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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB/A
(AMENDMENT No. 1)
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
ONTV, Inc.
(Formerly known as LA GROUP, INC.)
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(Name of Small Business Issuer in Its Charter)
DELAWARE 16-1499611
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(State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification Number
30 Corporate Woods, Suite 280, Rochester, New York 14623
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(Address of Principal Executive Offices) (Zip Code)
716-426-5394
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(Issuer's Telephone Number)
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001
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(Title of Class)
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(Title of Class)
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TABLE OF CONTENTS
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Forward Looking Statements..........................................................................Page 3
Description of Business.............................................................................Page 4
Risk Factors.......................................................................................Page 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................Page 17
Description of Property............................................................................Page 20
Security Ownership of Certain Beneficial Owners
and Management...............................................................................Page 20
Directors and Executive Officers...................................................................Page 21
Executive Compensation.............................................................................Page 22
Certain Relationships and Related Transactions.....................................................Page 22
Description of Securities..........................................................................Page 24
Market Price of Common Stock.......................................................................Page 25
Legal Matters......................................................................................Page 25
Changes and Disagreements with Accountants.........................................................Page 26
Recent Sales of Unregistered Securities............................................................Page 26
Indemnification of Directors and Officers..........................................................Page 26
Financial Statements...................................................................................F-1
Index to Exhibits..................................................................................Page 45
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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Report contains "forward-looking" statements regarding potential
future events and developments affecting the business of the Company. These
forward looking statements involve risks and uncertainties and are usually
accompanied by words such as "believes," "anticipates," "plans," "expects," and
similar expressions. Our actual results could differ materially from those
expressed or implied by such forward-looking statements as a result of certain
factors, including the risk factors described above and elsewhere in this
Report. Such statements relate to, among other things, (i) competition for
customers for its products and services; (ii) the uncertainty of developing or
obtaining rights to new products that will be accepted by the market and the
timing of the introduction of new products into the market; (iii) the limited
market life of the Company's products; and (iv) other statements about the
Company or the direct response industry.
The Company's ability to predict results or the effects of any pending
events on the Company's operating results is inherently subject to various risks
and uncertainties, including competition for products, customers and media
access, the uncertainty of developing or obtaining rights to new products that
will be accepted by the market, the limited market life of the Company's
products; and the effects of government regulations. See MANAGEMENT'S DISCUSSION
AND ANALYSIS.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Form and year of organization:
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ONTV, Inc., formerly known as LA Group, Inc. (the Company) was formed in
the state of Delaware on 2/29/96, in order to create an entity with which to
form a reverse merger with a public company, Kent Toys, Inc.
Kent Toys, Inc. (Kent), a non-reporting company, was incorporated in Utah
in 1977, had been inactive for several years. Through a series of transactions,
Kent merged with the Company on 3/15/96. As part of the merger, the Company
assumed Kent's assets and liabilities, and issued one share of the Company's
stock for each share of Kent stock. Upon the completion of this transaction, the
Company became public and all Kent stock was then canceled.
On January 6, 1999, the Company formed a wholly owned subsidiary, Seen On
TV, Inc., a New York corporation, for the purpose of selling household, health,
and beauty products over the Internet. This subsidiary currently is responsible
for the electronic retailing segment of the Company's business.
On January 14, 2000, as described elsewhere in this statement, the
Company purchased the domain name, AsSeenOnTV.com. The Company plans to develop
this asset into a major website for e-commerce, and develop the site as an
entry point or portal for consumers seeking to purchase products that they have
seen on television.
From inception to date, the Company has not been involved in any
bankruptcy, receivership, or similar proceeding.
Mergers:
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As part of the merger with Kent, the Company, on 3/15/96, effected a 1
for 300 share reverse split of the Company common stock. On 4/8/96, the Company
merged with LA Distribution, Inc. (Distribution), a now inactive New York
corporation, formed 8/30/95. The Company issued a total of 10,000,000 shares of
Company stock on a 1 for 1 exchange of shares with Distribution
On 6/1/98, the Company merged with What A Product, Inc., an Arizona
corporation formed 2/27/93, which was a company involved in the design,
manufacturing, sales and marketing of products through direct response mediums,
primarily quality value channel. As consideration for the merger, the Company
issued 790,000 shares of the Company's common stock to acquire 100% of the
outstanding shares of What A Product, Inc.
OUR BUSINESS
Principal products or services and their markets.
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The Company's original operating business is somewhat different from
its present business. From the time of inception through December 1997, the
Company, through it's subsidiary, LA Distribution, Inc., was involved in retail
sales of products that were viewed by customers on television infomercials. Due
to the difficulties of selling this type of product in the traditionally high
rent retail environment, the Company ceased its conventional retail operations
to begin to develop the sale of those same type of products though its own
designed sites on the World Wide Web.
The Company presently has two main areas of business. The Company
designs and markets web sites for other businesses and derives income from
revenue sharing agreements. As described elsewhere in this statement, the
purchase of the domain name, "AsSeenOnTV.com" will also be operated by the
parent company and management expects to derive revenue from the marketing of
this portal. The second main area of business relates to Seen On TV, Inc. This
wholly owned subsidiary markets and sells products, on the Internet, to the
general public.
Through the Seen On TV, Inc. subsidiary, the Company operates the
website "SeenOnTV.com". "SeenOnTV.com is a destination website offering the
most sought after "as seen on tv" products direct to the consumer via the
Internet. The most sought after products were measured in Direct Response TV
Magazine and compiled by industry monitoring company Jordan-Whitney. The
"SeenOnTV.com" web site currently derives income from buying at distributor
prices and selling its products through its wholesale and retail customers. The
Company's management has over twelve years of experience in the Direct Response
Television Industry and maintains a wide range of relationships with many
direct response television marketing companies and major manufacturers who
provide products to the direct response industry.
Specific consumer products, through Seen On TV, Inc., which the Company
markets include a wide variety of categories, i.e.: health, beauty, weight loss,
kitchen, sporting goods, and household appliances, etc. Products sold by Seen On
TV, Inc. include, but are not limited to: Ronco Showtime Rotisserie & BBQ,
Popeil Pastamaker, Ronco Food Dehydrator, Tae-Bo video tapes, IGIA Wonder Forms,
Popeil Pocket Fisherman, IGIA IonAir, Tap Light, Egg-a-Part, IGIA Platinum nail,
Metabolize, Oxiclean, Orangeglow, Shelf Master, Sortmans Dream Knifes, True
Motion Lures, Vibatouch Fingertip Massager, QRB, Duzzit Handy Hanger, Eagle Eye
Sun Glasses, Hygionic Tooth, Steamin Iron, IGIA CelluLift, Instagone, Iron
Wonder, IGIA Epielle, Proactiv Solution, PVA Mop, Quick-n-Brite, Safety Can,
Silver lighting, Sweet simplicity and many more.
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The Company has recognized the enormous value in the phrase "as seen on
tv" causing the direct response industries products to be branded as "as seen on
tv" by the retail customer. As a response to the exponential growth of Internet
marketing and sales, the Company has secured (as described elsewhere in this
statement), and is developing, the portal "AsSeenOnTV.com" to become the
Internet gateway to the direct response television consumer. The domain
"AsSeenOnTV.com" will link business to business, and business to consumers, to
direct response television marketing companies, major manufactures and "as seen
on tv" retailers.
"AsSeenOnTV.com" anticipates that it will derive the majority of its
revenues from transaction fees for linking, banner advertising, feature product
advertising, new product test marketing and streaming Infomercial videos.
Because they may be under short-term contracts, they are difficult to forecast
accurately. The expense levels are based in part on expectations of future
revenue and, to a large extent, are fixed.
The Company expects that it will experience seasonality in its
business, reflecting a combination of seasonal fluctuations in Internet usage
and traditional retail seasonality patterns. Internet usage and the rate of
Internet growth may be expected to decline during the summer. Further, sales in
many of the traditional retail industries are significantly higher in the fourth
calendar quarter of each year than in the preceding three-quarters. Management
believes the Company's sales may follow a similar pattern.
The Company purchases a substantial majority of its products from a
multitude of vendors, and, therefore, the Company carries minimal inventory and
relies, to a large extent, on rapid fulfillment from these and other vendors.
The Company has no long-term contracts or arrangements with any of its vendors
that guarantee the availability of merchandise, the continuation of particular
payment terms or the extension of credit limits. There can be no assurance that
the Company's current vendors will continue to sell merchandise to the Company
on current terms or that the Company will be able to establish new, or extend
current, vendor relationships to ensure acquisition of merchandise in a timely
and efficient manner and on acceptable commercial terms. If the Company were
unable to develop and maintain relationships with vendors that would allow it to
obtain sufficient quantities of merchandise on acceptable commercial terms, its
business, prospects, financial condition and results of operations would be
materially adversely affected.
The Company's success, in particular its ability to successfully
process transactions, receive and fulfill orders and provide high-quality
customer service, largely depends on the efficient and uninterrupted operation
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of its computer and communications hardware systems. Substantially all of the
Company's computer and communications hardware is located at a single leased
facility in Rochester, New York. The Company's systems and operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events. The
Company does not presently have redundant systems or a formal disaster recovery
plan and does not carry sufficient business interruption insurance to
compensate it for losses that may occur. Despite the implementation of network
security measures by the Company, its servers are vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions, which could
lead to interruptions, delays, loss of data or the inability to accept and
fulfill customer orders. The occurrence of any of the foregoing risks could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
In addition to the sale of products over the Internet, the Company is
engaged in website marketing and development. Presently, this entity has only
one customer, Ronco Inventions, Inc., to which it provides services under a
letter agreement that expires in March 2002. Terms of the letter agreement are
such that the Company will be paid a specific commission for Ronco products sold
by the Company. The commission rate varies by the type of product and may
change from time to time depending on market demand. The three year term ends
on March 14, 2002 and is subject to a thirty day termination clause by either
party. Management believes that the agreement is working and does not
anticipate material changes prior to the end of the term. Through its own
websites, the Company markets general household, cosmetic, exercise, health and
beauty, automotive and other consumer products that are generally initially
advertised on television. The Company's emphasis is on products that have been
introduced to the marketplace through television infomercials. Infomercials are
paid television advertisements of varying lengths aired on television stations
in virtually every market in the United States. In addition, as part of its
Website hosting and design activity, the Company provides advisory service to
firms interested in marketing products through the World Wide Web. The Company
can be described as an e-commerce Business to Business (B2B) and Business to
Consumer (B2C) entity.
