UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
for the fiscal year ended December 31, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
for the transition period from ____ to ______
COMMISSION FILE NUMBER 33-39231
SOULFOOD CONCEPTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-3585743
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
630 Ninth Avenue, New York, New York 10036
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Issuer's telephone number: (212) 262-8333
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: NONE
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 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 NO X
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM
405 OF REGULATION S-B CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB
OR ANY AMENDMENT TO THIS FORM 10-KSB. [X]
THE ISSUER'S REVENUES FOR YEAR ENDED DECEMBER 31, 1996 WERE $3,596,282.
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES AT
DECEMBER 31, 1996, CANNOT BE DETERMINED BECAUSE THERE IS NO MARKET FOR THE
COMMON STOCK, AND ACCORDINGLY, NO MARKET VALUE PER SHARE.
THE NUMBER OF SHARES OF THE ISSUER'S COMMON STOCK OUTSTANDING AS OF DECEMBER 31,
1996 WAS 3,139,816.
DOCUMENTS INCORPORATED BY REFERENCE. NONE.
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PART I
Item 1. Description of Business
GENERAL:
In this Form 10-K, the "Company" refers to Soulfood Concepts Inc., a
Delaware corporation, (formerly known as STG International, Inc.) and its
consolidated Companies. The Company owns and operates one full service
restaurant under the name of "The Shark Bar". The Company is also the general
partner, which holds a 60% general partner interest and a 4% limited partner
interest, in one other full service restaurant under the name of "Mekka". Both
of these restaurants are located in the Borough of Manhattan in New York City,
NY. Subsequent to the year end, the Company finalized an acquisition which will
enable it to own and operate a "Shark Bar" restaurant located in Chicago.
During 1996, the Company (i) changed its name from STG International,
Inc. to Soulfood Concepts, Inc., (ii) effectuated a 3 for 1 reverse stock split
(the "Reverse Stock Split") of the issued and outstanding shares of common
stock, par value $.001 per share (the "Common Stock") of the Company, (ii)
created Series A Convertible Preferred Stock and issued 125,000 shares of such
Preferred Stock to Mr. Brian A. Hinchcliffe ("Hinchcliffe") in exchange for the
reduction of loans made by Hinchcliffe, (iii) issued 1,316,897 shares of Common
Stock (after taking into effect the Reverse Stock Split) to Hinchcliffe in
cancellation of notes and reduction of loans made by Hinchcliffe to the Company,
and (iv) located the Chicago site for the "Shark Bar" which is expected to open
by April 1997.
The Shark Bar, which was opened in New York in 1990, is a full service
95 seat restaurant. The menu at The Shark Bar features both upscale Soulfood and
New Southern Cuisine at affordable prices. The menu is organized so that diners
may choose an entree with two accompanying side orders. The entrees featured on
the menu include Blackened Catfish, Honey Dipped Fried Chicken, Turkey
Meatloafs, and Grilled Pineapple Salmon. The Shark Bar has established a
reputation of quality and consistency in its food, particularly with its side
orders, which includes black eyed peas, collard greens, macaroni and cheese,
candied yams and mashed potatoes. The Shark Bar, which was developed to appeal
to a 35-50 year old customer base, has a separate bar area along with 3 dinning
rooms with table cloth settings. The restaurant serves lunch Wednesday, Thursday
and Friday, and offers a brunch buffet on Saturday and Sunday. Dinner is served
7 days a week and accounts for over 90% of beverage and food sales. The
distribution between food and beverage sales are approximately 65% food and 35%
beverages.
The Company is also the General Partner of a 55 seat restaurant known
as Mekka. The menu at Mekka is also based on soulfood and New Southern cooking,
but also offers a selection of Caribbean dishes. Mekka was designed with
slightly lower price points than The Shark Bar and is targeted towards a
customer in the 20-40 age group. Mekka serves dinner seven days a week, does not
serve lunch during the week but does offer a brunch on Sunday. The distribution
between food and beverages sales is approximately 55% for food and 45% for
beverages. In 1996, the average guest check in the Shark Bar was approximately
$22 (including alcoholic beverages). Mekka also has outdoor cafe space that is
used in the warmer months and offers an additional 30 seats.
Following the decision by the Company in 1995 to close its Soul to Go
quick service operations, the Company has been and intends to be focused on
expanding its business through the development of full service locations in
strategic markets.
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Corporate Strategy
The Company believes that excellence in the quality of food and
service, location and price-value relationships and having a "Niche" are keys to
success in the restaurant industry. The Company believes that it differentiates
its restaurants by emphasizing the following strategic elements:
o Positioning in the mid-priced, full service, casual
dining segment of the restaurant industry.
o Upscale Soulfood and New Southern Cuisine provide a
unique and enduring attraction to a broad and diverse
demographic and socio-economic mix of customers in
the 20-40 age group.
o Generous "Southern" portions accompanied by side
orders offered at affordable prices.
o Consistent high quality products through careful
ingredient selection and food preparation.
Reorganization of the Company
The Company was initially organized on August 23, 1984 in the State of
Delaware under the name Empire Ventures, Inc. On December 14, 1992, the Company
entered into an agreement and plan of re-organization with Soul To Go, Inc. in
exchange for 5,031,250 shares of the common stock of Empire Ventures, Inc. As a
result of the transactions consummated pursuant to such agreement, Soul to Go,
Inc. became the wholly-owned subsidiary of Empire Ventures, Inc. and
shareholders of Soul To Go, Inc. became the owners of approximately 92% of the
issued and outstanding shares of common stock of Empire Ventures, Inc.
Soul to Go, Inc. was a New York based holding Company controlling a
group of operating subsidiaries consisting of the Shark Restaurant Corp., which
owns The Shark Bar, and Shark Catering Corp., which operated a quick service
business called Soul To Go. On January 25, 1993, Empire Ventures Inc. changed
its name to STG International, Inc. Subsequent to the re-organization, STG
International opened a second Soul to Go operation in Jamaica, Queens, and
through its wholly owned subsidiary 7 West Rest. Corp. became the General
Partner of "Mekka". Due to operating losses both Soul to Go stores were closed
in 1995.
Menu
The Shark Bar dinner menu features a variety of fish and chicken dishes
prepared using spices and sauces traditional to Southern cooking. All dinners
offer a complete meal including salad, cornbread and biscuit and a choice of two
side orders including black eyed peas, collard greens, macaroni and cheese,
candied yams, mashed potatoes and others. The lunch and dinner menus also
include appetizers and desserts, together with a full bar service. Alcoholic
beverage service accounted for approximately 35% of the Company's net sales
during 1996.
Restaurant Expansion
At this time, the Company intends to expand its business through the
development of full service restaurants, namely The Shark Bar and Mekka. The
Company believes that its overall business objectives will be better met
through the expansion of full service units in the larger markets, like Chicago,
and especially those markets that do not currently have directly competing
restaurants. These large markets can support a 125 seat plus establishment which
the Company believes will enhance cash flow and establish name recognition in
certain of the important US markets.
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The first expansion outside of the New York market is expected to be
The Shark Bar in Chicago ("Shark Bar Chicago"), which the Company believes will
be opened by April 1997. On January 10, 1997, the Company completed the purchase
of the lease, restaurant assets and licenses of the "Affair Club" in Chicago,
Ill. from Affair, L.P. and all of the issued and outstanding shares of capital
stock of Affair Restaurant, Inc. for the aggregate purchase of approximately
$335,000 (the "Chicago Acquisition"). Mr. Hinchcliffe helped finance this
acquisition with a loan at 10% interest to the Company which will be convertible
into the Company's capital stock. The Shark Bar Chicago is a 9,000 square foot
unit, of which 6,000 square feet can be used for sales space on three floors,
with a 2500 square feet outside adjoining deck. At this time, the Company plans
the main dining floor to have 110 seats plus a small bar area, while the second
floor will have the larger bar space and seating for up to an additional 75
persons, if so required. The second floor will also be able to accommodate
larger private parties and catering events.
In addition, the Company has had continuing discussions with brokers,
agents and landlords regarding new sites for additional Shark Bars. However,
there can be no assurance that additional restaurants will be opened.
Site Selection and Design
The Company is seeking to locate sites for new restaurants in locations
that offer favorable demographic and economic factors that can support a
profitable operation. The Company has established parameters with respect to
such things as Sales vs. Investment ratios" and "rent as a percentage of sales"
that it will use in order to evaluate the feasibility of additional sites. At
this time, the Company intends to use the design, methods and mode of operations
developed at "The Shark Bar" and "Mekka" restaurants in New York as models for
additional sites in other locations.
Restaurant Management
Each sales unit is headed by a General Manager, who is assisted by a
Head Chef. Food products and other supplies are purchased from various
unaffiliated suppliers and by the personnel in each unit. Beverage and kitchen
units each have specific targets to meet, as part of each unit's budget.
Financial and management control is maintained through the use of POS systems,
which the Company is in the process of standardizing throughout the various
units.
Employees
As of December 31, 1996, the Company employed approximately 82 persons.
Of the Company's employees, approximately 55 are full time and approximately 27
are employed on a part time basis. None of the Company's employees are covered
by a collective bargaining agreement. The Company has not experienced any work
stoppages and considers it's employee relationship to be good.
Trademark
The Company filed Trademark applications with the United States Patent
and Trademark Office for The Shark Bar(Trademark) on September 25,1996 and for
Mekka(Trademark) on or about October 16, 1996. There can be no assurance that
the Company will be granted trademarks on such trademarks.
In addition, the United States Patent and Trademark office has issued a
certificate of registration on the Supplemental Register for SOUL TO
GO(Registered). A trademark registered on the Supplemental Register is not
considered to be inherently distinctive but is considered to be "capable" of
becoming distinctive. Once the trademark becomes distinctive (acquired secondary
meaning), it can be transferred to the Principal Register.
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Trade Secrets
The Company has developed and currently owns trade secrets with respect
to its food products, its preparation and sources. The Company is relying upon
confidentially for the protection of it's trade secrets. There is no assurance
that such confidentially can or will be obtained or that such trade secrets will
afford the Company meaningful competitive advantages.
Competition
The restaurant business generally, and, in Manhattan (New York), is
intensely competitive and involves a high degree of risk and management expects
this will continue. The Company believes that a large number of new restaurants
open each year in the New York city metropolitan area, a significant number of
which do not succeed. Even successful restaurants can rapidly lose popularity
due to changes in customer tastes, economic conditions, population and traffic
patterns. The Company competes with locally-owned restaurants and bars as well
as with large national and regional restaurants chains, which have substantially
greater financial and marketing resources and longer operating histories than
the Company. There is active competition for management personnel and attractive
commercial real estate sites suitable for restaurants.
