfeit and cease to have any
claim to any accrued but unpaid dividends under this SECTION 1 with respect to
such converted shares.
<PAGE> 2
1.2 For purposes of this SECTION 1, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock on Common Stock, or the purchase or redemption of shares of the
Corporation (other than redemptions, retirements, repurchases or acquisitions
of capital stock pursuant to terms approved by the Board from employees,
advisors, officers, directors and consultants of, and persons performing
services for, the Corporation or its subsidiaries upon termination of
employment or association) for cash or property, including any such transfer,
purchase or redemption by a subsidiary of the Corporation. Notwithstanding the
foregoing, the term "distribution" shall not be deemed to include any
distribution made in connection with any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
SECTION 2. LIQUIDATION PREFERENCE
2.1 LIQUIDATION. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of each share
of Series B Preferred Stock and Series A Preferred Stock, which, for purposes
of this Section 2, such Series A Preferred Stock shall be considered equal to,
and not senior or junior to the Series B Preferred Stock, shall be entitled,
before any distribution or payment is made upon any share of Common Stock or
any other class or series of the Corporation's capital stock ranking junior as
to liquidation rights to the Series B Preferred Stock (but after preferential
distributions or payments required to be made on any other securities of the
Corporation senior to the Series B Preferred Stock), to be paid with respect to
each share of Series B Preferred Stock outstanding, an amount per share equal
to the sum of $29.00 per share (subject to appropriate adjustment for stock
splits, stock combinations, stock dividends, reclassifications and similar
other events affecting the Series B Preferred Stock) plus any dividends on a
share of Series B Preferred Stock provided for by SECTION 1.1 hereof that are
accrued but are unpaid through the date of distribution to the holders of the
outstanding shares of Series B Preferred Stock in connection with such
liquidation, dissolution or winding up (the sum of such amounts payable with
respect to one share of Series B Preferred Stock being sometimes referred to as
the "Series B Liquidation Preference"). If upon a liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Series B Preferred Stock (and all holders
of Series A Preferred Stock and any other preferred stock of the Corporation
ranking on parity with the Series B Preferred Stock in the event of a
liquidation, dissolution or winding up of the Corporation) shall be
insufficient to permit payments in full to the holders of Series B Preferred
Stock of the Series B Liquidation Preference, then all assets of the
Corporation available for distribution to stockholders after the Corporation
has made preferential distributions or payments required to be made on any
other securities of the Corporation senior to the Series B Preferred Stock
shall be distributed ratably, in accordance with the liquidation preference
rights of the Series B Preferred Stock and the Series A Preferred Stock, among
the holders of Series B Preferred Stock (and all holders of Series A Preferred
Stock and any other preferred stock of the Corporation ranking on parity with
the Series B Preferred Stock in the event of a liquidation, dissolution or
winding up of the Corporation).
2.2 OTHER DISTRIBUTIONS. Upon any liquidation, dissolution or
winding up of the Corporation, immediately after the holders of Series B
Preferred Stock and any other series of Preferred Stock shall have been paid in
full, any preferred stock liquidation preferences (including the Series B
Liquidation Preference and the liquidation preference for the Series A
Preferred Stock) that they are respectively entitled to, the remaining assets
of the Corporation available for distribution shall be distributed to the
holders of Common Stock, the holders of the Series B Preferred Stock and the
Series A Preferred Stock in proportion to the number of shares of Common Stock
deemed to be held on an "as-if-converted" basis.
-2-
<PAGE> 3
2.3 TERMINATION OF SERIES B PREFERRED STOCK. In the event the
distributions provided for by this SECTION 2 are made to the holders of Series
B Preferred Stock upon any liquidation, dissolution or winding up of the
Corporation, the Series B Preferred Stock shall be retired and canceled and the
holders thereof shall cease to have any continuing interest in the Corporation
in their capacity as holders of Series B Preferred Stock.
2.4 NOTICE. Written notice of any liquidation, dissolution or
winding up and any related distribution, stating the payment date and the place
where said payments shall be made, shall be given by mail, postage prepaid, or
by telecopy to non-U.S. residents, not less than 20 days prior to the payment
date stated therein, to the holders of Series B Preferred Stock, such notice to
be addressed to each such holder at its address as shown on the records of the
Corporation.
SECTION 3. CONVERSION
The holders of Series B Preferred Stock shall have the following conversion
rights (the "Series B Conversion Rights"):
3.1 RIGHT TO CONVERT; AUTOMATIC CONVERSION
A. Subject to SECTION 3.3, each share of Series B Preferred Stock
shall be convertible at any time before a liquidating or redemption payment is
made to the holder of such Series B Preferred Stock pursuant to SECTION 2 or
SECTION 5 hereof, at the option of the holder thereof, at the office of the
Corporation or any transfer agent for such shares, into the number of fully
paid and nonassessable shares of Common Stock provided for below.
B. Each share of Series B Preferred Stock shall be convertible
into four fully paid and nonassessable shares of Common Stock. The Series B
Conversion Price shall be $7.25 per share of Common Stock.
3.2 MECHANICS OF CONVERSION. Before any holder of shares of Series
B Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificates for the shares of Series B
Preferred Stock, duly endorsed, at the office of the Corporation or of any
transfer agent for such shares (or the holder shall notify the Corporation or
its transfer agent that such certificate has been lost, stolen or destroyed and
execute an agreement in form and substance reasonably satisfactory to the
Corporation to indemnify the Corporation for any loss incurred by the
Corporation in connection therewith), and shall give written notice to the
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. (A holder of Series B
Preferred Stock may not effect a transfer of shares pursuant to conversion
unless all applicable restrictions on transfer are complied with.) The
Corporation shall, as soon as practicable, issue and deliver at such office to
such holder of shares of Series B Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as provided above. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the certificate or certificates (or
the indemnification agreement referred to above) representing the shares of
Series B Preferred Stock being converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. In case the number of shares of Series B
Preferred Stock represented by the certificate or certificates surrendered
exceeds the number of shares converted, the Corporation shall, upon such
conversion, execute and deliver to the holder, at the expense of the
Corporation, a new
-3-
<PAGE> 4
certificate or certificates for the number of shares of Series B Preferred
Stock represented by the certificate or certificates surrendered which are not
to be converted.
3.3 CONVERSION PRICE ADJUSTMENTS. The Series B Conversion Price
shall be subject to adjustment from time to time as follows:
A. "Effective Date" with respect to the Series B Preferred Stock
means the date on which the Certificate of Designation establishing the Series
B Preferred Stock (the "Certificate of Designation") is filed in the office of
the Secretary of State of Delaware.
B. In the event the Corporation should at any time or from time
to time after the Effective Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend, distribution, split or subdivision, if no record date is fixed),
the Series B Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share shall be
increased in proportion to such increase of outstanding shares of Common Stock.
C. If the number of shares of Common Stock outstanding at any
time after the Effective Date is decreased by a combination of the outstanding
shares of Common Stock, then, as of the record date of such combination, the
Series B Conversion Price shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each such share shall be
decreased in proportion to such decrease in outstanding shares of Common Stock.
3.4 OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in SECTION 3.3.B, then, in each
such case for the purpose of this SECTION 3.4, the holders of the Series B
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Series B Preferred Stock
are convertible as of the record date fixed for the determination of the
holders of Common Stock of the Corporation entitled to receive such
distribution.
3.5 RECAPITALIZATION. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this SECTION 3), provision shall be made so that the holders of the Series B
Preferred Stock shall thereafter be entitled to receive, upon conversion of the
Series B Preferred Stock, such shares or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section with respect to the rights of the holders of the Series B
Preferred Stock after the recapitalization to the end that the provisions of
this Section (including adjustments of the Series B Conversion Price then in
effect and the number of shares issuable upon conversion of shares of Series B
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
-4-
<PAGE> 5
3.6 NO IMPAIRMENT. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith assist in the carrying out of
all the provisions of this Section and in the taking of all such action as may
be necessary or appropriate in order to protect the Series B Conversion Rights
of the holders of the Series B Preferred Stock against impairment; provided
that in any event, any provisions of this Section may be amended with the
approval of holders representing not less than 66- 2/3% of the outstanding
shares of Series B Preferred Stock (in addition to all other approvals required
by law).
3.7 FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
A. In lieu of issuing fractional shares upon a conversion of Series B
Preferred Stock, the Corporation may (but unless otherwise required by
applicable law shall not be obligated to) pay cash equal to the fraction
multiplied by the then fair market value of a share of Common Stock, as
determined by the Board. Whether or not fractional shares would be issuable
upon such conversion shall be determined on the basis of the total number of
shares of Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
B. Upon the occurrence of each adjustment of the Series B
Conversion Price pursuant to this Section, the Corporation, at its expense,
shall promptly compute such adjustment in accordance with the terms hereof and
prepare and furnish to each holder of shares of Series B Preferred Stock a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based.
3.8 NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of its stockholders for the purpose of determining
stockholders who are entitled to approve or disapprove of any consolidation or
merger to which the Corporation is a party or who are entitled to receive
payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of any class or any other securities
or property, or to receive any other right, the Corporation shall mail to each
holder of shares of Series B Preferred Stock, at least 20 days prior to the
date specified therein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend, distribution, right, merger or
consolidation and the amount, character and terms of such dividend,
distribution, right, merger or consolidation.
3.9 RESERVATION OF COMMON STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series B Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series B Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series B
Preferred Stock, the Corporation shall take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose. Before taking any action which would cause an adjustment
reducing the Series B Conversion Price below the par value (if any) of the
shares of Common Stock deliverable upon conversion of the shares of Series B
Preferred Stock, the Corporation shall take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of Common Stock
at such adjusted Series B Conversion Price.
