UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
Fresh'n Lite, Inc.
(Name of Small Business Issuer in its charter)
Texas 75-2337102
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2804 Judson Rd. Longview, Texas 75605
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (903)663-5525
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Common Stock OTC-BB and Boston Exchange (Pendinq)
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
(Title of class)
Potential persons who are to respond to the collections of
information contained in this form are not requiredl to
respond unless the form displays a currently valid control
number.
<PAGE>
GENERAL INSTRUCTIONS
A. Use of Form 10-SB.
1. This Form may be used by a "small business issuer," defined in Rule 12b-2
(ss.240.12b-2) of the Securities Exchange Act of 1934 (dine "Exchange
Act"), to register a class of securities under Section 12(b) or (g) of the
Exchange Act. For further information as to eligibility to use dhis form
see Item 10(a) of Regulation S-B (17 CFR 228.10 et seg.). 2. If the small
business issuer is not organized under the laws of any of dhe states of or
the United States of America, it shall at dhe time of filing tlis
registration statement, file with the, Commission a written irrevocable
consent and power of attorney on Fonn FX [ss. 239.42]. Any change to the
name or address of the agent for service of dhe issuer shall be
communicated promply to the Commission through amendment of dhe requisite
form and referencing d e file number of the registration statement.
B. Signature and Filing of Registration Statement.
1. File three "complete" copies and five "additional" copies of the
registration statement with dhe Commission and file at least one complete
copy with each exchange on which the securities will be registered. A
"complete" copy includes financial statements, exhibits and all ocher
papers and documents. An "additional" CODY excludes exhibits.
2. Manually sign at least one copy of the report filed with the Commission and
each exchange; ocher copies should have typed or printed signatures.
C. Information to be Incorporated by Reference.
Refer to Rule 12b-23 (ss.240.12b-23 of dhis chapter) if information will be
incorporated by reference from other documents in answer or partial answer to
any item of this Fonn.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 1. Description of Business.
Furnish the information required by Item 101 of Regulation S-B.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Furnish the infonnation required by Item 303 of Regulation S-B.
Item 3. Description of Property.
Furnish the information required by Item 102 of Regulation S-B.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Furnish the information required by Item 403 of Regulation S-B.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Furnish the information required by Item 401 of Regulation S-B.
Item 6. Executive Compensation.
Furnish the information required by Item 402 of Regulation S-B.
Item 7. Certain Relationships and Related Transactions.
Furnish the information required by Item 404 of Regulation S-B.
Item 8. Legal Proceedings.
Furnish the information required by Item 103 of Regulation S-B.
Item 9. Market for Common Equity and Related Stockholder Matters.
Furnish the infonnation required by Item 201 of Regulation S-B.
<PAGE>
Item 10. Recent Sales of Unregistered Securities.
Fumish the information required by Item 701 of Regulation S-B.
Item 11. Description of Securities.
Fumish the information required by Item 202 of Regulation S-B.
Item 12. Indemnification of Directors and Officers.
Fumish the information required by Item 702 of Regulation S-B.
Item 13. Financial Statements.
Fumish the information required by Item 310 of Regulation S-B.
Item 14. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
Furnish the information required by Item 304 of Regulation S-B.
Item 15. Financial Statements and Exhibits.
(a) List separately all financial statements filed as part of the registration
statement.
(b) Furnish the exhibits required by Item 601 of Regulation S-B.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, "hereunto duly authorized.
Fresh 'n Lite, Inc.
(Registrant)
Date October 23rd, 1997 /S/ Curtis A. Swanson
------------------------------------------
Curtis A. Swanson, Chief Financial Officer
* Print the name and title of each signing officer under his or her signature.
<PAGE>
Item 1. Description of Business
History.
Fresh'n Lite, Inc. (the "Company") was incorporated under the laws of the
State of Delaware on May 9, 1990. The Company was originally formed under the
name of Bosko's, Inc.
On June 5, 1989, the founders of the Company established the first "Bosko's
3 N 1 D-Lite" restaurant in Marshall, Texas. The restaurant served an assortment
of submarine sandwiches, soups, salads, deli sandwiches, croissant sandwiches,
low fat burgers, baked potatoes, grilled chicken sandwiches, fat free pizza,
steaks, seafood, pastas, no-fat frozen yogurt, fat free & sugar free desserts,
soft drinks, potato chips, and other similar food products. This restaurant was
sold early in 1995.
The Company opened a second restaurant in Tyler, Texas, on February 15,
1991, under the name "Bosko's 3 N 1 D-Lite." This restaurant was sold in early
1995. However, in May, 1995, the Company reacquired this restaurant for the
amount owed on the note to the Company by the prior owner. The Marshall and
Tyler restaurants were marginally profitable and were sold to allow management
to focus on the Company's more profitable restaurants and to divest assets that
were less compatible with the Company's current restaurant concept. The Tyler
restaurant was repurchased because the purchaser was having difficulty in paying
the note and management believes it could reacquire the restaurant and again
make it profitable.
The Company opened a third restaurant in Longview, Texas, on March 8, 1992,
also under the name "Bosko's 3 N 1 D-Lite." This was the Company's first step in
the testing of a store using a geodesic dome design. The address of the Longview
store is 2804 Judson Road, Longview, TX 75601. This store was closed in October
of 1997 in order to allow management to concentrate it's efforts on it's higher
volume and more profitable urban market stores.
On November 9, 1992, the name of the Company was changed to "Fresh'n Lite,
Inc." Consequently, the stores' names also changed to "Fresh'n Lite Cafe &
Grill," with an accompanying marketing slogan "Tastes great, Less Fat." The name
change came about due to market research and the need for public name
recognition of what the Company sells.
The Company's fourth restaurant (bearing the "Fresh'n Lite" name) opened in
Nacogdoches, Texas, on May 24, 1993. This store was another test store for the
Company's geodesic design as well as the first location to have an accompanying
recreation center for the children of customers. The address for the Nacogdoches
store is 1122 North Street, Nacogdoches, Texas 75961. This store was closed in
February of 1997 in order to allow management to concentrate it's efforts on
it's higher volume and more profitable urban market stores.
The fifth "Fresh'n Lite" restaurant opened in Texarkana, Texas, in June of
1994. Although the geodesic design provides a unique, highly visible design, the
Company determined through operations of the Longview and Nacogdoches stores
that this design is not as efficient as a more proven and standard design.
Therefore, the Texarkana store is a 3,308 square foot rectangular building
utilizing a traditional floor plan. The address of the Texarkana store is 3520
Summerhill Road, Texarkana, Texas 75502. This store was closed in April of 1997
in order to allow management to concentrate it's efforts on it's higher volume
and more profitable urban market stores.
The sixth "Fresh'n Lite" restaurant opened in Dallas, Texas, in July of
1995. The design is considerably different and has been changed to be more
suitable to what management believes is the urban taste. It has approximately
4,500 square feet. It has take-out orders and drive-thru capability. It does not
have a recreation area. It is located at 6150 Frankford Rd., Dallas, Texas.
The seventh Fresh'n Lite restaurant opened in Irving (Valley Ranch), Texas
in February, 1997. The design in comparable to that of the company's Dallas
store. The store is located at 8604 N. MacArthur Blvd., Irving, Texas.
The eight Fresh'n Lite restaurant opened in "The Colony", Texas in October
1997. This store is also patterned after the more traditional design used at
it's Dallas store. The store is located at 4707 Hwy 121 W. The Colony, Texas.
Given that the Marshall store was sold and the Texarkana, Longview, and
Nacogdoches stores were closed and then leased to other operators, there are now
a total of four Company restaurants open.
In October 1995, Fresh'n Lite, Inc., a Delaware corporation, merged into
its wholly owned subsidiary, F'NL, Inc., a Texas corporation, with the name
"Fresh'n Lite, Inc." continuing as the name of the Texas corporation. The
Company and its business continues as a Texas corporation. The purpose of the
merger was to merely change the domicile of the Company to Texas.
<PAGE>
Company Business
The Company currently owns and operates four full-service cafe and grill
restaurants located in the Texas cities of Dallas, The Colony, Valley Ranch
(Irving) and Tyler under the name of Fresh'n Lite Cafe & Grill. The Company's
basic concept is to offer its customers a healthy alternative to traditional
casual dining restaurants by utilizing high quality low-fat fresh cut meats and
cheeses, nonfat mayonnaise, and fresh cut vegetables as well as fat-free pizzas
and other specialty items which are not normally associated with healthy eating.
However, the Company feels it is essential that restaurant offerings do not
sacrifice taste for the benefit of more nutritional eating. The majority of the
Company's menu items are prepared to order using fresh meats, cheeses, and
vegetables which are prepared daily in order to meet the customers' expectations
created by the name "Fresh'n Lite." While the restaurants offer full service
casual dining, the menu is geared toward fast preparation selections. Drive-thru
and take-out service has proven to be very popular with consumers.
The Fresh'n Lite restaurants' menu offerings are competitive in price
relative to other casual dining restaurants which use less nutritional food
products. For this reason, the Company feels consumers can perceive an excellent
price/value relationship as they become more aware of the higher quality food
selections, which they receive for the same price as those of lesser quality
offered by competitors.
The Company's restaurants are subject to all local health department codes
and inspections, as well as all Federal Food & Drug Administration policies and
OSHA policies. Certain routine inspections have been made of the restaurants and
have resulted in no health code or other violations.
The Company's primary supplier of goods is Conco Food Systems, P.O. Box
8848, Shreveport, LA 71148. The Company currently purchases approximately 90% of
its inventory from Conco Foods. The Company has a written contract with Conco
Foods, and purchases as needed on a net thirty (30) day basis. The Company is
current in its account with Conco Foods. The Company has accounts with other
suppliers to insure product availability in the event that Conco Food Systems is
unable to meet the Company's needs in the future. Conco Food's parent,
Consolidated Companies, Inc., purchased 133,332 shares of the Company's Common
Stock in March, 1995, for $199,999, and Consolidated Companies has entered into
a five-year Primary Distribution Agreement pursuant to which it has agreed to
provide 90% of products which are required by the Company and which it can
provide.
Control Systems.
The Company utilizes point of sale computer systems at all stores which
allow the Company's corporate management to monitor the stores on a daily basis
via computer modems and tracking software which will assist the Company in
maintaining control of inventory, supplies and labor costs.
All personnel are provided with a detailed operations manual which outlines
their job duties, safety standards, Company policies, and food handling and
preparation responsibilities. The employees are expected to comply with all
information contained in this manual.
The Company also intends to utilize the services of area managers who will
be in the stores at least twice a week. An area manager will have direct
oversight of no more than seven stores within a given area. The area managers
will be responsible for insuring the stores' compliance with all Company
policies, including but not limited to, inventory control, hiring and firing,
training, maintenance of facilities, food purchasing and preparation, customer
relations, bookkeeping, and etc. The area manager will report directly to the
chief operating officer of the Company on a weekly basis.
Concept and Strategy.
The Company feels that in order to be successful in today's competitive
environment, it must focus on a clearly differentiated identity and offer its
customers the highest quality food product in a comfortable, attractive
atmosphere at reasonable prices. The niche which Fresh'n Lite has identified for
urban, white-collar markets is that of a cafe and grill which offers a wide
selection of sandwiches, salads, pizzas, steaks, seafood, Tex-Mex and special
dinner items and desserts which have nonfat or low-fat content and appeal to the
health conscious, yet do not sacrifice taste and are reasonably priced. The
concept addressing this niche is the "Fresh'n Lite" concept.
Company restaurants featuring the "Fresh'n Lite" concept are designed to
offer full service to the casual diner with food preparation time comparable to
fast-food restaurants. This allows more rapid turnover of busy lunch time
crowds. All of the current stores have substantial drive-thru and take-out
business. While the Company's design allows those customers who are
time-constrained to be served in an efficient manner, the atmosphere of the
restaurants is such that those customers looking for a more relaxed environment
can be served quickly, yet not feel rushed.
<PAGE>
Pricing.
The Company's pricing strategy is to compete initially with other low cost
producers in order to gain an initial acceptance for the Company's product. This
will be possible because of the relatively low initial cost to establish each
new location. With other restaurant chains offering value pricing on many items,
it will also be necessary to keep price competitive to attract new customers.
However, because of the quality of the product and the hoped for repeat
business, it is the Company's expectation that it will be able to increase
prices, subject to price strategies at competing restaurants.
Management and Employees.
The Company believes that attracting and maintaining superior employees
will continue to be vital to its success. Managers receive an attractive
compensation package which includes performance bonuses and other incentives. In
return, they are expected to meet high standards in terms of store margins,
sales volumes, and overall atmosphere in their restaurants. Fresh'n Lite has
established a corporate culture which emphasizes a fun, yet professional,
environment where employees at all levels take pride in their work and
understand their individual importance to the Company's overall success as well
as their value to senior management. The Company currently has approximately 18
full time and 86 part time employees in its operations.
Competition.
The Company believes it is competing with other restaurants which offer
similar products to that which Fresh'n Lite serves as well as those that offer
other food types. For instance, a consumer may typically eat at a hamburger
establishment one day, a Mexican food take-out restaurant another day, and a
deli-style restaurant such as Fresh'n Lite another day. By serving a
consistently good product and emphasizing its comparative healthfulness,
management expects to attract customers back on a more repetitive basis than
those serving other food products. By emphasizing this market niche the Company
hopes to maintain a competitive posture with respect to chain restaurants.
In competing in the healthy eating environment for its "Fresh'n Lite"
restaurants, the Company has the advantage of the "expanded menu" concept, which
will allow the same consumer to have a variety of meal choices for different
days. Yogurt and sandwich specialty shops offer products that are seasonal and
typically eaten at certain times of the day. By offering both of these products,
as well as other alternatives, Fresh'n Lite can accommodate the needs of a
broader customer base, thus generating better productivity throughout the day
and evening. In competing with those restaurants serving similar food products,
the Company believes that its superior service, quality of food products,
competitive pricing, and the combination of fast food and relaxing full service
environment, coupled with the need to eat healthier, has proven its competitive
edge in serving the consumer.
The restaurant industry is competitive on both a national and regional
basis. On a national level, overall marketing and pricing strategies are
dictated by the larger, well established fast food chains. As economic
conditions change, product prices at major chains may be lowered to entice
customers to eat out more. To the extent the Company competes with local
franchises of these national chains, the Company's prices will have to be
competitive to continue attracting their regular customers, as well as gaining
an additional market share in new locations.
National firms will also have the benefit of substantial financial
resources for advertising and other marketing promotions. While Fresh'n Lite is
not able to compete on the same scale, by initially concentrating its efforts on
a certain geographic region, the Company hopes to gain name recognition through
advertisements and promotions with the local media. (See "Advertising and
Marketing") In competing with franchises of national restaurant chains, Fresh'n
Lite does have the advantage of paying no franchise fees to the parent. This
allows for higher operating margins for each dollar of revenue generated.
The Company also faces competition from other local restaurant businesses.
This will include small, one store restaurants, as well as regional restaurant
chains. By keeping overall set-up costs and overhead low, management believes it
will have more staying power than its competitors during those times when
consumers eat out less frequently.
Regulation. Restaurants are subject to licensing and regulation by state
and local health, sanitation, safety, fire, and other authorities and are also
subject to state and local licensing and regulation of the sale of alcoholic
beverages and food. The company has experienced no problems in it's current
operations in complying with these authorities.
Trademark. The Company has been granted a registration for the name
"Fresh'n Lite Deli Cafe." Application for registration of the name "Fresh'n Lite
Deli and Grill" was filed in June 1995. While no assurance can be given
regarding the outcome of this later application, the favorable response received
to date on the first registration is an indication the second registration
should also be granted.