The Company in the past generally has not incurred significant expenses
for advertising and promotion, relying instead on word-of-mouth to bring its
restaurant establishments to the attention of new customers.
Governmental Regulations
The Company is subject to various federal, state and local laws
affecting its employees and guests, its owned and leased properties and the
operation of its restaurants. The restaurants are subject to licensing and/or
regulations by various fire, health, sanitation and safety agencies in the
applicable state and/or municipality. In particular, the Company has adopted
extensive procedures designed to meet the requirements of applicable food
handling and sanitation laws and regulations. To date, the Company has not
experienced any material problems resulting from its sanitation and food
handling procedures.
The Company's restaurants are subject to state and local licensing and
regulations with respect to the sale and service of alcoholic beverages.
Typically, alcoholic beverage licenses must be renewed annually and may be
revoked or suspended for cause. Alcoholic beverage control regulations relate to
numerous aspects of the daily operations of the Company's restaurants, including
minimum age of patrons and employees, hours of operation, advertising, wholesale
purchasing, inventory control and the handling, storage and dispensing of
alcoholic beverages. The Company has not encountered material problems relating
to alcoholic beverage licenses to date, but the failure of a restaurant to
obtain or retain a liquor license would adversely affect the restaurant's
operations.
In certain states, the Company is subject to "dram shop" statutes,
which generally give a person injured by an intoxicated person the right to
recover damages from the establishment that wrongfully served alcoholic
beverages to the intoxicated person. The Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance.
The Company is subject to federal and state fair labor standards,
statutes and regulations that govern such matters as minimum wages, overtime,
tip credits, child labor and other working conditions. A good number of the
Company's food service personnel are paid at rates based on applicable federal
and state minimum wages.
4
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Item 2. Description of Property
The following table sets forth certain information with respect to the
Company's facilities currently in operation (unless otherwise noted):
===============================================================================
Date Restaurant Seating Lease
Name and Location Opened Size Capacity Expiration
- -------------------------------------------------------------------------------
The Shark Bar 11/90 2,500 sq. ft. 90 1999
305-307 Amsterdam Ave
New York, New York
(Bet. 74th & 75th Street
- -------------------------------------------------------------------------------
MEKKA 12/94 1500 sq. ft. 65 10/2002(1)
14 Avenue A
New York, New York
- -------------------------------------------------------------------------------
212 North Canal St. (2) 9,000 sq. ft. 200(2) 2008
Chicago, Illinois
===============================================================================
(1) Exercise of 5 year option will extend term to 2007.
(2) At this time, the Company believes that its facilities in the Chicago
restaurant (which is expected to seat approximately 200 persons) will
be operational by April 1997.
The Company's headquarters are located in an office building located in
New York, New York, where the Company leases approximately 2,500 sq. ft. The
lease expires in July 1998. The Company believes that the space is adequate for
its present and projected needs for at least the next two years.
Item 3. Legal Proceedings.
The Company is not a party to any pending legal proceeding other than
routine litigation that is incidental to the Company's business, with the
exception of an action brought against the Company in the approximate amount of
$48,000 with respect to a stolen automobile that the plaintiff has alleged,
among other things, is due to the negligence of the Company. Colonial Insurance
Company is handling the defense of this lawsuit and the Company believes that
this claim is covered by insurance.
Item 4. Submission of Matters to a Vote of Security Holders.
On November 6, 1996, the stockholders of the Company adopted certain
actions pursuant to a Consent of Stockholders in lieu of a Meeting. Of the
5,468,753 shares of common stock entitled to vote, 4,494,375 shares of Common
Stock representing in excess of 82% of the Company's outstanding shares of
Common Stock, executed the consent to approve the following resolutions: (i) the
election of Brian Hinchcliffe, Michael D. Vann and Stephen Epstein to serve as a
director of the Company; and (ii) to adopt the Amended and Restated Bylaws of
the Company.
On December 13, 1996, the stockholders of the Company adopted certain
actions pursuant to a Consent of Stockholders in lieu of a Meeting. Of the
8,219,443 shares of Common Stock entitled to vote, 7,245,065 shares of
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Common Stock representing in excess of 88% of the Company's outstanding shares
of Common Stock, executed the consent to approve the following amendments to the
Certificate of Incorporation: (i) a change in the name of the Company from STG
International, Inc. to Soulfood Concepts, Inc.; and (ii) a one for three reverse
stock split of the issued and outstanding Common Stock of the Company.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
There is currently no trading market for the Company's Common Stock nor
has there ever been a trading market.
As of December 31, 1996, there were approximately 50 holders of record
of the Company's Common Stock.
The Company has never paid dividends on its Common Stock. The Company
intends to distribute dividends to its stockholders at such time as its earnings
permit. However, there can be no assurance that the Company will have sufficient
earnings in the foreseeable future from which to distribute such dividends.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis examines the Company's
operations which comprise The Shark Bar Restaurant and Mekka, and should be read
in conjunction with the Company's Financial Statements and Notes thereto
included elsewhere in this Form 10-KSB.
Results of Operation
Sales for the 1996 fiscal year decreased to $3,596,282, down
11% from $4,048,152 for the 1995 year, which can primarily be attributed to the
fact that 1995 includes the sales for the Company's Soul To Go quick service
operations are included for 6 months until the closing of The Soul To Go
Operations in June 1995. Fourth quarter 1996 sales of $957,770 were 7% more than
sales of $892,934 for the fourth quarter of 1995. The fourth quarter 1996 sales
increase was due primarily to an increase in patrons of the restaurant resulting
from improved marketing techniques. Gross profit margin was 73% for the 1996
year, as compared to 71% for 1995.
Cost of sales, primarily food and beverages, decreased
slightly as a percentage of sales to 27.3% for 1996 from 28.6% for 1995 for the
Company's two full service restaurants. The Restaurants' operating expenses for
1996 were $2,027,613 (56.4% of sales) representing a decrease from operating
expenses of $2,474,947 (61% of sales) for 1995. On site labor costs and various
other operating expenses decreased, in part, as a result of tighter cost
controls.
Operating income for 1996 was $172,378 or 5% of sales. For the
fourth quarter of 1996, operating (loss) was $(14,105) or (.04)% of sales. For
1995 and the fourth quarter of 1995, the comparable amounts were ($9,192) or
(2)% and $(23,874) or (.05)% respectively.
Overall operating expenses decreased by $448,534 which can
primarily be attributed to a decrease in salaries and various general,
administrative and promotional expenses.
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Financial Condition and Liquidity
Cash and cash equivalents at December 31, 1996 increased
$67,551 (taking into effect the cash position of Mekka) from December 31, 1995.
However, the use of cash to reduce liabilities has resulted in the negative
current ratio decreasing to .8% at December 31, 1996 from .3% at December 31,
1995. Cash provided by operation of $50,715 was used to reduce debt and to
acquire fixed assets.
Long-term debt at December 31, 1996 amounted to $171,199 a
decrease of $600,359 from September 30, 1996 and $602,479 from December 31,
1995, in part, as a result of the Conversion of officer's loans converted into
Common Stock, and the repayment of Limited Partners' loans.
Management believes that existing cash and net cash provided
by operating activities, will be sufficient to meet operating needs during 1997.
The Company expects to incur approximately $600,000 in capital expenditures in
connection with Chicago Shark Bar and is expected to incur additional capital
expenditures to the extent that other restaurant sites are developed during
fiscal 1997. The Company intends to raise money through the issuance of
securities (debt or equity) or to obtain loans in order to fund such anticipated
capital expenditures.
The effect of inflation has not been a factor upon either the
operations or the financial condition of the Company. The Company's business is
not significantly seasonal in nature.
Forward-looking Information
Statements contained in this Form 10-KSB that are not
historical facts, including, but not limited to, statements found in this Item
6, Management's Discussion and Analysis of Financial Condition and Results of
Operations, are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 that involve
a number of risks and uncertainties. The actual result of the future events
described in such forward-looking statements in this Form 10-KSB could differ
materially from those stated in such forward-looking statements. Among the
factors that could cause actual results to differ materially are: the Company's
ability to operate existing restaurants profitably, changes in economic
conditions are concentrated, increasingly intense competition in the restaurant
industry, increases in food, labor, and employee benefits and similar costs, as
well as the risks and uncertainties discussed in this form 10-KSB.
Item 7. Financial Statements.
The information required under this item is set forth on pages F-1 through F-12
of this Annual Report on Form 10-KSB.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
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PART III
Item 9:
Directors, Executive Officers, Promoters and Control Persons
The name, age, principal occupation, other business affiliations and
other information (relating to the past five or more years) concerning each
director, and, where applicable, the year each was first elected a director of
the Company, are set forth below:
Brian Hinchcliffe, 40, is the Chief Executive Officer, President and a
Director of the Company since 1992. Prior thereto he was the President and a
Director of Soul to Go, Inc. Mr. Hinchcliffe also serves as a director of Jordex
Resources, Inc. and The Ampac Group, Inc.
Michael Vann, 39, has served as a director of the Company since 1992
and has served as the Company's Vice President from 1992 through November, 1996.
Mr. Vann was a founder of the Shark Bar Restaurant. Mr. Vann graduated from
Western Michigan University in April 1979, earning a Bachelor's degree in
marketing and retail.
Stephen Epstein, 48, has served as a director of the Company since
1992. Mr. Epstein is currently and has been admitted to practice law in New York
State since 1976. Mr. Epstein is currently Of Counsel to the law firm of Pryor
Cashman, Sherman and Flynn. Mr. Epstein graduated cum laude from Queens College
in 1971 and received his law degree from Hofstra University in 1975.
Keith T. Clinkscales, 33, has served as a director of the Company since
January 1997. Keith T. Clinkscales is the President and CEO of VIBE, the urban
music magazine, since its inception in September 1993. Mr. Clinkscales is a
magna cum laude graduate of Florida A&M University. He was the first student
speaker for the prestigious School of Business and Industry Forum series, and
the President of Kappa Alpha Psi fraternity.
Compliance with Section 16(a) of the Exchange Act
Not Applicable.
Item 10:
Executive Compensation
(a) Cash Compensation.
The following table sets forth all compensation, in excess of $100,000,
awarded to, earned by, or paid to the Company's Chief Executive Officer and the
four other most highly compensated executive officers (the "named executive
officers") for the years ended December 31, 1996, 1995 and 1994. None of the
executive officers of the Company had total compensation in excess of $100,000.