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3.10 TRANSFER TAXES, ETC. The Corporation shall pay any and all
documentary stamp, issue or transfer taxes, and any similar taxes payable in
respect of the issue or delivery of shares of Common Stock upon conversions of
shares of Series B Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the holder of the shares of Series B
Preferred Stock to be converted and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
3.11 NOTICES. Any notice required by the provisions of this Section
to be given to the holders of shares of Series B Preferred Stock shall be
deemed to be delivered when deposited in the United States mail, postage
prepaid, registered or certified, and addressed to each holder of record at the
address of such holder appearing on the stock transfer books of the
Corporation.
3.12 TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition by the Corporation of any
such shares shall be considered an issue or sale of Common Stock for purposes
of this SECTION 3 and SECTION 4.
SECTION 4. VOTING RIGHTS
4.1 GENERAL. Except as provided in SECTION 4.2 and elsewhere in
this Certificate of Designation, in the Certificate of Incorporation of the
Corporation, or in one or more other Certificates of Designations of the
Corporation, and except as otherwise required by law, the holders of the Series
B Preferred Stock shall have no voting rights.
4.2. PROTECTIVE PROVISIONS. Beginning as of the date shares of
Series B Preferred Stock are first issued and outstanding, for so long as there
remain issued and outstanding any shares of Series B Preferred Stock, the
Corporation shall not, without the affirmative vote or consent of holders
representing at least 66-2/3% of the outstanding shares of Series B Preferred
Stock voting together as a single class, and in addition to any vote otherwise
required by the Law:
A. Amend, alter or repeal the rights, preferences, privileges, or
restrictions of such Series B Preferred Stock or effect any reclassification of
the Series B Preferred Stock.
B. Amend, alter or repeal any provision of, or add any provision
to, the Certificate of Incorporation or By-laws of the Corporation if such
change could reasonably be expected to adversely affect the holders of the
Series B Preferred Stock in any respect, provided the immediately foregoing
shall not prohibit the adoption and filing of one or more additional
Certificates of Designations for Preferred Stock not otherwise prohibited by
SECTION 4.2.C.
C. Create, authorize, issue or sell (including but not limited to
by way of reclassification or in connection with the creation of any
convertible indebtedness) any shares of any other class or series of shares
(other than the Series A Preferred Stock) providing for (i) dividends or other
distributions on a preferred basis to the Series B Preferred Stock, (ii)
redemption rights or (iii) liquidation privileges senior to, or on a parity
with, the Series B Preferred Stock, or senior to the Common Stock in excess of
the sum of the original purchase price thereof plus accrued dividends.
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SECTION 5. REDEMPTION
5.1 On or after the Effective Date, the Corporation, at the option
of the Board, may redeem all or any of the shares of Series B Preferred Stock
then outstanding, upon notice duly given as hereinafter provided, by paying in
cash for each share of Series B Preferred Stock so redeemed an amount equal to
the Series B Liquidation Preference.
5.2 Notice of each redemption of shares of Series B Preferred
Stock shall be given by mailing such notice not less than 30 nor more than 50
days before the date fixed for such redemption to each holder of record of
shares of Series B Preferred Stock to be so redeemed, and shall be deemed
sufficiently given if the Corporation shall cause a copy thereof to be mailed
to such holders of record at their respective addresses, as the same shall
appear on the books of the Corporation, by mail, postage prepaid, registered or
certified; provided, however, that neither the failure to mail such notice nor
the existence of any defect in the notice to one or more of such holders shall
affect the validity of such redemption as to the holders to whom proper notice
was mailed.
If any such notice of redemption shall have been duly given and if, on
or before the redemption date specified therein, all funds necessary for such
redemption shall be irrevocably deposited or set aside and continue to be
available for payment on or after the redemption date upon surrender of the
certificates for the shares of the Series B Preferred Stock so called for
redemption, then, notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered to the Corporation for cancellation,
from and after the redemption date, all shares so called for redemption shall
no longer be deemed to be outstanding, and all rights with respect to such
shares shall forthwith cease and terminate, except only for the right for the
holders of the certificates therefore, upon surrender thereof, to receive the
Series B Liquidation Preference out of the funds so deposited, without
interest. Any interest accrued on such funds shall be paid to the Corporation
from time to time.
5.3 On or before the date set for redemption in the notice sent to
the holders of the Series B Preferred Stock pursuant to SECTION 5.2 above, the
holder of such Series B Preferred Stock may, at such holder's option, exercise
the conversion rights contained in SECTION 3 herein. The written notice of
conversion required in SECTION 3.2 must be received in the office of the
Corporation prior to the redemption date set in the redemption notice mailed by
the Corporation pursuant to SECTION 5.2, in order to prevent the shares from
being redeemed pursuant to this SECTION 5.
SECTION 6. REISSUANCES
6.1 NO REISSUANCE OF SERIES B PREFERRED STOCK. No shares of Series
B Preferred Stock which have been converted into Common Stock or otherwise
cease to be outstanding shall be reissued by the Corporation; provided,
however, that each such share, after being retired and canceled, shall be
restored to the status of an authorized but unissued share of Preferred Stock
without designation as to series and may thereafter be issued as a share of
Preferred Stock not designated as Series B Preferred Stock.
IN WITNESS WHEREOF, I have hereto set my hand this 1st day of April,
1997.
TRISTAR CORPORATION
By: /s/ Loren M. Eltiste
-------------------------------
Loren Eltiste
Vice President,
Chief Financial Officer
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CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK
OF
TRISTAR CORPORATION
TRISTAR CORPORATION (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Law"), does hereby certify:
A. The Certificate of Incorporation of the Corporation fixes the
total number of shares of all classes of capital stock which the Corporation
shall have the authority to issue at 31,000,000 shares, of which 1,000,000
shares shall be shares of Preferred Stock, par value $.05 per share ("Preferred
Stock"), and 30,000,000 shares shall be shares of Common Stock, par value $.01
per share ("Common Stock").
B. Pursuant to authority expressly conferred upon the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation, said Board of Directors (the "Board") has duly authorized and
adopted the following resolution providing for an issue of a series of the
Preferred Stock to be designated "Series A Convertible Preferred Stock":
RESOLVED, that an issue of a series of the Preferred Stock of the
Corporation is hereby provided for, the designation of which shall be "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock"). The number of
shares of Series A Preferred Stock shall be 666,529.
FURTHER RESOLVED, that the preferences and relative participating,
optional and other special rights, and qualifications, limitations and
restrictions thereof, of the Series A Preferred Stock are hereby fixed as
follows:
SECTION 1. DIVIDENDS
1.1 The holders of shares of outstanding Series A Preferred Stock
shall be entitled to receive in any fiscal year, when and as declared by the
Board, out of assets of the Corporation legally available therefor,
distributions (as defined below) on a pro rata basis in cash at the annual rate
of $0.315 per share (subject to appropriate adjustment for stock splits, stock
combinations, stock dividends, reclassifications and similar other events
affecting the Series A Preferred Stock). Such distributions shall accrue from
day to day, whether or not earned or declared, and shall be cumulative from
December 11, 1996, and shall be payable quarterly or otherwise as the Board may
from time to time determine. Distributions may be declared and paid upon Common
Stock and other shares of the Corporation ranking junior to the Series A
Preferred Stock as to distributions in any fiscal year of the Corporation, only
if full cumulative distributions shall have been paid to or declared upon and
set apart for all shares of Series A Preferred Stock at such annual rate
through the date of distribution. With respect to distributions declared and
paid upon Common Stock, the Series A Preferred Stock shall also be entitled to
participate in and receive distributions on an "as-if-converted" basis. For
purposes of the distributions provided for by this SECTION 1, the Corporation's
Series B Convertible Preferred Stock, $.05 par value per share (the "Series B
Preferred Stock") shall be considered equal to, and not senior or junior to,
the Series A Preferred Stock and shall be entitled to distributions with the
Series A Preferred Stock in proportion to the relative amounts of dividends
accrued on the Series B Preferred Stock. Any holder of shares of Series A
Preferred Stock whose shares of Series A Preferred Stock are converted pursuant
to SECTION 3 hereof shall, upon such conversion, forfeit and cease to have any
claim to any accrued but unpaid dividends under this SECTION 1 with respect to
such converted shares.