<PAGE>
Registration of these names does not assure the Company that its ownership
is incontestable until five (5) years after registration issues and the Company
files an additional affidavit with the Trademark Office. There are other users
of the name "Fresh'n Lite," several of which began use of the name before the
Company, but none of these users have made any claim regarding the use of this
name by the Company. Whether another user could restrict the Company's use of
the name will depend upon the facts of the particular case, including priority
of use, priority of registration, the area of use, the type of use and the
generic or descriptive nature of the name. The Company has, by attempting
registration, taken those actions the law allows to protect its name.
Item 2: Management Discussion and Analysis
Overview
The Company was organized in In June of 1990 as Bosko's, Inc. under the
laws of the State of Delaware, in November of 1992 the Company changed it's name
to Fresh'n Lite, Inc. and in November of 1995 merged into a Texas corporation
also bearing the name Fresh'n Lite, Inc.. The Company currently owns and
operates 4 Fresh'n Lite Cafe & Grill restaurants, in Dallas, Tyler, Irving
(Valley Ranch), and The Colony, Texas. Additionally the Company owns 3
properties in Longview, Nacogdoches, and Texarkana, Texas which the company has
leased to other operators. The Company has recently entered into a lease
agreement for property in Richardson, Texas for the construction of another
Fresh'n Lite Cafe & Grill. The Company plans to expand by opening additional
Fresh'n LiteCafe & Grill restaurants on a Company owned basis.
The Company has observed a trend towards casual dining. This segment of the
market is expanding at a rate four times faster than other restaurant concepts.
The increase in dual income families, coupled with longer work hours, have
created the demand and desire to dine our more frequently, and the lower check
average of casual dining restaurants such as Fresh'n Lite Cafe & Grill have
provided the price/value impetus. While the fast-food market is dominated by
hamburger and pizza places, there are no clear leaders in table service. In
fact, the two largest categories in terms of share, seafood and Italian,
captured less than 20% of the market, thus leaving this market open for emerging
companies such as Fresh'n Lite.
The Company is targeting, among other groups, the "Baby Boomer" generation
as one of its primary customer groups. The Company believes that its concept
appeals specifically to this group because of the fact that "Baby Boomers" are
generally changing the way they eat. They are trying to prolong as well as
increase the quality of their lives. This group spends 44% of their food dollar
on dining out, but look for a quality experience, not just low fat food. This is
where the Fresh'n Lite Cafe & Grill concept fits in. The Company emphasizes
low-fat foods that taste great, the taste, presentation, and value are being as
important as the nutritional content.
Although recently increased government (FTC) scrutiny has been put on the
nutritional claims of many restaurant operations, the Company feels that it has
taken steps to validate its low-fat approach to casual dining.
Fiscal Year 1993 - 1996 Review
Operating revenues for 1993 were $964,312, with a gross profit of $637,179
(66%), and operating income of $32,414.
Operating revenues for 1994 increased to $1,302,024, with a gross profit of
$865,782 (66%), and an operating loss of $248,023. Contributing to the 1994
operating loss were a $49,009 write-off for the sale of the Marshall and Tyler
units (the Tyler unit was repurchased in May, 1995), expenses of approximately
$30,000 related to a recision offer for some of the Company's stock, and an
increase in general and administrative cost in preparation for the Company's
expansion plans.
Operating revenues for 1995 were $1,840,756, with a gross profit of
$1,318,576 (72%) and operating income of $89,113 before adding royalty revenues
of $5,211 and a franchise fee of $50,000, which increased overall operating
income to $144,324. The Company was able to generate a profit in 1995 based on a
significant increase in gross profits resulting primarily from the addition of
the Dallas restaurant and the increased menu prices in Dallas.
Operating revenues for 1996 were $2,602,533, with a gross profit of
$1,862,111 (71.5%), and operating income of $188,327, before adding royalty
revenues of $34,744, which increased operating income to $223,101.
Financial Condition and Discussion
The Company to date has expanded it's operation through the utilization of
private placement and traditional debt financing. Through these sources of
funding the Company has been able to establish a debt to worth ratio of
approximately 2 to 1 and a cash flow ratio with relation to it's current long
term debt of 2 to 1. The Company has accumulated seven restaurants, five of
which the Company owns the building, fixtures, and equipment but leases the
land, one of which the Company owns the building, fixtures, equipment, and the
land, and one of which the Company owns the equipment and fixtures but leases
the building.
<PAGE>
The Company is currently operating out of cash flow from operations. Its
ability to expand rely on the ability of management to secure additional sources
of funding. The current plans include the procurement of additional debt through
traditional lending institutions.
Plan of Operations
The Company has planned the following operations for the 1997 calendar
year, including;
(i) Construct an additional free standing Company owned Fresh'n Lite Cafe &
Grill restaurant on the Richardson locations. The Company expects to spend
approximately $650,000.00 on the construction, equipping, and start up of this
operation which the Company is funding with additional debt.
Intermin Financial Statements
For the nine months ending September 30, 1997 the Company has generated
revenues of $2,352,906, a gross profit of $1,701,285, and an operating income of
$44,110. The Company took a pre-tax charge of $169,075 for accelerated
amortization costs associated with the closing of the Nacogdoches and Texarkana
facilities, and $50,000 in extraordinary professional fees, in the first
quarter. The operating income without the extraordinary charges stated above
would have been $263,185, a 61% increase over the same period in 1996.
Seasonality of Business
Based on the Company's limited experience, Management believes that
restaurant sales should be greater during the summer months. However, because
the Company's experience is limited in the Dallas area, there can be no
assurance that such will be the case in the future.
Employees
The Company expects to hire three full time management personnel and thirty
part time hourly personnel with the opening of each new restaurant operation.
The cost of these personnel should be 25% of the annual operating revenue to be
generated by each operation, the initial cost of hiring and training of all
personnel is covered in the store start up costs.
Item 3: Description of Property
Restaurant Locations.
The following table provides information with respect to each of the
Company's properties, the Dallas, Irving, The Colony, Longview, and Texarkana
buildings are owned, with a lease on the land, the Company owns both the
building and land in Nacogdoches and leases the facility in Tyler. The Company's
current plans are to secure 20 year lease-purchases on the property to be used
for the expansion of the next four stores.
Location Square Feet Lease Term
- --------------------------------------------------------------------------------
Tyler, Texas 2,600 sq. ft. 5 Years
Dallas, Texas 4.500 sq. ft. 20 Years
Irving (Valley Ranch), Texas 4,700 sq. ft. 20 Years
The Colony, Texas 4,700 sq. ft. 20 Years
Texarkana, Texas 3,308 sq. ft. 20 Years
Nacogdoches, Texas 4,200 sq. ft. Owned
Longview, Texas 3.500 sq. ft. 20 Years
- --------------------------------------------------------------------------------
<PAGE>
Item 4: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of Common Shares of the Company
owned by each Director, Officer, and by each person of record who beneficially
owns 10% or more of the outstanding Common Stock as of December 31, 1995.
Title of Class Name & Address of Owner(1) After Offering Class
- ----------------- ----------------------------- ----------------------- --------
Common
Shares Stan & Carole Swanson 1,203,921 19.74
3216 Page Road
Longview, Texas 76505
- ----------------- ----------------------------- ----------------------- --------
Common Curtis & Kim Swanson 407,000 6.67
Shares 3218 Page Rd.
Longview, Texas 75605
- ----------------- ----------------------------- ----------------------- --------
Common Edward Dmytryk 20,000 0.33
Shares 707 Kyle Drive
Arlington, Texas 76011
- ----------------- ----------------------------- ----------------------- --------
(1) Bob Lilly is not listed as owners of Common Shares, since at this time they
only have options to purchase Common Stock. Refer to the table set forth
below for information on these options.
The following table sets forth information concerning certain options held
by Stanley L. Swanson, Curtis A. Swanson, and Bob Lilly, Director and Douglas K.
Tabor and Roland R. Jehl, former Directors of the Company, and McCap, Inc. a
former consultant to the Company.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Name of Holder Amount of Common Shares Called for by Options Exercise Price Date of Exercise
- ------------------------------------------------------------------------------------------------------------------------
Bob Lilly 50,000 $1.50 On or before 2/28/2000
3,572 $0.10 On or before 2/28/2000
Douglas K. Tabor 25,000 $1.50 On or before 10/19/2000
Roland Jehl 25,000 $1.50 On or before 10/19/2000
Stanley L. Swanson 100,000 $2.50 On or before 12/31/2002
Curtis A. Swanson 100,000 $2.50 On or before 12/31/2002
McCap, Inc. 300,000 $2.50 On or before 12/21/2001
</TABLE>
<TABLE>
<CAPTION>
Item 5: Directors, Executive Officers, Promoters, and Control Persons.
The Directors and Officers of the Company are set forth below.
<S> <C>
Name Age Position In Office Since
- ------------------------------------------------------------------------------------------
Chief Executive Officer, Chairman of
Stanley L. Swanson 51 the Board of 1990
Directors, and President
Curtis A. Swanson 28 Director, Treasurer, 1990
Chief Financial Officer
Jean Hedges 35 Controller 1993
Carole A. Swanson 53 Secretary 1990
Edward Dmytryk 49 Director 1992
Robert (Bob) Lilly 56 Director 1995
Dr. Donald Whittaker 65 Director 1997
</TABLE>
<PAGE>
All directors hold office until the next annual meeting of the shareholders
of the Company, and until their successors are elected and qualified. Officers
hold office until the first meeting of the Board of Directors following the
annual meeting of shareholders, subject to earlier removal by the Board of
Directors.
Family relationships among Officers and Directors: Stanley L. Swanson and
Carole A. Swanson are husband and wife. Curtis A. Swanson is the son of Stanley
L. and Carole A. Swanson.
BUSINESS EXPERIENCE OF DIRECTORS & OFFICERS
Stanley L. Swanson, a founder of the Company, has served as President , Chief
Executive Officer, and Chairman of the Board since its inception in May, 1990.
In addition to developing the Company's overall business strategy and expansion
plans, Mr. Swanson is responsible for selection and negotiations for all future
locations. Prior to establishing the first Fresh'n Lite restaurant in Marshall,
Texas in June 1989, Mr. Swanson was the President and CEO of Canaan Enterprises,
Inc., a Montana corporation involved in the development of real estate
franchises within the state. Under Mr. Swanson's leadership, the company grew
from one franchise in 1986 to ten franchises in 1988. It was at this time that
Mr. Swanson sold his holdings in Canaan Enterprises, Inc., in order to establish
the restaurant business which is now Fresh'n Lite, Inc. From 1981 to 1986, Mr.
Swanson was a real estate broker in the state of Montana, where he owned and
operated two real estate sales and development companies. From 1972 until 1981,
Mr. Swanson was an entrepreneur in the restaurant industry, owning and operating
two restaurant establishments. From 1962 until 1972, Mr. Swanson played
professional baseball, where he was primarily associated with the Cincinnati
Reds and Montreal Expos organizations.
Curtis A. Swanson has been Chief Financial Officer, Executive Vice President,
and Treasurer of the Company since its inception in May, 1990. Mr. Swanson
handles all financial matters and day to day operations for the Company. Prior
to his involvement with Fresh'n Lite, Inc., Mr. Swanson was an officer in Canaan
Enterprises, Inc., from 1986 to 1988. His duties with Canaan Enterprises, Inc.,
included the sales, set-up, and oversight of franchises within the state of
Montana. From 1987 to 1989, Mr. Swanson owned and operated two real estate
franchises, a video rental store, and a pizza establishment.
Jean M. Hedges has been Corporate Controller for the Company since September
1993. Ms. Hedges is responsible for all accounting and office management
functions including generating and analyzing financial reports, performing
monthly, quarterly, and annual closeout functions, budget planning, cash flow
forecasting, analyzing capital expenditures, and evaluating return on
investments. Ms. Hedges has had extensive CPA firm experience and brings a 10
year record as a controller and business manager to the Company. Prior to her
employment with Fresh'n Lite, Ms. Hedges was the controller of Stainback
Casting, a manufacturer based out of Tyler, Texas, from 1992 to 1993. From 1990
to 1992, Ms. Hedges was the controller of American Retirement Homes which owned
over 1/3 of all the retirement homes in the State of Virginia. It was through
this position that Ms. Hedges gained experience in a multi-unit environment.
From 1987 to 1990, Ms. Hedges was the business office manager for Goodman &
Company, CPA, the largest CPA firm in the State of Virginia. From 1984 to 1987
Ms. Hedges was an internal accounting manager with Price Waterhouse, CPA in
Norfolk, Virginia. Ms. Hedges has a Bachelor of Arts degree in Business
Management/Economics and Political Science from Randolph Macon College.
Carole A. Swanson, wife of Stanley L. Swanson and co-founder of Fresh'n Lite,
Inc., has served as Secretary of the Company since its inception in May, 1990.
Prior to establishing the first Fresh'n Lite restaurant in Marshall, Texas, in
June of 1989, Ms. Swanson was a broker/owner of a real estate company in
Hamilton, Montana, from 1983 to 1988. From 1980 to 1983, Ms. Swanson co-owned
and operated the Cedar Chest restaurant in Darby, Montana. From 1977 through
1980, Ms. Swanson took time off to concentrate on home and family. From 1972 to
1976, Ms. Swanson co-owned and operated the Lochsa Lodge Resort and restaurant
in Powell, Idaho. From 1954 through 1972, Ms. Swanson worked with her father in
the development of a 31 store restaurant chain based out of Knoxville,
Tennessee, called the Blue Circle's. This company was sold due to the death of
Ms. Swanson's father. She was involved in training, inventory control, food cost
analysis, labor cost analysis, and bookkeeping.
Edward C. Dmytryk has been a Director of the Company since 1992. Mr. Dmytryk is
currently the chief executive officer and principal owner of Benchmark, Inc., a
metal fabricating company located in Fort Worth, Texas. Until January, 1995, Mr.
Dmytryk was formerly the chief operating officer for Bollinger Industries
International, located in Irving, Texas. Bollinger is a fitness product
corporation with annual sales nearing $60 million. Mr. Dmytryk served as chief
operating officer for Bollinger from September, 1988 until January, 1995. From
November, 1986, until September, 1988, Mr. Dmytryk was the president and general
manager of Mac's Snacks, Inc., located in Arlington, Texas. He was responsible
for the successful turnaround of a national snack food company. Through an
overhaul of the sales and marketing effort, sales increased by 250% under his
leadership. Mr. Dmytryk also successfully negotiated the sale of Mac's to Evans
Food Products. From November, 1985 until November, 1986, Mr. Dmytryk was the
vice president of sales and marketing for Animed, Inc., located in Roslyn, New
York. He was functionally responsible for the overall corporate marketing of a
veterinarian's products and services company, to include research, planning,
<PAGE>
execution, and evaluation. Under his leadership, sales volume grew from $8
million to $16 million through a combination of acquisitions and incremental
sales volume. From 1973 until 1985, Mr. Dmytryk held various executive positions
with Wulfsberg Electronics, Inc., Polaroid Corporation, and We Chemical
Products/Alfa Laval. From 1968 until 1973, Mr. Dmytryk was a captain, regular
officer and pilot in the United States Air Force. He is a graduate of the
Citadel in Charleston, South Carolina with a Bachelors degree in Business
Administration.
Robert (Bob) Lilly has been a director of the Company since March, 1995. Mr.
Lilly is currently the owner of Professional Imaging & Promotions, Inc., a
photography and graphics imaging company located in Graham, Texas. From 1961
through 1974, Mr. Lilly played football for the Dallas Cowboys, a National
Football League franchise. Subsequent to his retirement from the Dallas Cowboys,
Mr. Lilly has been involved in personal investments, endorsements and his
photography and graphic imaging business. Over the years he has acquired an
interest in nutrition and has attempted to learn and apply fundamental healthy
nutritional concepts to his personal living and, hence, has developed an
interest in the concept of the Company.
Dr. Donald Whittaker has been a director of the Company since May, 1997. Dr.