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Summary Compensation Table
Fiscal Annual
Name and Principal Position Year Salary ($)
- --------------------------- ------ ----------
Brian A. Hinchcliffe,
President and Chief Executive Officer 1996 $62,500
1995 $38,000
1994 $-0-
Directors' Fees and Other Remuneration
Directors received no compensation for services as a member of the
Board of Directors or of any committee of the Board of Directors in respect of
1996. However, at this time, the Company intends to establish a stock option
plan which will allow both directors, employees and consultants to participate.
Stock Options.
No stock options were granted by the Company during 1996.
Item 11:
Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Management
The following table sets forth certain information, as of December 31,
1996, to the knowledge of the Company, regarding the beneficial ownership of
Common Stock, which is the Company's only class of outstanding voting
securities, by each Stockholder who owns more than 5% of the outstanding shares,
by each director, by each of the named executive officers of the Company and by
all directors and executive officers of the Company as a group. The information
set forth in the table and accompanying footnotes has been furnished by the
named beneficial owners. Since the table reflects beneficial ownership
determined pursuant to the applicable rules of the Securities and Exchange
Commission, the information is not necessarily indicative of beneficial
ownership for any other purpose.
Name and Address of Amount and Nature of
Beneficial Owner(1) Beneficial Ownership(2)(3) Percent of Class
--------------------- -------------------------- ----------------
Arthur Tullman 223,125 7.1%
Brad Gardiner 223,125 7.1%
Brian A. Hinchcliffe 2,547,522(4) 67.7%
Michael D. Vann 223,125 7.1%
Stephen Epstein 223,125 7.1%
Keith Clinkscales 0 0%
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Name and Address of Amount and Nature of
Beneficial Owner(1) Beneficial Ownership(2)(3) Percent of Class
--------------------- -------------------------- ----------------
All Executive Officers and
Directors as a group
(4 persons) 2,993,772(4) 79.5%
(1) The address of Mr. Epstein 410 Park Avenue, 10th floor, New York, New
York 10022. The address of Mr. Hinchcliffe is 690 Ninth Avenue, New
York, New York 10036. The address of Mr. Keith Clinkscales is 205
Lexington Avenue, 3rd floor, New York, NY 10016. The address of Mr.
Michael D. Vann is 444-448 West 42nd Street, New York, New York 10036.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment
power with respect to the shares shown as beneficially owned. Shares of
Common Stock subject to options currently exercisable or exercisable
within 60 days are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other person.
(3) The amount of ownership takes into effect the reverse stock split of
the Company's outstanding Common Stock on the basis of one new share of
common stock for each 3 shares of outstanding Common Stock of the
Company as of November 6, 1996.
(4) Includes 625,000 shares of Common Stock, which can be obtained through
the conversion of 125,000 shares of Class A Preferred Stock of the
Company.
Item 12:
Certain Relationships and Related Transactions
On or prior to December 31, 1992, Mr. Brian Hinchcliffe
("Hinchcliffe"), a director and officer of the Company, loaned the Company the
aggregate sum of $400,100, together with accrued interest thereon (hereinafter
referred to as the "Hinchcliffe Loan"). In connection therewith, in order to
evidence the Hinchcliffe Loan the Company issued to Hinchcliffe a Convertible
Note in the aggregate principal amount $400,100, together with accrued interest
thereon which note bore interest at the rate of 8% per annum. The Convertible
Note provided Hinchcliffe with the right to convert said note into that number
fully paid and non assessable shares of Common Stock of the Company as shall be
equal to the aggregate principal amount of the Note, and interest accrued
thereon, multiplied by (5). During November 1996, Mr. Hinchcliffe requested that
the Note be converted. In December, 1996, such note was converted into 2,750,690
shares of Common Stock (after taking into effect the Reverse Stock Split).
Pursuant to an arrangement between the Company and
Hinchcliffe, during the period of 1993 through end of 1996, the Company borrowed
in excess of $285,266 from Hinchcliffe at an interest rate of 10% per annum. On
December 30, 1996 it was determined by the Board of Directors of the Company to
be in the best interest of the Company that the Company accept Hinchcliffe's
offer to (i) convert $125,000 of said loans into 125,000 shares of Series A
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Convertible Preferred Stock, which stock contains the designations, rights and
preferences which were filed in the Certificate of Designation with the
Secretary of State of the State of Delaware and (ii) to convert an additional
$80,000 of loans into 400,000 shares of Common Stock. See "Financial Statements
and Notes Thereto."
In addition, during January, 1997, in order to finance the
Chicago Acquisition, Mr. Hinchcliffe loaned the Company approximately $305,000,
which loan bears interest at the rate of 10% per annum and will be convertible
into the Company's capital stock.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following documents heretofore filed by the Company with the Securities and
Exchange Commission ("SEC") are hereby incorporated by reference:
Exhibit No. Document
- ----------- --------
2.1(2) Agreement and Plan of Reorganization
3.1(1) Certificate of Incorporation
3.2(1) By-Laws of the Company
3.3(2) Amended Certificate of Incorporation
10.1(1) Escrow Agreement between the Company and New Jersey National Bank
10.2(1) Warrant Agreement between the Company and Interest Transfer Co.,
Inc.
10.3(3) Lease Agreement relating to the New York Shark Bar restaurant
10.7(3) Sublease Agreement for MEKKA
The following documents are filed herewith:
3.4 Amended and Restated By-Laws of the Company
3.5 Amended Certificate of Incorporation
3.6 Certificate of Designation relating to the Series A Convertible
Preferred Stock
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10.10 Cancelled Convertible Note issued to Brian Hinchcliffe in the
principal amount of $400,100.
21 List of Subsidiaries
- --------------------------------
(1) Incorporated by reference from registrant's registration statement on
Form S-18, File No. 22-38231 - NY.
(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the Year Ended December 31, 1992.
(3) Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1994.
(b) Reports on Form 8-K. The Company did not file any Current Reports
on Form 8-K during the fourth quarter ended December 31, 1996.
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SOULFOOD CONCEPTS, INC.
Date: March 13, 1997 By: /s/ Brian A. Hinchcliffe
------------------------
Brian A. Hinchcliffe,
Chief Executive Officer and
President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature and Title Date
/s/ Brian A. Hinchcliffe March 13,1997
- --------------------------------
Brian A. Hinchcliffe, Chief
Executive Officer, President
and Director
/s/ Kevin Starkes March 13, 1997
- --------------------------------
Kevin Starkes, Vice President
and Treasurer [Principal
Financial Officer]
/s/ Michael D. Vann March 13, 1997
- --------------------------------
Michael D. Vann, Director
/s/ Stephen Epstein March 19, 1997
- --------------------------------
Stephen Epstein, Director
/s/ Keith Clinkscales March 13, 1997
- --------------------------------
Keith Clinkscales, Director
13
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 2
Consolidated Balance Sheet 3
Consolidated Statement of Income 4
Consolidated Statement of Stockholders' Equity 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 12
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES:
630 NINTH AVENUE
NEW YORK, NY 10036
We have audited the accompanying consolidated balance sheet of SOULFOOD
CONCEPTS, INC. AND SUBSIDIARIES as at December 31, 1996 and 1995 and the related
consolidated statements of income, stockholders equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SOULFOOD CONCEPTS,
INC. AND SUBSIDIARIES as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C
Certified Public Accountants
New York, New York
January 29, 1997
F-2
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
---------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 80,751 $ 9,351
Accounts Receivable (Note 2) 45,293 25,266
Inventory (Note 3) 30,489 20,811
Prepaid Expenses 22,422 26,548
Escrow Advance (Note 12) 33,500 -
Loans & Exchange 15,968 4,482
---------- ----------
Total Current Assets 228,423 86,458
Property and Equipment, Net of Accumulated
Depreciation of $215,037 and $152,848,
respectively (Note 4) 262,032 220,114
Intangible Assets, Net of Accumulated
Amortization of $387,405 and $357,084,
respectively (Note 5) 36,735 66,336
Security Deposits 49,357 50,730
Deferred Taxes (Note 9) - -
---------- ---------
TOTAL ASSETS $ 576,547 $ 423,638
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash Overdraft $ 3,851 $ -
Current Portion of Long-Term Debt (Notes 7 & 8) 10,956 16,814
Accounts Payable & Accrued Expenses 257,709 296,547
Obligation Under Capital Lease (Note 7) 5,533 6,456
----------- -----------
Total Current Liabilities 278,049 319,817
----------- -----------
LONG-TERM LIABILITIES
Long-Term Debt (Notes 7 & 8) 171,199 773,678
Obligation Under Capital Lease (Note 7) - 5,072
----------- -----------
Total Long-Term Liabilities 171,199 778,750
----------- -----------
TOTAL LIABILITIES 449,248 1,098,567
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 10 & 12)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, par value $.003; Authorized
500,000 shares; issued and outstanding
125,000 shares 375 -
Common Stock, par value $.003; Authorized
14,500,000 shares; issued and outstanding
3,139,816 shares 9,420 5,469
Additional Paid-in Capital 765,649 14,837
Partners'Capital ( 18,356) ( 52,470)
Accumulated (Deficit) ( 629,789) ( 642,765)
----------- -----------
Total Stockholders' Equity (Deficit) 127,299 ( 674,929)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 576,547 $ 423,638
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
----------- --------
<S> <C> <C>
SALES $ 3,596,282 $ 4,048,152
COST OF SALES 979,835 1,157,778
----------- -----------
GROSS PROFIT 2,616,447 2,890,374
----------- -----------
Operating Expenses 2,368,822 2,817,356
Interest Expense 75,247 82,210
----------- -----------
2,444,069 2,899,566
----------- -----------
Income (Loss) Before Depreciation, Amortization,
Other (Expenses) and Provision for Income Taxes 172,378 ( 9,192)
Depreciation & Amortization ( 93,468) ( 142,202)
Loss on Abandonment of Assets ( 1,306) ( 105,491)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 77,604 ( 256,885)
PROVISION FOR INCOME TAXES (Note 9) 13,633 5,178
----------- -----------
NET INCOME (LOSS) $ 63,971 $( 262,063)
=========== ===========
EARNINGS (LOSS) PER SHARE:
Primary $ 0.031 $( 0.144)
=========== ==========
Fully Diluted $ 0.031 $( 0.144)
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Total Stockholders'
------------------ ------------------- Paid-in Partners' Accumulated Equity
Shares Amount Shares Amount Capital Capital Deficit (Deficit)
------ ------ ------ ------ ------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance-December 31, 1994 5,468,753 $5,469 $ 14,837 $(69,273) $(363,087) $(427,054)
Distributions (812)
Net Income (Loss) 17,615 (279,678)
------ ------ --------- ------ ------- --------- ---------
Balance - December 31, 1995 5,468,753 5,469 14,837 (52,470) (642,765) $ 674,992
=========
Issuance of Common Stock
in Conversion of
Stockholder Loan 2,750,690 2,751 547,387
Reverse 1 for 3 Stock
Split (5,479,627)
Issuance of Common Stock
in Conversion of
Stockholder Loan 400,000 1,200 78,800
Issuance of Preferred Stock
in Conversion of
Stockholder Loan 125,000 $ 375 124,625
Distributions (16,880)
Net Income 50,994 12,976
------- ----- --------- ------ -------- -------- --------- ---------
Balance-December 31, 1996 125,000 $ 375 3,139,816 $9,420 $765,649 $(18,356) $(629,789) $ 127,299
======= ===== ========= ====== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
---------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 63,971 $( 262,063)
Non Cash Items Included in Net Income (Loss):
Loss on Disposition of Assets 1,306 105,491
Depreciation and Amortization 93,468 142,202
(Increase) Decrease In:
Accounts Receivable ( 20,027) 51,113
Prepaid Expenses 4,126 11,764
Inventory ( 9,678) 6,629
Loans and Exchange ( 44,986) 6,500
Security Deposits 1,373 11,225
(Decrease) Increase In:
Accounts Payable & Accrued Expenses ( 38,838) 73,199
---------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 50,715 146,060
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment ( 108,512) ( 67,420)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Debt 180,410 104,619
Repayment of Debt ( 39,182) ( 43,636)
Partner Distributions ( 16,880) ( 812)
---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 125,348 60,171
---------- -----------
Net Increase in Cash During the Year 67,551 138,811
Cash - January 1, 9,351 ( 129,460)
---------- -----------
Cash - December 31, $ 76,902 $ 9,351
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Year For:
Interest $ 36,360 $ 19,652
========== ===========
Taxes $ 704 $ -
========== ==========
</TABLE>
NON-CASH FINANCING ACTIVITIES
During the year the Company issued preferred and common stock to
convert stockholder loans totalling $749,652.