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<PAGE> 9
1.2 For purposes of this SECTION 1, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock on Common Stock, or the purchase or redemption of shares of the
Corporation (other than redemptions, retirements, repurchases or acquisitions
of capital stock pursuant to terms approved by the Board from employees,
advisors, officers, directors and consultants of, and persons performing
services for, the Corporation or its subsidiaries upon termination of
employment or association) for cash or property, including any such transfer,
purchase or redemption by a subsidiary of the Corporation. Notwithstanding the
foregoing, the term "distribution" shall not be deemed to include any
distribution made in connection with any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
SECTION 2. LIQUIDATION PREFERENCE
2.1 LIQUIDATION. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of each share
of Series A Preferred Stock and Series B Preferred Stock, which, for purposes
of this SECTION 2, such Series B Preferred Stock shall be considered equal to,
and not senior or junior to the Series A Preferred Stock, shall be entitled,
before any distribution or payment is made upon any share of Common Stock or
any other class or series of the Corporation's capital stock ranking junior as
to liquidation rights to the Series A Preferred Stock (but after preferential
distributions or payments required to be made on any other securities of the
Corporation senior to the Series A Preferred Stock), to be paid with respect to
each share of Series A Preferred Stock outstanding, an amount per share equal
to the sum of $7.00 per share (subject to appropriate adjustment for stock
splits, stock combinations, stock dividends, reclassifications and similar
other events affecting the Series A Preferred Stock) plus any dividends on a
share of Series A Preferred Stock provided for by SECTION 1.1 hereof that are
accrued but are unpaid through the date of distribution to the holders of the
outstanding shares of Series A Preferred Stock in connection with such
liquidation, dissolution or winding up (the sum of such amounts payable with
respect to one share of Series A Preferred Stock being sometimes referred to as
the "Series A Liquidation Preference"). If upon a liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Series A Preferred Stock (and all holders
of Series B Preferred Stock and any other preferred stock of the Corporation
ranking on parity with the Series A Preferred Stock in the event of a
liquidation, dissolution or winding up of the Corporation) shall be
insufficient to permit payments in full to the holders of Series A Preferred
Stock of the Series A Liquidation Preference, then all assets of the
Corporation available for distribution to stockholders after the Corporation
has made preferential distributions or payments required to be made on any
other securities of the Corporation senior to the Series A Preferred Stock
shall be distributed ratably, in accordance with the liquidation preference
rights of the Series A Preferred Stock and the Series B Preferred Stock, among
the holders of Series A Preferred Stock (and all holders of Series B Preferred
Stock and any other preferred stock of the Corporation ranking on parity with
the Series A Preferred Stock in the event of a liquidation, dissolution or
winding up of the Corporation).
2.2 OTHER DISTRIBUTIONS. Upon any liquidation, dissolution or
winding up of the Corporation, immediately after the holders of Series A
Preferred Stock and any other series of Preferred Stock shall have been paid in
full, any preferred stock liquidation preferences (including the Series A
Liquidation Preference and the liquidation preference for the Series B
Preferred Stock) that they are respectively entitled to, the remaining assets
of the Corporation available for distribution shall be distributed to the
holders of Common Stock, the holders of the Series A Preferred Stock and the
Series B Preferred Stock in proportion to the number of shares of Common Stock
deemed to be held on an "as-if-converted" basis.
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2.3 TERMINATION OF SERIES A PREFERRED STOCK. In the event the
distributions provided for by this SECTION 2 are made to the holders of Series
A Preferred Stock upon any liquidation, dissolution or winding up of the
Corporation, the Series A Preferred Stock shall be retired and canceled and the
holders thereof shall cease to have any continuing interest in the Corporation
in their capacity as holders of Series A Preferred Stock.
2.4 NOTICE. Written notice of any liquidation, dissolution or
winding up and any related distribution, stating the payment date and the place
where said payments shall be made, shall be given by mail, postage prepaid, or
by telecopy to non-U.S. residents, not less than 20 days prior to the payment
date stated therein, to the holders of Series A Preferred Stock, such notice to
be addressed to each such holder at its address as shown on the records of the
Corporation.
SECTION 3. CONVERSION
The holders of Series A Preferred Stock shall have the following conversion
rights (the "Series A Conversion Rights"):
3.1 RIGHT TO CONVERT; AUTOMATIC CONVERSION
A. Subject to SECTION 3.3, each share of Series A Preferred Stock
shall be convertible at any time before a liquidating or redemption payment is
made to the holder of such Series A Preferred Stock pursuant to SECTION 2 or
SECTION 5 hereof, at the option of the holder thereof, at the office of the
Corporation or any transfer agent for such shares, into the number of fully
paid and nonassessable shares of Common Stock provided for below.
B. Each share of Series A Preferred Stock shall be convertible
into one fully paid and nonassessable share of Common Stock. The Series A
Conversion Price shall be $7.00 per share.
3.2 MECHANICS OF CONVERSION. Before any holder of shares of Series
A Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificates for the shares of Series A
Preferred Stock, duly endorsed, at the office of the Corporation or of any
transfer agent for such shares (or the holder shall notify the Corporation or
its transfer agent that such certificate has been lost, stolen or destroyed and
execute an agreement in form and substance reasonably satisfactory to the
Corporation to indemnify the Corporation for any loss incurred by the
Corporation in connection therewith), and shall give written notice to the
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. (A holder of Series A
Preferred Stock may not effect a transfer of shares pursuant to conversion
unless all applicable restrictions on transfer are complied with.) The
Corporation shall, as soon as practicable, issue and deliver at such office to
such holder of shares of Series A Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as provided above. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the certificate or certificates (or
the indemnification agreement referred to above) representing the shares of
Series A Preferred Stock being converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. In case the number of shares of Series A
Preferred Stock represented by the certificate or certificates surrendered
exceeds the number of shares converted, the Corporation shall, upon such
conversion, execute and deliver to the holder, at the expense of the
Corporation, a new
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certificate or certificates for the number of shares of Series A Preferred
Stock represented by the certificate or certificates surrendered which are not
to be converted.
3.3 CONVERSION PRICE ADJUSTMENTS. The Series A Conversion Price
shall be subject to adjustment from time to time as follows:
A. "Effective Date" with respect to the Series A Preferred Stock
means the date on which the Certificate of Designation establishing the Series
A Preferred Stock (the "Certificate of Designation") is filed in the office of
the Secretary of State of Delaware.
B. In the event the Corporation should at any time or from time
to time after the Effective Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend, distribution, split or subdivision, if no record date is fixed),
the Series A Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share shall be
increased in proportion to such increase of outstanding shares of Common Stock.
C. If the number of shares of Common Stock outstanding at any
time after the Effective Date is decreased by a combination of the outstanding
shares of Common Stock, then, as of the record date of such combination, the
Series A Conversion Price shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each such share shall be
decreased in proportion to such decrease in outstanding shares of Common Stock.
3.4 OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in SECTION 3.3.B, then, in each
such case for the purpose of this SECTION 3.4, the holders of the Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the
holders of Common Stock of the Corporation entitled to receive such
distribution.
3.5 RECAPITALIZATION. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this SECTION 3), provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive, upon conversion of the
Series A Preferred Stock, such shares or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section with respect to the rights of the holders of the Series A
Preferred Stock after the recapitalization to the end that the provisions of
this Section (including adjustments of the Series A Conversion Price then in
effect and the number of shares issuable upon conversion of shares of Series A
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
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3.6 NO IMPAIRMENT. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith assist in the carrying out of
all the provisions of this Section and in the taking of all such action as may
be necessary or appropriate in order to protect the Series A Conversion Rights
of the holders of the Series A Preferred Stock against impairment; provided
that in any event, any provisions of this Section may be amended with the
approval of holders representing not less than 66- 2/3% of the outstanding
shares of Series A Preferred Stock (in addition to all other approvals required
by law).
3.7 FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
A. In lieu of issuing fractional shares upon a conversion of Series A
Preferred Stock, the Corporation may (but unless otherwise required by
applicable law shall not be obligated to) pay cash equal to the fraction
multiplied by the then fair market value of a share of Common Stock, as
determined by the Board. Whether or not fractional shares would be issuable
upon such conversion shall be determined on the basis of the total number of
shares of Series A Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
B. Upon the occurrence of each adjustment of the Series A
Conversion Price pursuant to this Section, the Corporation, at its expense,
shall promptly compute such adjustment in accordance with the terms hereof and
prepare and furnish to each holder of shares of Series A Preferred Stock a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based.
3.8 NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of its stockholders for the purpose of determining
stockholders who are entitled to approve or disapprove of any consolidation or
merger to which the Corporation is a party or who are entitled to receive
payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of any class or any other securities
or property, or to receive any other right, the Corporation shall mail to each
holder of shares of Series A Preferred Stock, at least 20 days prior to the
date specified therein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend, distribution, right, merger or
consolidation and the amount, character and terms of such dividend,
distribution, right, merger or consolidation.
3.9 RESERVATION OF COMMON STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred Stock, the Corporation shall take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose. Before taking any action which would cause an adjustment
reducing the Series A Conversion Price below the par value (if any) of the
shares of Common Stock deliverable upon conversion of the shares of Series A
Preferred Stock, the Corporation shall take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of Common Stock
at such adjusted Series A Conversion Price.
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3.10 TRANSFER TAXES, ETC. The Corporation shall pay any and all
documentary stamp, issue or transfer taxes, and any similar taxes payable in
respect of the issue or delivery of shares of Common Stock upon conversions of
shares of Series A Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the holder of the shares of Series A
Preferred Stock to be converted and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
3.11 NOTICES. Any notice required by the provisions of this Section
to be given to the holders of shares of Series A Preferred Stock shall be
deemed to be delivered when deposited in the United States mail, postage
prepaid, registered or certified, and addressed to each holder of record at the
address of such holder appearing on the stock transfer books of the
Corporation.
3.12 TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition by the Corporation of any
such shares shall be considered an issue or sale of Common Stock for purposes
of this SECTION 3 and SECTION 4.
SECTION 4. VOTING RIGHTS
4.1 GENERAL. Except as provided in SECTION 4.2 and elsewhere in
this Certificate of Designation, in the Certificate of Incorporation of the
Corporation, or in one or more other Certificates of Designations of the
Corporation, and except as otherwise required by law, the holders of the Series
A Preferred Stock shall have no voting rights.
4.2. PROTECTIVE PROVISIONS. Beginning as of the date shares of
Series A Preferred Stock are first issued and outstanding, for so long as there
remain issued and outstanding any shares of Series A Preferred Stock, the
Corporation shall not, without the affirmative vote or consent of holders
representing at least 66-2/3% of the outstanding shares of Series A Preferred
Stock voting together as a single class, and in addition to any vote otherwise
required by the Law:
A. Amend, alter or repeal the rights, preferences, privileges, or
restrictions of such Series A Preferred Stock or effect any reclassification of
the Series A Preferred Stock.