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The Company's goal is to be recognized as a worldwide leader in the
electronic retailing industry. As this industry continues to rapidly expand, the
Company realizes the exciting stage that has developed. As the Company moves
through the maturation process, it will be positioned to survive the falling out
process that will occur with lessor developed competitors. Though strategic
alliances with direct response marketers and infomercial companies, the Company
is pursuing a business strategy focusing on increasing the utilization of its
domestic relationships, securing and marketing innovative consumer products to
increase existing product lines, and engineering an efficient business model for
the conduit of a worldwide direct response business. The company also intends to
utilize its assets such as its customer lists in order to realize the true
value thereon. The Company has extensive email, opt-in mail and customer lists.
The Company intends to market directly to these people and possibly to make
these lists available for other advertisers.
The Company intends to pursue expansion of its Internet operations in
order to capitalize on the consumer brand-awareness created by the Company's
"AsSeenonTV.com" web site. The Company believes that the product exposure
enables the Company to utilize distribution channels without incurring any of
the additional advertisement costs that other consumer product companies may
incur.
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The Company has developed considerable expertise in the area of web
design and development of the associated shopping carts for use in e-commerce.
The Company's most dramatic success has come from the redesign and marketing of
a new website for Ronco Inventions, Inc., one of the foremost informercial
marketing companies. Prior to the Company taking on this website, Ronco
generated approximately $25,000 in revenue for the calendar year 1998. The
Company took over the website at a time when Ronco had launched a very
successful new product, the Showtime Rotisserie and BBQ unit. A combination of
the newly designed website, and Ronco's new product, resulted in website sales
of nearly $2,000,000 for calendar year 1999. While this result is
extraordinary, management believes similar successes may be available or
possible with other customers. The revenue sharing agreement with Ronco expires
on March 14, 2000.
The company intends to pursue expansion of its electronic retail
operations in order to capitalize on the consumer brand-awareness created by the
publics' awareness of the "As Seen On TV" logo.
At this stage of development, management feels the Company may be
properly described as in its infancy. The Company launched it new business plan,
and has generated increasing revenues. After consecutive periods of operating
losses, the Company, during the June 30, 1999 fiscal year, began to generate
profits. It is expected that increasing revenues will fund continuing operations
in substantial part, supplemented by normal commercial borrowing, such that
capital formation or augmentation would be secondary considerations in relation
to the Company's ability to sustain itself as a going concern. See further
discussion in Management's Discussion and Analysis.
Subsequent to the January 31, 2000 filing of the Company's
registration statement, the Company contacted its shareholders for approval of
several items. This Consent of Stockholder vote was done in lieu of a
previously proposed Shareholders meeting. Management determined that the
Shareholders' Meeting should be rescheduled until after the end of the current
fiscal year. Amendment 1 to the Registration Statement has been updated to
reflect that change, as well as by documenting the issues voted upon by the
shareholders in the Consent of Stockholder document.
The issues voted upon by the shareholders were: 1) Change of the
Company name, from LA Group, Inc., to ONTV, Inc.; 2) Increase of the number of
authorized shares of common stock of the corporation, from 20,000,000, to
100,000,000 (80,000,000 shares Class A and 20,000,000 shares Class B); 3)
Increasing the number of authorized shares of preferred stock, from 2,000,000,
to 5,000,000; and 4) Ratification of all acts and deeds of the Officers and
Directors of the Corporation from the date of its inception through January 31,
2000.
On March 8, 2000, the shareholders consent was tabulated, and all four
issues were approved. As a result of this vote, the shareholders have
authorized the name change, along with the other issues. The Certificate of
Amendment of the Certificate of Incorporation was filed on March 14, 2000 with
the Delaware Secretary of State, and the capitalization has been increased as
set forth.
After results of the shareholder vote on March 8, 2000, the Company was
authorized to change its name from LA Group, Inc., to ONTV, Inc. The purpose of
this action is to better reflect our activity, to help define our clients and
advertisers, and to tie our stock name to our authorized stock symbol.
DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES
The Company distributes its products through generally recognized
channels and utilizes various delivery services. Product is primarily shipped by
United Postal Service (UPS), and utilizes both Federal Express and the US Postal
Service on an as needed basis. Some product is shipped directly from the
manufacturer or developer to the end customer. Some products are shipped
directly by the company. In the case of website development and advisory
services, no distribution is required other than through electronic means.
RECENT ACQUISITION OF DOMAIN NAME
On 1/14/00, the Company entered into an agreement with the shareholders
of Conrad Promotions, LLC, a Tennessee Limited Liability Company. The agreement
calls for the Company to acquire the domain name "AsSeenOnTV.com", for a
purchase price of Five Million dollars ($5,000,000). The consideration paid by
the Company includes cash and a promissory note, with payments due at various
times from closing until fifteen months after closing. The note will be
collateralized by 2.1 million shares of Company stock and by the domain name.
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The registered domain name "AsSeenOnTv.com" name has never been
activated or tied to a website. A domain name is a singularly unique "address"
used as part of the World Wide Web to identify locations on the web. The Company
believes that its purchase of, and thus its ownership of, the domain name is a
significant, material asset. The company intends to develop the yet undeveloped
domain name into a major website for e-commerce, and develop the site as an
entry point or portal for consumers seeking to purchase products that they have
seen offered on television. By utilizing management's knowledge of the
infomercial and seen on TV products, management anticipates being able to offer
a variety of products and company access through the portal site
(AsSeenOnTV.com). In addition, direct sales will occur for products on this new
site. Management intends to develop other revenue streams from this acquisition.
The AsSeenOnTV.com site will generate revenues from product sales, sale of
banner advertising, sale of highlighted products, development of new products
from an inventors forum located at the site, rental of site real estate for
electronic infomercial viewing, affiliate programs as well as mail/email list
rentals.
The acquisition of the AsSeenOnTV.com name will mean that the Company
will benefit from its own advertisements, traditional trade use of the name and
random site access from those web surfers who utilize the name. In addition,
given the unique name, search engines are expected to rank the site very high.
Management believes proper development of the AsSeenOnTV.com site will result
in substantial growth to the company. It intends to sell banner advertisements,
as seen on TV products, close out items and other items. In addition,
management is designing a unique search pattern for the new site that will
include products, product spokespersons, and companies.
The Company has entered into marketing agreements with several
Internet companies, including America On Line, Netscape, Compuserve, among
others. These are not material contracts, but merely agreements allowing the
Company to advertise on those specific websites.
As part of its strategy, management anticipates an aggressive
television and radio advertising campaign to "drive traffic" to the
www.AsSeenOnTv.com site.
The Company immediately began to develop the new website, and after
beta testing, launched the new site, www.AsSeenOnTV.com, on March 2, 2000.
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COMPETITIVE BUSINESS CONDITIONS
Competition in the Electronic Retailing Industry is intense and may be
expected to remain so for some time to come. There are other larger and
well-established electronic retailers, with whom the Company must compete. The
Company competes with a large number of consumer product companies and retailers
who have substantially greater financial, marketing and other resources than the
Company, some of which have commenced, or indicated their intent to conduct,
direct response marketing. Products similar to the Company's products may be
sold in department stores, pharmacies, general merchandise stores, and through
magazines, newspapers, direct mail advertising, and catalogs. It is management's
opinion that some, if not all, of its major competitors may be better and longer
established, better financed, and with enhanced borrowing credit based on
historical operations, and enjoy substantially higher revenues than does the
Company, currently. As a relatively new entrant into this marketing industry,
the Company relies on the skill, experience and innovative discernment of
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management in the hope that its judgment will provide it a competitive
advantage. The Company's major competitors are, among others: Guthy Renker
Corp. and Media Group Incorporated. These two companies are two of our many
suppliers. Anyone that is a reseller of product similar to the product the
Company handles may be deemed a competitor to the Company. Cyberbrands.com,
Connecticutsbest.com, Smdistributers.com, Tvgadgets.com, Imall.com, and
Planetcybermall2.com. are examples of this type of reseller. See further
discussion in the Risk Factors section of this statement.
SOURCES OF PRODUCTS
The company purchases no raw materials. However, through its Seen On
TV, Inc. subsidiary, it purchases product for resale. These products, as
previously described, are purchased from industry wide distributors, such as
Tactica, On-Tel, Media Group, Guthy Renker, QRB, and Dental Systems, among
others.
DEPENDENCE ON MAJOR CUSTOMERS
Prior to the previously described contractual agreement with the
infomercial customer, Ronco Inventions, Inc., all company revenue was derived
from retail sales, and did not have dependence on any one customer. As a result
of hosting Ronco's web site, beginning in January 1999, 30.3% of the revenue
recorded by the Company for fiscal year ending June 30, 1999 was derived from
this one customer. In addition, for quarters ending September 30, 1999, and
December 31, 1999, revenue from this same one customer was 66.6% and 71.7%,
respectively. The Company presently has no other major customers.
PATENTS AND TRADEMARKS
By virtue of its acquisition, in 1998, of What a Product, Inc., LA
Group, Inc. acquired ownership to the following trademarks: What-a Razor(TM),
What-a Spoon(TM), What-a Tray(TM), What-a-Carver(TM), What-a Loveseat(TM)and
What-a-Couch(TM). In addition, along with one other independent company, the
Company owns the patent granted on the What-a-Saw. This patent is not likely to
make a material contribution to the future financial results of the Company.
The Company generates a revenue stream as it receives a royalty, or commission,
from Coordinated Strategic Alliances, Inc. (CSA) of Chester, New York on any
sales by CSA as follows:
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PRODUCT ROYALTY/COMMISSION
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What-a-Saw(TM) $1.00
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What-a-Saw Deluxe(TM) $1.00
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Slide Lock What-a-Saw(TM) $0.20
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What-a-Razor(TM) $0.10
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What-a-Chair(TM) $0.10
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What-a-Chair Deluxe(TM) $0.05
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Twogether What-a-Chair(TM) $0.10
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What-a-Tray(TM) $1.00
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What-a-Carver(TM) $0.50
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What-a-Loveseat(TM) $0.50
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What-a-Couch(TM) $0.50
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The Company also owns the broader registered trademark What-A(TM)
serial number 75/410219.