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
a. History
Soulfood Concepts, Inc. (f/k/a STG, International, Inc.)
("the Company"), is a Delaware Corporation. The Company owns
the outstanding stock of Shark Restaurant Corp. and Shark
Catering Corp., which it acquired on December 14, 1992. Shark
Restaurant Corp. operates the Shark Bar Restaurant in New
York, New York. Shark Catering Corp., a take-out catering
establishment, ceased operations in June, 1995. In 1995,
T.W.S. Rest. Corp. was formed to operate a take-out service in
Jamaica, N.Y. It too ceased operations in June, 1995.
7 West Rest. Corp., a New York Corporation formed in February,
1994, was created to be the general partner of Avenue A
Restaurant Associates, L.P. which operates Mekka Restaurant in
New York, N.Y.
The consolidated financial statements reflect the accounts of
all the above entities for the periods that they were in
existance. All significant intercompany transactions and
balances have been eliminated.
b. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
c. Cash and Cash Equivalents
All instruments purchased with a maturity of three months or
less have been classified as cash equivalents.
d. Inventory
Inventory is valued at the lower of cost or market under the
FIFO method of costing.
e. Depreciation and Amortization
Fixed assets are valued at cost and are depreciated over their
useful lives, usually 7 years using the straight line method.
Leasehold improvements are amortizable over the life of the
lease.
f. Organization Costs
Organization costs are being amortized over 60 months.
g. Costs of Leasehold
The cost of leasehold arose from the purchased business and is
being amortized over the life of the lease.
F-7
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (cont'd)
h. Goodwill
Goodwill arose from the excess of the cost of the purchased
business over the value of the net underlying assets and has
been amortized by the straight line method over the term of
the agreement which was 66 months and expired in April of
1996.
i. Earnings Per Share
The computation of primary earnings per share is based on the
weighted average number of outstanding common shares during
the period. Fully diluted earnings per share additionally
assumes the conversion of outstanding Preferred Stock. In
1995, the computation of both primary and fully diluted
earnings per share was based on the weighted average number of
outstanding common shares. The shares used in the computations
for the years ended December 31, 1996 were as follows:
1996 1995
--------- -------
Primary 2,056,217 1,822,918
Fully Diluted 2,059,642 1,822,918
j. Income Taxes
Income taxes are provided for based on the liability method of
accounting pursuant to Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". The
liability method requires the recognition of deferred tax
assets and liabilities for the expected future tax
consequences of temporary differences between the reported
amount of assets and liabilities and their tax basis.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consist of charges due from credit card
companies and others.
NOTE 3 - INVENTORY
Inventory consisted of the following at December 31:
1996 1995
-------- ------
Food $ 6,459 $ 4,053
Beverage 23,611 15,252
-------- --------
30,070 19,305
Other Merchandise 419 1,506
-------- --------
$ 30,489 $ 20,811
======== ========
F-8
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
NOTE 4 - PROPERTY AND EQUIPMENT
Property and Equipment consisted of the following at December
31:
<TABLE>
<CAPTION>
Accumulated Net Book
1996 Cost Depreciation Value
---- --------- ------------ --------
<S> <C> <C> <C>
Furniture, Fixtures &
Equipment $ 370,100 $ 170,293 $ 199,807
Leasehold Improvement 106,969 44,744 62,225
--------- --------- ---------
$ 477,069 $ 215,037 $ 262,032
========= ========= =========
1995
Furniture, Fixtures &
Equipment $ 291,446 $ 123,155 $ 168,291
Leasehold Improvement 81,516 29,693 51,823
--------- --------- ---------
$ 372,962 $ 152,848 $ 220,114
========= ========= =========
</TABLE>
Depreciation expense for the years ending December 31, 1996
and 1995 was $48,819 and $44,037, respectively.
NOTE 5 - OTHER ASSETS
Other Assets consist of the following at December 31:
<TABLE>
<CAPTION>
Accumulated Net Book
1996 Cost Amortization Value
---- ---- ------------ --------
<S> <C> <C> <C>
Organization Cost $ 24,140 $ 23,120 $ 1,020
Cost of Leasehold 380,000 344,285 35,715
Restrictive Covenant 10,000 10,000 -
Goodwill 10,000 10,000 -
--------- --------- ---------
$ 424,140 $ 387,405 $ 36,735
========= ========= =========
1995
----
Organization Cost $ 24,140 $ 22,750 $ 1,390
Cost of Leasehold 380,000 316,420 63,580
Restrictive Covenant 10,000 9,317 683
Goodwill 10,000 9,317 683
--------- --------- ---------
$ 424,140 $ 357,804 $ 66,336
========= ========= =========
</TABLE>
F-9
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
NOTE 6 - INVESTMENT IN PARTNERSHIP
The Company, through its subsidiary 7 West Rest. Corp., is the
general partner in Avenue A Restaurant Associates, L.P., which
operates a similar restaurant facility. 7 West Rest. Corp.
owns a 60% general partnership interest and a 2% limited
partnership interest.
7 West Rest. Corp. has advanced funds to the partnership as
per the partnership agreement. It also performs management
services for which fees are paid to it by the partnership.
These intercompany transactions and balances have been
eliminated in consolidation.
NOTE 7 - LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Working capital loan from Citibank, bearing interest at 11.5%
per annum on the outstanding balance, payable in monthly
installments of $913 principal only with interest accrued,
maturing in January, 1999. $ 22,826 $ 33,785
Note payable for purchase of restaurant. Terms indicate a
monthly payment of $3,805, including interest at 11%, self
liquidating.
Last scheduled payment was April, 1996. - 5,858
Advances from officers of the Company, payable on demand. It
is intended that these advances will be repaid in more than
one year. No interest has been accrued on these advances. 73,169 105,719
Partner loans to Avenue A Restaurant Associates, L.P.
being repaid on a quarterly basis. Interest is also being
paid on a quarterly basis at 10% per annum to the limited
partners and any unpaid amounts have been accrued. 86,160 125,000
Advances from stockholder, payable on demand, convertible into
common stock and bearing interest on the principal balance at
10% per annum. Includes accrued interest of $120,030.
(See Note 11). - 520,130
--------- ---------
Total 182,155 790,492
Less: Current Portion 10,956 16,814
--------- ---------
Long-Term Debt $ 171,199 $ 773,678
========= =========
</TABLE>
F-10
<PAGE>
SOULFOOD CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company was advanced monies from shareholders and officers
as detailed in Note 7.
NOTE 9 - INCOME TAXES
The provision for income taxes is summarized as follows:
Federal Income Tax $ 10,993 $ -
State and Local 13,633 5,178
-------- --------
24,626 5,178
Tax Benefit of Net Operating Loss
Carryfowards (10,993) -
-------- -------
Provision for Income Taxes $ 13,633 $ 5,178
======== ========
The Company has net carryforward losses substantially in
excess of their profits. Because of the uncertainty of future
profits, a valuation allowance has been established equal to
the tax benefit of the loss carryforwards.
The loss carryforwards expire as follows:
December 31,
2007 $ 4,419
2008 26,900
2009 218,652
2010 120,030
--------
$370,001
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under several rental agreements.
1. Shark Bar Restaurant space expires 1999. Annual rent of
$82,800 with no scheduled increases.
2. Shark Bar Restaurant extension expires 1999. Annual
rent of $29,800 increasing to $36,200 by expiration.
3. Office space expiring August 1998 with an annual rent
of $31,800 increasing to $32,400 by expiration.
4. Mekka Restaurant space expires December, 2002 with an
annual rent of $44,128 increasing to $53,628 by
expiration. There is an option to extend the lease five
years for a $20,000 fee.
The Company is obligated under a capital lease for the
purchase of equipment. Minimum future rental payments
are as follows:
1997 $ 5,533
F-11
<PAGE>
SOULFOOD CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
NOTE 11 - STOCKHOLDERS' EQUITY
Preferred Stock
On December 30, 1996, the Board of Directors of the Company
approved the issuance of 125,000 shares of preferred stock in
exchange for a reduction in the amount owed to a stockholder.
Beginning January 1, 1997, the holder of the preferred stock
may convert each share of Preferred Stock into five shares of
common stock.
Common Stock
On December 6, 1996, advances from a stockholder as described
in Note 7 were converted into 2,750,690 shares of stock.
On December 30, 1996, an additional 400,000 shares of stock
were issued to the same stockholder for a reduction in the
amount owed to that stockholder.