B. Amend, alter or repeal any provision of, or add any provision
to, the Certificate of Incorporation or By-laws of the Corporation if such
change could reasonably be expected to adversely affect the holders of the
Series A Preferred Stock in any respect, provided the immediately foregoing
shall not prohibit the adoption and filing of one or more additional
Certificates of Designations for Preferred Stock not otherwise prohibited by
SECTION 4.2.C.
C. Create, authorize, issue or sell (including but not limited to
by way of reclassification or in connection with the creation of any
convertible indebtedness) any shares of any other class or series of shares
(other than the Series B Preferred Stock) providing for (i) dividends or other
distributions on a preferred basis to the Series A Preferred Stock, (ii)
redemption rights or (iii) liquidation privileges senior to, or on a parity
with, the Series A Preferred Stock, or senior to the Common Stock in excess of
the sum of the original purchase price thereof plus accrued dividends.
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SECTION 5. REDEMPTION
5.1 On or after the Effective Date, the Corporation, at the option
of the Board, may redeem all or any of the shares of Series A Preferred Stock
then outstanding, upon notice duly given as hereinafter provided, by paying in
cash for each share of Series A Preferred Stock so redeemed an amount equal to
the Series A Liquidation Preference.
5.2 Notice of each redemption of shares of Series A Preferred
Stock shall be given by mailing such notice not less than 30 nor more than 50
days before the date fixed for such redemption to each holder of record of
shares of Series A Preferred Stock to be so redeemed, and shall be deemed
sufficiently given if the Corporation shall cause a copy thereof to be mailed
to such holders of record at their respective addresses, as the same shall
appear on the books of the Corporation, by mail, postage prepaid, registered or
certified; provided, however, that neither the failure to mail such notice nor
the existence of any defect in the notice to one or more of such holders shall
affect the validity of such redemption as to the holders to whom proper notice
was mailed.
If any such notice of redemption shall have been duly given and if, on
or before the redemption date specified therein, all funds necessary for such
redemption shall be irrevocably deposited or set aside and continue to be
available for payment on or after the redemption date upon surrender of the
certificates for the shares of the Series A Preferred Stock so called for
redemption, then, notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered to the Corporation for cancellation,
from and after the redemption date, all shares so called for redemption shall
no longer be deemed to be outstanding, and all rights with respect to such
shares shall forthwith cease and terminate, except only for the right for the
holders of the certificates therefore, upon surrender thereof, to receive the
Series A Liquidation Preference out of the funds so deposited, without
interest. Any interest accrued on such funds shall be paid to the Corporation
from time to time.
5.3 On or before the date set for redemption in the notice sent to
the holders of the Series A Preferred Stock pursuant to SECTION 5.2 above, the
holder of such Series A Preferred Stock may, at such holder's option, exercise
the conversion rights contained in SECTION 3 herein. The written notice of
conversion required in SECTION 3.2 must be received in the office of the
Corporation prior to the redemption date set in the redemption notice mailed by
the Corporation pursuant to SECTION 5.2, in order to prevent the shares from
being redeemed pursuant to this SECTION 5.
SECTION 6. REISSUANCES
6.1 NO REISSUANCE OF SERIES A PREFERRED STOCK. No shares of Series
A Preferred Stock which have been converted into Common Stock or otherwise
cease to be outstanding shall be reissued by the Corporation; provided,
however, that each such share, after being retired and canceled, shall be
restored to the status of an authorized but unissued share of Preferred Stock
without designation as to series and may thereafter be issued as a share of
Preferred Stock not designated as Series A Preferred Stock.
IN WITNESS WHEREOF, I have hereto set my hand this 1st day of April,
1997.
TRISTAR CORPORATION
By: /s/ Loren M. Eltiste
-------------------------------
Loren Eltiste
Vice President,
Chief Financial Officer
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<PAGE> 15
CERTIFICATE OF MERGER
OF
EUROSTAR PERFUMES, INC.
(a Texas corporation)
INTO
TRISTAR CORPORATION
(a Delaware corporation)
Pursuant to Section 252(c) of the
State of Delaware General Corporation Law
TRISTAR CORPORATION, a Delaware corporation, hereby certifies as
follows:
FIRST: The names of the constituent corporations to the merger
are TRISTAR CORPORATION, whose State of incorporation is Delaware, and Eurostar
Perfumes, Inc., whose State of incorporation is Texas.
SECOND: An Agreement and Plan of Merger has been approved,
adopted, certified, executed and acknowledged by each constituent corporation
in accordance with Section 252 of the General Corporation Law of the State of
Delaware.
THIRD: TRISTAR CORPORATION shall be the surviving corporation.
FOURTH: The Certificate of Incorporation of the surviving
corporation shall be its Certificate of Incorporation, except that paragraph IV
of the Certificate of Incorporation of TRISTAR CORPORATION, as the surviving
corporation, which sets forth the authorized capital stock of TRISTAR
CORPORATION, is hereby amended to read in its entirety as follows:
ARTICLE IV
CAPITAL STOCK
Section 1. Classes and Shares Authorized. The authorized
capital stock of the Corporation shall consist of 30,000,000 shares of
Common Stock, $.01 par value per share (hereinafter referred to as
either the "Common Shares" or "Common Stock") and 1,000,000 shares of
Preferred Stock, $.05 par value per share (hereinafter referred to as
either the "Preferred Shares" or "Preferred Stock").
Section 2. Preferred Stock. The shares of Preferred Stock
shall be issuable from time to time in one or more series, with
respect to each of which series the Board of Directors shall be
authorized, without further approval from the shareholders of the
Corporation, to fix:
(a) the designation of the series;
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<PAGE> 16
(b) the number of shares of each series, which number the
Board of Directors may increase or decrease (but not below the number
of shares thereof then outstanding);
(c) the annual dividend rate of the series;
(d) the dates at which dividends, if declared, shall be
payable, and the dates from which the dividends shall be cumulative;
(e) the redemption rights, if any, for shares of the series;
(f) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(g) the amounts payable on shares of the series in the event
of any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation;
(h) whether the shares of the series shall be convertible into
Common Stock or other securities, and, if so, the conversion price or
prices, any adjustments thereof, and all other terms and conditions
upon which such conversion may be made;
(i) restrictions on the issuance of the shares of the same
series or of any other class or series; and
(j) the voting rights, if any, exercisable by the holders of
the shares of such series. Shareholders shall have no preemptive
rights."
FIFTH: The executed Agreement and Plan of Merger is on file at
the principal place of business of the surviving corporation; the address of
said principal place of business is as follows:
TRISTAR CORPORATION
12500 San Pedro Avenue, Suite 500
San Antonio, Texas 78216
Attn: Secretary
SIXTH: A copy of the Agreement and Plan of Merger will be
furnished by the surviving corporation, TRISTAR CORPORATION, on request and
without cost, to any stockholder of any constituent corporation.
SEVENTH: The authorized capital stock of the non-surviving
corporation, which is incorporated under the laws of the State of Texas, is
1,000,000 shares of Common Stock, $.001 par value.
EIGHTH: This Certificate of Merger shall become effective at
11:59 P.M. Central Daylight Savings Time on August 31, 1995.
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<PAGE> 17
IN WITNESS WHEREOF, this certificate is hereby executed 30th
day of August, 1995.
TRISTAR CORPORATION
By: /s/ Viren S. Sheth
------------------------------
Viren S. Sheth,
President and Chief
Executive Officer
ATTEST:
/s/ Loren M. Eltiste
- ----------------------------
Loren M. Eltiste,
Assistant Secretary
-17-
<PAGE> 18
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Ross Cosmetics Distribution Centers, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware.
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting
duly held, adopted the following resolution proposing and declaring advisable
an amendment to the certificate of Incorporation of said corporation:
RESOLVED, that the Board recommends to the shareholders of the
Company that, at the Annual Meeting of the Company, they approve the
amendment to the Company's Certificate of Incorporation changing the
Company's corporate name to TRISTAR CORPORATION;
SECOND: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 of the General Corporation Law
of Delaware.
THIRD: Accordingly, Article I of the Company's Certificate of
Incorporation is hereby amended to read as follows:
"The name of the corporation is TRISTAR CORPORATION."
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by Richard P. Rifenburgh, its Chairman of the Board of Directors, and
attested by James M. Shoemaker, Jr., its Secretary, this 16th day of March,
1993.
Ross Cosmetics Distribution Centers, Inc.
By /s/ Richard P. Rifenburgh
---------------------------------------
Richard P. Rifenburgh
Chairman of the Board of Directors
ATTEST:
By /s/ James M. Shoemaker, Jr.
-------------------------------
James M. Shoemaker, Jr.
Secretary
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<PAGE> 19
CERTIFICATE OF OWNERSHIP AND MERGER
(ARTICLES OF MERGER)
MERGING
ROSS COSMETICS DISTRIBUTION CENTER S.W., INC.,
A TEXAS CORPORATION
INTO
ROSS COSMETICS DISTRIBUTION CENTERS, INC.
A DELAWARE CORPORATION
Pursuant to Section 253 of the General Corporation Law of the State of Delaware
and Article 5.16 of the Texas Business Corporation Act.