The Company currently owns or controls the following Internet domains:
What-A.com, What-A-Product.com, Whataproduct.com, AsSeenOnTV.com,
iAsSeenOnTV.com, i-AsSeenOnTV.com, eAsSeenOnTV.com, e-AsSeenOnTV.com,
ASeenOnTV.com, SeenOnTV.com, iSeenOnTV.com, i-SeenOnTV.com, eSeenOnTV.com,
e-SeenOnTV.com, WeEscrow.com and LAGroupInc.com.
The company owns no licenses, franchises, concessions, and has not
entered into any labor or bargaining contracts.
GOVERNMENTAL APPROVAL
The Company needs no government approval for its principal products or
services.
GOVERNMENTAL REGULATIONS
Aspects of the Company's business that are subject to governmental
regulation include federal and state taxing authorities. In addition to the
federal and franchise taxing authorities, the Company collects and remits sales
tax in the one state in which it has a physical presence. The Company is
prepared to collect sales taxes for other states, if laws are passed requiring
such collection. The Company does not believe that a change in the tax laws
requiring the collecting of sales tax will have a material adverse effect on the
Company's financial condition or results of operations.
Government regulation and legal uncertainties pertaining to the
Internet could hurt the business of ONTV, Inc.
Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws, could decrease the demand for
the Company's services, increase its cost of doing business or otherwise have a
material adverse effect on its business. There is, and will likely continue to
be, an increasing number of laws and regulations pertaining to the Internet.
These laws or regulations may relate to liability for information retrieved from
or transmitted over the Internet, online content regulation, user privacy,
taxation and the quality of products and services. Furthermore, the growth and
development of electronic commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on electronic
commerce companies, as well as companies like ONTV, Inc. that provide
electronic commerce services.
Recently adopted legislation provides that, prior to October 2001, a
state cannot impose sales taxes on products sold on the Internet unless those
taxes could be charged on non-Internet transactions involving the same products.
During this moratorium, it is possible that taxing mechanisms may be developed
that would, following the moratorium, impose increasing sales and similar tax
burdens on the Company. If these burdens are placed on ONTV, Inc., it may
have a negative effect on its financial condition. In addition, foreign
jurisdictions may claim that ONTV, Inc. is subject to taxation if it
conducts transactions with their citizens.
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RESEARCH AND DEVELOPMENT
The Company has incurred no research and development costs in the past,
however, management does not rule out such unforeseen costs occurring in the
future.
ENVIRONMENTAL LAWS
Through the present time, the Company has incurred no costs as a result
of complying with environmental laws. However, with any changes in current laws,
there is always a potential for some such costs in the future.
EMPLOYEES
The Company, as of January 1, 2000, had one full time employee and
three contract employees who provide accounting, financial, and technical
services to the Company on an as needed basis. None of the employees are covered
by collective bargaining agreements and management considers relations with its
employees to be good. In addition, the Company utilizes paid consultants and
advisors.
DEPENDENCE ON KEY EMPLOYEES
The Company believes that its success will depend to a significant
extent upon the efforts and abilities of a small group of executive officers,
and in particular on Daniel M. Fasano, the Company's Chief Executive Officer.
The loss of the services of one or more of these key personnel could have a
material adverse effect on the Company's future business, financial condition
and results of operations. In addition, the Company's future success will depend
upon its ability to continue to attract and retain qualified technical and
management personnel. There can be no assurance that the Company will be
successful in attracting and retaining such personnel.
REPORTS TO SECURITY HOLDERS
The purpose of the registration statement is to become a fully
reporting company. As such, the Company intends to provide an annual report to
security holders, which will include audited financial statements.
Upon satisfactory completion of the registration process, the Company
intends to file all required reports with the Securities and Exchange
Commission.
The public may read and copy any materials that the Company files with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549. The public may obtain information on the Company from the
Public Reference Room by calling the SEC at 1-800-SEC-0330. As the
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Company intends to be an electronic filer, the SEC maintains an Internet site
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The SEC site address
is: http://www.sec.gov. In addition, the public may contact the Company's own
Internet site at http://www.lagroupinc.com.
RISKS RELATED TO THE INTERNET INDUSTRY
ONTV, Inc.'s business is very difficult to evaluate because its
operating history is limited.
In January 1999, the Company began operations in electronic retailing,
through its wholly owned subsidiary, Seen On TV, Inc. In addition, the Company,
through its parent, ONTV, Inc., began web site hosting and development
during the same period. Accordingly, there is very limited information about the
Company with which to evaluate its business, strategies, and performance. In
assessing the risks associated with the Company, one should consider the risks,
expenses and uncertainties that an early stage company like ONTV, Inc.
faces, particularly in the new and rapidly evolving Internet market.
ONTV, Inc. may not be able to compete effectively against its
current and potential competitors.
ONTV, Inc. competes with a number of other companies that provide
electronic retailing, web site design and hosting over the Internet. Some of
these competitors may have greater financial, technical, and marketing resources
than the Company has. This may allow them to devote greater resources to the
development and promotion of their products and services. In addition, some of
these competitors may offer a broader base of products and services that may
attract consumers to their websites. This could result in reduced market
penetration for the Company's products and services. In addition, because the
barriers to entry are low, new competitors may emerge and rapidly acquire market
share.
ONTV, Inc. faces potential electronic commerce related liabilities
and expenses that may be costly.
Arrangements with electronic commerce merchants may expose the Company
to legal risks and uncertainties, including potential liabilities to consumers
of third party products and services. Although ONTV, Inc. carries general
liability insurance, its insurance may not cover potential claims of this type
or may not be adequate to indemnify ONTV, Inc. for all liability that may be
imposed.
Some of the risks that may result from these arrangements with businesses
engaged in electronic commerce include:
14
<PAGE> 15
- - Potential liabilities for illegal activities that may be conducted by
participating merchants;
- - Product liability or other tort claims relating to goods or services
sold through third-party commerce sites;
- - Consumer fraud and false or deceptive advertising or sales practices;
- - Breach of contract claims relating to merchant transactions;
- - Claims that materials included in merchant sites or sold by merchants
through these sites infringe third-party patents, copyrights,
trademarks or other intellectual property rights, or are libelous,
defamatory or in breach of third-party confidentiality or privacy
rights; and
- - Claims relating to failure of merchants to appropriately collect and
remit sales or other taxes arising from electronic commerce
transactions.
Even if any asserted claims do not result in material liability,
investigating and defending claims could be costly and may have a material
adverse effect of the Company's business, operating results or financial
condition.
The growth of ONTV, Inc. will depend on its ability to develop its
brand name.
The Company believes that broader brand recognition and a favorable
consumer perception of the "As Seen On TV" brand is essential to its future
success. Accordingly, the Company intends to pursue an aggressive
brand-enhancement strategy, which will include mass market and multimedia
advertising, promotional programming, infomercials, and public relations
activities. ONTV, Inc. intends to incur significant expenditures on these
activities. These expenditures may not result in a sufficient increase in
revenue to cover the advertising and promotional expenses. In addition, even if
brand recognition increases, the number of consumers, advertisers or customers
may not increase. If ONTV, Inc.'s brand enhancement strategy is
unsuccessful, these expenses may never be recovered and the Company may be
unable to increase future revenues.
If ONTV, Inc. is unable to expand its products and services,
profits may not continue.
To increase its revenues, the Company will need to expand its
operations by promoting new or complementary products and by expanding the
breadth and depth of its services. In particular, the Company's future success
will depend largely on its ability to increase revenues through the facilitation
of electronic commerce transactions and attracting and maintaining visitors to
15
<PAGE> 16
the "AsSeenOnTV.com" website. The market for electronic commerce services is
extremely competitive. The expansion of the Company's business to include
providing other products and services via the Internet will require additional
development resources. This expansion may strain the Company's managerial,
financial, and operational resources. The Company's expansion into new product
and service offerings may not be timely or may not generate sufficient revenues
to offset their cost. If this occurs, the Company's business, operating results
and financial condition will be materially adversely affected.
LA Group, Inc.'s success depends in part on the growth of electronic
commerce and consumer acceptance of the Company's products and services.
The future success of ONTV, Inc. is dependent on the continued
growth of electronic commerce generally, and the increased market share of the
Company, offered via the Internet. The continued growth of these areas depends
on various factors, many of which are outside the Company's control. These
factors include:
- - The continued acceptance and effectiveness of the Internet as a medium
for transactions in business and consumer related products and
services;
- - The performance and reliability of the Internet to facilitate
electronic commerce transactions;
- - Security and authentication concerns with respect to the transmission
over the Internet of confidential information, such as credit card
numbers, and attempts by unauthorized computer users, so-called
hackers, to penetrate online security systems; and
- - Privacy concerns, including those related to the ability of websites to
gather user information without the user's knowledge or consent.
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of the financial condition and results of
operations of ONTV, Inc. should be read in conjunction with the consolidated
financial statements and the notes to those statements included elsewhere in
this statement. This discussion contains forward-looking statements that involve
risks and uncertainties. The actual results of the Company may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, such as those set forth elsewhere in this Report.
RESULTS OF OPERATIONS
Fiscal Period Ended December 31, 1999 vs. Fiscal Period Ended December
31, 1998
Revenue for the fiscal quarter ended December 31, 1999 was $125,551, an
increase of approximately 1050% over revenue of $10,915 for the comparable
period in 1998. Revenue for the six months ended December 31, 1999 was $209,754,
an increase of approximately 1173% over the comparable six-month period in the
prior year. Such increases were due to the Company's hosting of Ronco
Inventions, Inc.'s web site, and the sale of product over the Internet by its
Seen On TV, Inc. subsidiary. The sales by Seen On TV, Inc., as well as the
hosting of the web site by ONTV, Inc., for the quarter ending December 31, 1999
is inclusive of the seasonal holiday business, and management feels that the
volume due to this season related business will not continue throughout the
final two quarters of this fiscal year ending June 30, 2000. Comparatives
between the two separate business segments for the comparable periods are not
possible, as neither business segment was active in the prior fiscal year.
Cost of revenue, as a percentage of revenue, was 14% for the fiscal
quarter ended December 31, 1999 as compared with 9% for the comparable period in
17
<PAGE> 18
the prior year, and approximately 15% and 17% for the six month fiscal periods
ended December 31, 1999, and 1998. Such increases are due to the commencement of
the sales of product over the Internet, which involved the sale of merchandise
acquired at less than normal cost during the prior fiscal year. Thus, it is the
opinion of management that the low cost of revenue percentages seen in the prior
fiscal year are not reflective of expectations in the future.