Whittaker is the founder and operator of Dr. Whittaker's Vitamins and Completely
Fit Health Foundation.. From 1968 through the present Dr. Whittaker has been a
physician in private practice. Dr. Whittaker has been the host of "Calling Dr.
Whittaker" a weekly program dealing with cutting edge health issues. The program
has been broadcast internationally on TBN since 1979. Dr. Whittaker is a
graduate of Texas Wesleyan College where he received a degree in Chemistry. He
received is post graduate training at Kansas City School of Medicine where he
graduated as a D.O.
<TABLE>
<CAPTION>
Item 6: Executive Compensation
Set forth below is certain relevant information for the Company's
Officers and Directors for the Company's most recently completed fiscal year:
<S> <C>
Name of Individual or Identity Capacities in Which Remuneration Aggregate Remuneration
of Group was Received
- --------------------------------------------------------------------------------------------------
Stanley L. Swanson CEO and President $26,000
Curtis A. Swanson Treasurer and CFO $26,000
Jean Hedges Controller $26,000
All Directors & Officers as a Group $91,300
Including the Above Persons
- --------------------------------------------------------------------------------------------------
</TABLE>
No remuneration is paid to the Board of Directors for their service in that
office, except that Mr. Lilly is paid $500 for each meeting, plus expenses, and
he has been granted an option to acquire 50,000 shares. However, in the future
the Directors may receive a nominal Director's fee for their attendance at
meetings of the Company's Board of Directors, and reimbursement for actual
expenses incurred in attending such meetings.
<TABLE>
<CAPTION>
PROPOSED FUTURE REMUNERATION OF OFFICERS
It is anticipated that in the future the remuneration of officers will
increase to the following annual remuneration amounts.
<S> <C> <C>
Name of Individual or Identity Capacities in Which Remuneration was Aggregate Remuneration
of Group Received
Stanley L. Swanson CEO and President $60,000
Curtis A. Swanson Treasurer and CFO $50,000
Jean Hedges Controller $30,000
</TABLE>
STOCK OPTIONS PLAN
On March 1, 1997, the Board of Directors of the Company adopted its 1997
Incentive Stock Option Plan pursuant to which 200,000 shares of the Company's
stock were set aside for the purpose of the granting of incentive stock options
to directors and key employees of the Company. The purchase price of the stock
purchased pursuant to the exercise of such an option is required to be not less
than 100% of the fair market value of the stock on the date of the grant of the
option. This plan was approved by the shareholders on May 23, 1997.
<PAGE>
Under the 1995 Incentive Stock Option Plan, an option for 50,000 shares has
been granted to Bob Lilly for service as a member of the Board of Directors with
a purchase price of $1.50 per share. This option extends until March 1, 2000.
Also under the Incentive Stock Option Plan, Roland R. Jehl and Douglas K. Tabor
have been granted an option for 25,000 shares each for service as members of the
Board of Directors with a purchase price of $1.50 per share. These options
extend until October 19, 2000.
Additionally, Mr. Lilly was granted an option to acquire stock at $.10 per
share in a manner so that the difference between the price of $.10 per share and
the fair market value of the stock at the time of the issuance of the grant
multiplied by the number of shares equaled $2,500 for each day of promotional
appearances that Mr. Lilly made before December 1, 1995 on behalf of the
Company. Options covering 3,572 shares were granted for personal appearances
made by Mr. Lilly on behalf of the Company before December 1, 1995.
A new agreement has been entered into between the Company and Mr. Lilly
regarding personal appearances made by Mr. Lilly after December 1, 1995. For
each promotional appearance, Mr. Lilly will receive $1,500.00, plus the grant of
an option to acquire Common Stock of the Company at not less than 100% of the
fair market value as of the grant date. The grant of the option will be for
stock having a fair market value of $3,000 at the time of the grant with an
option term of 5 years.
Item 7: Certain Relationships and Related Transactions.
In May, 1994, the Marshall restaurant was sold by the Company to a business
entity owned, in part, by Curtis Swanson. The sales price was $25,000,
consisting of the assumption of indebtedness and the assumption of the lease.
The Company made this choice after determining that the Marshall restaurant was
not particularly profitable and did not fit into the long-range plans of the
Company. It believes that the terms of the sale were commercially reasonable.
Currently, Mr. Curtis Swanson, a director, treasurer, and chief financial
officer, and Mr. Edward Dmytryk, a director, formed F'NL Investments, LLC, a
Texas limited liability company, which has entered into a franchise agreement
with the Company for the establishment of a restaurant in Arlington, Texas. The
franchise restaurant was located at 900 Six Flags Dr. in Arlington. The parties
payed a $50,000 franchise fee and agreed to pay royalties of 5% of gross
revenues. The directors have elected to convert this restaurant to a pizza
restaurant because of demographics and open the franchise restaurant in
Arlington at a location to be determined in the future. FNL Investments, LLC
will not be required to pay additional franchise fee when the new franchise
sight is selected.
On December 1, 1995, the Company entered into an agreement with a Director,
Bob Lilly, whereby Mr. Lilly receives $1,500.00 plus the grant of an option to
acquire Common Stock of the Company at not less than 100% of the fair market
value as of the grant date, for each promotional appearance made by Mr. Lilly on
behalf of the Company. This agreement superseded a previuos agreement between
Mr. Lilly and the Company through which Mr. Lilly acquired options to purchase
3,572 shares of Common Stock at $.10 per share.
At December 31, 1996 the Company had a note receivable from FNL
Investments, LLC which is owned by Ed Dmytryk and Curtis A. Swanson, two
directors of the Company, and which operated a franchise restaurant in
Arlington, Texas. The note was in the amount of $31,345 plus interest at a rate
of 9%. The entire principal amount, along with interest, was repaid prior to the
maturity date of April 30, 1996. The note was for salary payments made on behalf
of FNL Investments, LLC by the Company in connection with payroll services it
was providing FNL Investments, LLC in paying FNL Investments, LLC employees.
Item 8: Legal Proceedings
The Company is not presently a party to any litigation.
Item 9: Market for Common Equity and Related Stockholder Matters.
The Company's common stock began trading on the OTC-Bulletin Board under the
symbol FLTT on May 9, 1997. As of October 22, 1997 there were approximately 475
shareholders of record. The following table sets forth for the quarters
indicated the high and low sale prices of the Company's common stock.
1997 High Low
- --------------------------------------------------------------------------------
First Quarter N/A N/A
Second Quarter $3.00 $2.50
Third Quarter $3.75 $2.50
<PAGE>
Item 10: Recent Sales of Unregistered Securities
Item 10: Recent Sales of Unregistered Securities
As of October 23rd, 1997 the Company had sold 198,450 Units, each unit
consisting of 4 shares of common stock and 2 warrants (which entitle the bearer
to purchase one share of common stock for each warrant held, for $3.00 per
share, on or before June 25, 2001) for an aggregate offering price of $10.00 per
unit. The total amount raised to date through the offering is $1,984,500 of
which $56,600 was paid in underwriting commissions.
The Company had entered into an Underwriting Agreement (the "Agreement")
with Dillon-Gage Securities, Inc., but after 56,600 Units were sold, the
Agreement was allowed to terminate and the underwriter refunded $10,000 of
expenses previously advanced, but the underwriter retained a 10% commission of
$56,600 in the Units previously sold. The Company then proceeded to sell the
Units through its qualified personnel.
The Company is registered as an issuer broker dealer with the Texas
Securities Board. The offering was made only to residents of the State of Texas.
The Company relied upon the Section 3 (a) (11), Intrastate Offering
Exemption of the Securities Act of 1933 as amended for the sale of these
securities.
Item 11: Description of Securities
The Company has only one class of capital stock consisting of Common Stock,
of which it is authorized to issue 50,000,000 shares. No share of Common Stock
is entitled to preference over any other share, and each share is equal to every
other share in all respects. Holders are entitled to one vote for each share
with respect to all matters voted upon by shareholders, including the election
of Directors; are entitled to receive dividends as may be declared by the Board
of Directors out of funds legally available therefore; and are entitled to share
pro rata in the distribution of assets available for such purpose in the event
of liquidation. No preemptive rights attach to ownership of Common Shares. No
current shareholder has any option, warrant or other right to acquire shares on
a basis different than any member of the general public, except that Bob Lilly
has an option to purchase 53,572 shares and Douglas K. Tabor and Roland R. Jehl
have an option to purchase 25,000 shares each, Curtis Swanson and Stanley L.
Swanson have options to purchase 100,000 shares each, and McCap, Inc. has an
option to purchase 300,000 shares. There is no buy-sell agreement restricting
transfer of the shares.
Item 12: Indemnification of Officers and Directors:
Liability and Indemnification. The Company has been incorporated under the
laws of the state of Texas. Such laws have provisions which provide exculpation
and indemnification to officers and directors that may be broader than those
which might be provided by the corporation laws of other states. Such provisions
could diminish the rights of shareholders to sue officers or directors compared
to common law rights they may have had absent such provisions. Additionally, the
Company may seek to amend its Articles of Incorporation to further provide for
indemnity provisions which could reduce or deplete the assets of the Company
unless an act or omission of an officer or director results from proven fraud,
willful misconduct, bad faith, or gross negligence.
Item 13. Financial Statements:
1994, 1995, and 1996 audited financial statements and the interim unaudited
financial statements for the 9 month period ending September 30, 1997.
Item 14. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure:
None
Item 15: Financial Statements and Exhibits.
Attached hereto are the exhibits as required.
VII. EXHIBITS
Hereafter set forth as an Exhibit to the Form 10 of Fresh'n Lite, Inc.
<PAGE>
Fresh 'n Lite, Inc.
Financial Statements Together
With Auditors' Report
December 31, 1996
<PAGE>
T. G. PROTHRO & COMPANY, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
100 INDEPENDENCE PLACE, SUITE 213 BANK ONE BUILDING
POST OFFICE Box 7337 PHONE 903.534.8811
TYLER, TEXAS 75711 -7337 FAX 903.534.8891
Indepndent Auditors' Report
Board of Directors,
Fresh'n Lite, Inc.
Longview, Texas
We have audited the accompanying balance sheet of Fresh'n Lite, Inc. as of
December 31, 1996, and the related statements of income, changes in
shareholders' equity and cash flows for the years ended December 31, 1996, 1995
and 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted the audit 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the f-mancial position of Fresh'n Lite, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
years ended December 31, 1996, 1995 and 1994, in conformity with generally
accepted accounting principles.
/s/ T.G. Prothro & Company, P.L.L.C.
--------------------------------
Certified Public Accountants
June 4, 1997
Tvler, Texas
Members, American Institute of Certified Public Accountants
Members, Texas Society of Certified Public Accountants
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
Fresh 'n Lite, Inc.
Balance Sheet
December 31, 1996
1996
ASSETS ----
CURRENT ASSETS
Cash $ 18,967
Inventory 27,189
------------
Total Current Assets 46,156
------------
PROPERTY AND EQI1IPMENT (Pledged)
Buildings 2,001,702
Land 100,000
Capitalized Land Leases 1,343,000
Leasehold Improvements 83,297
Vehicles and Equipment 1,050,499
------------
Total Property and Equipment 4,578,498
Accumulated Depreciation (392,428)
Property and Equipment - Net 4,186,070
------------
OTHER ASSETS
Restaurant Preopening Remodel Costs
and Other Assets, Net of
Accumulated Amortization 314,673
Deferred Franchise System Cost, 65,273
Net of Accumulated Amortization 31,345
Note Receivable - Related Party ------------
Total Other Assets 411,291
------------
TOTAL ASSETS $ 4,643,517
============
(Continued)
<PAGE>
Fresh 'n Lite, Inc.
Balance Sheet
December-31, 1996
1996
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued Expenses 142,873
Accounts Payable 47,009
Bank Overdraft 1,327
Note Payable-ShortTerm 6,299
Current Portion of Capital Lease Obligations 13,219
CurrentPortion of Notes Payable-Long Term 675,864
Total Current Liabilities ------------
886,591
OTHER LIABILITES
Capital Lease Obligations, net of Current Portion 1,337,260
Notes Payable-Long-Term, net of Current Portion 321,170
Deferred Income Tax Liability 94,000
------------
Total Liabilities 2,639,021
------------
CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, $0.01 Par Value; 50,000,000
Shares Authorized; 5,491,082
Shares Issued and Outstanding 54,911
Additional Paid in Capital 1,768,610
Retained Earnings 182,225
------------
2,005,746
Less: Treasury Stock, at Cost,
1,250 Shares (1,250)
------------
Total Shareholders' Equity 2,004,496
------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,643,517
============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Fresh 'n Lite, Inc.
Statements of Income
For the Years ended December 31,1996,1995 and 1994
<S> <C>
1996 1995 1994
----------- ----------- -----------
SALES $ 2,602,533 $ 1,840,756 $ 1,302,024
COST OF SALES (740,422) (522,180) (436,242)
----------- ----------- -----------
GROSS PROFIT 1,862,111 1,318,576 865,782
Franchise Royalties Earned 34,774 5,211 --
Franchise Fees Earned -- 50,000 --
----------- ----------- -----------
Total Gross Profit and Franchise Income 1,896,885 1,373,787 865,782
----------- ----------- -----------
EXPENSES
Salaries and Contract Labor 653,997 474,486 353,834
Payroll and Other Taxes 118,574 92,619 47,418
Professional Fees 15,062 16,917 45,615
Advertising and Promotional 64,878 42,275 63,189
Rent 47,423 48,932 55,788
Insurance 41,525 46,390 15,763
Telephone 20,823 22,765 31,308
Travel 5,763 8,412 7,901
Utilities 86,794 67,926 61,598
Depreciation 162,793 122,633 79,918
Amortization 133,731 137,445 120,997
Interest 155,466 106,265 72,723
Linen and Laundry 22,452 10,291 8,643
Repairs and Maintenance 19,164 12,261 15,318
Supplies 12,099 8,116 14,442
Miscellaneous 19,240 11,730 70,341
Loss on Sale of Restaurants -- -- 49,009
----------- ----------- -----------
Total Expenses 1,579,784 1,229,463 1,113,805
----------- ----------- -----------
OPERATING INCOME (LOSS) 317,101 144,324 (248,023)
Income Tax (Expense) Benefit:
Current -- -- --
Deferred (94,000) -- 15,200
----------- ----------- -----------
NET INCOME (LOSS) $ 223,101 $ 144,324 $ (232,823)
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Fresh 'n Lite, Inc.
Statements of Changes in Shareholders' Equity
For the Years ended December 31, 1996. 1995 and 1994
<S> <C> <C> <C>
Total
Additional Retained Share-
Common Paid In Earnings Treasury holders'
Stock Capital (Deficits) Stock Equity
----------- ----------- ----------- ----------- -----------
BALANCES, JANUARY 1, 1994 $ 46,737 $ 788,697 $ 47,623 $ (1,250) $ 881,807
Net Loss -- -- (232,823) -- (232,823)
Sale of Common Stock,
299,210 Shares 2,992 210,823 -- -- 213,815
----------- ----------- ----------- -----------
Balances, December 3 1, 1994 49,729 999,520 (185,200) (1,250) 862,799
Net Income -- -- 144,324 -- 144,324
Sale of Common Stock,
291,734 Shares 2,918 365,334 -- -- 368,252
----------- ----------- ----------- ----------- -----------
Balances, December 31, 1995 52,647 1,364,854 (40,846) (1,250) 1,375,375
Net Income -- -- 223,101 -- 223,101
Sale of Common Stock,
226,400 Shares 2,264 563,736 -- -- 566,000
Stock Issuance Costs -- (159,980) -- -- (159,980)
BALANCES, -- -- -- -- --
DECEMBER 31, 1996 $ 54,911 $ 1,768,610 $ 182,225 $ (1,250) $ 2,004,496
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Fresh 'n Lite, Inc.