Ross Cosmetics Distribution Centers, Inc. (hereinafter referred to as
the "Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Delaware GCL"), does hereby
certify that:
1. The Corporation was incorporated on June 5, 1987, pursuant to
the Delaware GCL and is existing under such Law. The address of the
Corporation's registered office in Delaware is 32 Loockerman Square, Suite
L-100, Dover, Delaware 19901.
2. Ross Cosmetics Distribution Center S.W., Inc. ("RCDCSW") was
incorporated on May 10, 1985, pursuant to the Texas Business Corporation Act
and is existing under such Law.
3. RCDCSW has only one class of shares outstanding (Common Stock
$.001 par value per share) and the number of outstanding shares of RCDCSW
Common Stock is 1,000, all of which is owned by the Corporation.
4. The Corporation, by the following resolutions of its Board of
Directors, duly adopted on the 25th day of January 1993, determined to merge
into itself RCDCSW on the conditions set forth in such resolutions.
WHEREAS the Corporation lawfully owns all the outstanding
stock of RCDCSW, a corporation organized and existing under the laws
of Texas; and
WHEREAS the Corporation desires to merge into itself RCDCSW,
and to be processed of all the estate, property, rights, privileges
and franchises of said corporation.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation merge
into itself, and it does hereby merge into itself RCDCSW and assumes
all of its liabilities and obligations, and
FURTHER RESOLVED, that the president or a vice-president, and
the secretary or treasurer of the Corporation be and they hereby are
directed to make and execute, under the corporate seal of the
Corporation, a certificate of ownership setting forth a copy of the
resolution, to merge RCDCSW and assume its liabilities and
obligations, and the date of adoption thereof, and to file the same in
the offices of the Secretary of the State of Delaware and Texas, and a
certified copy thereof in the office of the Recorder of Deeds in Kent
County, Delaware, and in such other places as may be proper; and
FURTHER RESOLVED, that the officers of the Corporation be and
they hereby are authorized and directed to do all acts and things
whatsoever, whether within or
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<PAGE> 20
without the State of Delaware and Texas, which may be in any way
necessary or proper to effect said merge.
IN WITNESS WHEREOF, the authorized officers of the below named
corporations have herewith set their hands and seals this 25th day of January
1993.
ROSS COSMETICS DISTRIBUTION CENTERS,
INC.
ATTEST:
/s/ James M. Shoemaker, Jr. By: /s/ Richard P. Rifenburgh
- ------------------------------ -------------------------------
Secretary Title: Chairman
ROSS COSMETICS DISTRIBUTION CENTER
S.W., INC.
ATTEST:
/s/James M. Shoemaker, Jr. By: /s/ Eugene H. Karam
- ------------------------------ -------------------------------
Secretary Title: President
-20-
<PAGE> 21
Certificate of Restoration and Revival of
Certificate of Incorporation
of
Ross Cosmetics Distribution Centers, Inc.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"corporation") is Ross Cosmetic Distribution Centers, Inc.
2. The corporation was organized under the provisions of the
General Corporation Law of the State of Delaware. The date of filing
of its original certificate of incorporation with the Secretary of
State of the State of Delaware is June 5, 1987.
3. The address, including the street, city, and county, of the
registered office of the corporation in the State of Delaware and the
name of the registered agent at such address as follows: The
Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite
L-100, Dover, Delaware 19901, County of Kent.
4. The corporation hereby procures a restoration and revival of
its certificate of incorporation, which became inoperative by law on
March 1, 1991 for failure to file annual reports and non-payment of
taxes payable to the State of Delaware.
5. The certificate of incorporation of the corporation, which
provides for and will continue to provide for, perpetual duration,
shall, upon the filing of this Certificate of Restoration and Revival
of the Certificate of Incorporation in the Department of State of the
State of Delaware, be restored and revived and shall become fully
operative on February 28, 1991.
6. This Certificate of Restoration and Revival of the Certificate
of Incorporation is filed by authority of the duly elected directors
and prescribed by Section 312 of the General Corporation Law of the
State of Delaware.
Signed and attested to on April 8, 1991.
/s/ Eugene H. Karam
-----------------------
Vice President
Attest:
/s/ Michael E. Emery
- ----------------------------
Assistant Secretary
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<PAGE> 22
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
TO: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Federal Street
Dover, Delaware 19903
Pursuant to the provisions of Section 134 of Title 8 of the Delaware
Code, the undersigned Agent for service of process, in order to change the
address of the registered office of the corporations for which it is registered
agent, hereby certifies that:
1. The name of the agent is Corporate Filing Service, Inc.
2. The address of the old registered office was 229 South State
Street, Kent County, Delaware 19901.
3. The address to which the registered office is to be changed is
32 Loockerman Square, Suite L-100, Dover, Kent County, Delaware 19901. The new
address will be effective on October 27, 1989.
4. The names of the corporations represented by said agent are
set forth on the list annexed to this certificate and made a part hereof by
reference.
IN WITNESS WHEREOF, said agent has caused this certificate to be
signed on its behalf by its Vice President and Assistant Secretary this 10th
day of October 1989.
CORPORATE FILING SERVICE, INC.
/s/ Alan E. Spiewak
-------------------------------
Alan Spiewak, Vice President
ATTEST:
/s/ Richard L. Kushay
- --------------------------
Richard L. Kushay,
Assistant Secretary
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<PAGE> 23
Certificate
for Renewal and Revival of Charter
Ross Cosmetics Distribution Centers, Inc., a corporation organized under the
laws of Delaware, the charter of which was voided for non-payment of taxes, now
desires to procure a restoration, renewal and revival of its charter, and
hereby certifies as follow:
1. The name of this corporation is Ross Cosmetics Distribution
Centers, Inc.
2. Its registered office in the State of Delaware is located at
229 South State Street, City of Dover, Zip Code 19901, County of Dover, the
name and address of its registered agent is Corporate Filing Services, Inc.
(#9007630).
3. The date of filing of the original Certificate of
Incorporation in Delaware was June 5, 1987.
4. The date when restoration, renewal, and revival of the charter
of this company is to commence is the 28th day of February, same being prior to
the date of the expiration of the charter. This renewal and revival of the
charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the
business authorized by its charter until the 1st day of March, 1989 A.D. 19___
at which time its charter became inoperative and void for non-payment of taxes
and this certificate for renewal and revival is filed by authority of the duly
elected directors of the corporation in accordance with the laws of the State
of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended,
providing for the renewal, extension and restoration of charters, Ross A.
Freitas the last and acting President, and Carolyn S. Kenner, the last and
acting Secretary of Ross Cosmetics Distribution Centers, Inc., have hereunto
set their hands to this certificate this 28th day of May, 1989.
/s/ Ross A. Freitas
---------------------------------
Last and Acting President
ATTEST:
/s/ Carolyn S. Kenner
---------------------------------
Last and Acting Secretary
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<PAGE> 24
CERTIFICATE OF CHANGE OF ADDRESS OF
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
TO: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Federal Street
Dover, Delaware 19903
Pursuant to the provisions of Section 134 of Title 8 of the Delaware
Code, the undersigned Agent for service of process, in order to change the
address of the registered office of the corporations for which it is registered
agent, hereby certifies that:
1. The name of the agent is CORPORATE FILING SERVICE, INC.
2. The address of the old registered office was 410 South State
Street, Dover, Delaware 19901.
3. The address to which the registered office is to be changed is
229 South State Street, Dover, Delaware 19901. The new address will be
effective on September 1, 1987.
4. The names of the corporations represented by said agent are
set forth on the list annexed to this certificate and made a part hereof by
reference.
IN WITNESS WHEREOF, said agent has caused this certificate to be
signed on its behalf by its Vice President and Secretary this 27th day of
September 1987.
CORPORATE FILING SERVICE, INC.
/s/
------------------------------
ATTEST:
/s/
- -----------------------------
Secretary
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<PAGE> 25
CERTIFICATE OF MERGER
OF
ROSS COSMETICS DISTRIBUTION CENTERS, INC.
(a New York Corporation)
INTO
ROSS COSMETICS DISTRIBUTION CENTERS, INC.
(a Delaware Corporation)
Under Section 252 of the Business Corporation Law
of the State of Delaware
The undersigned, Ross Freitas, being the President of Ross Cosmetics
Distribution Centers, Inc., a domestic corporation duly organized and existing
under and by virtue of the laws of the State of Delaware and being, the
President of Ross Cosmetics Distribution Centers, Inc., a foreign corporation
duly organized and existing by virtue of the laws of the State of New York, do
hereby certify that:
1. The name of each constituent corporation is as follows: (i)
Ross Cosmetics Distribution Centers, Inc. (hereinafter "RCDC"), (a New York
corporation); and (ii) Ross Cosmetics Distribution Centers, Inc. (the
"Surviving Corporation"), (a Delaware corporation).
2. The Agreement of Merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with Section 252.
3. The name of the surviving corporation is Ross Cosmetics
Distribution Centers, Inc., a Delaware corporation.
4. An Agreement of Merger has been adopted by the Board of
Directors of the Surviving Corporation and thereafter was duly ratified by
shareholders of the Surviving Corporation in accordance with Section 252 of the
Delaware Corporation Law.
5. The authorized capital stock of RCDC is 10,000,000 shares of
Common Stock.
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<PAGE> 26
6. The designation and number of outstanding shares of RCDC
entitled to vote on the merger is 2,144,231 shares of Common Stock, $.01 par
value per share.
7. The merger of RCDC and the Surviving Corporation into the
Surviving Corporation was authorized by RCDC at a meeting of shareholders by a
vote of the holders of a minimum of sixty-seven (67%) per cent of all
outstanding shares of RCDC entitled to vote thereon pursuant to New York
Business Corporation Law and Delaware Corporation Law.