Gross profit, as a percentage of revenue, was 86% for the fiscal
quarter ended December 31, 1999 as compared with 81% for the comparable period
in the prior year, and approximately 85% and 83% for the six month fiscal
periods ended December 31, 1999, and 1998.
Operating expenses, as a percentage of sales, were approximately 44%
for the fiscal quarter ended December 31, 1999, as compared with approximately
56% for the comparable quarter ended December 31, 1998, and approximately 41%
for the six month period ended December 31, 1999, contrasted with 78% for the
comparable period ended December 31, 1998. Included in operating expenses during
the periods ending December 31, 1999 were normal costs related to both the
previously described new business segments which were not in operation during
the periods ending December 31, 1998. The fiscal 1999 improvements are
attributable to the increase of revenues with the expenses generally remaining
more stable. It is management's belief that these expenses, as a percentage of
sales will increase during the remainder of the fiscal year, due to the salaries
and related expenses of the new management team, along with the necessary costs
associated with the acquisition of the domain name, AsSeenOnTV.com.
The net income for the six months ended December 31, 1999 was $87,372,
or $.0057 per share, compared with net income of $1,223, or $.000 per share, for
the six months ended December 31, 1998.
Fiscal Year Ended June 30, 1999 vs. Fiscal Years Ended June 30, 1998
and June 30, 1997
Revenue for the fiscal year ended June 30, 1999 was $129,050, an
increase of approximately 167% over fiscal 1998 revenue of $48,311, and
approximately 77% over 1997 fiscal year revenue of $72,812. Such increases were
in each instance attributable to the Company's development of new businesses,
specifically Internet sales and web site hosting. The retail sales business,
conducted by LA Distribution, Inc., was phased out at the end of December 1997.
Comparison between the two separate business segments are not possible, as
neither of these current specific revenue generators activities were active
during the prior fiscal year.
Cost of revenue, as a percentage of revenue, was 20% for fiscal 1999,
as compared with approximately 27% and 53% for the fiscal years ended June 30,
1998 and June 30, 1997, respectively.
18
<PAGE> 19
Gross profit, as a percentage of revenue, was 80% for the fiscal year
ended June 30, 1999, as compared with 73% and 47% for the fiscal years ended
June 30, 1998 and June 30, 1997, respectively.
Operating expenses, as a percentage of revenue, approximated 63% for
the fiscal year ended July 31, 1999, as compared with 109% and 157% for the
fiscal years ended June 30, 1998 and 1997, respectively. The decreases are
attributable to both the increase in revenue volume and decrease in costs
primarily related to the elimination of the retail business.
Net income, for the fiscal year ending June 30, 1999, was $20,807, or
$.001 per share, as compared to ($18,574) and ($81,307), or ($.0034) and
($.0172) per share, for fiscal years ended June 30, 1998 and 1997, respectively.
IMPACT OF INFLATION
The Company believes that it will be able to offset the effects of
inflation. Although the Company does not purchase, by contract, any product for
resale, the Company sells all products on an individual basis. Any increase in
costs to the Company can be immediately passed on to the customer. Although
inflation could have an impact on the volume of sales, the Company could combat
this by adjusting product mix, or by the change of product offered for sale.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has been able to finance operations
primarily through funds generated by operations, and by non-interest bearing
loans both from wholly owned subsidiaries and from an executive officer.
The Company has not needed financing from traditional sources such as
banking institutions, and as such, other than the note resulting from the
purchase of the domain name, as described elsewhere within this statement, the
company has no long term debt. Since inception of the Company, short term cash
flow shortfalls have been made up by loans from the CEO, Mr. Fasano. The
Company, other than the domain name note, has only current liabilities,
consisting of payments for products for resale, services, and sales taxes
collected and due for products sold.
In April 1999, the Company issued 75,000 shares of restricted common
stock to two individuals for $30,000. These funds were utilized by the Company
to invest in Tirk Internet Systems, Inc., as described in Item 7 of this
registration statement. Additionally, the Company, at various times, has issued
stock in exchange for services, as well as for exchanges of other companies
stock during merger transactions. As referenced in Part II, Item 4 of this
registration statement, on April 24, 1997, the Company issued 200,000 shares of
common stock to Ronald J. Axelrod, Esq. in lieu of payment for legal services
rendered to the Company. The trading value of the shares was $.05 on the date of
issuance. Also, on September 8, 1997, the Company issued 150,000 shares of
common stock to N&G International Holdings, Inc. for payment of
services relating to assistance in seeking financing sources. These efforts
proved to be unsuccessful to the Company. The trading value of the shares was
$.05 on the date of issuance. Other exchanges were specifically for the merger
with Kent Toys, Inc., LA Distribution, Inc., LA Acquisition, Inc., all of which
occurred in 1996, and What A Product, Inc. in January 1998.
Management believes the profits generated from operations will be
sufficient to finance the web hosting and Internet sales segments of the
business for the next twelve months. In the event sufficient profits have not
been generated to meet the July 15, 2000 payment of $125,000 to the seller of
the AsSeenOnTV.com domain, than the Company must secure funding from
traditional lending facilities. If cash flow from operations
19
<PAGE> 20
is inadequate to capitalize on the AsSeenOnTV.com acquisition, the Company
will seek to secure working capital to fully develop and market the new portal.
In addition, the Company must seek to pay or refinance the debt instrument
incurred from the AsSeenOnTv.com acquisition. The Company intends to seek the
required financing through infusions from major customers, the sale of
additional equity or debt securities, or to obtain traditional lending
facilities. The sale of additional equity or convertible debt securities would
result in additional dilution to our stockholders. The incurrence of
indebtedness would result in increased fixed obligations and could result in
covenants that would restrict our operations. We have not made arrangements to
obtain additional financing and there can be no assurance that financing will be
available in amounts or on terms acceptable to us, if at all.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's official office is located at 30 Corporate Woods, Suite
280, Rochester, New York 14623. The Company currently leases the office on a
month to month basis. In addition, the Company leases space from the Company
CEO, Mr. Fasano. This facility is used for the warehousing and fulfillment
functions of shipping the Seen On TV, Inc. products to customers. Nominal rents
are paid for each site. The Company owns no real estate.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
TABLE A
COMMON STOCK
OFFICERS AND DIRECTORS AND OWNERS OF 5% OR MORE OF THE COMMON SHARES
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner - Title Actual Ownership % Ownership
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ACTUAL
Daniel J. Fasano None 3,000,000 19.6%
Daniel M. Fasano Chairman and CEO 2,900,000 19.0%
Director
Frank T. Costanzo President 560,000 3.7%
Curt B. Westrom Treasurer -0- -0-
Ronald J. Axelrod Secretary 360,000 2.4%
All Officers and Directors as a Group 6820,000 44.6%
Total Shares Issued and Outstanding 15,277,938 100.0%
</TABLE>
20
<PAGE> 21
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS.
Daniel M. Fasano is presently the sole director of the Company, serving
as director since its inception. It is intended that he will serve until, and
that additional Directors will be nominated at, the next meeting of
shareholders, tentatively proposed to be held after the end of the current
fiscal year.
The Officers of the corporation are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Daniel M. Fasano 38 Chairman, Chief Executive Officer
and Director
Frank T. Costanzo 51 President
Curt B. Westrom 56 Treasurer and Chief Financial Officer
Ronald J. Axelrod 54 Secretary
</TABLE>
Daniel M. Fasano, of Rochester, New York, has served as CEO of the
Company since September 1995. Mr. Fasano has over twelve years experience in the
Direct Response Industry. Mr. Fasano was the first to successfully market, in a
retail setting, products traditionally sold exclusively on television. During
this period, Mr. Fasano was an officer in a Direct Response cosmetics and skin
care company involved in the production of infomercials. Mr. Fasano attended
Rochester Institute of Technology.
Mr. Fasano was the founder and President of a private company,
Everything Seen On TV, Inc., a company involved in retail sales. As a result of
an action by one landlord, this company instituted Chapter 7 insolvency
proceedings in 1995. As a result of having personally guaranteed this company's
lease obligation, Mr. Fasano was forced to file for personal bankruptcy
protection in 1996. Both cases have been discharged.
Frank T. Costanzo, of Chandler, Arizona, was appointed President in
January 2000. Mr. Costanzo has been a founder, officer and/or director in
several public and private companies, including Ronco Holding, LLC. He has been
a business consultant with FTC & Associate, Inc. during the past five years. In
this capacity, he has served as President of FTC & Associate, Inc., President of
What-a-Product, Inc. and Chief Operating Officer of Ronco Inventions, Inc. In
addition, Mr. Costanzo has been an adviser to Coordinated Strategic Alliances, a
major supplier of product to QVC Television. Mr. Costanzo also has served as an
officer of Featherfew, an Arizona based publishing company. Mr. Costanzo has
taught at the University of Phoenix and remains an adjunct faculty member. He
received a MA degree from Kane College of New Jersey, and holds a BA degree from
St. Bonaventure University.
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<PAGE> 22
Curt B. Westrom, of Bemus Point, New York, was appointed Treasurer in
January 2000. Since 1997, Mr. Westrom has been the sole principal of Curt B.
Westrom, P.A., a public accounting firm in Jamestown, NY. During the period 1993
through 1997, Mr. Westrom was the President and sole shareholder of Standard
Portable Products, Inc. a manufacturing company in Mayville, NY. Prior to 1993,
Mr. Westrom was a co-founder and Chief Financial Officer for an electronics
manufacturer, Electronic Technology Group, Inc., a Buffalo, NY based public
company. He holds a Bachelor' Degree in Accounting from St. Bonaventure
University.
Ronald J. Axelrod, of Pittsford, New York, was appointed Secretary of
the Company in January 2000. Mr. Axelrod has been a full time practicing
attorney, in Rochester, NY, for the past 30 years. He was co-founder of The
Maxim Group, Inc., now known as Floor Covering America, and traded on the New
York Stock Exchange. Mr. Axelrod has a B.S. Degree in Finance from SUNY at
Buffalo and a J.D Degree from its Law School.
There are no other directors, executive officers, promoters, or control
persons other than those listed under item 4. Daniel J. Fasano is Daniel M.