Statements of Cash Flows
For the Years ended December 31, 1996, 1995 and 1994
<TABLE>
<S> <C> <C>
1996 1995 1994
----------- ----------- ----------
Cash Flows from Operating Activities:
Net Income (Loss) $ 223,101 $ 144,324 $ (232,823)
----------- ----------- -----------
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities:
Depreciation 162,793 122,633 79,918
Amoriization 133,731 137,445 120,997
Change in Net Capital Leases (6,414) (2,476) 3,940
Net Change in Assets and Liabilities:
(Increase) Decrease in Inventory 8,172 (11,063) (4.232
Increase (Decrease)in Accounts Payable (13,074) (15,173) 47,775
Increase (Decrease)in Accrued Expenses (50,505) 86,121 (1,294)
Increase (Decrease)in Deferred Taxes 94,000 -- (15,200)
Loss on Sale of Restaurants -- -- 49,009
----------- ----------- -----------
Total Adjustments 328,703 317,487 280,913
----------- ----------- -----------
Net Cash Provided by
Operating Activities 551,804 461,811 280,913
Cash Flows from Investing Activities:
Capital Expenditures (771,327) (928,617) 48,090
Expenditures for Preopening/Remodel
Costs and Other Assets (74,708) (54,495) (94,951)
(Increase)Decrease in Note Receivable-Related Party 9,712 (41,057) --
(Increase) Decrease in Deferred Stock Issuance Cost
and Deferred Franchise System Costs 80,624 (72,392) --
Proceeds from Restaurant Sales -- -- --
Net Cash Used in
Investing Activities (755,699) (1,096,561) (683,879)
Cash Flows from Financing Activities:
Sale of Common Stock, net of Stock Issuance Costs 406,020 200,001 169,996
Borrowings on Notes Payable 144,694 487,550 751,287
Principal Payments on Notes Payable (312,570) (57,825) (284,225)
----------- ----------- -----------
Net Cash Provided by
Financing Activities 238,144 629,726 637,058
NET INCREASE (DECREASE) IN CASH 34,249 (5,024) 1,269
CASH (OVERDRAFT) AT BEGINNING OF YEAR (16,609) (11,585) (12,854)
CASH (OVERDRAFT) AT END OF YEAR
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO
FINANCIAL STATEMENTS
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
Fresh'n Lite, Inc., "the Company" (a Texas Corporation since October, 1995) was
incorporated as Bosko's, Inc., in May 1990 as a Delaware Corporation. In
December 1992 the corporate title was changed to Fresh tn Lite, Inc. in order to
have its restaurants' names more reflective of its products. The Company's
restaurants changed their names throughout 1992, which resulted in significant
costs being capitalized during that year. In 1995, the Corporation merged from a
Delaware Corporation into F'NL, Inc., a Texas Corporation. Immediately, the
Corporation changed its name to Freshtn Lite, Inc.
Prior to 1994, the Company's restaurants provided healthy foods and beverages in
a "fast food" deli atmosphere. Dunng 1994, the Company expanded all stores into
"full service" stores, offering dinner menus and a wait staff. During 1995, the
Company closed the Texarkana, Longview and Nacogdoches stores and reopened them
as Aunt Bea's Home Cooking. The Company expects the Aunt Bea concept to offer a
wider appeal to rural locations.
The Company operates the following restaurants:
City Date Opened
------------------------------------ -----------------
Marshall, Texas (sold May 26, 1994) June 1990
Tyler, Texas (sold August 1, 1994,
Repurchased March 31, 1995) February 1991
Longview, Texas March 1992
Nacogdoches, Texas May 1993
Texarkana, Texas June 1994
Dallas (Frankford Avenue), Texas July 1995
Irving (Valley Ranch),Texas Februarv 1997
Other restaurant locations are under consideration.
INVENTORY Inventory consists of food and beverage products and paper supplies
stated at the lower of cost (determined on the first-in, first-out basis) or
market value.
PROPERTY AND EQUIPMENT Property and equipment items are stated at cost.
Expenditures for maintenance and repairs are charged to expense as incurred
Major improvements are capitalized. Significantly all Property and Equipment is
pledged against the Company's notes payable.
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RESTAURANT PREOPENING/REMODEL COSTS
During the period of construction or major remodel, the Company capitalizes
certain costs pertaining to the restaurants. These costs include interest,
salaries, advertising, contract labor, rent, repairs, supplies, and other costs
that relate to either the preopening period, in the case of a new restaurant, or
the remodelina period, in the case of a major remodel of an existing restaurant.
Once the new restaurants open or existing restaurants' major remodels are
completed, capitalization ceases.
DEFERRED STOCK ISSUANCE COSTS
The Company offered stock for sale during 1996, using an Underwriter for the
first time. As costs and expenses were incurred pursuant to the stock offering,
they were deferred until the stock sale took place. When the stock sale took
place, these costs, which aggregated $ 159,980, reduced the additional paid in
capital realized from the sale. The majority of the costs involved were
attorney's fees.
DEFERRED FRANCHISE SYSTEM COSTS
During 1995 and 1996, the Company incurred certain internal, as well as
external, costs as it developed its franchise system. Substantially all internal
phases of the franchise system were in place by February, 1996 at which time no
additional internal costs were deferred. The Company amortizes total deferred
franchise system costs over five years, beginning in February of 1996. Total
amortization of deferred franchise system cost were $ 22,311 in 1996. No costs
were amortized during 1995, as the franchise system was not operational.
FRANCHISE FEES
The Company has sold one franchise to a franchisee that is an entity partially
owned by an officer/stockholder of the Company. The terms of the franchise
require a $ 50,000 fee to be paid to the Company. The Company recognizes this
payment as revenue when it has completed its obligations under the franchise
agreement. At December 31, 1995, the Company had no further obligation under
this initial franchise and has received the fee of $ 50,000.
In addition to the franchise fee, the Company earns royalties based upon 5 % of
the franchisee's gross sales. The Company recognizes franchise royalty revenue
when earned, not when received. At December 31, 1996, the Company had earned $
34,774 from royalties, of which $ 7,500 was not paid at year end. At December
31, 1995, the Company had earned $ 5,211 from such royalties which was not paid
at year end.
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ADVERTISING COSTS
All advertising costs are expensed when incurred, except for those capitalized
during a restaurant's preopenin~ period.
DEPRECIATION AND AMORTIZATION
Leasehold improvements are amortized over the terms of the underlying leases
using the straight line method. Buildings are depreciated over the estimated
useful lives of twenty years using the straight line method. Vehicles and
equipment are depreciated over the estimated useful lives of five to ten years
using the straight line method.
Restaurant preopening/remodel costs are amortized over sixty months using the
straight line method.
CAPITALIZED LAND LEASES
At December 31, 1996, the Company was leasing land for its restaurants in
Longview, Texas; Texarkana, Texas; Dallas (Frankford Avenue), Texas; and Irving
(Valley Ranch), Texas. For financial reporting purposes, such leases are
capitalized at an amount equal to the lesser of the present value of the lease
payments or market value. No depreciation is being recorded on the capitalized
land leases.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents, along with cash in bank and cash overdrafts. The Company paid
no cash for income taxes in 1996 and paid $ 177,370 for interest in 1996. The
Company paid no cash for income taxes in 1995 and paid $ 112,889 for interest in
1995. The Company paid no cash for income taxes in 1994 and paid $ 48,070 for
interest in 1994.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
fnnncial statements and consist of taxes currently due plus deferred taxes.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes.
The differences relate primarily to depreciable assets (use of different
depreciation methods and lives for financial statement and income tax purposes),
restaurant preopening/remodel costs (deferred for financial statement purposes
but not for income tax purposes), capitalized land leases (capitalized for
financial statement purposes but not for income tax purposes) and basis of
accounting (cash basis for income tax purposes and accrual basis for financial
statement purposes).
<PAGE>
Fresh 'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred taxes also
are recognized for operating losses and tax credits that are available to offset
future taxable income.
ESTIMATES
The accompanying financial statements include certain estimates made by
management in order for the f~nancial statements to be presented in accordance
with generally accepted accounting principles. Management believes there are
reasonable bases for each estimate and that the methods involved are consistent
from year to year.
CONSIDERATION OF CREDIT RISK
The Company maintains its cash in bank deposit accounts at high quality fnancial
institutions. The balances are at all times with~n federal insurance limits. The
Company believes their cash management policies effectively address their cash
in bank credit risk. All restaurant sales are either cash or credit card. The
credit card sales are approved at point of sale with very little risk of loss.
NOTE 2 - lNVENTORY
A summary of inventory, by restaurant location, is as follows:
1996
-----------
Tyler, Texas $ 3,686
Longview, Texas 3,367
Nacogdoches, Texas -
Texarkana, Texas 8,374
Dallas (Frankford Avenue), Texas 11,762
-----------
Total Inventory $ 27,189
===========
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31. 1996
NOTE 3 - RESTAURANT PREOPENING/REMODEL COSTS
Restaurant Preopening/Remodel Costs consist of the following:
Accumulated
Costs Amortization
---------- ------------
Balances, January 1, 1996 $ 625,523 $ 268,998
Additions 60,924 128,219
Balances, December 31, 1996 $ 686,447 $ 397,217
---------- -----------
Other costs included with Restaurant Preopening/Remodel Costs in the balance
sheet aggregated $ 25,443 as of December 31, 1996. These costs were for
organizational expenses, funding costs, prepaid items and utility deposits.
A summary of Restaurant Preopening/Remodel Costs, by restaurant location, is as
follows:
1996
----------
Longview, Texas $ 122,448
Nacogdoches, Texas 210,750
Texarkana, Texas 230,028
Dallas (Frankford Avenue), Texas 62,297
Irving (Valley Ranch), Texas 60,924
----------
Total Restaurant Preopening/Remodel Cost $ 686,447
==========
NOTE 4-INCOME TAXES
1996 1995 1994
--------- --------- ---------
Earnings (loss) before income taxes $ 315,011 $ 144,324 $(248,023)
Add:
Timing differences (23,455) 33.129 112,332
Taxable income (loss) before -- -- --
Net operating loss carryforward $ 291,556 $ 177,453 $(135,691
--------- --------- ---------
Income tax (expense) benefit $ (94,000) $ -- $ 15,200
========= ========= =========
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 4 - INCOME TAXES (Continued)
Deferred taxes result from differences in the bases of assets and liabilities
for income tax and financial statement purposes. The source of the differences
and the tax effect creating the balance at December 31, 1996, 1995 and 1994 are
as follows:
1996 1995 1994
--------- --------- ---------
Deferred tax assets:
Net operating loss carry forward $ ( 53,405) $(127,908) $ 150,953)
Valuation allowance -- 11,962 45,718
--------- --------- ---------
Net deferred tax asset (53,405) (115,946) (105,235)
--------- --------- ---------
Deferred tax liabilities:
Difference in depreciation methods 97,800 48,500 21,333
Deduction of startup costs 82,750 95,040 97,987
Cash to accrual conversion (47,900) (35,060) (19,717)
Other 14,755 7,466 5,632
--------- --------- ---------
Net deferred taX liability 147,405 115,946 105 235
--------- --------- ---------
Balance $ 94,000 $ -- $ --
========= ========= =========
The Company has tax loss carryforwards totaling $ 157,081 that may be offset
against future taxable income. If not used, the carryforwards will expire as
follows:
Year Originated Year Expiring Amount
- ---------------------------- -------------------- ---------
December 31, 1993 December 31, 2008 $ 21,390
December 31, 1994 December 31,2009 135,691
---------
Total Tax Loss Carryforwards $ 157,081
=========
NOTE 5 - NOTE PAYABLE-SHORT TERM
Notes payable-short term at December 31, 1996 consisted of the following:
Transamerica Insurance Finance Corporation, dated July 28, 1996, due July
28, 1997, interest rate at 9.28%, payable in 12 monthly payments of $ 2,134
beginning August 28, 1996 and the balance at maturity. $ 6,299
===========
<PAGE>
Fresh 'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
<TABLE>
<CAPTION>
NOTE 6 - NOTES PAYABLE-LONG TERM
Notes payable-long term at December 31, 1996 consisted of the following:
<S> <C>
Amount
East Texas National Bank, dated March 30, 1994, due June 30, 1997, interest -----------
rate at 8.50%, payable in 36 monthly payments of $ 3,594 beginning June 3O,
1994 and the balance at maturity, including interest, collateralized by the
Company's real and personal property in Gregg, Nacogdoches and Bowie
counties, Texas $ 334,018
East Texas National Bank, dated January 28, 1994, due January 28, 1997,
interest rate at 8.50%, payable in 36 monthly payments of $ 3,282 beginning
February 7, 1994 and the balance at maturity, including interest,
collateral~zed by the Company's real and personal property in Gregg,
Nacogdoches and Bowie counties, Texas 300,233
East Texas National Bank, dated May 12, 1995, due September 12, 1998,
interest rate at ETNB prime plus .50%, payable in four installments of
interest only (beginning June 12, 1995), then thirty-five monthly payments
of $ 3,261, then a final balloon payment to fully repay the loan,
collateralized by the Company's Frankford Avenue leasehold estate in
Dallas, and by various personal properties 34,409
East Texas National Bank, dated November 1, 1995, due October 12, 1998,
interest rate at 10.25%, payable in 35 Monthly payments of $ 1,864
beginning November 12, 1995 and the balance at maturity, including
interest, collateralized by a second lien on the Company's Frankford Avenue
leasehold estate in Dallas, and by a security interest in various
equipment, fixtures and other personal property at that location 165,265
East Texas National Bank, dated December 31, 1996, due January 30, 1998,
interest rate at 10.2%, payable in 11 Monthly payments of $ 2,526 beginning
January 30, 1997, and the balance at maturity,~including interest,
collateralized by all accounts receivable, inventory, and equipment. 138,395
</TABLE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
<TABLE>
<CAPTION>
NOTE 6 - NOTES PAYABLE (Continued)
<S> <C>
Related Party:
Stanley L. Swanson, dated October 19, 1994, due October 19, 1999,
interest rate at 9.49%, payable in 60 monthly payments of $ 251
beginning November 19, 1994 and the balance at maturity,~including
interest, collateralized by a second lien on a 1994 Nissan pick-up and
a corporate guarantee 7,573
Ford Motor Credit Company, dated June 25, 1993, due July 25, 1997, interest
rate at 9.50%, payable $ 209 monthly, including interest, secured by a 1993
Nissan truck
1,462
Frost National Bank, dated March 2, 1995, due June 2, 2000, interest rate
at 11.75%, payable $239 monthly, including interest, secured by a 1995
Mazda truck 7,750
Frost National Bank, dated March 31, 1995, due May 31, 2000, interest rate
at 11.990%, payable $ 241 monthly, including interest, secured by a 1995
Mazda truck 7,929
-----------
Total Notes Payable-Long Term 997,034
Less Current Portion (675,864)
Notes Payable-Long Term, net of Current Portion $ 321,170
===========
</TABLE>
During the years ended December 31, 1996, 1995 and 1994, the Company capitalized
as building costs $ 44,500, $ 12,347 and $ 2,000, respectively, in interest
related to the above notes payable.
Notes Payable-Long Term are expected to mature over the next five years as
follows:
1997 $ 675,864
1998 150,314
1999 22,060
2000 9,453
2001 8,310
---------
Total $ 866,001
=========
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 7- LEASES
Following is a summary of the Company's operating and capital leases:
Marshall, Texas restaurant (land and building):
The lease term was from April 6, 1989 to March 9, 1990 and has expired. An oral
arrangement of paying rent month to month has been agreed upon. Minimum lease
rentals were $ 550 per month with no contingent rentals. This has been
classified as an operating lease. This store was sold May 26, 1994 and the above
lease was assumed by the purchaser; therefore, the Company had no further
obligation under this lease after the date of sale.
Tyler, Texas restaurant (land and building):
The sublease term is from April 1, 1995 to July 31, 1999. Minimum lease rentals
are $ 1,500 per month with no contingent rentals. The lease includes a five year
option at the same terms and conditions as during the primary term. This has
been classified as an operating lease.