8. An executed copy of the Agreement of Merger is on file at the
principal place of business of the Surviving Corporation at 135 Canal Street,
Staten Island, New York 10304, and shall be furnished to any stockholder of a
constituent corporation requesting such without cost.
9. The Certificate of Incorporation of the constituent Delaware
corporation shall be the Certificate of Incorporation of the Surviving
Corporation and shall not be amended or changed.
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<PAGE> 27
IN WITNESS WHEREOF, I have executed and subscribed this Certificate of
Merger and do affirm the foregoing statements made herein are true under the
penalties of perjury this 17th day of September, 1987.
ROSS COSMETICS DISTRIBUTION CENTERS,
INC., (a New York Corporation)
ATTEST:
By: /s/ Carolyn Safer Kenner By: /s/ Ross Freitas
---------------------------- ----------------------------
CAROLYN SAFER KENNER, ROSS FREITAS, President
Secretary
ROSS COSMETICS DISTRIBUTION CENTERS,
INC., (a Delaware Corporation)
ATTEST:
By: /s/ Carolyn Safer Kenner By: /s/ Ross Freitas
---------------------------- ----------------------------
CAROLYN SAFER KENNER, ROSS FREITAS, President
Secretary
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<PAGE> 28
CERTIFICATE OF INCORPORATION
OF
ROSS COSMETICS DISTRIBUTION CENTERS, INC.
* * * * * * * * * * * * * * *
ARTICLE I
NAME
The name of the corporation is Ross Cosmetics Distribution Centers,
Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Delaware is
located at 410 South State Street in the City of Dover, County of Kent. The
name of its registered agent at that address is Corporate Filing Services, Inc.
ARTICLE III
PURPOSE
The conduct, carry on and engage in the wholesale distribution
of cosmetic products, perfumes, colognes, beauty aids and health care
products; and in connection therewith to manufacture, buy, sell, job,
import, export and otherwise deal in and with cosmetics, chemicals and
pharmaceutical products, lipsticks, rouges, powders, soaps, colognes,
perfumes, toilet waters, hair bleaches, henna, hair rinses and washes,
hair dressings, lotions, fresheners, shadow and eyebrow pencils,
massage creams, cold cream, vanishing cream, balms, ointments, drugs,
medicines, pharmaceutical and chemical products, preparations and
compounds, sanitary and hygienic goods and products nail polishes,
bleaches, cuticle removers, baby oils, deodorants, depilatories, witch
hazel, rubbing alcohol, astringents, dentifrices, mouth washes,
gargles, shaving creams, shaving stocks, shaving soaps, mineral oils,
smelling salts, tooth brushes, combs, brushes, vanities, nail files,
cuticle scissors, paper towels and tissues, jars, bottles, tubes,
perfume bases, oils, extracts, flavors and other cosmetics, perfumes,
toilet preparations, beauty preparations, chemicals and
pharmaceuticals of every kind and description; and all products,
by-products, materials, supplies, machinery, tools, packaging
materials, applicators and devices used or useful in connection with
or resulting from the manufacture, sale, marketing, distribution or
use thereof.
To purchase, lease, copyright, produce, construct and
otherwise acquire, and to use, operate, repair, maintain, develop and
improve and to sell, trade, exchange, rent, lease, create security
interests in and otherwise dispose of any and all materials,
facilities, appliances, articles, products, equipment or supplies
proper for or adapted to be used in connection with or incidental to
the business and affairs of the corporation as the same pertain to the
conduct and operation of the corporation's principal or ancillary
business activities and to do any and
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<PAGE> 29
all things incidental thereto, or necessary to expedient or proper to
be done in connection with the matters set out herein.
To take, buy, sell, exchange, rent, lease, sublease or
otherwise acquire, and to erect, construct, maintain, improve,
rebuild, enlarge, alter, manage, control, develop, assign, transfer,
convey, pledge, alienate or otherwise dispose and to mortgage or
otherwise encumber, and to generally deal in real and personal
property wherever situated, either directly or through ownership of
shares in any corporation, and to acquire, buy, hold, sell, assign,
transfer, mortgage, pledge, exchange or otherwise encumber of dispose
of the securities of any corporation, domestic or foreign, including
but not limited to shares, scrip, bonds, notes, evidences of
indebtedness, debentures, commercial paper, whether such corporation
be public or private, and to do any other lawful acts necessary,
incidental or proper thereto, not prohibited by law, and while the
holder of any securities, to exercise all rights and privileges of
ownership, and to collect all dividends, and interest payable thereon,
and to do all things not prohibited by law, to protest, conserve, or
increase the value of all property and of all securities held by it.
To have as part of the corporate purposes, all of the powers
conferred upon corporations organized under the General Corporation
Law subject to any limitations thereof contained in the Certificates
of Incorporation or in the laws of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
Section 1. Classes and Shares Authorized. The authorized capital stock
of the Corporation shall consist of 10,000,000 shares of Common Stock, $.01 par
value per share (hereinafter referred to as either the "Common Shares" or
"Common Stock") and 1,000,000 shares of Preferred Stock, $.05 par value per
share (hereinafter referred to as either the "Preferred Shares" or "Preferred
Stock").
Section 2. Preferred Stock. The shares of Preferred Stock shall be
issuable from time to time in one or more series, with respect to each of which
series the Board of Directors shall be authorized, without further approval
from the shareholders of the Corporation, to fix:
(a) the designation of the series;
(b) the number of shares of each series, which number the
Board of Directors may increase or decrease (but not below the number
of shares thereof then outstanding);
(c) the annual dividend rate of the series;
(d) the dates at which dividends, if declared, shall be
payable, and the dates from which the dividends shall be cumulative;
(e) the redemption rights, if any, for shares of the
series;
(f) the terms and amount of any sinking fund provided for
the purchase or redemption of shares of the series;
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<PAGE> 30
(g) the amounts payable on shares of the series in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation;
(h) whether the shares of the series shall be convertible
into Common Stock or other securities, and, if so, the conversion
price or prices, any adjustments thereof, and all other terms and
conditions upon which such conversion may be made;
(i) restrictions on the issuance of the shares of the
same series or of any other class or series; and
(j) the voting rights, if any, exercisable by the holders
of the shares of such series. Shareholders shall have no pre-emptive
rights.
ARTICLE V
PRE-EMPTIVE RIGHTS
Stockholders of the Corporation shall not have pre-emptive rights to
acquire unissued or treasury shares of the Corporation or securities
convertible into such shares of carrying a right to subscribe to or acquire
such shares.
ARTICLE VI
PLACE OF BUSINESS
Part or all of the business of the Corporation may be conducted in the
City of Dover, County of Kent, or any place in the State of Delaware or outside
of the State of Delaware, in other states or territories of the United States
and in foreign countries.
ARTICLE VII
BOARD OF DIRECTORS
Section 1. Board of Directors: Number. The governing board of the
Corporation shall be known as the Board of Directors, shall consist of a
minimum of three and a maximum of nine members, subject, however, to the number
being from time to time increased or decreased in such manner as shall be
provided in the By-laws of the Corporation, provided that the number of
directors shall not be reduced to less than three except that there need be
only as many directors as there are stockholders in the event that the
outstanding shares are held of record by fewer than three stockholders.
Section 2. Classification of Directors. The Board of Directors may,
but need not be divided into three classes, Class 1, Class 2 and Class 3, each
class to be as nearly equal in number as possible. In the event the Corporation
elects to adopt a "staggered" Board, the term of office of Class 1 directors
shall expire at the first annual meeting of stockholders after their election,
that of Class 2 directors shall expire at the second annual meeting after their
election, and that of Class 3 directors shall expire at the third annual
meeting after their election. At each annual meeting after such classification,
the number of directors equal to the number of the class whose term expires at
the time of such meeting shall be elected to hold office until the third
succeeding annual meeting. No classification of directors shall be effective
prior to the first annual meeting of stockholders or at any time when the Board
of Directors consists of less than six members. Notwithstanding the foregoing,
and except as otherwise required by
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<PAGE> 31
law, whenever the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a class, to elect one or more directors of
the Corporation, the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of stockholders.
Section 3. Nomination of Directors. (a) Nominations for the election
of directors may be made by the Board of Directors, by a committee of the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Nominatings by stockholders shall be made by notice, in writing,
delivered or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days prior
to any meeting of the stockholders called for the election of directors;
provided, however, that if less than 21 days notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed, as prescribed,
to the Secretary of the Corporation not later than the close of the seventh day
following the day on which notice of the meeting was mailed to stockholders.
(b) Each notice under subsection (a) shall set forth: (i) the
name, age, business address and, if known, residence address after each nominee
proposed in such notice; (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee.