Fasano's father. Daniel J. Fasano has no involvement in the day to day
operations of the Company.
The Company currently has one director, the CEO, Daniel M. Fasano. The
Company has not yet secured a Directors' and Officers' liability insurance
policy. The three remaining current officers have been requested to, and agreed
to, serve as directors of the Company at the time an insurance policy is in
effect. An application for this insurance is in process and expected to be in
effect in mid to late April.
ITEM 6. EXECUTIVE COMPENSATION.
The Company has entered into formal agreements with members of
management, which have been attached as exhibits to this document.
ITEM 6 - EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NANE AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMP
---- ------- ----- ------------ ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel M. Fasano - CEO 12/31/99 $10,000 0 0 0 0 0 $3,000
6/30/99 0 0 0 0 0 0 $6,000
6/30/98 0 0 0 0 0 0 $6,000
6/30/97 0 0 0 0 0 0 $6,000
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
(ALL GRANTS MADE PER EMPLOYMENT AGREEMENTS 1/1/2000)
NUMBER OF PERCENT EXERCISE EXPIRATION
NAME AND POSITION OPTIONS OF TOTAL PRICE DATE
- ----------------- --------- -------- -------- ----------
<S> <C> <C> <C> <C>
Daniel M. Fasano - CEO 100,000 8.3% $1.00 12/31/05
100,000 8.3% 2.00 12/31/05
100,000 8.3% 3.00 12/31/05
100,000 8.3% 4.00 12/31/05
Frank T. Costanzo - President 100,000 8.3% 1.00 12/31/01
100,000 8.3% 2.00 12/31/01
100,000 8.3% 3.00 12/31/01
100,000 8.3% 4.00 12/31/01
Curt B. Westrom - Treasurer 100,000 8.3% 1.00 12/31/01
100,000 8.3% 2.00 12/31/01
100,000 8.3% 3.00 12/31/01
100,000 8.3% $4.00 12/31/01
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company, as an investor in a privately held company in Rochester,
NY, has a 20% interest in Tirk Internet Systems, Inc. (Tirk). Tirk is the
developer of a Java Application Server, the Tirk Application Server. The Tirk
Application Server will allow developers to rapidly develop database driven web
sites and Internet based applications. The Tirk Application Server is comprised
of a powerful multithreaded http web server and an object database. The Tirk
Application Server is an open system in that it can be extended with Java and
other interpreted languages. Currently the interpreted programming language
JPython has been bundled with the Tirk Application Server allowing for rapid
prototyping and application development. Other interpreted or scripting
languages in which a Java interpreter exists may be bundled with the system such
as TCL, Rhino, and Beanshell (a Java interpreted scripted language).
22
<PAGE> 23
The platform incorporates a tag based template system to implement
business logic and also to provide html developers a powerful time saving
environment. The application server is web based, in that it is maintained and
administered via a web browser. Tirk has leveraged XML technology throughout the
Platform with the aid of a Sax based XML parser. XML is used in the following
areas, System Configuration, Object Definitions, Data Modeling, User Interfaces,
Defining Access Privileges, and Cluster Management.
As part of the same transaction in which the Company acquired a 20%
interest in Tirk, Tirk received 450,000 common shares in the Company. In
addition, Tirk has a warrant to purchase an additional 400,000 shares of common
stock at $.50 per share. Also, the Company has a warrant to purchase 5% of Tirk
for an exercise price of $75,000 at any time prior to April 30, 2004.
Dean Fragnito, a principal in Tirk, is a relative of Daniel M. Fasano,
the Company's Chief Executive Officer.
Under the definition section in Rule 405, two individuals, Daniel J.
Fasano and Daniel M. Fasano (father and son) (see references to these
individuals in other location with the statement) are defined as promoters. No
other promoters have been involved with the Company.
Since the Company's inception, at various times of cash flow
shortfalls, the CEO, Daniel M. Fasano, has provided non-interest bearing loans
to the Company.
As disclosed elsewhere within this statement, the Company leases
office and warehouse space from Daniel M. Fasano, CEO, on a month to month
basis. A very nominal rent is paid. Management believes that the Company has
received substantial discount from the value received.
The following information discloses that the Company and its Officers,
Directors, and 5% Controlling persons, interests may have interests, which, from
time to time, may be inconsistent in some respect with the interest of the
Company. The nature of these conflicts of interest, if any, may vary. There may
be circumstances in which they may take advantage of an opportunity that might
be suitable for the Company. Although there can be no assurance that a conflict
of interest will not arise, or that resolutions of any such conflicts will be
made in a manner most favorable to the Company and its shareholders, the
Officers and Directors have a fiduciary responsibility to the Company and its
shareholders and, therefore, must adhere to a standard of good faith and
integrity in their dealings with and for the Company and its shareholders.
Certain specific conflicts of interest may include the following:
Conflicts Arising From Related Party Transactions.
- --------------------------------------------------
From time to time, transactions may be proposed between the Company and
related persons or entities. It is expected that any such transactions will be
consummated on terms and conditions no less favorable to the Company than could
be obtained in arm's-length negotiations with unaffiliated third parties. The
Company's shareholders may not be notified prior to any related party
transaction, but any significant related party transactions are expected to be
disclosed in the Company's annual report. There can be no assurance, in such a
circumstance, that some consideration, benefit or value would not be lost to or
relinquished by the Company and accrue to such related persons. The Company
expects, however, that following any business combination involving the Company,
present management will be replaced with candidates of the acquired company, and
that, thereafter, any transactions with presently related persons may be deemed
arm's-length transactions.
No officers, its director, or potential directors currently serve on
boards of, or occupy positions in, companies that cause conflicts of interest
and impede the fulfillment of their duties to the Company.
23
<PAGE> 24
Lack of Separate Representation.
- --------------------------------
Related persons and the company have not been represented by separate
counsel and it is not expected that they will be represented by separate counsel
prior to the consummation of any proposed business combination. The Officers and
Directors are accountable to the Company and its shareholders as fiduciaries
and, therefore, must adhere to a standard of good faith and integrity in their
dealings with and for the Company. The area of fiduciary responsibility is a
rapidly developing area of law, and persons who have questions concerning the
duties of the officers and directors should consult with their legal counsel.
ITEM 8. DESCRIPTION OF SECURITIES.
As a result of the Shareholders Vote on March 8, 2000, the authorized
capital stock of ONTV, Inc. consists of 80,000,000 shares of Class A and
20,000,000 shares of Class B. In addition, the Company is authorized to issue
5,000,000 shares of preferred stock.
As of June 30, 1999 there was a total of 15,277,938 shares of commons
stock outstanding, which included 6,393,766 restricted shares. As of March 8,
2000, there was no change in these figures.
On February 24, 2000, the Company's public traded securities were
delisted from trading on the Over The Counter Bulletin Board (OTCBB), and began
to trade on the electronic pink sheets. Upon the receipt of approval from the
SEC for this registration statement, the Company expects to again trade on the
OTCBB.
Since the incorporation of the Company, no shares of preferred stock
have been issued.
The authorized but unissued shares of common stock and preferred stock
are available for future issuance without stockholder approval, subject to
certain limitations imposed, if any, by the Nasdaq National Market. These
additional shares may be utilized for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The company intends to seek, at the next scheduled
shareholders' meeting, shareholder approval to apply for an increase in the
authorized level of common stock. The existence of authorized but unissued and
unreserved common stock and preferred stock could render more difficult or
discourage an attempt to obtain control of the Company by means of a proxy
contest, tender offer, merger or otherwise.
The transfer agent and registrant for the common stock is United Stock
Transfer, Inc., 3615 South Huron Street, Suite 104, Englewood, Colorado 80110.
24
<PAGE> 25
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
Market Information.
- -------------------
The Common Stock of this Registrant is quoted Over the Counter on the
Bulletin Board ("OTC BB"). The following information is provided based
upon the Internet research company. ASKRESEARCH at www.askresearch.com:
<TABLE>
<CAPTION>
Period Low Bid High Bid Period Low Bid High Bid
- ------ ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
1st 1998 n/a n/a 2nd 1999 .02 .05
- --------------------------------------------------------------------------------------
2nd 1998 n/a n/a 3rd 1999 .035 2.18
- --------------------------------------------------------------------------------------
3rd 1998 .125 .215 4th 1999 .56 .77
- --------------------------------------------------------------------------------------
4th 1998 .09 .145 1st 2000 .20 .56
- --------------------------------------------------------------------------------------
1st 1999 .05 .125 2nd 2000 .16 .32
- --------------------------------------------------------------------------------------
</TABLE>
The foregoing price information is based upon inter-dealer prices,
without retail mark-up, mark down or commission, and may not represent actual
transactions.
On February 24, 2000, the Company's public traded securities were
delisted from trading on the Over The Counter Bulletin Board (OTCBB), and began
to trade on the electronic pink sheets. Upon the receipt of approval from the
SEC for this registration statement, the Company expects to again trade on the
OTCBB.
The shares of common stock of the Company are subject to the "penny
stock" rules, as defined in Rule 3a51-1 of the Securities Exchange Act of 1934.
The "penny stock" disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market, resulting in large spreads
and a lower market price. Pursuant to the Penny Stock Reform Act of 1990, the
Securities and Exchange Commission (the "Commission") adopted a number of penny
stock transaction disclosure rules. Rule 15g-9, which became effective on
January 1, 1990, requires broker-dealers recommending penny stocks to document
the suitability of the investment for the specific customer and to obtain the
written agreement of the customer to purchase the penny stock. The Penny Stock
Disclosure Rules adopted by the Commission require a broker-dealer prior to
opening an account for a customer to whom it recommends the purchase or sale of
penny stocks to deliver to the customer a standardized Risk Disclosure Document,
to make specified disclosures in connection with each transaction in a penny
stock, and to deliver a specifically tailored monthly statement to customers
holding in their account penny stocks, the purchase of which was recommended by
the dealer.
Holders of record.
- ------------------
The exact number of holders of record, as of January 27, 2000 is 1126.
Dividends.