Longview, Texas restaurant (land):
The lease term is for twenty years, begir~ng January 6, 1992. Minimum lease
rentals are $1,000 per month for the first 36 months, $ 1,300 per month for the
next 24 months, $ 1,500 per month for the next 60 months and $ 1,600 per month
for the final 120 months. The lease includes contingent rentals based upon a
percentage of gross sales, that become due if the contingent rent~ls exceed the
minimum rentals. No contingent rentals have become due as of December 31, 1995.
The lease also contains an option to purchase the land for $ 160,000 within the
first five years of the lease. Management anticipates purchasing the land within
the option period. This lease has been classified as a capital lease.
Nacogdoches, Texas restaurant (land):
The lease term was for twenty years beginning September 28, 1992. Minimum lease
rentals were $ 960 per month for the first 36 months, $ 1,080 per month for the
next 24 months, $ 1,200 per month for the next 36 months, $ 1,344 per month for
the next 36 months, $ 1,505per month for the next 36 months, $ 1,686 per month
for the next 36 months and $ 1,888 permor~h for the final 36 months, with no
contingent rentals. The lease also contained an option to purchase the land for
$ 100,000 during the first three years of the lease. This lease has been
classified as a capital lease. During the year ended December 31, 1994, the
Company exercised its' purchase option, and has purchased the land for $
100,000. At December 31, 1994 the lease was no lon~er in effect.
<PAGE>
Fresh 'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 7-LEASES (Continued)
Texarkana, Texas restaurant (land):
The lease term is for twenty years beginning February 1, 1994. Minimum lease
rentals are $ 1,547 per month for the first 36 months, $ 1,949 per month for the
next 60 months, $ 2,258per month for the next 60 months, $ 2,615 per month for
the final 84 months, with no contingent rentals. The lease also contains an
option to purchase the land for $ 200,000 during the first three years of the
lease. Management anticipates purchasing the land within the option period. This
lease has been classified as a capital lease.
Dallas (Frankford Avenue), Texas restaurant (land):
The lease term is for twenty years beginning February 21, 1995. Minimum lease
rentals are $ 4,250 per month for the first 60 months, $ 4,583 per month for the
next 60 months, $ 5,167 per month for the next 60 months, and $ 5,417 per month
for the final 60 months, with no contingent rentals. The lease also contains two
five year extensions at $ 5,750 per month for the first five year period and $
6,083 per month for the second five year period. This has been classified as a
capital lease.
Irving (Valley Ranch), Texas restaurant (land):
The lease term is for twenty years beginning November 15, 1996. Minimum lease
rentals are $ 3,625 per month for the first 60 months, $ 4,167 per month for the
next sixty months, $ 4,667 per month for the next 60 months, and $ 5,250 per
month for the final 60 months with no contingent rentals. The lease also
contains two five year extensions, the first at market rate, but not to exceed $
7,O83 per month, and the second at market rate. This lease has been classified
as a capital lease.
Computers and related equipment:
The lease is with AT&T Capital Corporation, dated October 5, 1993. The lease
term is for 60 months beginning October 14, 1993. Minimum lease rentals are $
579 per month. This lease has been classified as an operating lease.
OPERATING LEASES
At December 31, 1996 the Company was leasing its Tyler restaurant land and
building as well as certain computer equipment under operating leases. The
annual minimum lease payments under noncancelable operating leases as of
December 31, 1996 are as follows:
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 7-LEASES (Continued)
Years Ending December 31:
1997 $ 24,948
1998 23,211
1999 10,500
2000 -
2001 -
Later Years -
---------
Total Minimum Lease Payments $ 58,659
CAPITAL LEASES
December 31, 1996:
At December 31, 1996, the Company was leasing the land for its Longview, Texas;
Texarkana, Texas; Dallas (Frankford Avenue), Texas; and Irving (Valley Ranch),
Texas restaurants under capital leases. The economic substance of the leases is
that the Company is financing the acquisition of the assets through the leases,
and accordingly, it is recorded in the Company's assets and liabilities.
The following is a schedule by years of future minimum lease payments required
under the capital leases, together with their present value as of December 31.
1996:
Years Endinc December 31:
1997 $ 135,888
1998 135,888
1999 135,888
2000 137,886
2001 14O,968
Later Years 2,225,788
---------
Total Minimum Lease Payments 2,912,306
Less Amount Representing Interest (1,561,827)
---------
Present Value of Minimum
Lease Payments 1,35O,479
Less Short Term Portion ( 13,219
---------
Present Value of Minimum Lease
Payments, net of Current Portion $ 1,337,260
===========
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 7-LEASES (Continued)
During the year ended December 31, 1996, the Company recognized $ 78,755 in
interest cost related to the above capital leases. During the year ended
December 31, 1995, the Company charged to expense $ 51,738 in interest costs
related to the above capital leases. During the year ended December 31, 1994,
the Company recognized $ 31,146 in interest costs related to the capital leases,
$ 7,729 was capitalized as Building Costs and $ 23,417 was charged to expense.
NOTE 8 - SUMMARARY OF NONCASH
TRANSACTIONS
Following is a summary of noncash investing and financing activities for the
years ended December 31:
1996 1995 1994
--------- --------- ---------
Exchange Common Stock for Furniture
And Equipment $ -- $ 34,901 $ 10,500
Exchange Common Stock for Building Costs -- 89,650 13,318
Exchange Common Stock for Corporate
Organizational Costs -- -- 20,000
Exchange Common Stock for Deferred
Stock Issuance Costs -- 5,000 --
Exchange Common Stock for Debt Repayment -- 38,000 --
Capital Lease Obligations 400,000 500,000 (165,000)
Accrued Deferred Stock Issuance Cost -- 82,935 --
Accrued Tyler Equipment Purchase -- 7,682 --
--------- --------- ---------
Total Noncash Investing and
Financing Activities $ 400,000 $ 758,868 $(121,182)
========= ========= =========
<PAGE>
Fresh'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 9-CONTINGENCIES
Securities Issues:
After February 28, 1994, the Company's counsel discovered that, beginning in
approximately March of 1992, the Company sold shares of its common stock to
shareholders in transactions which were not registered with either the U.S.
Securities and Exchange Commission or qualified under the Texas Securities Act.
These sales of stock were subject to rescission under the Texas Securities Act
by the purchaser or darnages if the purchaser no longer owns the shares. The
Company obtained a $ 500,000 line of credit which would allow it to repurchase
substantially all of the effected shares at the original sales price, plus
interest at 10% per annum.
On August 10, 1994, rescissions offers were prepared and sent to a certain
number of the effected shareholders, in a total amount of approximately $
481,682. On September 10, 1994, the rescission offers expired, at that date six
shareholders had accepted the offers in a total amount of $ 26,249, for 36,298
shares. A new shareholder purchased the subject shares from the accepting
shareholders, which management believes fulfills the Company's obligation under
the rescission offers.
Legal Actions:
Litigation was threatened against the Company by AT&T Capital Corporation
regarding an equipment lease entered into by the Company. The potential claim
was for approximately $ 30,000. Counsel has advised the Corporation that on
April 12, 1996 that AT&T had agreed not to pursue its claims agninst the Company
and that the likelihood of a non-favorable outcome was nominal at all times.
Suit was filed against the Company in 1994 for damages arising from an employee
accident involving a meat slicer. The Company has paid the employee's medical
expenses of $ 2,014 during 1995. The employee was seeking unspecified additional
amounts for lost wages, pain and suffering, disfi~urement and impairment. The
suit was scheduled for mediation on May 22, 1996 and for trial on July 8, 1996.
During 1996 the Company settled this claim for $ 14.000
<PAGE>
Fresh'n Lite, Inc.
Notes to Financia1 Statements
December 31, 1996
NOTE 10 - RELATED PARTY TRANSACTIONS
On May 26, 1994, the Company sold its Marshall, Texas store to an
officer/shareholder of the Company. As more fully described in Note 11, the
sales price was $ 25,000, which resulted in a loss of $ 11,500 for the year
ended December 31. 1994.
As more fully described in Note 5, the Company borrowed funds from two
officer/shareholders in the total amount of $ 50,641, during the year ended
December 31, 1994. At December 31, 1995, the Company owes one shareholder
10,025.
On February 17, 1995, the Company sold 133,333 shares of common stock to the
Company's largest food distnbutor for $ 200,000, pursuant to a stock purchase
agreement. The agreement binds the Company to purchase 90% of its food products
from the distributor for five years, as well as to repurchase the common stock
at the original price if one of two repurchasing events occur. As of December
31, 1996, the Company's obligation under this agreement has expired. As of June
4, 1997, the Company is unaware of and has not been notified that any
repurchasing events have occurred.
At December 31, 1996, the Company had a note receivable from an
officer/shareholder of the Company in the amount of $ 31,345. The note bears
interest at 9% and is payable in ten monthly payments of $ 3,264.51 beginning in
February, 1997.
NOTE 11-COMPENSATED ABSENCES
Compensated absences have not been accrued in the accompanying financial
statements as the amount cannot be reasonably estimated. Management believes the
amounts to be insignificant and, therefore, would have little impact on the
accompanying financial statements.
NOTE 12 - DISCONTINUED RESTAURANTS
The Company sold its Marshall, Texas and Tyler, Texas stores during the year
ended December 31, 1994. These stores were not a "segment" of the Company and,
therefore, these stores operations are included in income from continuing
operations for the Year ended December 31. 1994.
<PAGE>
Fresh 'n Lite, Inc.
Notes to Financial Statements
December 31, 1996
NOTE 12 - DISCONTINUED RESTAURANTS (Continued)
Following are certain items related to the discontinued restaurants during the
year ended December 31 1994:
Tyler Marshall
Restaurant Restaurant Total
---------- ---------- ----------
Sales $ 111,542 $ 41,273 $ 152,815
Cost of Sales (42,183) (13,165) 55,348
--------- --------- ---------
Gross Profit 69,827 28,108 97,467
--------- ---------
Operating Expenses (61,827) (29,789) (91,616)
--------- --------- ---------
Net Operating Income (Loss) $ 7,532 $ (1,681) $ 5,851
========= ========= =========
Loss on Sale $ (3,509) $ (11,500) $ (49,009)
========= ========= =========
On March 31, 1995, the company reacquired the Tyler restaurant for $ 21,632.
NOTE 13-STOCK OPIIONS
On March 1, 1995, the Board of Directors of the Company adopted its 1995
Incentive Stock Option Plan pursuant to which 100,000 shares of the Company's
stock were set aside for the purpose of granting of incentive stock options to
directors and key employees of the Company. The purchase price of the stock
purchased pursuant to the exercise of such an option is required to be not less
than 100% of the fair market value of the stock on the date of the grant of the
option. This plan was approved by shareholders on October 19, 1995.
Under the Plan, an option for 50,000 shares has been granted to one shareholder
for service as a member of the Board of Directors with a purchase price of $
1.50 per share and expires March 1, 2000. Also, under the Plan, two other
Directors have been granted options for 25,000 shares each for service as
members of the Board with a purchase price of $ 1.50 per share and expire on
October 19, 2000. As of June 4, 1997, none of these stock options have been
exercised.
<PAGE>
FRESH'N LITE, INC.
BALANCE SHEET
FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
ASSETS 9 Month Period Ending
September 30, 1997
-------------------------------
CURRENT ASSETS
Cash 82,643
Inventory 73,958
Total Current Assets 156,601
PROPERTY AND EQUIPMENT
(Pledged)
Buildings 2,908,175
Land 100,000
Capitalized Land Leases 1,343,000
Leasehold Improvements 83,297
Vehicles and Equipment 1,284,773
Total Property and Equipment 5,719,245
Accumulated Depreciation (521,075)
Property and Equipment - Net 5,198,170
OTHER ASSETS
Restaurant Preopening/Remodel Costs
and Other Assets, Net of Accumulated Amortization 169,945
Deferred Stock Issuance Costs 29,969
Deferred Franchise System Costs 75,273
Note Receivable - Related Party 56,866
Total Other Assets 332,053
TOTAL ASSETS $5,686,824
<PAGE>
FRESH'N LITE, INC.
BALANCE SHEET
FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
LIABILITIES AND
SHAREHOLDER'S EQUITY 9 Month Period Ending
September 30, 1997
---------------------------
CURRENT LIABILITIES
Accrued Expenses 111,863
Accounts Payable 51,965
Current Portion of Capital Lease Obligations 13,219
Current Portion of Notes Payable- Long Term 75,864
Total Current Liabilities 252,911
OTHER LIABILITIES
Capital Lease Obligations, Net of Current Portion 1,337,260
Notes Payable - Long Term, Net of Current Portion 1,078,547
Total Liabilities 2,415,807
CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, $0.01 Par Value; 50,000,000 Shares
Authorized; 6,041,800 Shares Issued and Outstanding 60,418
Additional Paid In Capital 2,732,603
Retained Earnings - Prior 182,225
Retained Earnings - Current 44,110
----------
3,019,356
Less Treasury Stock at Cost, 1250 Shares (1,250)
Total Shareholders' Equity 3,018,106
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $5,686,824
<PAGE>
FRESH'N LITE, INC
INCOME STATEMENT
FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited )
9 Month Period Ending
September 30, 1997
----------------------------
SALES $2,352,906
COSTS OF SALES (651,621)
----------
GROSS PROFIT 1,701,285
EXPENSES
Salaries and Contract Labor 622,101
Payroll and Other Taxes 88,803
Professional Fees 86,953
Advertising and Promotional 57,925
Rent 109,114
Insurance 38,149
Telephane 28,618
Travel 10,557
Utilities 66,116
Depreciation 141,680
Amortization 230,416
Interest 83,001
Linen and Laundry 22,879
Repairs and Maintenance 50,795
Supplies 12,201
Miscellaneous 7,867
----------
Total Expenses $1,657,175
----------
OPERATING INCOME(LOSS) 44,110
Income Tax (Expense) Benefit:
Current
Deferred
NET INCOME $ 44,110
<PAGE>
<TABLE>
<CAPTION>
Fresh 'o Lite, Inc.
Statements of Changes in Shareholders' Equity
For the Years ended December 31, 1996, 1995, 1994 and the interim 9
months ending September 1997
<S> <C>
Total
Additional Retained Share
Common Paid in Earnings Treasory holders'
Stock Capital (Deficits) Stock Equity
---------- ---------- ----------- ---------- -----------
BALANCES, JANUARY
1, 1994 $ 46,737 $ 788,697 $ 47,623 $ (1,250) $ 881,807
Net (Loss) -- -- 232,823) -- (232,823)
Sale of Common
Stock, 299,210
Shares 2,992 210,823 -- -- 213,815
----------- ----------- ----------- ----------- -----------
Balances, Dec. 31, 1994 49,729 999,520 (185,200) (1,2SO) 862,799
Net Income -- -- 144,324 -- 144,324
Sale of Common
Stock, 291,734
Shares 2,918 365,334 -- -- 368,252
----------- ----------- ----------- ----------- -----------
Balances, Dec. 31, 1995 52,647 1,364,854 (40,876) (1,250) 1,375,375
Net Income -- -- 223,101 -- 223,101
Sale of Common
Stock, 226,400
Shares 2,264 563,736 -- -- 566,000
Stock Issuance
Costs -- (159,980) -- -- (159,9801
----------- ----------- ----------- ----------- -----------
Balances, Dec. 31, 1996 54,911 1,768,610 185,200 (1,250) 2,004,496
Net Income -- -- 44,110 -- 44,110
Sale of Common
Stock, 550,700
Shares 5,507 963,993 -- -- 969,500
----------- ----------- ----------- ----------- -----------
BALANCES,
SEPTEMBER30,1997 $ 60,418 $ 2,732,603 $ 226,338 $ (1,250) $ 3,018,106
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
FRESH'N LITE, INC.