Reverse Stock Split
On November 6, 1996, the Board of Directors of the Company
adopted a resolution authorizing amendments to the Company's
Articles of Incorporation approving a reverse split of the
Company's outstanding common stock, par value $.001 per share
on the basis of one new share of common stock of the Company
for each 3 shares of outstanding common stock as of that date
and increasing the par value to $.003 per share.
Warrants and Options
There were no warrants or options in effect as of the date of
this report.
NOTE 12 - SUBSEQUENT EVENTS
On January 10, 1997, the Company completed the purchase of the
"Affair Club" in Chicago, Ill. from Affair, L.P. for $335,000.
The President of the Company has financed this purchase with a
loan at 10% interest to the Company which will be convertible
into Capital Stock. The purchase was for the lease, restaurant
assets and licenses of the Affair Club. The Affair, L.P.
partners will have no connection to the new club. Two key
employees of the Avenue A Restaurant Associates, L.P. have
been sent to Chicago to orchestrate the opening of Shark Bar
Chicago, the former Affair Club.
F-12
BY-LAWS
OF
SOULFOOD CONCEPTS, INC.
A
DELAWARE CORPORATION
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. Subject to change by resolution of the
Board of Directors, the annual meeting of the Stockholders of the Corporation
for the purpose of electing directors and for the transaction of such other
business as may be brought before the meeting shall be held on a date fixed,
from time to time, by the directors of the corporation, and each successive
annual meeting shall be held on a date within thirteen months after the date of
the preceding annual meeting. The meeting may be held at such time and such
place within or without the State of Delaware as shall be fixed by the Board of
Directors and stated in the notice of the meeting.
SECTION 2. Special Meetings. Special meetings of the stockholders may
be called at any time by the Chief Executive Officer, Chairman of the Board, a
majority of the Board of Directors or by a majority of the stockholders of
record of all shares entitled to vote. Special meetings shall be held on the
date and at the time and place either within or without the State of Delaware as
specified in the notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise expressly required
by law or the Certificate of Incorporation, written notice stating the place and
time of the meeting and the purpose or purposes of such meeting, shall be given
by the Secretary to each stockholder entitled to vote thereat at his address as
it appears on the records of the Corporation not less than ten (10) nor more
than sixty (60) days prior to the meeting. Notice of any meeting of stockholders
shall not be required to be given to any stockholder who shall attend such
meeting in person or by proxy; and if any stockholder shall, in person or by
attorney thereunto duly authorized, waive notice of any meeting, in writing or
by telephone or facsimile, whether before or after such meeting be held, the
notice thereof need not be given to him. The attendance of any stockholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
<PAGE>
Notice of any adjourned meeting of stockholders need not be given except as
provided in SECTION 5 of this Article I.
SECTION 4. Quorum. Subject to the provisions of law in respect of the
vote that shall be required for a specific action, the number of shares the
holders of which shall be present or represented by proxy at any meeting of
stockholders in order to constitute a quorum for the transaction of any business
shall be at least thirty three and one-third (33-1/3) percent of the total
number of shares issued and outstanding and entitled to vote at such meeting.
Where a separate vote by a class or classes is required, thirty three and
one-third (33-1/3) of the total names of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum to
take action with respect to that vote on that matter and the affirmative vote of
the majority of shares of such class or classes present in person or represented
by proxy at the meeting shall be the act of such class.
SECTION 5. Adjournment. At any meeting of stockholders, whether or not
there shall be a quorum present, the holders of a majority of the shares voting
at the meeting, whether present in person at the meeting or represented by proxy
at the meeting, may adjourn the meeting from time to time. Except as provided by
law, notice of such adjourned meeting need not be given otherwise than by
announcement of the time and place of such adjourned meeting at the meeting at
which the adjournment is taken. At any adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally called but only those stockholders entitled to vote at
the meeting as originally noticed shall be entitled to vote at any adjournment
or adjournments thereof.
SECTION 6. Organization. The Chairman of the Board or, in his absence
or non-election, the Vice Chairman or, in his absence or non-election, the
President or, in the absence of the foregoing officers, a Vice President shall
call meetings of the stockholders to order and shall act as Chairman of such
meetings. In the absence of all of the foregoing officers, holders of a majority
in number of the shares of the capital stock of the Corporation present in
person or represented by proxy and entitled to vote at such meeting shall elect
a Chairman, who may be the Secretary of the Corporation. The Secretary of the
Corporation shall act as secretary of all meetings of the stockholders; but in
the absence of the Secretary, the Chairman may appoint any person to act as
secretary of the meeting.
SECTION 7. Voting. Each stockholder shall, except as otherwise provided
by law or by the Certificate of Incorporation, at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
capital stock entitled to vote held by such stockholder, but no proxy shall be
voted on after three years from its date, unless said proxy provides for a
longer period. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Any other action shall be authorized by a
vote of a majority of the votes cast except where the General Corporation Law
prescribes a different percentage of votes and/or a different
-2-
<PAGE>
exercise of voting power, and except as may be otherwise prescribed by the
provisions of the Certificate of Incorporation and these By-laws. In the
election of directors, and for any other action, voting need not be by ballot,
unless the Board of Directors in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his or her discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
SECTION 8. Stockholders List. The officer of the Corporation who has
charge of the stock ledger of the Corporation shall prepare and make a complete
list of the stockholders entitled to vote at any meeting of stockholders,
arranged in alphabetical order with the address of each and the number of shares
held by each, which list shall be open to the examination of any stockholder,
for any purpose germane to the meeting during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole thereof and may be inspected by any stockholder who
is present. The stock ledger of the Corporation shall be the only evidence as to
who are the stockholders entitled to examine the ledger, the list required by
this Section 8 of Article I or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
SECTION 9. Address of Stockholders. Each stockholder shall designate to
the Secretary of the Corporation an address at which notices of meetings and all
other corporate notices may be served upon or mailed to him, and if any
stockholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his last known post office address.
SECTION 10. Inspectors of Election. The Board of Directors may at any
time appoint one or more persons to serve as Inspectors of Election at the next
succeeding annual meeting of stockholders or at any other meeting or meetings
and the Board of Directors may at any time fill any vacancy in the office of
Inspector. If the Board of Directors fails to appoint Inspectors, his office
becomes vacant and be not filled by the Board of Directors, the Chairman of any
meeting of the stockholders may appoint one or more temporary Inspectors for
such meeting. All proxies shall be filed with the Inspectors for such meeting.
All proxies shall be filed with the Inspectors of Election of the meeting before
being voted upon.
SECTION 11. Action by Consent. Unless otherwise provided in the
Certificate of Incorporation any action required to be taken at any meeting of
stockholders, or any action which may be taken at any meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote if a consent in writing, setting forth the action so taken, shall be signed
by the holders of all of the outstanding voting stock of the Corporation. In
addition, any action required by the General Corporation Law to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of
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stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing. Action taken pursuant to this paragraph shall be subject
to the provisions of Section 228 of the General Corporation Law.
SECTION 12. Advance Notice of Stockholder Business. Notwithstanding any
other provision of these By-Laws, for business to be properly brought before an
annual or special meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be received at the principal executive
offices of the corporation, not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. Notwithstanding anything in these By-Laws to the
contrary, no business brought by a stockholder shall be conducted at any meeting
except in accordance with the procedures set forth in this ARTICLE I, SECTION
12. The Chairman of the meting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section and if he should so determine,
he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of
Directors. The Board of Directors shall have the power and authority to
authorize the officers of the Corporation to
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enter into such agreements as the Board of Directors shall deem appropriate
including the power and authority to authorize the seal of the Corporation to be
affixed to all papers that may require it.
SECTION 2. Number, Qualification and Term of Office. The number of
directors shall be at least two and not more than twelve, except as may
otherwise be provided in the Certificate of Incorporation of the Corporation. As
of the effective date of the By-laws, the Board and subsequent Boards shall
consist of three directors until changed as hereinafter provided. Directors need
not be stockholders. Each director shall hold office for the term for which he
is appointed or elected and until his successor shall have been elected and
shall qualify, or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. Directors need not be elected by
ballot, except upon demand of any stockholder. The Chairman of the Board, if one
be elected, and the Vice Chairman of the Board, if one be elected, shall be
chosen from among the directors. The number of directors may be increased or
decreased by action of the directors.
SECTION 3. Quorum and Manner of Action. Except as otherwise provided by
law or these By-laws, at least one third of the total number Board of Directors
shall be required to constitute a quorum for the transaction of business at any
meeting, and the act of a majority of the entire Board of Directors shall be the
act of the Board of Directors. In the absence of a quorum, a majority of the
directors present may adjourn any meeting from time to time until a quorum be
had. Notice of any adjourned meeting need not be given. The directors shall act
only as a board and individual directors shall have no power as such. In the
event that the Board of Directors shall be unable to take action on any matter
because of a deadlock, upon the motion of any director the matter shall be
submitted to a vote of the stockholders. Any action so approved by a majority
vote of the stockholders shall be the action of the Board of Directors, however,
any director who voted against the action taken by the stockholders prior to the
submission of such matter to the stockholders may, within 10 days following such
stockholder vote, dissent in writing to such action to the Secretary of the
Corporation, who shall enter such dissent in the minutes of the Corporation.
SECTION 4. Place of Meeting, etc. The Board of Directors may hold its
meetings, have one or more offices and keep the books and records of the
Corporation at such place or places within or without the State of Delaware as
the Board may from time to time determine or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
SECTION 5. Regular Meetings. A regular meeting of the Board of
Directors shall be held for the election of officers and the transaction of
other business as soon as practicable after each annual meeting of stockholders,
and other regular meetings of said Board shall be held at times and places as
said Board shall direct. No notice shall be required for any regular meeting of
the Board of Directors but a copy of every resolution fixing or changing the
time or
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place of regular meetings shall be mailed to every director at least three days
before the first meeting held in pursuance thereof.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the board, the Chief Executive Officer, or any
one Director. The Secretary or any Assistant Secretary shall give notice of the
time and place of each special meeting by mailing a written notice of the same
to each director at his last known post office address at least three (3)
business days before the meeting or by causing the same to be delivered
personally or to be transmitted by telecopies, overnight mail, telegraph, cable,
wireless, telephone or orally at least twenty-four hours before the meeting to
each director. In the event the Secretary or Assistant Secretary shall fail to
give the notice of a Special Meeting called in accordance with this Section, the
person who called such meeting shall be empowered to give notice of such meeting
in accordance with the immediately preceding sentence.