- ---------
The Company has not declared or paid any cash dividends on our capital
stock since inception. We intend to retain any future earnings to finance the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
On April 1, 1998, an action was commenced in the New York State
Supreme Court in New York County, Index #601272/98, by Charles Schwab & Co.,
Inc. against Quintin A. Prospero, LA Group, Inc. and CDR Transfer, Inc. Charles
Schwab & Co., Inc. sold stock of the company allegedly owned by Schwab's
customer, Quintin A. Prospero. The stock was subject to a stop-transfer order
and the customer could not make good delivery of the shares. Charles Schwab was
forced to go into the market and buy shares, resulting in an out-of-pocket loss
of $33,850.00. Charles Schwab claims that there was no legend on the face of its
customer's certificates and that it is not bound by the stop-transfer
restriction. The Company has valid cross-claims against the other Defendants;
however, they are both judgment proof. While the Company may prevail on its
defenses against Charles Schwab, there is the possibility that the Company could
be liable for the entire amount for which it is being sued. It is likely that
this case will be settled prior to trial.
25
<PAGE> 26
company could be liable for the entire amount for which it is being sued. It is
likely that this case will be settled prior to trial.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no disagreements of any sort or kind with Auditors or
Accountants respecting any matter or item reflected in the financial statements
of the Company.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On April 24, 1997, the Company issued 200,000 shares of common stock
to Ronald J. Axelrod, Esq. in lieu of payment for legal services rendered to
the Company. The trading value of the shares was $.05 on the date of issuance.
The shares were issued without registration in reliance on the exemption
provided by 4(2) of the Securities Act.
Also on April 24, 1997, the Company issued 100,000 shares of common
stock to Trobriand Properties, Ltd., a former shareholder of Kent Toys, Inc.,
as additional payment for the merger which occurred on March 15, 1996. The
trading value of the shares was $.05 per share on the date of issuance. The
shares were issued without registration reliance on the exemption form
registration provided by 4(2) of the Securities Act.
On September 8, 1997, the Company issued 150,000 shares of common
stock to N & G International Holdings, Inc. for payment of professional
services. The trading value of the shares was $.05 per share on the date of
issuance. The shares were issued without registration in reliance on the
exemption from registration provided by 4(2) of the Securities Act.
On December 15, 1997, the Company issued 100,000 shares of common
stock to each of FTC & Associates, Inc., Eric Levine, Edward Tesher, and Kevin
Day. Each of those parties were shareholders of What A product, Inc., and were
issued the shares in exchange for their interest in What A Product, Inc. In
addition, the Company issued 345,000 shares of common stock to F.D. and Mary K.
Haberkorn Trust U/A, and 45,000 shares of common stock to Charles Haberkorn.
Each of those two parties received the shares in consideration for the
assignment of a Collateral Security Agreement issued by What A Product, Inc.
The trading value of the shares was $.05 at the time of issuance. The shares
were issued without registration in reliance on the exemption form registration
provided by 4(2) of the Securities Act.
On June 1, 1998, the Company issued 300,000 shares of common stock to
Trobiand Properties, Ltd., a former shareholder of Kent Toys, Inc., as
additional payment for the merger which occurred on March 15, 1996. The
trading value of the shares was $.05 per share on the date of issuance. The
shares were issued without registration in reliance on the exemption from
registration provided by 4(2) of the Securities Act.
On April 6, 1999, the Company issued 25,000 shares of common stock to
Frank T. Costanzo in a private placement transaction. The trading value was
$.40 per share on the date of issuance, and Mr. Costanzo paid the Company a
total of $10,000 for the shares. The shares were issued without registration in
reliance on the exemption from registration provided by 4(2) of the Securities
Act.
Also, on April 6, 1999, the Company issued 50,000 shares of common
stock to Ehad Ramon in a private placement transaction. The trading value was
$.40 per share on the date of issuance, and Mr. Ramon paid the Company a total
of $20,000 for the shares. The shares were issued without registration in
reliance on the exemption from registration provided by 4(2) of the Securities
Act. Mr. Ramon and the Company's CEO, Mr. Fasano, had been acquaintances for
several years and worked together on a mutual client. When the Company needed
funds for the investment in Tirk Systems, as described elsewhere in this
Statement, Mr. Ramon offered to invest in ONTV, Inc. He signed a private
placement memorandum stating he was a qualified investor. Shares issued to him
were previously registered in a Regulation D filing.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law. Indemnification of
Officers, Directors, Employees and Agents; Insurance
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent or
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees); judgment, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such actions, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and except
that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b), or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsection of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement or expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, shall stand in the same position under the provisions
of this Section with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this Section, references to "other enterprises" shall
include employee benefit plans, references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation" as
referred to in this Section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or
indemnification brought under this Section or under any bylaw, agreement,
vote or stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Article 10 of the Bylaws of the Corporation states the following:
The following indemnification provision will be contained in any
future Employment Agreements of executive officers.
"Indemnification. Employer shall indemnify Employee and hold
Employee harmless from liability for acts or decisions made by
Employee while performing services for Employer to the greatest
extent permitted by applicable law. Employer shall use its best
efforts to obtain coverage for Employee under any insurance policy
now in force or hereafter obtained during the term of this Agreement
insuring Officers and Directors of Employer against such liability."
The Company has applied for Officers and Directors Liability Insurance and
expects to have this coverage in effect by April 30, 2000.
26
<PAGE> 27
PART F/S
FINANCIAL STATEMENTS
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Independent Auditors' Report F-2
Independent Accountant's Report on Interim Unaudited
Financial Information F-3
Consolidated Balance Sheets at June 30, 1999 and 1998 and
December 31, 1999 and 1998 (Unaudited) F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
June 30, 1999, 1998 and 1997 and for the Six Months Ended
December 31, 1999 (Unaudited) F-5
Consolidated Statements of Operations for the Years Ended June 30, 1999, 1998
and 1997 and for the Quarters Ended December 31, 1999 and 1998 (Unaudited) and
for the Six Months Ended December 31, 1999 and 1998
(Unaudited) F-6
Consolidated Statements of Cash Flows for the Years Ended June 30, 1999, 1998
and 1997 and for the Six Months Ended December 31, 1999 and 1998
(Unaudited) F-7
Notes to Consolidated Financial Statements F-8-F-11
</TABLE>
F-1
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders
LA Group, Inc. & Subsidiaries
Rochester, New York
We have audited the accompanying consolidated balance sheets of LA
Group, Inc. & Subsidiaries (A Delaware Corporation) as of June 30, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended June 30, 1999. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LA Group,
Inc. & Subsidiaries as of June 30, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1999, in conformity with generally accepted accounting principles.
Rotenberg & Company, LLP
Rochester, New York
January 24, 2000
F-2
<PAGE> 29
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
and Stockholders
LA Group, Inc. & Subsidiaries
Rochester, New York
We have reviewed the accompanying consolidated balance sheets of LA
Group, Inc. & Subsidiaries (A Delaware Corporation) as of December 31, 1999 and
1998 and the related statements of operations, changes in stockholders' equity,
and cash flows for the three months and six months ended December 31, 1999 and
1998 in accordance with standards established by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of LA Group, Inc. &
Subsidiaries.
A review consists principally of inquiries of company personnel and
analytical procedures applied to the financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheets as of June 30, 1999 and 1998, and the
related statements of operations, changes in stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1999, and in our report
dated January 24, 2000, we expressed an unqualified opinion on those financial
statements.
Rotenberg & Company, LLP
Rochester, New York
January 26, 2000
F-3
<PAGE> 30
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
=============================================================================================================================
(AUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 16,549 $ 85 $ 20,773 $
Accounts Receivable 10,308 38,283 $ 7,967
Marketable Securities 35,000 50,000
Inventory 4,001 895 11,388 1,409
Due from Officer 10,334 40,971 10,052
Prepaid Expenses 600
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 76,792 980 161,415 19,428
PROPERTY AND EQUIPMENT - Net of Accumulated Depreciation 3,870 163 6,233
INTANGIBLE ASSETS - Net of Accumulated Amortization 95,411 103,405 106,673 99,305
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 176,073 $ 104,548 $ 274,321 $ 118,733
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 66,417 $ 54,401 $ 59,205 $ 57,207
Accrued Expenses 20,393 4,041 22,678 3,134
Accrued Taxes 17,781 11,019 22,497 11,498
Due to Officer 14,412 9,446 24,263
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 104,591 83,873 113,826 96,102
- -----------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock: $.001 Par; 20,000,000 Shares Authorized,
15,277,938 Shares Issued and Outstanding 15,278 15,203 15,278 15,203
Additional Paid In Capital 165,630 135,705 165,630 135,705
Accumulated Deficit (109,426) (130,233) (20,413) (128,277)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 71,482 20,675 160,495 22,631
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 176,073 $ 104,548 $ 274,321 $ 118,733
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE> 31
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
=======================================================================================================================
Additional
Number Common Paid In Accumulated Stockholders'
of Shares Stock Capital Deficit Equity
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - JULY 1, 1996 13,662,938 13,663 73,466 (30,352) 56,777
Common Stock Issued -
For Services Rendered 200,000 200 9,800 -- 10,000
Common Stock Issued -
Kent Acquisition 100,000 100 4,900 5,000
Net Loss -- -- -- (81,307) (81,307)
- -----------------------------------------------------------------------------------------------------------------------
BALANCE -
JUNE 30, 1997 13,962,938 13,963 88,166 (111,659) (9,530)
Common Stock Issued -
Kent Acquisition 300,000 300 14,700 -- 15,000
Common Stock Issued -
For Cash 150,000 150 7,350 -- 7,500
Common Stock Issued -
What A Product Acquisition 790,000 790 25,489 -- 26,279
Net Loss -- -- -- (18,574) (18,574)
- -----------------------------------------------------------------------------------------------------------------------
BALANCE -
JUNE 30, 1998 15,202,938 15,203 135,705 (130,233) 20,675
Common Stock Issued 75,000 75 29,925 -- 30,000
Net Income -- -- -- 20,807 20,807
- -----------------------------------------------------------------------------------------------------------------------
BALANCE -
JUNE 30, 1999 15,277,938 15,278 165,630 (109,426) 71,482
Net Income (Unaudited) -- -- -- 89,013 89,013
- -----------------------------------------------------------------------------------------------------------------------
BALANCE -
DECEMBER 31, 1999 15,277,938 $ 15,278 $165,630 $ (20,413) $ 160,495