STATEMENT OF CASH FLOW
FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
9 Month Period Ending
September 30, 1997
----------------------------
Cash Flows from Operating Activities
Net Income (Loss) $226,335
--------
Adjustments to Reconcile Net Income
to Net Cash Provided by
Operating Activities:
Depreciation 141,680
Amortization 230,416
Change in Net Capital Leases o
Net Change in Assets and Liabilities
(Increase) in Inventory (46,769)
Increase (Decrease) in Accounts Payable 4,956
Increase (Decrease) in Accrued Expenses (31,010)
(Decrease) in Deferred Taxes o
Loss on Sale of Restaurants o
Total Adjustments 299,273
Net Cash Provided bv O~eratina Activities 525,608
Cash Flows from Investing Activities:
Capital Expenditures (1,140,747)
Expenditures for Preopening/Remodel Costs and
Other Assets (111,118)
(Increase ) Decrease in Note Receivable (25,521)
(Increase) in Deferred Franchise System Costs (1O,000)
Proceeds from Restaurant Sales 0
Net Cash Used in Investing Activities (1,287,386)
Cash Flows from Financing Activities:
Sale of Common Stock 969,500
Borrowing on Notes Payable 385,O00
Principal Payments on Notes Payable (656,398)
Net Cash Provided by Financing Activities 698,102
NET INCREASE (DECREASE) IN CASH 63,676
CASH AT BEGINNING OF YEAR 18,967
CASH AT END OF PERIOD 82,643
<PAGE>
Item 14. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure:
None
Item 15: Financial Statements and Exhibits.
Attached hereto are the exhibits as required.
<PAGE>
EX-3.(I)
Articles of Incorporation
State of Delaware
[STAMPED]
Received For Record
'90 Jul 10 A9:50
EVELYN T. ALLMAR
RECORDER
Office of Secretary of State
-------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATED OF
INCORPORATION OF BOSKO'S, INC. FILED IN THIS OFFICE ON THE NINTH DAY OF MAY,
A.D. 1990, AT 9 O'CLOCK A.M.
--------------------
[Stamped seal of Department of State of
Delaware Office of the Secretary of State] /S/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
901295163
AUTHENTICATION: 12649082
DATE: 05/09/1990
<PAGE>
STATE OF DELAWARE
o SECRETARY OF
STATE DIVISION
OF CORPORATIONS
FILED 09:00 AM
05/09/1990 901295163
- 2230140
CERTIFICATE OF INCORPORATION
of BOSKO S, INC.
FIRST. The name of this corporation is B0SKO S, INC.
SECOND. Its registered office in the State of Delaware is to be located at 725
Market in the City of Wi1ming, County of New Castle. The registered agent in
charge thereof is The Company Corporation at "same as above"
THIRD. The nature of the business and, the objects and purposes proposed to be
transacted, promoted and carried on, are to do any or all the things herein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz:
"The purpose of the corporation is to engage in any lawful an or activity
for which corporations may be organized under the General Corporation Law
of Delaware.
FOURTH. The amount of the total authorized capital stock of this corporation is
50,000,000 share of .00001 Par Value.
FIFTH. The name and mailing address of the incorporators as follows: NAME:
ADDRESS: Michele Baray 725 Market St. Wilmington, DE 19801
SIXTH. The powers of the incorporator are to terminate upon
filing of the certificate of incorporation, and the name(s) and mailing
address(es) of persons who are to serve as director(s) until the first annual
meeting of stockholders or until their successors are elected and qualify are as
follows Name and address of director(s) Stanley L. Swanson and Curtis Swanson
both at Fill in name(s) 500 E. Houston Marshall, TX 75670 and addresse.(es)
SEVENTH. The Directors shall have power to make and to alter or amend the
By-Laws; to fix the amount to be reserved as working capital., and to authorize
and cause to be executed, mortgages and liens without limit as to the amount,
upon the property and franchise of the Corporaton.
With the consent in writing, ant pursuant to a vote of the hollers of a majority
of the capital stock issued and outstanding, the Directors shall have the
authority to dispose, in any manner. of the whole property of this corporation.
The By-Laws shall determine whether and to what extent the accounts and books of
this corporation. or any of them shall be open to The inspection of the
stockholders: and no stockholder shall have any right of inspecting any account,
or book or document of this Corporation, except as conferred by the law or the
9y-Laws~ or by resolution of the stockholders.
The stockholders and director shall have power to hold their meeting, and keep
the books, documents and papers of the Corporation outside of the State of
Delaware. at such places as may be from time to time designated by the By-Laws
or by resolution of the stockholders or directors, except as otherwise required
by the laws of Delaware.
It is the intention that the objects, purposes ant powers specified in the
Third paragraph hereof shall, except where otherwise specified in said
paragraph, be nowise limited or restricted by reference to or inference from the
terms of any other clause or paragraph or in this certificate of incorporation.
but that the objects, purposes and powers specified in the Third paragraph and
in each of the clauses or paragraphs of this charter shall be regarded as
independent objects, purposes and powers.
EIGHTH. Directors of the corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach of fiduciary
duties unless the breach involves ( I 1 a director's duty of loyalty to the
corporation or its stockholders; (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; ( 3)
liability for unlawful payments of dividends or unlawful stock purchases or
redemption by the corporation; or (4) a transaction from which the director
derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the laws of
the State of Delaware, do make, file and record this Certificate and do certify
that the facts herein are true; and I have accordingly hereunto set my hand.
DATED AT: May 7, 1990
State of Delaware
County of New Castle
/s/ Michele Baray
-------------------
<PAGE>
[STAMPED]
State of Delaware CERTIFICATE OF AMENDMENT
SECRETARY OF STATE
DIVISION OF CORPORATIONS OF
FILED 09:00 AM 01/4/1993
930145271 - 2230140] CERTIFICATE OF INCORPORATION
Bosko's, Inc., a Corporation organized and existing under and by virtue of the
General corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
Bosko's, Inc., resolutions were duly adopted setting forth a proposed amendment
of the Certificate of incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows.
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "one & six" so that, as
amended said Article shall be and read as follows:
"First. The name of this corporation is FRESH'N LITE, INC.
SIXTH, Name and address of directors(s) Stanley L. Swanson @ 1011 W. Loop
281 #8 Longview, TX 75604 Curtis A. Swanson @ 1011 W. Loop 281 #8 Longview,
TX 75604 Edward Dmytryk @ 222 W. Airport Freeway Irving TX 75062 Donald W.
Hurta @ 807 holly Highlands, TX 77562
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called
and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting of the necessary
number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment as duly adopted in accordance with provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said corporation has caused its corporate seal to be
hereunto affixed and this certificate to be signed by Stanley L. Swanson its
president and Carole A. Swanson its Secretary, this 1st day of November, 1992.
/s/ Carole Swanson /s/ Stanley L. Swanson
------------------- ----------------------
Secretary President
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Fresh'n Lite, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Fresh'n Lite,Inc.,
Resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment
to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. the resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "fourth" so that, as
amended said Article shall be and read as follows:
"The amount of authorized capital stock of this corporation is
50,000,000 shares of .01 par value.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called
and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting of the necessary
number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment as duly adopted in accordance with the
provisions of Section 242 of the Genere1 Corporation Law of the state of
Delaware.
FOURTH: That the capital of eald corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said Secretary has caused its corporate aea1 to be
hereunto affixed and this certificate to be signed by Stanley L. Swanson its
President and Carole A Swanson its Secretary, this 16th day of March, 1994.
/s/ Carole A. Swanson Stanley L. Swanson
---------------------- ------------------------
Secretary President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AN 03/21/1994
944045032 - 2230140
<PAGE>
State of Delaware
Page 1
Office of the secretary of State
----------------------------------
I, WILLlAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THAT THE SAID "BOSKO'S, INC.", FILED A CERTIFICATE OF AMENDMENT,
CHANGING ITS CORPORATE TITLE TO "FRESH'N LITE, INC.", ON THE FOURTEENTH DAY OF
JANUARY, A.D. 1993, AT 9 O' CLOCK A.M.
932325159
/s/ William T. Quillen
-------------------
William T. Quillen, Secretary of State
4028719
AUTHENTICATION:
08/24/1993
DATE:
[GRAPHIC OMITTED]
932325159
<PAGE>
[STAMPED SEAL]
THE STATE OF TEXAS
SECRETARY OF STATE
The undersigned, as Secretary of State of the State of Texas, HEREBY
CERTIFIES that the attached is a true and correct copy of the following
described instruments on file in this office:
BOSKO'S. INC.
Application for Certificate of Authority June 19, 1991
{stamped seal
State of Texas]
IN TESTIMONY WHEREOF, I have hereunto signed my name
officially and caused to impressed hereon the Seal of State
at my office in the City of Austin, this 9th day of
November, A.D. 1992
/s/ John Hannah Jr
-------------------------
Secretary of State
600/200
8/92
<PAGE>
[Stamped seal of the
state of Texas]
The State of Texas
Secretary of State
AMENDED CERTIFICATE OF AUTHORITY
OF
FRESH'N LITE, INC.
CHARTER NUMBER 00087909
FORMERLY
BOSKO'S, INC.
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED APPLICATION BY THE ABOVE NAMED ENTITY FOR AN AMENDED
CERTIFICATE OF AUTHORITY TO TRANSACT BUSINESS IN THIS STATE, HAS BEEN RECEIVED
IN THIS OFFICE AND IS FOUND TO CONFORM TO LAW.
ACCORDINGLY THE UNDERSIGNED, AS SECRETARY OF STATE, AND BY VIRTUE OF THE
AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS AMENDED CERTIFICATE
OF AUTHORITY TO TRANSACT BUSINESS IN THIS STATE UNDER THE NAME OF
FRESH'N LITE, INC.
DATED SEP. 9, 1993
EFFECTIVE SEP. 9, 1993
[STAMPED SEAL OF THE
STATE OF TEXAS] /S/ John Hannah Jr
-----------------------
Secretary of State
<PAGE>
[Stamped seal of the
state of Texas]
The State of Texas
Secretary of State
Sep. 14, 1993
FRESH N' LITE
1011 LOOP 281 STE 4
LONGVIEV, TX 75604
RE:
FRESH'N LITE, INC.
CHARTER NUMBER 00087909-06
IT HAS BEEN OUR PLEASURE TO APPROVE AND PLACE ON RECORD YOUR AMENDED CERTIFICATE
OF AUTHORITY. THE APPROPRIATE EVIDENCE IS ATTACHED FOR YOUR FILES, AND THE
ORIGINAL HAS BEEN FILED IN THIS OFFICE.
PAYMENT OF THE FILING FEE IS ACKNOWLEDGED BY THIS LETTER.
IF WE CAN BE OF FURTHER SERVICE AT ANY TIME, PLEASE LET US KNOW.
VERY TRULY YOURS,
[STAMPED SEAL OF THE
STATE OF TEXAS] /S/ John Hannah Jr
-----------------------
Secretary of State
<PAGE>
State of Delaware
Page 1
Office of the secretary of State
----------------------------------
I, WILLlAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY "FRESH'N LITE, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE
STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO
FAR AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE TWENTY-FIRST DAY OF MARCH,
A.D. 1994.
[GREAT SEAL OF THE STATE OF DELAWARE
1793.1847.1907.]
[SEAL OF SECRETARY'S OFFICE
DELAWARE] /S/ William T. Quillen
-----------------------
William T. Quillen, secretary of State
AUTHENTICATION: 7061861
2230140 8300 DATE: 3-21-94
944044243
<PAGE>
State of Delaware
Page 1
Office of the secretary of State
----------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE CERTIFICATE OF MERGER, WHICH MERGES:
"FRESH'N LITE, INC.", A DELAWARE CORPORATION,
WITH AND INTO "FNL, INC." UNDER THE NAME OF "FRESH'N LITE, INC.", A
CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF TEXAS, WAS
RECEIVED AND FILED IN THIS OFFICE THE TWENTY-FOURTH DAY OF OCTOBER, A.D. 1995,
AT 4:30 O'CLOCK P.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CORPORATION SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO
AND I DO HEREBY FURTHER CERTIFY THAT UPON FILING OF THE AFORESAID
CERTIFICATE OF MERGER, THE CORPORATE EXISTENCE OF "FRESH'N LITE, INC." WAS
TERMINATED. DATE.
[SEAL OF THE
SECRETARY'S OFFICE
DELAWARE] /S/ Edward J. Freel
-----------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7686957
2230140 8330
DATE: 10-25-95
950246175
<PAGE>
State of Delaware
Page 1
Office of the secretary of State
----------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
MERGER, WHICH MERGES:
"FRESH'N LITE, INC.", A DELAWARE CORPORATION,
WITH AND INTO "FNL, INC." UNDER THE NAME OF "FRESH'N LITE, INC.", A
CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF TEXAS, AS
RECEIVED AND FILED IN THIS OFFICE THE TWENTY-FOURTH DAY OF OCTOBER, A.D. 1995,
AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL OF THE
SECRETARY'S OFFICE
DELAWARE] /S/ Edward J. Freel
-----------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7687148
2255160 8100M
DATE: 10-25-95
950245580
<PAGE>
DIVISION OF CORPORATIONS
FILED 04:30pm 10/24/1995
950145580-2230140
CERTIFICATE OF MERGER
OF
FRESH'N LITE, INC. (a Delaware Corporation)
INTO
F'NL, INC. (a Texas Corporation)
The undersigned corporation organized and existing under and by virtue of
the General corporation Law of the State of Delaware.
DOES HEREBY CERTIFY;
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger are as follows:
Name of Corporation State
------------------- -----
FRESH'N LITE, INC. Delaware
F'NL, INC. Texas
SECOND: That a Plan and Agreement of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of Section
252 of the General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the merger is F'NL,
Inc., a Texas corporation.
FOURTH: That the certificate of incorporation (the articles of
incorporation) of F'NL, INC., shall be amended by amending Article One thereof
so that upon the within described Merger the name of such corporation shall be
FRESH'N LITE, INC., and that the certificate of incorporation (as mended) of
F'NL, INC., a Texas corporation which the surviving the Merger, shall be the
certificate of incorporation of the surviving corporation.
FIFTH: That the executed Plan and Agreement of Merger is on file at the
principle place of business of the surviving corporation. the address of the
principle place of business of the surviving corporation is 2804 Judson road,
Longview, Texas 75061.
SIXTH: That a copy of the Plan and Agreement of Merger will be furnished by
the surviving corporation, on request and without cost, to any stockholder of
any constituent corporation.
SEVENTH: F'NL, INC., the corporation which is surviving the merger hereby
agrees that it may be served with process in Delaware in any proceeding for
enforcement of any obligation of any constituent corporation of Delaware, as
well as for enforcement of any obligation of F'NL, INC., the surviving
corporation of the merger, including any suit or other proceeding to enforce the
right of any stockholder as determined in appraisal proceedings pursuant to the
provisions of Section 262 of the General Corporation Law of the State of
Delaware. F'NL, INC., does hereby irrevocably appoint the Secretary of state of
Delaware as its agent to accept service of process in any suit or other
proceeding, and the address to which a copy of such process shall be mailed by
the Secretary of State is as follows:
2804 Judson road
Longview, Texas 75061
EXECUTED this 19th day of October, 1995.
F'NL, INC.
By: /s/ Stanley L. Swanson
-----------------------
Stanley L. Swanson, President
ATTEST:
BY: /S/ Carole A. Swanson
-----------------------------
Carole A. Swanson, Secretary
<PAGE>
[seal of The Secretary of State
State of Texas Corporations Section
P.O. Box 13697
Austin, Texas 78711-3697
ENTITY:
FRESH'N LITE, INC.
CHARTER NUMBER: 87909-6
DOCUMENT FILED:
TERMINATION
FILE DATE: OCTOBER 24, 1995
This letter will acknowledge the receipt and filing of the above referenced
document. The relevant statutory provision does not provide for a certificate of
filing for this type of document and, therefore, this letter may be used as
evidence of filing. Should you require further information or assistance, please
call (512) 463-5581.