SECTION 7. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of any committee thereof may be taken without
a meeting, if a written consent thereto is signed by all members of the Board or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board or committee.
SECTION 8. Organization. At each meeting of the Board of Directors, the
Chairman of the Board or in his absence,the Vice Chairman of the Board, or in
his absence, the President, or in his absence or non-election, a director chosen
by a majority of the directors present shall act as Chairman. The Secretary or,
in his absence, an Assistant Secretary or, in the absence of both the Secretary
and an Assistant Secretary, any person appointed by the Chairman shall act as
Secretary of the meeting.
SECTION 9. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors, the President or
the Secretary of the Corporation. The resignation of any director shall take
effect at the time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 10. Removal of Directors. Except as otherwise provided by law,
any director may be removed for cause, by the affirmative vote of a majority of
the board of Directors. Except as may be otherwise provided by law, cause for
removal shall be construed to exist only if the director whose removal is
proposed has been convicted of a felony by a court of competent jurisdiction and
such conviction is no longer subject to a right of appeal, or has been adjudged
by a court of competent jurisdiction to be liable for gross negligence, or
willful misconduct, in the performance of his duty to the Corporation in a
matter of substantial importance to the Corporation and such adjudication is no
longer subject to a right of appeal.
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SECTION 11. Vacancies. Any vacancy in the Board of Directors caused by
death, resignation, removal, disqualification, an increase in the number of
directors or any other cause shall be filled by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
SECTION 12. Compensation of Directors. Directors may receive such
reasonable sums for their services and expenses as may be directed by resolution
of the Board; provided that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for their services and expenses.
SECTION 13. Committees. By resolution or resolutions passed by a
majority of the whole Board at any meeting of the Board of Directors, the
directors may designate one or more committees of the Board of Directors, each
committee to consist of two or more directors. To the extent provided in said
resolution or resolutions, unless otherwise provided by law, such committee or
committees shall have and may exercise all of the powers of the board of
Directors in the management of the business and affairs of the Corporation,
including the power and authority to authorize the seal of the Corporation to be
affixed to all papers that may require it. No committee, however, shall have the
power to declare dividends or to authorize the issuance of shares of capital
stock of the Corporation. Further, the Board of Directors may designate one or
more directors as alternate members of a committee who may replace an absent or
disqualified member at any meeting. If an alterative member of a committee is
not selected by the Board of Directors, and in the absence or disqualification
of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. A committee may
make such rules for the conduct of its business and may appoint such committees
and assistants as it shall from time to time deem necessary. A majority of the
members of a committee shall constitute a quorum for the transaction of business
of such committee. Regular meetings of a committee shall be held at such times
as such committee shall from time to time by resolution determine. No notice
shall be required for any regular meeting of a committee but a copy of every
resolution fixing or changing the time or place of at least three days before
the first meeting held in pursuance thereof. Special meetings of a committee may
be called by the Chairman of such committee or the Secretary of such committee,
or any two members thereof. The Secretary of the Corporation or the Secretary of
such committee shall give notice of the time and place of each special meeting
by mail at least two days before such meeting or by telegraph, cable, wireless,
telephone or orally at least twenty-four hours before the meeting to each member
of such committee.
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SECTION 14. Participation in Meetings. Members of the Board of
Directors or of any committee may participate in any meeting of the Board or
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 15. Interested Directors or Officers. No contract or
transaction between the Corporation and one or more of its directors of
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participate in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted by such purpose if (i) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
SECTION 16. Advanced Notification of Stockholder Nominations. Only
persons who are nominated in accordance with the procedures set forth in this
ARTICLE II, shall be eligible for election as directors. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of stockholders by or at the direction of the Board of Directors or by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section. Such nominations, other than those made by or, at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice shall be
received at the principal executive offices of the Corporation not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the
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Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such persons' written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such stockholder and (ii)
the class and number of shares of the Corporation which are beneficially owned
by such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a Director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth in this Section. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
By-Laws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE III
Officers
SECTION 1. Number. The officers of the Corporation shall be a Chairman
of the Board, a Vice Chairman of the Board, a President, a Treasurer and a
Secretary. In addition, the Board may elect one or more Vice Presidents and such
other officers as may be appointed in accordance with the provisions of Section
3 of this Article III. Any number of offices may be held by the same person, as
the directors may determine.
SECTION 2. Election, Term of Office and Qualification. The officers
shall be elected annually by the Board of directors at their first meeting after
each annual meeting of the stockholders of the Corporation. Each officer, except
such officers as may be appointed in accordance with the provisions of Section 3
of this Article, shall hold office until his successor shall have been duly
elected and qualified, or until his death or until he shall have resigned or
shall have become disqualified or shall have been removed in the manner
hereinafter provided.
SECTION 3. Subordinate Officers. The Board of Directors or the Chief
Executive Officer may from time to time appoint such other officers, including
one or more Assistant Treasurers and one or more Assistant Secretaries, and such
agents and employees of the Corporation as may be deemed necessary or desirable.
Such officers, agents and employees shall hold office for such period and upon
such terms and conditions, have such authority and perform such duties as in
these By-laws provided or as the Board of Directors or the Chief Executive
Officer may from time to time prescribe. The Board of Directors or the Chief
Executive Officer
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may from time to time authorize any officer to appoint and remove agents and
employees and to prescribe the powers and duties thereof.
SECTION 4. Removal. Any officer may be removed, either with or without
cause, by the affirmative vote of a majority of the Board of Directors.
SECTION 5. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chief Executive Officer or the
Secretary. Any such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-laws for
regular selection or appointment to such office.
SECTION 7. Chairman of the Board. The Chairman of the Board shall be
the Chief Executive Officer of the Corporation and shall preside, if present, at
all meetings of the stockholders and at all meetings of the Board of Directors
and shall perform such other duties and have such other powers as from time to
time may be assigned by the Board of Directors or prescribed by these By-laws.
SECTION 8. Vice Chairman of the Board. The Vice Chairman of the Board
shall, at the request of the Chairman of the Board or in his absence or
disability, perform the duties of the Chairman of the Board and when so acting
shall, have all the powers of, and be subject to all restrictions upon, the
Chairman of the Board and shall perform such other duties and have such other
powers as from time to time may be assigned to him by the Chairman of the Board
or prescribed by these By-laws.
SECTION 9. President. The President shall have general direction of the
affairs of the Corporation and general supervision over its several officers,
subject, however, to the control of the Board of Directors and the Chief
Executive Officer, and in general shall perform such duties and, subject to the
other provisions of these By-laws, have such powers incident to the office of
President and perform such other duties and have such other powers as from time
to time may be assigned to him by the Board of Directors and the Chief Executive
Officer.
SECTION 10. Vice President. A Vice President may sign with the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
certificates of stock of the Corporation and shall have such other powers and
shall perform such other duties as from time to time may be assigned to him by
the Board of Directors, the Chief Executive Officer or the President or
prescribed by these By-laws.
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SECTION 11. Secretary. The Secretary shall keep or cause to be kept, in
books provided for the purpose, the minutes of the meetings of the stockholders,
the Board of Directors and any committee when so required, shall see that all
notices are duly given in accordance with the provisions of these By-laws and as
required by law, shall be custodian of the records and the seal of the
Corporation and see that the seal is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these By-laws, shall keep or cause to be kept
a register of the post office address of each stockholder, may sign with the
Chairman of the Board, the Chief Executive Officer, the President or any Vice
President certificates of stock of the Corporation, and in general shall perform
such duties and have such powers incident to the office of Secretary and shall
perform such other duties and have such other powers as from time to time may be
assigned to him by the Board of Directors, the Chief Executive Officer or the
President or prescribed by these By-laws.
SECTION 12. Assistant Secretary. Any Assistant Secretary shall, at the
request of the Secretary or in his absence or disability, perform the duties of
the Secretary and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the Secretary and shall perform such other duties and
have such other powers as from time to time may be assigned to him by the Chief
Executive Officer, the President, the Secretary or the Board of Directors or
prescribed by these By-laws.
SECTION 13. Chief Financial Officer. The Chief Financial Officer shall
be responsible to the Board of Directors and the Chief Executive Officer for all
financial control and internal audit of the Corporation and its subsidiaries. He
shall perform such other duties as may be assigned to him by the Board of
Directors, the Chief Executive Officer or prescribed by these By-laws, and shall
be responsible to a designated Vice President only for the routine
administrative matters pertaining to the duties of his office.
SECTION 14. Treasurer. The Treasurer shall have charge and custody of,
and be responsible for, all funds and securities of the Corporation, and deposit
all such funds in the name of the Corporation in such banks, trust companies or
other depositaries as shall be selected in accordance with the provisions of
these By-laws, shall at all reasonable times exhibit his books of account and
records, and cause to be exhibited the books of account and records of any
corporation controlled by the Corporation to any of the directors of the
Corporation upon application during business hours at the office of the
corporation, or such other corporation, where such books and records are kept,
shall, if called upon to do so, receive and give receipts for monies due and
payable to the Corporation from any source whatsoever, may sign with the
Chairman of the Board, the Chief Executive Officer, the President or any Vice
President certificates of stock of the Corporation, and in general shall perform
such duties and have such powers incident to the office of Treasurer and such
other duties and have such other powers as from time to time may be assigned to
him by the Board of Directors, Chief Executive Officer or the President or
prescribed by these By-laws.
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SECTION 15. Assistant Treasurer. Any Assistant Treasurer shall, at the
request of the Treasurer or in his absence or disability, perform the duties of
the Treasurer and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the Treasurer and shall perform such duties and have
such other powers as from time to time may be assigned to him by the Chief
Executive Officer, the President, the Treasurer or the Board of Directors or
prescribed by these By-laws.
SECTION 16. Other Officers. Such officers as the Board of directors may
choose shall perform such duties and have such powers as may be appropriate to
such officer or as from time to time may be assigned to them by the Board of
Directors. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
SECTION 17. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Directors. No officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the Corporation.
SECTION 18. Authority of Officers. The officer of the Corporation shall
have such duties and authority as set forth in these By-laws and as shall be
determined from time to time by the Board of Directors.
ARTICLE IV
Shares and their Transfer
SECTION 1. Certificates of Stock. Certificates for shares of the
capital stock of the Corporation shall be in such form not inconsistent with law
as shall be approved by the Board of Directors. They shall be numbered in order
of their issue and shall be signed by the Chairman of the Board or the President
or any Vice President and the Treasurer or any Assistant Treasurer, or the
Secretary or any Assistant Secretary of the Corporation, and the seal of the
Corporation is not required to be affixed thereto. Any of or all the signatures
on the certificate may be a facsimile. In case any officer, transfer agent or
registrar who shall have signed or whose facsimile signature shall have been
placed upon any such certificate or certificates shall cease to be such officer
or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be adopted by
the Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature shall have
been used thereon had not ceased to be such officer or officers of the
Corporation.