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE> 32
<TABLE>
<CAPTION>
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
(AUDITED) SIX MONTHS Six Months
YEARS ENDED QTR ENDED QTR Ended ENDED Ended
1999 1998 1997 DEC. 31, 1999 Dec. 31, 1998 DEC. 31, 1999 Dec. 31, 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 129,050 $ 48,311 $ 72,812 $ 125,551 $ 10,915 $ 209,754 $ 16,476
- ------------------------------------------------------------------------------------------------------------------------------------
COST OF GOODS SOLD 25,970 13,239 38,658 17,086 978 32,423 1,110
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Profit 103,080 35,072 34,154 108,465 9,937 177,331 15,366
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Amortization 8,453 5,040 638 2,269 2,130 4,288 4,260
Depreciation 143 75 -- 443 -- 586 --
Interest 1,119 1,110 213 136 314 314 624
Legal and Accounting 9,701 10,810 10,280 11,340 -- 22,608 --
Litigation Contingency 16,500 -- -- -- -- -- --
Other Expenses 45,214 35,636 103,254 41,617 3,618 59,877 8,041
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 81,130 52,671 114,385 55,805 6,062 87,673 12,925
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Taxes 21,950 (17,599) (80,231) 52,660 3,875 89,658 2,441
Provision for Income Taxes 1,143 975 1,076 645 975 645 975
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 20,807 $ (18,574) $ (81,307) $ 52,015 $ 2,900 $ 89,013 $ 1,466
====================================================================================================================================
EARNINGS PER SHARE
====================================================================================================================================
Income (Loss) Per
Common Share - Basic
and Diluted $ 0.0014 $ (0.0013) $ (0.0059) $ 0.0034 $ 0.0002 $ 0.0058 $ 0.0001
Weighted Average Number of
Common Shares Outstanding 15,220,404 14,679,760 13,811,705 15,220,404 14,679,760 15,220,404 14,679,760
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE> 33
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
================================================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================================================================
AUDITED Unaudited
YEARS ENDED Six Months Ended
JUNE 30, December 31,
1999 1998 1997 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 20,807 $(18,574) $(81,307) $ 89,013 $ 1,466
Adjustments to Reconcile Net Income (Loss)
To Net Cash Flows from Operating Activities:
Amortization 8,555 5,676 3,455 4,288 4,260
Depreciation 143 75 -- 586 --
Changes in Assets and Liabilities:
Accounts Receivable (10,308) -- -- (27,975) (7,967)
Inventory (3,106) 5,723 (1,598) (7,387) (514)
Prepaid Expenses (600) -- -- 600 --
Accounts Payable 12,016 (2,629) 32,018 (7,212) 2,806
Accrued Expenses 16,352 1,804 2,075 2,285 (417)
Accrued Taxes 6,762 5,960 3,011 4,716 479
Other (161) 161 (706)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 50,460 (1,804) (43,052) (58,914) 113
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Marketable Securities (35,000) -- -- (15,000) --
Acquisition of Property and Equipment (3,850) (238) -- (2,949) 163
Acquisition of Intangible Assets (400) -- (375) (15,550) (160)
Due To/From Officer (24,746) (5,587) 32,870 (21,191) (201)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (63,996) (5,825) 32,495 (54,690) (198)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Minority Interest in Equity -- -- 10,703
Proceeds from Issuance of Common Stock 30,000 7,500 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 30,000 7,500 10,703 -- --
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 16,464 (129) 146 4,224 (85)
Cash and Cash Equivalents - Beginning of Year 85 214 68 16,549 85
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 16,549 $ 85 $ 214 $20,773 $ --
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Interest Paid $ -- $ -- $ -- $ -- $ --
Income Taxes Paid $ -- $ -- $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of Common Stock in Exchange
for Intangible Assets $ -- $65,000 $15,000 $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-7
<PAGE> 34
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE A - SUMMARY OF TRANSACTION SEGMENT DATA, GEOGRAPHIC INFORMATION
AND SIGNIFICANT CUSTOMERS
The corporation operates in two industry segments and
generates revenue from customers throughout the United States.
LA Group, Inc. was formed on February 29, 1996 under the laws
of the State of Delaware. The company has since merged with
other companies as well as acquired the stock of other
companies. The company is authorized to issue 20,000,000
shares of common stock $.001 par value. The company is also
authorized to issue 2,000,000 shares of preferred stock.
There were no preferred shares issued or outstanding at
December 31, 1999. The company is primarily engaged in
retail sales of general merchandise and consumer goods.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
The accompanying unaudited interim financial statements
reflect all adjustments of a normal and recurring nature which
are, in the opinion of management, necessary to present fairly
the financial position, results of operations and cash flows
of the Company for the interim periods presented. The results
of operations for these periods are not necessarily comparable
to, or indicative of, results of any other interim period or
for the fiscal year as a whole.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expense during the
reporting period. Actual results can differ from those
estimates.
CONCENTRATIONS OF CREDIT RISK\
Financial instruments which potentially expose the Corporation
to significant concentrations of credit risk consist
principally of bank deposits. Cash is placed primarily in high
quality short term interest bearing financial instruments.
Beginning in January 1999, 30.3% of the revenue recorded by
the Company for fiscal year ending June 30, 1999 was derived
from one customer. In addition, for the six months ended
December 31, 1999, 71.7% of revenue was derived from this same
customer. The Company had no other major customers.
F-8
<PAGE> 35
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the LA Group and its wholly or majority owned subsidiaries.
All significant inter-company balances and transactions have
been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates
of deposit, and all highly liquid debt instruments with
original maturities of three months or less. The company
maintains cash and cash equivalents at financial institutions
that periodically may exceed federally insured amounts.
- continued -
F-9
<PAGE> 36
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
MARKETABLE SECURITIES
The Company accounts for marketable securities in accordance
with the provisions of Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" (SFAS 115).
Under SFAS 115, debt securities and equity securities that
have readily determinable fair values are to be classified in
three categories:
HELD TO MATURITY - the positive intent and ability to
hold to maturity. Amounts are reported at amortized
cost, adjusted for amortization of premiums and
accretion of discounts.
TRADING SECURITIES - bought principally for purpose
of selling them in the near term. Amounts are
reported at fair value, with unrealized gains and
losses included in earnings.
AVAILABLE FOR SALE - not classified in one of the
above categories. Amounts are reported at fair value,
with unrealized gains and losses excluded from
earnings and reported separately as a component of
shareholders' equity.
Marketable securities consist of common stock warrants with an
aggregate cost, based on specific identification, of $35,000
which approximates fair value as of June 30, 1999. All of the
Company's securities are classified as available for sale
securities.
INVENTORY
Inventory is stated at the lower of cost or market using the
first-in, first-out method. Inventory consists of "as seen on
TV" merchandise available for shipment.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost, less accumulated
depreciation computed using the straight line method over the
estimated useful lives as follows:
Computer Equipment 5 - 7 Years
Maintenance and repairs are charged to expense. The cost of
the assets retired or otherwise disposed of and the related
accumulated depreciation are removed from the accounts.
F-10
<PAGE> 37
TRADEMARKS
Trademarks are carried at cost and are amortized using the
straight-line method over the estimated useful lives, not to
exceed 10 years from the date of issuance of the trademark.
GOODWILL
Goodwill results from the excess of the fair market value of
assets acquired over the purchase price. Goodwill is carried
at cost and is amortized using the straight line method over
15 years.
- continued -
F-11
<PAGE> 38
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
NET INCOME PER COMMON SHARE
Net income (loss) per common share is computed in accordance
with SFAS No. 128, "Earnings Per Share." Basic Earnings Per
Share is calculated by dividing income available to common
stockholders by the weighted average number of common shares
outstanding for each period. Diluted Earnings per share is the
same as Basic Earnings Per Share since there are no
outstanding warrants, options, or convertible securities, for
periods ending December 31, 1999 and prior.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS
No. which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of
such assets and liabilities. This method utilizes enacted
statutory tax rates in effect for the year in which the
temporary differences are expected to reverse and gives
immediate effect to changes in income tax rates upon
enactment. Deferred tax assets are recognized, net of any
valuation allowance, for temporary differences and net
operating loss and tax credit carry forwards. Deferred income
tax expense represents the change in net deferred assets and
liability balances. The Corporation had no material deferred
tax assets or liabilities for the periods presented.
PROVISION FOR INCOME TAXES
Deferred income taxes result from temporary differences
between the basis of assets and liabilities recognized for
differences between the financial statement and tax basis
thereon, and for the expected future tax benefits to be
derived from net operating losses and tax credit
carryforwards. A valuation allowance is recorded to reflect
the likelihood of realization of deferred tax assets.
NOTE C - BUSINESS SEGMENTS
The Company operates in two principal business segments.
Through its wholly owned subsidiary Seen on TV, Inc., the
Company delivers products directly to the consumer via its
internet website. (Segment I) The Company is also engaged in
website hosting and development. (Segment II)
Information on the Company's current business segments was as
follows:
<TABLE>
<CAPTION>
=================================================================================================================
Years Ended June 30, Six Months Ended
1999 1998 1997 12/31/99 12/31/98
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEGMENT I
Sales $ 64,025 $ -- $ -- $ 66,315 $ --
Cost of Sales 24,175 -- -- 32,423 --
-----------------------------------------------------------------------------------------------------------------
Gross Profit $ 39,850 $ -- $ -- $ 33,892 $ --
Expenses 36,903 -- -- 42,705 --
-----------------------------------------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Income $ 2,947 $ -- $ -- $ (8,813) $ --
=================================================================================================================
SEGMENT II
Sales $ 58,673 $ -- $ -- $153,643 $ --
Cost of Sales -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Gross Profit $ 58,673 $ -- $ -- $153,643 $ --
Expenses 28,612 -- -- 57,650 --
-----------------------------------------------------------------------------------------------------------------
Net Income $ 58,061 $ -- $ -- $ 95,993 $ --
=================================================================================================================
</TABLE>
F-13
<PAGE> 40
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consisted of
the following:
<TABLE>
<CAPTION>
=================================================================================================================
June 30, 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer Equipment $ 4,013 $ 238
Less: Accumulated Depreciation 143 75
-----------------------------------------------------------------------------------------------------------------
Net Property and Equipment $ 3,870 $ 163
=================================================================================================================
</TABLE>
Depreciation expense for the years ended June 30, 1999 and 1998 was
$143 and $-0-, respectively.