Very truly yours,
Lorna Wassdorf
Deputy Assistant Secretary
Statutory Filings Devision
The Office of the Secretary of State does not discriminate on the basis of race,
color, national origin, sex, religion, age or disabilitys in employment or the
provision of service.
<PAGE>
The state of Texas
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
F'NL, INC.
CHARTER NUMBER 1371543-00
The undersigned, as Secretary of State of Texas, hereby certifies that the
attached Articles of Incorporation for the above named corporation have been
received in this office and are found to conform to law.
ACCORDINGLY, the undersigned, as Secretary of State, and by virtue of the
authority vested in the Secretary by law, hereby issues this Certificate of
Incorporation.
Issuance of this Certificate of Incorporation does not authorize the use of a
corporate name in this state in violation of the rights of another under the
federal Trademark Act of 1946, the Texas trademark law, the Assumed Business or
Professional Name Ace, or the common law.
Dated: September 28, 1995
Effective: September 28, 1995
[Seal of the State of Texas]
/s/ Antonio O. Garza, Jr.
----------------------------
Antonio O. Garza, Jr.
Secretary of State LCS
<PAGE>
ARTICLES OF INCORPORATION
OF Filed
In the office of the
F'NL, INC. Secretary of State of Texas
----------
SEP 28 1995
CORPORATIONS SECTION
I, the undersigned natural person of the age of eighteen (18) years or
more, acting as incorporator of a corporation under the Texas Business
Corporation Act (the "Act"), do hereby adopt the following Articles of
Incorporation for such corporation.
ARTICLE ONE
The name of the corporation is "F'NL, Inc."
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The corporation is organized for the purpose of engaging in any lawful act,
activity and/or business for which a corporation may be organized under the Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority
to issue is FIFTY MILLION (50,000,000) shares of common stock, each with a par
value of ONE CENT ($0.01), all of such shares being of the same class.
ARTICLE FIVE
No shareholder shall have any preemptive rights to acquire unissued or
treasury shares of the corporation.
<PAGE>
ARTICLE SIX
No shareholder shall be entitled to cumulate his votes at any election of
the directors of the corporation.
ARTICLE SEVEN
The corporation will not commence business until it has received for the
issuance of its shares consideration equal to or exceeding the value of
$1,000.00, consisting of money, labor done, or property actually received.
ARTICLE EIGHT
The address of its initial registered office is 2804 Judson Road, Longview,
Texas 75601. The name of its initial registered agent at such address is Stanley
L. Swanson.
ARTICLE NINE
The number of initial directors is one (1). The name and address of each
director is:
Stanley L Swanson
2804 Judson Road
Longview, Texas 75601
ARTICLE TEN
The name and address of the incorporator is:
Rex S. Whitaker
Naman, Howell, Smith & Lee, P.C.
P. O. Box 1470
Waco, Texas 76703-1470
ARTICLE ELEVEN
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for any act or omission in
his capacity as a director, except to the extent a statute of the State of Texas
expressly precludes elimination or limitation of such personal liability. Any
<PAGE>
repeal or modification of this Article shall be prospective only, and shall not
adversely affect any limitation of the personal liability of a director of the
corporation existing at the time of the repeal or modification.
ARTICLE TWELVE
Any action required to be taken at any annual or special meeting of
shareholders of the corporation, or any action which may be taken at any annual
or special meeting of the shareholders, may be taken without a meeting, without
prior notice, and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holder or holders of shares
having not less than the minimum number of votes that would be necessary to take
such action at a meeting at which the holders of all shares entitled to vote on
the action were present and voted.
/s/ Rex S. Whitaker
----------------------------
Rex S. Whitaker, Incorporator
DISCLAIMER
I, the undersigned, being the incorporator of F'NL, Inc., a corporation
formed by filing these Articles of Incorporation with the Secretary of State of
the State of Texas, do hereby disclaim any and all interests in said
corporation.
/s/ Rex S. Whitaker
----------------------------
Rex S. Whitaker
<PAGE>
[seal]
The State of Texas
SECRETARY OF STATE
CERTIFICATE OF MERGER
FRESH'N LITE, INC.
formerly F'NL, INC.
The undersigned, as Secretary of State of Texas, hereby certifies that the
attached Articles of Merger of
FRESH'N LITE, INC. (a Delaware no permit corporation)
with
F'NL, INC. which changed its name to
FRESH'N LITE, INC. (A Texas corporation)
have been received in this office and are found to conform to law. ACCORDINGLY,
the undersigned, as Secretary of state, and by virtue of the authority vested in
the Secretary by law, hereby issues this Certificate of Merger.
Dated October 27, 1995.
Effective October 27, 1995
[seal of
THE STATE OF TEXAS]
/s/ Antonio O. Garza, Jr.
------------------------
Antonio O. Garza, Jr.
Secretary of State
<PAGE>
ARTICLES OF MERGER
OF
[Filed stamped]
FRESH'N LITE, INC., AND F'NL, INC.
In the Office of
INTO the Secretary of State
OCT 27 1995
F'NL., INC. Corporations Section
(Herein Renamed Fresh'n Lite, Inc.)
Pursuant to the provisions of Article 5.04 of the Texas Business Corporation
Act, the undersigned domestic and foreign corporations adopt the following
Articles of Merger.
1. The names of the corporations participating in the merger and in the State
under the laws of which they are respectively organized are as follows:
Name of Corporation State
------------------ -----
Fresh'n Lite, Inc. Delaware
F'NL, Inc. Texas
2. The Plan and Agreement of Merger (the "Plan of Merger") is set forth as
Exhibit "A".
3. The Plan of Merger was duly approved by the shareholders of each corporation
as follows:
Name Number of
OF Shares
Corporation Outstanding Entitled to Vote as a Class
- ----------- ----------- ---------------------------
F'NL, Inc., Common Stock: One (1) None. All Shares are
a Texas Corporation Preferred Stock: None entitled to vote equally.
Fresh'n Lite,Inc., Common Stock: 5,131,948 None. All shares are
a Delaware Corporation Preferred Stock: None entitled to vote equally.
<PAGE>
As to each of the undersigned corporations, the total number of shares
voted for and against the Plan of Merger, respectively, are as follows:
Total Total
Voted Voted
Name of Corporation For Against
- ------------------- ----- -------
F'NL, Inc. Common stock: One (1) None
Fresh'n Lite, Inc. Common Stock: 2,919,454 None
Each of the corporations has only one class of shares; therefore, no
separate class of shares is entitled to vote as a class.
4. As to each foreign corporation that is a party to the Plan of Merger, the
approval of the Plan of Merger was duly authorized by all action required by the
laws under which it was incorporated or organized and by its constituent
documents.
5. the Articles of Incorporation of F'NL, Inc. are hereby amended pursuant to
the Plan of Merger so that Article One of said Articles of Incorporation shall
hereafter provide as follows:
"ARTICLE ONE
-----------
"The name of the Corporation is Fresh'n Lite, Inc."
Dated: October 19,1995
ATTEST: Fresh'n Lite, Inc.,
a Delaware Corporation
/s/ Carole A. Swanson
-----------------------------
Carole A. Swanson, Secretary
/s/ Stanley L. Swanson
-------------------------------
Stanley L. Swanson, President
ATTEST: F'NL, Inc.
a Texas Corporation
/s/ Stanley L. Swanson
---------------------------
Stanley L. Swanson, Secretary
/s/ Stanley L. Swanson
-------------------------------
Stanley L. Swanson, President
<PAGE>
PLAN AND
AGREEMENT OF MERGER
-------------------
PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of the 28th day
of September 1995, pursuant to section 252 of the General Corporation Law of
Delaware, and Article 5.01-5.4 of the Texas Business Corporation Act, between
Fresh'n Lite, Inc., a Delaware corporation and F"NL Inc., a Texas Corporation.
WITNESSETH:
----------
WHEREAS, the constituent corporations desire to merge (the "Merger") into a
single corporation; and
WHEREAS, the purpose of the Merger is to effectuate a change of the
domicile of Fresh'n Lite, Inc., from Delaware to Texas;
NOW, THEREFORE, the corporations, parties to this Agreement, in
consideration of the mutual covenants, agreements and provisions hereinafter
contained do hereby prescribe the terms and conditions of said Merger and mode
of carrying the same into effect as follows:
FIRST: F'NL, Inc., a Texas corporation (sometimes referred to herein as the
"surviving corporation"), hereby merges into itself Fresh'n Lite, Inc., a
Delaware corporation, and said Fresh'n Lite,Inc., a Delaware corporation
(sometimes referred to herein as the "merged corporation" or the "merging
corporation"), shall be and hereby is merged into F"NL, Inc. a Texas
corporation, which shall be the surviving corporation, and under whose laws it
shall be governed.
<PAGE>
SECOND: The Articles of Incorporation of F'NL, Inc., a Texas corporation,
as in effect on the date of the merger provided for in this Agreement, shall
continue in full force and effect as the Articles of Incorporation of the
corporation surviving this merger except that the name of the surviving
corporation shall be changed to Fresh'n Lite, Inc.
THIRD: The manner of converting the outstanding shares of the capital stock
of each of the constituent corporations into the shares or other securities of
the surviving corporation shall be as follows:
(a) Each share of common stock of the surviving corporation, which shall be
issued and outstanding immediately prior to the effective time of the Merger,
shall immediately upon effectiveness of the merger be canceled and deemed not
issued and outstanding.
(b) Each share of common stock of the merged corporation which shall be
outstanding on the effective time of this merger, and all rights in respect
thereof shall immediately upon effectiveness of the Merger therewith the changed
and converted into one share of common stock of the surviving corporation so
that immediately upon effectiveness of the merger the shareholders of the
surviving corporation shall be one and the same as those of the merged
corporation and shall hold a number of shares of the surviving corporation as
they formerly held in the merged corporation.
(c) After the effective date of this merger, each holder of an outstanding
certificate representing shares of common stock of the merged corporation shall
surrender the dame to the surviving corporation and each such holder shall be
entitled upon such surrender to receive the number of shares of common stock of
the surviving corporation on the basis provided herein. Until so surrendered,
the outstanding shares of the stock of the merged corporation to be converted
into the stock o the surviving corporation as provided herein, may be treated by
the surviving corporation for all corporate purposes as evidencing the ownership
of shares of the surviving corporation as though said surrender and exchange has
taken place. After the effective date of this Agreement, each registered owner
of any uncertified shares of common stock or preferred stock of the merged
corporation shall have said shares canceled and said registered owner shall be
entitled to the number of common shares of the surviving corporation of the
basis provided herein.
FOURTH: The terms and conditions of the merger are as follows:
<PAGE>
(a) The bylaws of the surviving corporation as they shall exist on the
effective date of this merger shall be and remain the bylaws of the surviving
corporation until the same shall be altered, amended or repealed as therein
provide.
(b) the articles of incorporation of the surviving corporation shall be and
remain the articles of incorporation of the surviving corporation except that
such articles shall be amended upon the effective date of the merger to provide
that the name of the surviving corporation shall be Fresh'n Lite, Inc.
(c) The directors and officers of the merging corporation shall become the
directors and officers of the surviving corporation and shall continue in office
until the next annual meeting of stockholders and directors, respectively, and
until their successors shall have been elected and qualified.
(d) this merger shall become effective upon filing with the Secretary of
State of Texas.
(e) Upon the merger becoming effective, all the property, real estate,
rights, privileges, franchised, patents, trademarks, licenses, registrations and
other assets of every kind and description of the merged corporation shall be
transferred to, vested in, and devolve upon, the surviving corporation without
further act or deed and all property, real estate, rights, and every other
interest of the surviving corporation and the merged corporation shall be as
effectively the property of the surviving corporation as they were of the
surviving corporation and the merged corporation respectively. the merged
corporation hereby agrees from time to time, as and when requested by the
surviving corporation or by its successors or assigns, to execute and deliver or
cause to be executed and delivered all such deeds and instruments and to take or
cause to be taken such further or their action as the surviving corporation may
deem necessary or desirable in order to vest in and confirm to the surviving
corporation title to and possession of any property of the merged corporation
acquired or to be acquired by reason of or as a result of the merger herein
provided for and otherwise to carry out the interest and purposes hereof and the
proper officers and directors of the merged corporation and the proper officers
and directors of the surviving corporation are fully authorized in the name of
the merged corporation or otherwise to take any and all such action.
(f) the Fresh'n Lite,Inc. 1995 Incentive Stock Option Plan (the "Option
Plan") of the merged corporation shall become the Option Plan of the surviving
corporation, reference in the Option Plan to the "Company" shall mean the
surviving corporation, and all options previously granted thereunder and under
any other option agreement which is not pursuant to the Option Plan shall be
deemed as options with the surviving corporation.
(g) All liabilities and obligations of the merged corporation shall become
the liabilities and obligations of the surviving corporation.
(h) All contractual rights and obligations of the merged corporation shall
become the contractual rights and obligations of the surviving corporation.
(i) the Merger is to be a reorganization described in Section 368(a)(1)(F)
of the Internal Revenue Code of 1986.
(j) the taxpayer identification number of Fresh'n Lite, Inc., shall be the
taxpayer identification number of F'NL, Inc. as allowed under Rev. Rul. 73-526,
1973-1 CB404, and all other tax or other assigned numbers of Fresh'n Lite,Inc.,
shall become the numbers of F'NL, Inc. unless otherwise prohibited by law or
contract.
FIFTH: Anything herein or elsewhere to the contrary notwithstanding, this
Agreement may be amendded by the Board of Directors of all constituent
corporations or terminated and abandoned by the Board of Directors of any
constituent corporation at any time prior to the date of filing this Agreement
with the Secretary of State of Texas, provided that an amendment made subsequent
to the adoption of the Agreement by the stockholders of any constituent
corporation shall not (1) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
constituent corporation, (2) alter or change any term of the Certificate of
Incorporation of the surviving corporation to be effected by the merger, or (3)
alter or change any of the terms and conditions of the Agreement if such
alteration or change would adversely affect the holders of any class or series
thereof of such constituent corporation.
IN WITNESS WHEREOF, the parties to this Agreement, pursuant to the approval
and authority duly given by resolutions adopted by their respective Boards of
Directors, have caused these presents to be executed by the President and
attested by the Secretary of each party hereto as the respective act, deed and
<PAGE>
agreement of each of said corporations, on this 28th day of September, 1995.
F'NL, Inc.
a Texas Corporation
/s/ Stanley L. Swanson
-------------------------------
Stanley L. Swanson, President
ATTEST:
/s/ Stanley L. Swanson
-----------------------------
Stanley L. Swanson, Secretary
FRESH'N LITE,INC.
a Delaware Corporation
/s/ Stanley L. Swanson
-------------------------------
Stanley L. Swanson, President
ATTEST:
/s/ Carole Swanson
------------------------------
Carole Swanson, Secretary
<PAGE>
EX-3.(II)
Bylaws of Fresh'n Lite, Inc.
BYLAWS OF
FRESH'N LITE INC.
ARTICLE I.
MEETINGS OF SHAREHOLDERS
1.1 Meetings. All meetings of the shareholders for the election of
Directors shall be held at the registered office of the Corporation or at such
other place as the Board may fix from time to time. Meetings of shareholders for
any other purpose may be held at such time and place, within or without the
State of Texas, as shall be stated in the notice or in a duly executed waiver of
notice.
1.2 Annual Meetings. An annual meeting of the shareholders, commencing with
the year following the adoption of these Bylaws, shall be held on January 20, if
not a legal holiday, and if a Sunday or legal holiday, then on the next weekday
following, at 10:00 a.m., or at such other date and time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which time the shareholders shall elect a Board of Directors, and
transact such other business as may properly be brought before the meeting.