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SECTION 2. Transfer of Stock. Transfer of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, or by his attorney thereunto authorized by a power of attorney
duly executed and filed with the Secretary of the Corporation, or a transfer
agent of the Corporation, if any, on surrender of the certificate or
certificates for such shares properly endorsed. A person in whose name shares of
stock stand on the books of the Corporation shall be deemed the owner thereof as
regards the Corporation, and the Corporation shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.
SECTION 3. Lost Destroyed and Mutilated Certificates. The holder of any
stock issued by the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor or the failure to
receive a certificate of stock issued by the Corporation, and the Board of
Directors or the Secretary of the Corporation may, in its or his discretion,
cause to be issued to such holder a new certificate or certificates of stock,
upon compliance with such rules, regulations and/or procedures as may be
prescribed or have been prescribed by the Board of Directors with respect to the
issuance of new certificates in lieu of such lost, destroyed or mutilated
certificate or certificates of stock issued by the Corporation which are not
received, including reasonable indemnification to indemnify it against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of such new certificate.
SECTION 4. Transfer Agent and Registrar; Regulations. The Corporation
shall, if and whenever the Board of Directors shall so determine, maintain one
or more transfer offices or agencies, each in the charge of a transfer agent
designated by the Board of Directors, where the shares of the capital stock of
the Corporation shall be directly transferable, and also one or more registry
offices, each in the charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares of
the capital stock of the Corporation, in respect of which a Registrar and/or
Transfer Agent shall have been designated, shall be valid unless countersigned
by such Transfer Agent and registered by such Registrar, if any. The Board of
Directors shall also make such additional rules and regulations as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the capital stock of the Corporation.
SECTION 5. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, to express
consent to corporate action in writing without a meeting, to receive payment of
any dividend or other distribution or allotment of any rights, to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action,
and only such stockholders as shall be
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stockholders of record of the date so fixed shall be entitled to such notice of
and to vote at such meeting and any adjournment thereof, to express consent to
any such corporate action, to receive payment of such dividend or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid. If the stock transfer books are to be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting in the case of a merger or consolidation, the books shall be
closed at least twenty days before such meeting.
SECTION 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE V
General Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end on
such date of each year as shall be determined by the Board of Directors of the
Corporation.
SECTION 2. Waivers of Notice. Whenever any notice of any nature is
required by law, the provisions of the Certificate of Incorporation or these
By-laws to be given, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
SECTION 3. Qualifying in Foreign Jurisdiction. The Board of Directors
shall have the power at any time and from time to time to take or cause to be
taken any and all measures which they may deem necessary for qualification to do
business as a foreign corporation in any one or more foreign jurisdictions and
for withdrawal therefrom.
SECTION 4. Registered Office. The registered office of the Corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle, State of Delaware.
SECTION 5. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware as the Board of
Directors may from time to time determine.
-14-
<PAGE>
SECTION 6. Proxies. Except as otherwise provided in these By-laws or in
the Certificate of Incorporation of the Corporation, and unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board may
appoint from time to time an attorney or attorneys, or agent or agents, of the
Corporation, on behalf and in the name of the Corporation, to cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporation, or to consent in writing to any action by such other
corporation, and may instruct the person or person so appointed as to the manner
of casting such votes or giving such consent, and may execute or cause to be
executed on behalf and in the name of the Corporation and under its corporate
seal, or otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
SECTION 7. Seal. The Board of Directors shall provide a suitable seal
containing the name of the Corporation, which seal shall be in the charge of the
Secretary and which may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. If and when so directed by the
Board of Directors, a duplicate of the seal may be kept and be used by an
officer of the Corporation designated by the Board.
SECTION 8. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
SECTION 9. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
ARTICLE VI
Indemnification
SECTION 1. Power to Indemnify in Actions, Suits or Proceedings other
than those by or in the Right of the Corporation. Subject to Section 3 of this
Article VI, the Corporation shall indemnify any person (to the full extent
permitted by the laws of the State of Delaware, as amended from time to time)
who was or is a party or is threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
-15-
<PAGE>
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, has
reasonable cause to believe that his conduct was unlawful.
SECTION 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VI, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit,
proceeding or claim by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprises
against expenses (including attorney's fees and expenses) actually and
reasonably incurred by him and to the extent permitted by applicable law in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses and amounts which the Court of
Chancery or such other court shall deem proper.
SECTION 3. Authorization of Indemnification. Any indemnification under
this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VI, as the case may be. Such
determination and determinations under Section 5 or 6 of this Article VI shall
be made (i) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by
-16-
<PAGE>
the stockholders. To the extent, however, that a director or officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorney's fees and expenses) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
SECTION 4. Good Faith Defined.
(a) For purposes of any determination under Section 3 of this
Article VI, a person shall be deemed to have acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Corporation or another enterprise, or
on information supplied to him by the officers of the Corporation or another
enterprise or on information or records given or reports made to the Corporation
or another enterprise by an independent certified public account or by an
appraiser or other expert selected with reasonable care by the Corporation or
another enterprise. The term "another enterprise" as used in this Section 4
shall mean any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise of which such person is or was serving
at the request of the Corporation as a director, officer, agent or employee.
(b) References in this Article VI to "penalties" include any
excise taxes assessed on a person with respect to an employee benefit plan;
references in this Article VI to "serving at the request of the Corporation"
include any service as a director or officer (or if appropriate an employee or
agent) or former director or officer (or if appropriate a former employee or
agent) of the Corporation which imposes duties on, or involves services by,
such person with respect to an employee benefit plan or its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
participants or beneficiaries of such an employee benefit plan shall be deemed
to have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation.
(c) The provisions of this Section 4 shall not be exclusive or
to limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Sections 1 or 2 of this
Article VI, as the case may be.
SECTION 5. Indemnification upon Application; Procedure Upon
Application; Etc. Except as otherwise provided in the proviso to Section 2 of
this Article VI:
(a) Any indemnification under Section 1 and 2 of this
Article VI shall be made no later than 45 days after receipt by the Corporation
of the written request
-17-
<PAGE>
by the director, officer, employee or agent or the former director, officer,
employee or agent, unless a determination is made within said 45-day period in
accordance with Section 3 of this Article VI that such person has not met the
applicable standard of conduct set forth in Section 1 or 2 of this Article VI.
(b) The right to indemnification under Section 1 or 2 of
this Article VI or advances under Section 6 of this Article VI shall be
enforceable by the director, officer, employee or agent or former director,
officer, employee or agent in any court of competent jurisdiction. The burden of
proving that indemnification is not appropriate shall be on the Corporation.
Neither the absence of any prior determination that indemnification is proper in
the circumstances, nor a prior determination that indemnification is not proper
in the circumstances, shall be a defense to the action or create a presumption
that the director or officer, or former director or officer, has not met the
applicable standard of conduct. The expenses (including attorneys' fees and
expenses) incurred by the director, officer, employee or agent in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such action (or in any action or claim brought by him to recover
under any insurance policy or policies referred to in Section 9 of this Article
VI) shall also be indemnified by the Corporation.
(c) If any person is entitled under any provision of this
Article VI to indemnification by the Corporation for some or a portion of
expenses, judgments, fines, penalties or amounts paid in settlement incurred by
him, but not, however, for the total amount thereof, the corporation shall
nevertheless indemnify such person for the portion of such expense, judgments,
fines, penalties and amounts to which he is entitled.
SECTION 6. Expenses Payable in Advance. Expenses (including attorneys'
fees and expenses) incurred by an officer, director, employee or agent or a
former officer, director, employee or agent in defending a civil or criminal
action or investigating a threatened or pending action, suit or proceeding may
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors in the specific case
upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation as authorized in this
Article VI; provided, however, that if he seeks to enforce his rights in a court
of competent jurisdiction pursuant to section 5(b) of this Article VI, said
understanding to repay shall not be applicable or enforceable unless and until
there is a final court determination that he is not entitled to indemnification
as to which all rights of approval have been exhausted or have expired.
SECTION 7. Certain Person Not Entitled to Indemnification.
Notwithstanding any other provision of this Article VI, no person shall be
entitled to indemnification under this Article VI or to advances under Section 6
of this Article VI with respect to any action, suit, proceeding or claim as
brought or made by him against the Corporation, other than an action,
-18-
<PAGE>
suit, proceeding or claim seeking, or defending such person's right to,
indemnification and/or expense advances pursuant to this Article VI or
otherwise.
SECTION 8. Non-exclusivity and Survival of Indemnification. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
By-law, agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office, it being the policy of the
Corporation that indemnification and expense advances to the persons specified
in Section 1 and 2 of this Article VI shall be made to the fullest extent
permitted by law and, accordingly, in the event of any change in law, by
legislation or otherwise, permitting greater indemnification and/or expense
advances to any such person, the provision of this Article VI shall be construed
so as to require such greater indemnification and/or expense advances. The
provisions of this Article VI shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VI but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VI shall continue as to a person who has ceased
to be a director or officer (or if appropriate an employee or agent) and shall
inure to the benefit of the heirs, executors and administrator of such person.
SECTION 9. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power or the obligation to indemnify him against such liability under the
provisions of this Article VI or the provisions of Section 145 of the General
Corporation Law of the State of Delaware. The Corporation shall not be obligated
under this Article VI to make any payment in connection with any claim made
against any person if and to the extent that such person has actually received
payment therefore under any insurance policy or policies.
SECTION 10. Meaning of "Corporation" for Purposes of Article VI. For
purposes of this Article VI, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VI
-19-
<PAGE>
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
SECTION 11. Limitation on Actions. No legal action shall be brought and
no cause of action shall be asserted by or on behalf of the Corporation or any
affiliate of the Corporation against any person who is or was a director or
officer of the Corporation after the expiration of two years from the date of
accrual of such cause of action, and any claim or cause of action of the
Corporation or its affiliates shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two-year period;
provided, however, that if any shorter period of limitations is otherwise
applicable, such shorter period shall govern.
SECTION 12. Severability. The provisions of this Article VI shall be
severable in the event that any provision hereof (including any provision within
a single section, subsection, clause, paragraph or sentence) is held invalid,
void or otherwise unenforceable on any ground by any court of competent
jurisdiction. In the event of any such holding, the remaining provisions of this
Article VI shall continue in effect and be enforceable to the fullest extent
permitted by law.