(c) The chairman of the stockholders' meeting may, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 4. Certain Powers of the Board of Directors. In furtherance
and not in limitation of the powers conferred by statute, and subject to the
rights of the holders of the Corporation's Preferred Stock as specified in
Section 5 of Article IV, the Board of Directors is expressly authorized:
(a) to manage and govern the Corporation by majority vote of
members present at any regular or special meeting at which a quorum shall be
present, to make, alter, or amend the By-laws of the Corporation at any regular
or special meeting, to fix the amount to be reserved as working capital over
and above its capital stock paid in, to authorize and cause to be executed
mortgages and liens upon the real and personal property of this Corporation,
and to designate one or more of committees, each committee to consist of two or
more of the directors of the Corporation, which, to the extent provided in the
resolution or in the By-laws of the Corporation, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation (such committee or committees shall have such name
or names as may be stated in the By-laws of the Corporation or as may be
determined from time to time by resolution adopted by the Board of Directors);
(b) to sell, lease, exchange, or otherwise dispose of all of or
substantially all of the property and assets of the Corporation in the ordinary
course of its business upon such terms and conditions as the Board of Directors
may determine without vote or consent of the stockholders;
(c) to sell, pledge, lease, exchange, liquidate, or otherwise
dispose of all or substantially all the property or assets of the Corporation,
including its goodwill, if not in the ordinary course of its business, upon
such terms and conditions as the Board of Directors may determine; provided,
however, that such transaction is authorized or ratified by the affirmative
vote of the holders of at least a majority to the shares entitled to vote
thereon at a stockholders' meeting duly called for such purpose, or is
authorized or ratified by the written
-31-
<PAGE> 32
consent of the holders of all of the shares entitled to vote thereon; and
provided, further, that any such transaction with any substantial stockholder
or affiliate of the corporation shall be authorized or ratified by the
affirmative vote of the holders of at least two-thirds of shares entitled to
vote thereon at a stockholders' meeting duly called for that purpose, unless
such transaction is with any subsidiary of the Corporation or is approved by
the affirmative vote of a majority of the continuing directors of the
Corporation, or is authorized or ratified by the written consent of the holders
of all the shares entitled to vote thereon;
(d) to merge, consolidate, or exchange all of the issued and
outstanding shares of one or more classes of the Corporation upon such terms
and conditions as the Board of Directors may authorize; provided, however, that
such merger, consolidation, or exchange is approved or ratified by the
affirmative vote of the holders of at least a majority of the shares entitled
to vote thereon at a stockholders' meeting duly called for that purpose, or is
authorized or ratified by the written consent of the holders of all of the
shares entitled to vote thereon; and provided, further, that any such merger,
consolidation or exchange with any substantial stockholder or affiliate of the
Corporation shall be authorized or ratified by the vote of the holders of at
least two-thirds of the shares entitled to vote thereon at a stockholders'
meeting duly called for that purpose, unless such merger, consolidation or
exchange is with any subsidiary of the Corporation or is approved by the
affirmative vote of a majority of the continuing directors of the Corporation,
or is authorized or ratified by the written consent of the holders of all the
shares entitled to vote thereon; and
(e) to distribute to the stockholders of the Corporation, without
the approval of the stockholders, in partial liquidation, out of stated capital
or capital surplus of the Corporation, a portion of its assets, in cash or in
property, so long as the partial liquidation is in compliance with the Delaware
General Corporation Law.
(f) as used in this Section 5, the following terms shall have the
following meanings:
(i) an "affiliate" shall mean any person or entity which
is an affiliate within the meaning of Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended;
(ii) a "continuing director" shall mean a director who was
elected before the substantial stockholder or affiliate of the Corporation
which is to be a party to a proposed transaction within the scope of
subsections (c) and (d) of this Section 5 became such a substantial stockholder
or affiliate of the Corporation, as the case may be, or is designated at or
prior to his first election or appointment to the Board of Directors by the
affirmative vote of a majority of the Board of Directors who are continuing
directors;
(iii) a "subsidiary" shall mean any corporation in which
the Corporation owns the majority of each class of equity security; and
(iv) a "subsidiary stockholder" shall mean any person or
entity which is the beneficial owner, within the meaning of Rule 13d-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, of 10% or more of the outstanding capital stock of the Corporation.
ARTICLE VIII
CONFLICTS OF INTEREST
Section 1. Related Party Transactions. No contract or other
transaction of the Corporation with any other person, firm or corporation, or
in which the corporation is
-32-
<PAGE> 33
interested, shall be affected or invalidated by (a) the fact that any one or
more of the directors or officers of this Corporation is interested in or is a
director or officer of such other firm or corporation; or (b) the fact that any
director or officer of this Corporation, individually or jointly with others,
may be a party to or may be interested in any such contract or transaction, so
long as the contract or transaction is authorized, approved or ratified at a
meeting of the Board of Directors by sufficient vote thereon by directors not
interested therein, to which such fact of relationship or interest has been
disclosed, or the contract or transaction has been approved or ratified by vote
or written consent of the stockholders entitled to vote, to whom such fact of
relationship or interest has been disclosed, or so long as the contract or
transaction is fair and reasonable to the Corporation. Each person who may
become a director or officer of the Corporation is hereby relieved from any
liability that might otherwise arise by reason of his contracting with the
Corporation for the benefit of himself or any firm or corporation in which he
may be in any way interested.
Section 2. Corporate Opportunities. The officers, directors and other
members of management of the Corporation shall be subject to the doctrine of
corporate opportunities only insofar as it applies to business opportunities in
which the Corporation has expressed an interested as determined from time to
time by resolution of the Board of Directors. When such areas of interest are
delineated, all such business opportunities within such areas of interest which
come to the attention of the officers, directors and other members of
management of the Corporation shall be disclosed promptly to the Corporation
and made available to it. The Board of Directors may reject any business
opportunity presented to it, and thereafter any officer, director, or other
member of management may avail himself of such opportunity. Until such time as
the Corporation, through its Board of Directors, has designated an area of
interest, the officers, directors, and other members of management of the
Corporation shall be free to engage in such areas of interest on their own and
the provisions hereof shall not limit the rights of any officer, director, or
other member of management of the Corporation to continue a business existing
prior to the time that such area of interest is designated by the Corporation.
This provision shall not be construed to release any employee of the
Corporation (other than an officer, director or member of management) from any
duties which such employee may have to the Corporation.
ARTICLE IX
INDEMNIFICATION
Section 1. Liability of Directors. No Director shall be personally
liable to the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as a director, except for any matter is respect of which such
director shall be liable under Section 174 of Title 8 of the Delaware Code
(relating to the Delaware General Corporation Law) or any amendment thereto or
successor provision thereto as shall be liable for reason that, in addition to
any and all other requirements for such liability, he: (i) shall have breached
his duty of loyalty to the Corporation or its stockholders; (ii) shall not have
acted in good faith, or in failing to act, shall not have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a manner
involving intentional misconduct or a knowing violation of law; or (iv) shall
have derived an improper personal benefit. Neither the amendment nor repeal of
this Article IX, nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this Article IX, shall eliminate or reduce the
effect of this Article IX in respect to any matter occurring, or any cause of
action, suit or claim that, but for this Article IX would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
Section 2. Insurance. The Board of Directors may exercise the
Corporation's power to purchase and maintain insurance on behalf of any person
who is or was a director, officer,
-33-
<PAGE> 34
employee, fiduciary or agent of the Corporation, or is or was serving at the
request of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such
liability under this Article X.
Section 3. Miscellaneous. The indemnification provided by this Article
X shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under these Articles of Incorporation, the
By-laws, agreements, vote of the stockholders or disinterested directors, or
otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer, employee, fiduciary or agent
and shall inure to the benefit of the heirs and personal representatives of
such person.
ARTICLE X
ARRANGEMENTS WITH CREDITORS
Whenever a compromise or arrangement is proposed by the Corporation
between it and its creditors or any class of them, and/or between the
Corporation and its stockholders or any class of the, any court of equitable
jurisdiction may, on summary application by the Corporation, or by a majority
of its stockholders, or on the application of any receiver or receivers
appointed for the Corporation, or on the application of trustees in
dissolution, order a meeting of the creditors or class of creditors and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be notified in such manner as the court decides. If a majority in number
representing at least three-fourths in amount of the creditors or class or
creditors, and/or the holders of the majority of the stock or class of stock of
the Corporation, as the case may be, agree to any compromise or arrangement
and/or to any reorganization of the Corporation, as a consequence of such
compromise or arrangement and/or said reorganization shall, if sanctioned by
the court to which the application has been made, be binding upon all the
creditors or class of creditors and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE XII
SHAREHOLDERS' MEETINGS
Stockholders' meetings may be held at such time and place as may be
stated or fixed in accordance with the By-laws. At all stockholders' meetings
one-third of all shares entitled to vote shall constitute a quorum.
ARTICLE XII
AMENDMENT
These Articles of Incorporation may be amended by resolution of the
Board of Directors if no shares have been issued, and if shares have been
issued, by the affirmative vote of the holders of at least a majority of the
shares entitled to vote thereon at a meeting duly called for that purpose, or,
when authorized, when such action is ratified by the written consent of all the
stockholders entitled to vote thereon.
-34-
<PAGE> 35
ARTICLE XIII
SHAREHOLDER VOTE
Whenever the laws of the State of Delaware require the vote or
concurrence of the holders of two-thirds of the outstanding shares entitled to
vote thereon, with respect to any action to be taken by the stockholders of the
Corporation, such action may be taken by the vote or concurrence of the holders
of at least a majority of the shares entitled to vote thereon.
ARTICLE XIV
DISSOLUTION
Section 1. Procedure. The Corporation shall be dissolved upon the
affirmative vote of the holders of at least a majority of the shares entitled
to vote thereon at a meeting duly called for that purpose, or when authorized
or ratified by the written consent of the holders of all of the shares entitled
to vote thereon.
Section 2. Revocation. The corporation shall revoke voluntary
dissolution proceedings upon the affirmative vote of the holders of at least a
majority of the shares entitled to vote at a meeting duly called for that
purpose, or when authorized or ratified by the written consent of the holders
of all of the shares entitled to vote thereon.