1.3 Special Meetings. Special meetings of the shareholders, for any purpose
or purposes, may be called by the Chairman of the Board, the President, the
Secretary, the Board of Directors, or the holders of not less than one-tenth of
all of the shares entitled to vote at the meeting so called. No question may be
voted upon at a special meeting of the shareholders unless the notice of such
meeting states that one of the purposes of such meeting will be to act upon such
question except that the shareholders may waive such requirement in the manner
hereinafter provided.
1.4 Notice of Annual and Special Meetings of Shareholders. Written or
printed notice stating the place, day, and hour of the meeting and, in the case
of a special meeting, the purposes for which the meeting is called shall be
delivered not less than ten (10) days nor more than sixty (60) days before the
date of the meeting, either personally or by mail, by or at the direction of the
officer or persons calling the meeting, to each shareholder entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his or her
address as it appears on the share transfer records of the Corporation, with
postage prepaid. Such notice of the date, hour, and place, and, in the case of a
special meeting, the purposes of the meeting of the shareholders may be waived
by one or more shareholders by written waiver or waivers signed by the person or
persons entitled to such notice, whether before or after the meeting, or in any
other manner allowed by law.
1.5 Closing of Transfer Books and Fixing Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive a distribution
by the Corporation (other than a distribution involving a purchase or redemption
by the Corporation of any of its own shares) or a share dividend, or in order to
make a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action to be taken without a
meeting of shareholders), the Board may provide that the share transfer records
shall be closed for a stated period but not to exceed, in any case, sixty (60)
days. If the share transfer records shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such records shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the share transfer
records, the Board may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days and, in case of a meeting of shareholders, not less than ten (10) days
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken. If the share transfer records are not closed
and no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or shareholders entitled to
receive a distribution (other than a distribution involving a purchase or
redemption by the Corporation of any of its own shares) or a share dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of share transfer records and the stated period of closing has expired.
Unless a record date shall have previously been fixed or determined pursuant to
this section, whenever action by shareholders is proposed to be taken by consent
in writing without a meeting of shareholders, the Board may fix a record date
for the purpose of determining shareholders entitled to consent to that action,
which record date shall not precede, and shall not be more than ten (10) days
after, the date upon which the resolution fixing the record date is adopted by
the Board.
1.6 List of Shareholders. At least ten (10) days before each meeting of
shareholders, the officer in charge of stock transfer books shall prepare a
complete list of the shareholders entitled to vote at said meeting, in
alphabetical order, setting out the address of and the number of voting shares
held by each. For a period of ten (10) days prior to such meeting, such list
shall be kept on file at the registered office or principal place of business of
the Corporation and shall be subject to inspection by any shareholder at any
time during usual business hours. Such list shall be produced and kept open at
the time and place of the meeting during the whole time of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meeting of shareholders.
<PAGE>
1.7 Quorum. The holders of a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of the
shareholders; provided, however, in those instances where the law requires class
voting on a question, each class that is entitled to vote on such question shall
be considered separately in determining whether a quorum is present for
consideration of such question.
1.8 Vote Necessary for Decision. Unless the vote of a greater number is
required, by law or by the Articles of Incorporation, for the question under
consideration, the vote, at a meeting at which a quorum is present, of the
holders of a majority of those shares, represented at the meeting in person or
by proxy that are entitled to vote on the question under consideration shall
constitute the act of the shareholders. A director shall be elected only if the
director receives the vote of the holders of a majorty of the shares entitled to
vote in the election of directors and represented in person or by proxy at a
meeting of shareholders at which a quorum is present. Each outstanding share,
regardless of class or series, shall be entitled to one vote on each matter
submitted to a vote at a meeting of the shareholders, except to the extent that
the voting rights of the shares of any class or series are 1irnited or denied by
the Articles of Incorporation. Except in those instances where the law or the
Articles of Incorporation require class voting, there shall be no class voting
on any matter submitted to a vote at a meeting of shareholders. A shareholder
may vote either in person or by written proxy executed by such shareholder. No
proxy shall be valid after eleven (11) months from the date of its execution
unless otherwise provided in the proxy. Each proxy shall be revocable unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest, or unless otherwise made irrevocable by law.
1.9 Meeting by Conference Telephone. Subject to the notice provisions
herein, the shareholders of the Corporation may participate in and hold any
meeting of such shareholders contemplated by these Bylaws by means of a
conference telephone or similar communications device by which all persons
participating in the meeting can hear each other. Participation in a meeting by
conference telephone or similar device shall be deemed to be the equivalent of
presence in person at a shareholders meeting, except where a person participates
in the telephone conference for the express purpose of objecting to the
transaction of any business on the ground that the meeting was not lawfully
called or convened.
1.10 Written Consent in Lieu of Meetings. Any action required to be taken
at any annual or special meeting of shareholders of the Corporation, or any
action which may be taken at any annual or special meeting of the shareholders,
may be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holder or holders of shares having not less than the minimum
number of votes that would be necessary to take such action at a meeting at
which the holders of all shares entitled to vote on the action were present and
voted. Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders who did not consent in writing.
ARTICLE II.
BOARD OF DIRECTORS
2.1 Management. The powers of the Corporation shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, its Board of Directors.
2.2 Number of Directors. The number of Directors shall be such number as is
from time to time specified by resolution of the Board or shareholders;
provided, however, no Director's term shall be shortened by reason of a
resolution reducing the number of Directors; and further provided that the
number of Directors constituting the initial Board shall be one (1), but
following the merger, if any, between the Corporation and Fresh "N Lite, Inc., a
Delaware Corporation, the number shall be seven (7), and shall remain at such
number unless and until changed by resolution of the Board or shareholders as
aforesaid. Directors need not be residents of the State of Texas or shareholders
of the Corporation.
2.3 Election. At each annual meeting of the shareholders, the shareholders
shall elect a complete Board of Directors to hold office until the next
succeeding annual meeting and until successors shall have been elected and
qualified.
2.4 Removal of Directors. Any Director or the entire Board may be removed
from his or their position(s) as Director, either with or without cause, by a
vote of the holders of a majority of the shares then entitled to vote at an
election of Directors, at any special meeting of shareholders expressly called
for such purpose.
2.5 Resignation of Directors. Any member of the Board of Directors may
resign at any time. Such resignation shall be made in writing and shall take
effect at the time specified therein or, if no time is specified, at the time of
its receipt by the Chairman of the Board, the President, the Secretary, or the
Board of Directors. No acceptance of a resignation shall be necessary to make it
effective.
2.6 Vacancies. Any vacancy occurring in the Board may be filled by the
affirmative vote of a majority of the remaining Directors, though less than a
quorum, or by the shareholders at an annual or special meeting of the
shareholders called for that purpose. The successor so chosen shall be elected
for the unexpired term of his predecessor in office. Any directorship to be
filled by reason of an increase in the number of Directors from the number
elected by the shareholders shall be filled by election at an annual or special
meeting of shareholders called for that purpose, or by the Board for a term of
office continuing only until the next election of one or more directors by the
shareholders; provided that the Board may not fill more than two such
directorships during the period between any two successive annual meetings of
shareholders.
2.7 Regular Meetings. The Board of Directors shall meet each year
immediately after the annual meeting of the shareholders, at the same place that
the meeting of the shareholders was held for the purpose of organization,
election of officers, and consideration of any other business that may properly
be brought before the meeting. No notice of any kind to either old or new
members of the Board of Directors for such annual meeting shall be necessary.
Other regular meetings of the Board of Directors may be held without notice at
such time and place as shall from time to time be determined by the Board of
Directors.
2.8 Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board, President or Secretary, acting alone, or by
any two (2) Directors, acting jointly. Special meetings of the Board of
Directors may be held either within or without the State of Texas. Notice of the
place and time of any special meeting of the Board shall be given to each member
of the Board at least forty-eight hours prior to such meeting, by or at the
direction of the person or persons calling the meeting; provided, however, if
such notice is by mail, it shall be given at least 72 hours prior to such
meeting. Any notice to Directors shall be given either personally or by mail,
telephone, telex, telefacsimile, cable or telegram. Personal, telephone, telex
or telefacsimile notice to any Director shall be deemed to be given when such
notice is actually received by such Director. Notice to any Director by cable or
telegram shall be deemed to be given when dispatched to such Director's last
known address. Notice to any Director by mail shall be deemed given when
deposited in the United States mail, postage prepaid, addressed to such
Director's last known address
2.9 Waiver of Notice by Directors. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting. Any notice
provided for a meeting of the Board of Directors may be waived by a Director in
writing either before or after the meeting. Attendance at any meeting shall
constitute a waiver of any required notice of such meeting except where a
Director attends the meeting for the express purpose of objection to the
transaction of any business because said meeting is not lawfully called or
convened.
2.10 Quorum. A majority of the number of Directors fixed by these Bylaws
shall constitute a quorum for the transaction of business. The act of the
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
2.11 Meeting by Conference Telephone. Subject to the notice provisions
herein, the Board of Directors or the members of any committee designated by
such Board may participate in and hold a meeting of such Board or committee by
means of a conference telephone or similar communications device by which all
persons participating in the meeting can hear each other. Participation in a
meeting by conference telephone or similar device will be deemed to be the
equivalent of presence in person at such meeting except where a person
participates in the telephone conference for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
2.12 Actions of Board Without a Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or committee, as
the case may be. Such consent shall have the same force and effect as a
unanimous vote at a meeting and may be stated as such in any document or
instrument filed with the Secretary of State.
2.13 Transactions Involving Officers. Directors or Affiliates. If a
transaction of the Company involves an officer, director or affiliate, the
transaction must be approved by a majority of the disinterested directors. In
order to approve such a transaction the disinterested directors must find that
the Company entered into the transaction on terms that were no less favorable to
the Company than could have been reached through armslength negotiations with a
non-affiliated third party. For the purposes of this provision, disinterested
directors mean any director who does not have an interest in the transaction
requiring approval and who is not related to any party having an interest in the
transaction.
ARTICLE III
OFFICERS
3.1 Appointment and Term of Office. The officers of the Corporation shall
consist of a President and a Secretary. There may be additional officers
including one or more Vice Presidents, a Treasurer, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers,
assistants, and agents as the Board may from time to time appoint, none of whom
need be either a Director or a shareholder of the Corporation. One of the
Directors may be chosen Chairman of the Board. Except to the extent that a
contract of employment between the Corporation and an officer shall provide for
employment for a term in excess of one year, which contracts are authorized in
the discretion of the Board, each of such officers (except such as may be
appointed pursuant to the provisions of paragraph (h) of Section 3.2) shall be
chosen annually by the Board at its regular meeting immediately following the
annual meeting of shareholders and shall hold office until the next annual
meeting and until his successor is chosen and qualified, unless removed earlier.
One person may hold and perform the duties of any two or more of said offices.
3.2 Powers and Duties. The powers and duties of the officers shall be those
usually pertaining to their respective offices subject to the supervision and
direction of the Board and as follows:
(a) Chairman of the Board. The Chairman of the Board shall be the chief
executive officer of the Corporation and shall have general supervision of
the business of the Corporation and over its officers, subject, however, to
the control of the Board. The Chairman of the Board, when present, shall
preside at all meetings of the shareholders and shall preside at all
meetings of the Board. He may execute and deliver, in the name and on
behalf of the Corporation, deeds, mortgages, leases, assignments, bonds,
contracts, or other instruments authorized by the Board unless the
execution and delivery thereof shall be expressly delegated by these Bylaws
to some other officer or agent of the Corporation. He shall, unless
otherwise directed by the Board or by any committee "hereunto duly
authorized, attend in person or by substitute or by proxy appointed by him
and act and vote on behalf of the Corporation at all meetings of the
shareholders of any corporation in which the Corporation holds shares.
(b) President. The President shall be the chief operating officer of the
Corporation and shall, in the absence of the Chairman of the Board, preside
at all meetings of the shareholders and of the Board. He shall perform the
activities assigned to him by the Board or delegated to him by the Chairman
of the Board and, at his request or in his absence, shall perform as well
the duties of the Chairman of the Board's office.
(c) Vice Presidents. Vice Presidents shall perform the duties assigned to
them by the Board or delegated to them by the President and, in order of
seniority, at his request or in his absence, shall perform as well the
duties of the President's office. Each Vice President shall have the power
also to execute and deliver in the name and on behalf of the Corporation
deeds, mortgages, leases, assignments, bonds, contracts, or other
instruments authorized by the Board unless the execution and delivery
thereof shall be expressly delegated by these Bylaws or by the Board to
some other officer or agent of the Corporation.
(d) Secretary. The Secretary shall keep the minutes of the meetings of the
Board, of all committees, and of the shareholders, shall be custodian of
all corporate records and of the seal of the Corporation, and shall
ascertain that all notices are duly given in accordance with these Bylaws
or as required by law.
(e) Assistant Secretaries. The Assistant Secretaries, in the order of their
seniority, unless otherwise determined by the Board shall, in the absence
or disability of the Secretary or at the Secretary's request, perform the
duties and exercise the powers of the Secretary. They shall perform such
other duties and have such other powers as the Board may from time to time
prescribe.
(f) Treasurer. The Treasurer shall be the principal accounting officer of
the Corporation and shall have charge of all the corporate funds and
securities and shall keep a record of the property and indebtedness of the
Corporation.
(g) Assistant Treasurers. The Assistant Treasurers, in the order of their
seniority, unless otherwise determined by the Board, shall, in the absence
or disability of the Treasurer or at the Treasurer's request, perform the
duties and exercise the powers of the Treasurer. They shall perform such
other duties and have such other powers as the Board may from time to time
prescribe.
(h) Other Officers. The Board may appoint and employ such other officers,
agents, or employees as it may deem necessary for the conduct of the
business of the Corporation. The chief executive officer may also employ
such agents or employees as he deems necessary for the conduct of the
business of the Corporation.
3.3 Resignations. Any officer may resign at any time by giving written
notice thereof to the Chairman of the Board, the President or to the Board. Any
such resignation shall take effect as of the date received by the Chairman of
the Board, the President, the Secretary or the Board of Directors unless some
other date is specified therein, in which event it shall be effective as of that
date. The acceptance of such resignation shall not be necessary to make it
effective.
3.4 Removal. Any officer may be removed at any time, either with or without
cause, by the Board.
3.5 Vacancies. A vacancy in any office arising at any time from any cause
may be filled by the Board.
3.6 Salaries. The salaries of all officers shall be fixed from time to time
by the Board and no officer shall be precluded from receiving a salary because
he is also a Director of the Corporation.
ARTICLE IV.
INDEMNIFICATION
To the fullest extent allowed by applicable law, including without
limitation, the Texas Business Corporation Act, as it may be amended from time
to time, the Corporation may advance expenses to and indemnify Directors,
officers, employees, agents, and other persons who may be advanced expenses and
indemnified under applicable law.
ARTICLE V.
MISCELLANEOUS
5.1 Certificates of Stock. Every shareholder shall be entitled to a
certificate or certificates, in such form as may be determined by the Board,
representing all shares to which the shareholder is entitled.
5.2 Fiscal Year. The fiscal year of the Corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.
5.3 Dividends. The Board of Directors may from time to time declare, and
the Corporation may pay, dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and its Articles of Incorporation.
5.4 Seal. Unless the Board determines otherwise, the Corporation shall have
a seal, the form of which is impressed immediately following the end of these
Bylaws, and said seal may be used by causing it, or a facsimile thereof, to be
impressed or affixed or reproduced. Every officer is authorized to affix,
impress, or reproduce the seal.
ARTICLE VI.
AMENDMENTS TO BYLAWS
These Bylaws may be altered, amended, or repealed and new Bylaws adopted by
the shareholders at any meeting, regular or special, of the shareholders, or by
the Board of Directors at any meeting, regular or special, of the Board of
Directors. Except in the case of a special meeting of the shareholders, no
notice to the Directors or shareholders, as the case may be, of the proposal
shall be necessary.
[SEAL]