-20-
<PAGE>
ARTICLE VII
Amendments
These By-laws may be altered, amended or repealed, in whole or in part,
or new By-laws may be adopted by either the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-laws be contained in the notice of such meeting of
stockholders or Board of Directors, as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office.
-21-
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
STG INTERNATIONAL, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
Corporation") is STG INTERNATIONAL, INC.
2. The Certificate of Incorporation of the Corporation is
hereby amended by striking out Articles FIRST and FOURTH thereof and by
substituting in lieu of said Articles the following new Articles First and
Fourth:
"FIRST: The name of the Corporation is Soulfood
Concepts, Inc. (hereinafter called the "Corporation")."
"FOURTH: The total number of shares of stock which
the Corporation shall have authority to issue is 14,500,000
shares of common stock, having a par value of $.003 per share
and 500,000 shares of preferred stock having a par value of
$.003 per share.
The holders of common stock (i) have equal ratable
rights to dividends from funds legally available therefor,
when, as and if declared by the Board of Directors of the
Corporation; (ii) are entitled to share ratably in all of the
assets of the Corporation available for distribution to
holders of common stock upon liquidation, dissolution or
winding up of the affairs of the Corporation; (iii) do not
have preemptive, subscription, conversion, option, or other
preferential rights, and there are no redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to
one non-cumulative vote per share on all matters which
stockholders may vote on at all meetings of stockholders.
There is hereby expressly vested in the Board of
Directors the authority to fix in the resolution or
resolutions providing for the issue of each series of such
preferred stock, the voting power and the designations,
preferences and relative, participating, operational or other
rights of each such series, and the qualifications,
limitations or restrictions thereof. Shares of preferred stock
may be issued from time to time in one or more series as may
from time to time be determined by the Board of Directors,
each such series to be distinctly designated."
<PAGE>
3. The amendments of the Certificate of Incorporation herein
certified have been duly adopted in accordance with the provisions of Section
228 and 242 of the General Corporation Law of the State of Delaware. Prompt
written notice of the adoption of the amendments herein certified has been given
to those stockholders who have not been consented in writing thereto, as
provided in Section 228 of the General Corporation Law of the State of Delaware.
Signed and attested to on November 6, 1996.
/s/ Brian Hinchcliffe
-------------------------------
Brian Hinchcliffe, President
Attest:
/s/ Andre Suite
Andre Suite, Secretary
SOULFOOD CONCEPTS, INC.
CERTIFICATE OF DESIGNATION
OF SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS
OF SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the
State of Delaware, Soulfood Concepts, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors of the Corporation by Article Fourth of the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation on December 30, 1996, adopted the following resolution creating a
series of Preferred Stock designated as Series A Cumulative Convertible
Preferred Stock.
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the General Corporation
Law of the State of Delaware and the provisions of the Certificate of
Incorporation, a series of the class of authorized Preferred Stock,
$.003 par value, of the Corporation is hereby created and that the
designation and number of shares thereof and the voting powers,
preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows:
Section 1. Designation and Number. The shares of such series shall be
designated "Series A Cumulative Convertible Preferred Stock" (the "Series A
Preferred Stock"). The number of shares initially constituting the Series A
Preferred Stock shall be 125,000.
Section 2. Dividends . The holders of the Series A Preferred Stock,
shall be entitled to receive, as and when declared by the Board of Directors,
out of funds legally available for the purpose, cumulative cash dividends, at
the rate of $.10 per annum, and no more, on each share, payable semi-annually on
the first days of January and July of each year, such dividends being cumulative
from and after January 1, 1997, so that if at any time dividends amounting to
$.10 per annum, on each share, shall not have been declared and paid, or set
apart for payment, for all preceding dividend periods from and after January 1,
1997, the deficiency shall be declared and paid, or set apart for payment, but
without interest, before any dividends shall be declared and paid, or set apart
for payment, on the common stock (the "Common Stock") of the Corporation.
<PAGE>
Section 3. Voting Rights. The holders of the Series A Preferred Stock
shall not be entitled to vote except as to matters in respect of which they
shall at the time be indefeasibly vested by statute with such right.
Section 4. Conversion. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after January 1,
1997, upon surrender to the Corporation of the certificate of the shares to be
converted, into fully paid and nonassessable shares of Common Stock, at the rate
of five shares of Common Stock for each share of Series A Preferred Stock. In
addition, at the time that a holder of Series A Preferred Stock exercises its
option to convert, the amount equal to all unpaid accumulated dividends, on each
share, from the date of issuance to the date of conversion, whether or not
earned or declared, may be convertible, at the option of the holder of the
Series A Preferred Stock, into fully paid and nonassessable shares of Common
Stock at the rate of five (5) shares of Common Stock for each dollar of
dividends so converted. The conversion rate shall be subject to adjustment from
time to time, so as to preserve to the holders of the Series A Preferred Stock
their conversion rights substantially without diminution, on the occurrence of
any of the following events: (a) reclassification of the Common Stock, or the
issuance by the Corporation of securities convertible into Common Stock, or any
options or warrants to purchase Common Stock; (c) any other action affecting the
number of outstanding shares of Common Stock, or which, in the opinion of the
Board of Directors, would affect materially and adversely the conversion rights
of the holders of the Series A Preferred Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock the full number of Common Stock deliverable upon the conversion of
all shares of Series A Preferred Stock from time to time outstanding. The
Company shall not be required to issue any fractional shares of its Common Stock
in connection with any conversion of Series A Preferred Stock, but may, in lieu
thereof, pay cash equal to the corresponding fraction of the then market value
of an integral share of Common Stock.
Section 5. Rights upon dissolution. Upon the dissolution of the
Corporation or upon its liquidation otherwise, or upon any distribution of its
assets by way of return of capital, the holders of shares of Series A Preferred
Stock shall be entitled to receive and be paid, the sum of $1.10 for each of
such share of Series A Preferred Stock held by them, plus an amount equal to all
unpaid accumulated dividends thereon, at the rate of $.10 per annum, on each
share, from the date of issuance to the date of payment, whether or not earned
or declared, and before anything shall be paid to or on account of the shares of
Common Stock.
Section 6. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares of Series A Preferred Stock shall upon their cancellation, and
upon the filing of an appropriate certificate with the Secretary of State of the
State of Delaware, become authorized but unissued shares of Preferred Stock,
$.003 par value, of the Corporation and may be reissued as part of another
series of Preferred Stock, $.01 par value, of the Corporation, subject to the
conditions or restrictions on issuance set forth herein.
2
<PAGE>
IN WITNESS WHEREOF, Soulfood Concepts, Inc. has caused this Certificate
to be duly executed in its corporate name on this 30th day of December, 1996.
SOULFOOD CONCEPTS, INC.
By:________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
3
<PAGE>
CONVERTIBLE DEMAND NOTE
$400,100.00 New York, New York
Dated: As of December __, 1992
1. FOR VALUE RECEIVED, the undersigned, STG INTERNATIONAL,
INC. ("Payor"), hereby promises to pay to the order of Brian Hinchcliffe
("Payee"), on demand, pursuant to five (5) days notice of such demand for
payment, but not later than December 31, 1997, in lawful money of the United
States, the principal sum of Four Hundred Thousand One Hundred ($400,100.00)
Dollars, together with any and all accrued interest thereon.
2. Commencing on January 1, 1993, the unpaid principal balance
hereof outstanding shall bear interest at a rate equal to ten (10%) percent per
annum. Interest hereunder shall be calculated on the basis of a 365-day year for
the actual number of days elapsed.
3. Commencing January 1, 1996, Payee shall have the right, at
his option to convert all or any portion of this Note, including any interest
accrued thereon, into the number of fully paid and nonassessable shares of
Common Stock of STG International, Inc. as shall be equal to the aggregate
principal amount of this Note, and any interest accrued thereon, then being
converted multiplied by five (5), by delivery of the this Note to Payor at the
offices of the Payor at the time of such request for conversion.
4. Presentment for payment, demand for payment, notice of
non-payment, notice of dishonor, protest and notice of protest are hereby
waived. The principal sum of, and any accrued interest on, this Note shall be
irrevocably and unconditionally payable by Payor, without offset, discount,
defense, claim or counterclaim of any nature except as otherwise provided in
Paragraph 3 hereto.
5. This Note may be prepaid, in whole or in part, at any
time, without premium or penalty.
6. No failure on the part of Payee to exercise, and no delay
in exercising any right hereunder, shall operate as a waiver thereof; nor shall
any single or partial exercise by Payee of any right preclude any other or
further exercise thereof or the exercise of any other right. Payor shall
reimburse Payee for all costs and expenses incurred by Payee, and Payor shall
pay the attorneys' fees and disbursements of counsel to Payee, in connection
with enforcement of any of Payee's rights and remedies under this Note.
<PAGE>
7. No amendment, modification or waiver of any provision of
this Note, nor any consent to any departure by Payor therefrom, shall be
effective unless the same shall be in writing and signed by Payee and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
8. This Note shall be binding upon the Payor and its
successors and assigns, and the terms hereof shall inure to the benefit of Payee
and their successors and assigns, including subsequent holders hereof. The
provisions of this Note are severable, and if any provision shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Note in any jurisdiction.
9. Any notice, request, demand or other communication
permitted or required to be given under this Note shall be in writing, shall be
sent by one of the following means to the addressee at the address provided
above (or at such other address as shall be designated hereunder by notice to
the other party) and shall be deemed conclusively to have been given: (i) on the
first day following the day timely deposited with Federal Express (or other
equivalent national overnight courier) or United States Express Mail, with the
cost of delivery prepaid or for the account of the sender; (ii) on the fifth day
following the day duly sent by certified or registered United States mail,
postage prepaid and return receipt requested; or (iii) on the day actually
received by the addressee when personally delivered.
2
<PAGE>
10. This Note shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of law or choice of law. Payor hereby irrevocably and unconditionally
consents to the exclusive jurisdiction and venue of any New York State or
Federal court located in New York City over any action or proceeding arising out
of any dispute between Payor and Payee, and Payor further irrevocably and
unconditionally consents to the service of process in any such action or
proceeding by the mailing of a copy of such process to Payor at its address.
STG INTERNATIONAL, INC.
By:_______________________________
Name:
Title:
3
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
Active Subsidiaries
Shark Bar Rest. Corp.
7 West Rest. Corp.
Affair Restaurant, Inc.
7 West Rest. Corp. is the General Partner, which holds a 60% general
partner insterest in Avenue A Restaurant Associates, L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