ARTICLE XV
The names and addresses of each Incorporator are:
Ross A. Freitas
135 Canal Street
Staten Island, New York 10305
Carolyn Safer Kenner
135 Canal Street
Staten Island, New York 10305
IN WITNESS WHEREOF, the undersigned officers for and on behalf of the
Corporation have signed this Certificate of Incorporation this 22nd day of May,
1987.
ROSS COSMETICS DISTRIBUTION
CENTERS, INC.
By: /s/ Ross Freitas
-----------------------------------
Ross Freitas, Incorporator
By: /s/ Carolyn Safer Kenner
----------------------------------
Carolyn Safer Kenner, Incorporator
-35-
<PAGE> 1
EXHIBIT 10.32
TRISTAR CORPORATION STOCK OPTION PLAN
INCENTIVE
STOCK OPTION AGREEMENT
Under the terms and conditions of the Amended and Restated Stock
Option Plan (the "Plan") of TRISTAR CORPORATION (the "Company"), a copy of
which is attached hereto and incorporated herein by reference, the company
hereby grants to Peter L. Liman an option to purchase up to 75,000 shares of
Common Stock, $.01 par value ("Common Stock"), of the Company at an exercise
price equal to $6.875 per share of Common Stock, subject to adjustment as
provided in the Plan.
This option shall be for a term commencing on the date hereof and
ending ten (10) years from the date hereof. This option is also subject to
termination as provided in the Plan. This option shall be exercisable at the
rate and in the following manner:
One-third of the shares of Common Stock covered by this option
shall vest and become exercisable on January 8, 1997, January 8,
1998 and January 8, 1999.
This option is an incentive stock option which is intended to be
governed by Section 422 of the Internal Revenue Code of 1986, as amended. In
accepting this option, the undersigned optionee accepts and agrees to be bound
by all the terms and conditions of the Plan.
Dated the 27th day of January, 1997.
TRISTAR CORPORATION
By:
--------------------------
Viren S. Sheth
President & Chief Executive Officer
ACCEPTED:
- ------------------------------
Peter L. Liman
- ------------------------------
Date
<PAGE> 1
EXHIBIT 10.33
February 13, 1997
Mr. Viren Sheth
Tristar Corporation
12500 San Pedro, Suite 500
San Antonio, Texas 78216
RE: Employment Agreement dated April 19, 1996 by and between Tristar
Corporation and Joseph DeKama
Dear Viren:
Notice is hereby given that effective immediately I resign my position as an
employee and as Executive Vice President and Director of Sales of Tristar
Corporation for the United States and Canada. Thank you for the opportunity to
serve.
As per our agreement in connection with this resignation, we are executing a
Independent Contractor Agreement and a Transition Agreement for transfer of the
New York Tristar Office and assets, which are attached hereto as Exhibit A & B
and incorporated herein by reference, and I agree that my future business
activity will be restricted in accordance with the terms and provisions of the
Independent Contractor relationship.
I hereby acknowledge that as of March 1, 1997, I owe the sum of $133,818.44 to
Tristar Corporation, which sum is represented by Promissory Notes dated October
16, 1996 in the original principal amounts of $45,000.00 and $100,000.00,
respectively, copies of such Promissory Notes are attached hereto and marked
Exhibit B and incorporated herein by reference (the "Promissory Notes"). I
agree such Promissory Notes will be paid in accordance with their terms. If
such Promissory Notes are not paid in accordance with their terms (i.e. in
monthly principal payments of $1,875.00 and $2,777.78, respectively, plus
accumulated interest on such notes), Tristar is hereby authorized to offset the
payments to be made under the Independent Contractor Agreement to use as
payment of the monthly sums due under the Promissory Notes. Upon any such event
of offset, I will continue to be bound by the terms, conditions and
restrictions set forth in the Independent Contractor Agreement.
With the acceptance of both parties of this resignation, it is agreed by both
parties each will be held harmless as to all matters occurring prior to the
date hereof, whether known or unknown, including all aspects of the prior
contractual agreement.
Sincerely,
Joseph Dekama
This resignation is hereby approved and accepted:
TRISTAR CORPORATION
BY: Date:
------------------------------------ -------------------------
Viren S. Sheth, President
<PAGE> 1
EXHIBIT 10.34
NEVELL INVESTMENTS, S. A.
RE: Promissory Note dated December 13, 1994, of Tristar Corporation, payable
to Nevell Investments, S. A. in the principal amount of $4,000,000 (the
"Note")
Gentlemen:
Tristar Corporation ("Tristar") hereby proposes that on February 21, 1997,
Nevell Investments, S. A. ("Nevell") purchase 120,690 shares of Series B
Convertible Preferred Stock, $.05 par value ("Preferred Stock"), of Tristar in
consideration for cancellation of $3,500,000.00 of the outstanding principal
under the Note.
The Preferred Stock shall have the following rights and preferences:
1. PREFERENCE. Preferred distribution in the event of liquidation in the
amount of $29.00 per share plus accrued and unpaid dividends.
2. DIVIDENDS. Cumulative preferred dividends in the amount of $2.03 per
share (7.0%) per annum.
3. CONVERTIBILITY. Convertible at the option of Nevell, at any time, into
Common Stock of Tristar at a conversion price of $7.25 per common share
with normal anti-dilution provisions and registration rights if
converted. Each share of Preferred Stock will be convertible into four
(4) shares of Common Stock.
4. REDEMPTION. Redeemable at the option of Tristar at any time, in whole or
in part, for cash in the amount of the liquidation preference thereof
upon 30 days written notice by Tristar to Nevell at which time Nevell
must either present the stock for redemption or convert it into common
stock at the $7.25 conversion price.
Please signify your agreement to the foregoing by executing the enclosed copy
of this letter in the space provided below and returning such copy to the
undersigned.
Very truly yours,
- ----------------------------------------
Loren M. Eltiste, Vice President & CFO
AGREED to this day of , 1997.
------------ --------------------------
NEVELL INVESTMENTS, S. A.
BY:
------------------------------
<PAGE> 1
EXHIBIT 10.35
THIRD AMENDMENT
TO CONSOLIDATED AND RESTATED
LOAN AND SECURITY AGREEMENT
This THIRD AMENDMENT TO CONSOLIDATED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Amendment") is made as of February 22, 1997, by and between
FREMONT FINANCIAL CORPORATION ("Fremont") and TRISTAR CORPORATION ("Borrower"),
in light of the following:
WHEREAS, Borrower and Fremont entered into a Consolidated and Restated
Loan and Security Agreement dated effective January 1, 1996, as amended by (i)
that certain First Amendment to Consolidated and Restated Loan and Security
agreement dated as of March 11, 1996 and (ii) that certain Second Amendment to
Consolidated and Restated Loan and Security Agreement effective as of October
1, 1996 (as amended from time to time, the "Loan Agreement"; Capitalized terms
used herein shall have the meanings set forth in the Loan Agreement unless
specifically defined herein); and
WHEREAS, Borrower and Fremont wish to amend the Loan Agreement as set
forth herein.
NOW THEREFORE, in consideration of the mutual promises and agreements of
the parties hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged the
parties hereto agree as follows:
1. Section 3.1 of the Loan Agreement is hereby amended by deleting the
language "March 31, 1997" and replacing such language with "July 7, 1997."
2. If the Loan Agreement is terminated at Borrower's request on or
before July 7, 1997 and Borrower has paid to Fremont a sum equal to Borrower's
Obligations, including, without limitation, accrued interest thereon and
Fremont's Expenses, Fremont hereby agrees to waive the payment of the Early
Termination Fee as provided for in Section 3.2 of the Loan Agreement.
3. Borrower reaffirms, ratifies and confirms its obligations under the
Loan Agreement, acknowledges that all the terms and conditions in the Loan
Agreement (except as amended herein) remain in full force and effect and
further acknowledges that the security interest granted to Fremont in the
Collateral is valid and perfected.
4. Borrower is not aware of any events which now constitute, or with the
passage of time or the giving of notice would constitute, an Event of Default
under the Loan Agreement.
<PAGE> 2
5. This Amendment constitutes the entire agreement of the parties in
connection with the subject matter of this Amendment and cannot be changed or
terminated orally. All prior agreements, understandings, representations
warranties and negotiations regarding the subject matter hereof, if any, are
merged into this Amendment.
6. This Amendment may be executed in counterparts, each of which when so
executed and delivered shall be deemed an original, and all of such
counterparts together shall constitute but one and the same agreement.
7. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of Georgia.
IN WITNESS WHEREOF, Borrower and Fremont have executed this Amendment
as of the date first written above.
FREMONT FINANCIAL CORPORATION,
a California corporation
By: /s/ Carlos E. Chang
-----------------------------
Carlos E. Chang
Vice President
TRISTAR CORPORATION,
a Delaware corporation
By: /s/Loren M. Eltiste
-----------------------------
Loren M. Eltiste
Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 23
Tristar Corporation
San Antonio, Texas
Ladies and Gentlemen:
RE: REGISTRATION STATEMENT NO. 33-45396
With respect to the subject registration statement, we acknowledge our
awareness of the use therein of our report dated April 10, 1997 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
KPMG Peat Marwick LLP
San Antonio, Texas
April 10, 1997
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<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-END> MAR-01-1997
<CASH> 149,000
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<RECEIVABLES> 14,090,000
<ALLOWANCES> 1,011,000
<INVENTORY> 13,658,000
<CURRENT-ASSETS> 2,869,500
<PP&E> 7,985,000
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9,177,000
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<TOTAL-LIABILITY-AND-EQUITY> 37,477,000
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<INCOME-PRETAX> (594,000)
<INCOME-TAX> 20,000
<INCOME-CONTINUING> (614,000)
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