NOTE E - INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
=================================================================================================================
June 30, 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 95,145 $ 95,145
Trademarks 15,382 15,382
Other 3,275 2,875
-----------------------------------------------------------------------------------------------------------------
$ 113,802 $ 113,402
Less: Accumulated Amortization 18,391 9,997
-----------------------------------------------------------------------------------------------------------------
Net Intangible Assets $ 95,411 $ 103,405
=================================================================================================================
</TABLE>
Amortization expense for the years ended June 30, 1999 and 1998 was
$8,453 and $5,040, respectively.
NOTE F - PROVISION FOR TAXES
The provision for income taxes is attributed to:
<TABLE>
<CAPTION>
Year Ended June 30, QTR Ended Six Months Ended
---------------------------- --------------------------- ---------------------------
1999 1998 1997 Dec 31, 1999 Dec 31, 1998 Dec 31, 1999 Dec 31, 1998
---------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before provision $ 21,950 $(17,599) $(80,231) $ 52,660 $ 3,875 $89,658 $ 2,441
for income taxes ---------------------------- --------------------------- ---------------------------
State income tax $ 1,143 $ 975 $ 1,076 $ 1,143 $ 975 $ 1,143 $ 975
============================ =========================== ===========================
</TABLE>
The provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to income before
provision for taxes. The sources and tax effects of the differences
are as follows:
<TABLE>
<CAPTION>
Year Ended June 30, QTR Ended Six Months Ended
---------------------------- ------------------------- -------------------------
1999 1998 1997 Dec 31, 1999 Dec 31, 1998 Dec 31, 1999 Dec 31, 1998
---------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Income tax at the federal statutory
rate of 35% $ 7,683 $ (6,160) $(28,081) $ 18,431 $ 1,356 $ 31,380 $ 854
Effect of graduated tax (rate of 15%) (4,390) 2,640 16,046 (10,532) (775) (12,646) (488)
State income tax net of federal benefit 972 829 915 972 829 914 829
Valuation allowance changes affecting
the provision for income taxes (3,122) 1,716 12,196 (7,728) (435) (18,505) (220)
---------------------------- ------------------------- ------------------------
$ 1,143 $ (975) $ 1,076 $ 1,143 $ 975 $ 1,143 $ 975
============================ ========================= ========================
</TABLE>
As of June 30, 1999 the company has net operating loss carryforwards
of approximately $10,790 for tax purposes which will be available to
offset future taxable income.
The Company's income tax provision was computed based on the federal
statutory rate, reduced by the effect of graduated tax rate and the
average state statutory rates, net of related federal benefit.
NOTE G - LAW SUIT
The company has been named a defendant in a lawsuit. While the
company may prevail, it is possible that the company may be liable
for the amount of the claim. The company believes that in the event
the outcome is unfavorable, the amount can be settled for
approximately $16,500. Accordingly, this amount has been recorded in
the accompanying financial statements.
NOTE H - SUBSEQUENT EVENTS
In January, 2000, the Company entered into an agreement with an
unrelated
F-14
<PAGE> 41
entity to acquire the domain name "As Seen on TV.Com" for $5 million.
The consideration includes cash of $25,000 and a non-interest bearing
promissory note of $4,975,000 with payments due over the next 15
months. The note is collateralized by 2.1 million shares of company
stock and the domain name.
F-15
<PAGE> 42
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
3 (i) Articles of Incorporation
3 (ii) Bylaws
4 Copy of Stock Certificate
9 Voting Trust Agreement - N/A
10 Material Contracts
11 Statement re: Computation of Earnings - see financials
16 Letter on Change of Certifying Accountant - N/A
21 Subsidiaries of the Registrant
24 Power of Attorney - N/A
27 Financial Data Schedule
99 Additional Exhibits
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, thereunto duly authorized.
LA Group, Inc. (Registrant)
By: Daniel M. Fasano Date: March 22, 2000
- ---------------------------------------------
Daniel M. Fasano: Director, Chairman
and Chief Executive Officer
45
<PAGE> 43
Exhibit Index
-------------
EXHIBIT 3
(i) Articles of Incorporation
(ii) Bylaws
EXHIBIT 4
Copy of stock certificates
EXHIBIT 9
N/A
EXHIBIT 10
Material Contract - Letter Agreement
EXHIBIT 11
See Financial Statements
EXHIBIT 16
N/A
EXHIBIT 21
Wholly owned subsidiaries
EXHIBIT 24
N/A
EXHIBIT 27
Financial Data Schedule
EXHIBIT 99
(1) Employment Contract of Daniel M. Fasano
(2) Employment Contract of Frank T. Costanzo
(3) Employment Contract of Curt B. Westrom
(4) Analysis of Intangible Assets
(5) Origin of Goodwill
<PAGE> 1
Exhibit 3(i)
ARTICLES OF INCORPORATION
OF
THE L.A. GROUP, INC.
The undersigned natural, adult person, acting as incorporator of a
corporation (hereinafter usually referred to as the "Corporation") pursuant to
the provisions of the Delaware Corporation Law, hereby adopts the following
Articles of Incorporation for said Corporation:
ARTICLE I
Name
The name of the Corporation shall be The L.A. Group, Inc.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
PURPOSE
-------
The purpose for which the Corporation is organized is to transact any
or all lawful business for which corporations may be incorporated pursuant to
the Delaware Corporation Law.
ARTICLE IV
CAPITAL STOCK
-------------
The authorized capital stock of the Corporation shall consist of
20,000,000 shares of common stock with a par value of $0.OOl per share and
2,000,000 shares of preferred stock with a par value of $0.00l per share.
ARTICLE V
<PAGE> 2
PREFERENCES. LIMITATIONS.
-------------------------
AND RELATIVE RIGHTS OF
----------------------
Capital Stock
No share of the common stock shall have any preference over or
limitation in respect to any other share of such common stock. All shares of
common stock shall have equal rights and privileges, including the following:
1. All shares of common stock shall share equally in dividends.
Subject to the applicable provisions of the laws of Delaware,
the Board of Directors of the Corporation may, from time to
time, declare and the Corporation may pay dividends in cash,
property, or its own shares, except when the Corporation is
insolvent or when the payment thereof would render the
Corporation insolvent or when the declaration or payment
thereof would be contrary to any restrictions contained in
these Articles of Incorporation. When any dividend is paid or
any other distribution is made, in whole or in part, from
sources other than unreserved and unrestricted earned surplus,
such dividend or distribution shall be identified as such and
the source and amount per share paid from each source shall be
disclosed to the stockholder receiving the same concurrently
with the distribution thereof and to all other stockholders
not later than six months after the end of the Corporation's
fiscal year during which such distribution was made.
2. All shares of common stock shall share equally in
distributions in partial liquidation. Subject to the
applicable provisions of the laws of Delaware, the Board of
Directors of the Corporation may distribute, from time to
time, to its stockholders in partial liquidation, out of
stated capital or capital surplus of the Corporation, a
portion of its assets in cash or property, except when the
Corporation is insolvent or when such distribution would
render the Corporation insolvent. Each such distribution, when
made, shall be identified as a distribution in partial
liquidation, out of stated capital or capital surplus, and the
source and amount per share paid from Corporation each source
shall be disclosed to all stockholders of the concurrently
with the distribution thereof. Any such distribution may be
made by the Board of Directors from stated capital without the
affirmative vote of any stockholders of the Corporation.
3. Each outstanding share of common stock shall be entitled to
one vote at stockholders' meetings, either in person or by
proxy.
(b) The designations, powers, rights, preferences,
qualifications, restrictions and limitations of the
preferred stock shall be established from time to
time by the Corporation's Board of Directors, in
accordance with the Delaware Corporation Law.
(c) Cumulative voting shall not be allowed in elections
of directors or for any purpose.
<PAGE> 3
2. No holders of shares of common stock of the Corporation shall
be entitled, as such, to any preemptive or preferential right
to subscribe to any unissued stock or any other securities
which the Corporation may now or hereafter be authorized to
issue. The Board of Directors of the Corporation, however, in
its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for
subscription solely to the holders of common stock of the
Corporation, or solely to the holders of any class or classes
of such stock, which the Corporation may now or hereafter be
authorized to issue, in such proportions based on stock
ownership as said board in its discretion may determine.
3. The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any
stockholder "first right of refusal to purchase" the stock, by
making the stock redeemable, or by restricting the transfer of
the stock under such terms and in such manner as the directors
may deem necessary and as are not inconsistent with the laws
of this State. Any stock so restricted must carry a
conspicuous legend noting the restriction and the place where
such restriction may be found in the records of the
Corporation.
4. The judgment of the Board of Directors as to the adequacy of
any consideration received or to be received for any shares,
options, or any other securities which the Corporation at any
time may be authorized to issue or sell or otherwise dispose
of shall be conclusive in the absence of fraud, subject to the
provisions of these Articles of Incorporation and any
applicable law.
ARTICLE VI
PLACE OF BUSINESS
-----------------
The registered office of the Corporation will be:
Three Christina Centre
201 North Walnut Street
Wilmington, Delaware 19801
NEW CASTLE COUNTY
The name of the Corporation's initial registered agent at its office
shall be:
<PAGE> 4
THE COMPANY CORPORATION
ARTICLE VII
DIRECTORS
---------
The affairs of the Corporation shall be governed by a board of not less
than one (1) director, who shall be elected in accordance with the Bylaws of the
Corporation. Subject to such limitation, the number of directors shall be fixed
by or in the manner provided in the Bylaws of the Corporation, as may be amended
from time to time. The organization and conduct of the board shall be in
accordance with the following:
1. The name and address of the initial Director, who shall hold
office until the first annual meeting of the stockholders of the
Corporation or until his successor shall have been elected and
qualified, is:
NAME ADDRESS
------------------------------------------------------------------
Anthony Biondi 15461/2 West Ridge Road
Rochester, NY 14615
2. The directors of the Corporation need not be residents of Delaware
and shall not be required to hold shares of the Corporation's
capital stock.
3. Meetings of the Board of Directors, regular or special, may be
held within or without Delaware upon such notice as may be
prescribed by the Bylaws of the Corporation. Attendance of a
director at a meeting shall constitute a waiver by him of notice
of such meeting unless he attends only for the express purpose of
objecting to the transaction of any business thereat on the ground
that the meeting is not lawfully called or convened.
4. A majority of the number of directors at any time constituting the
Board of Directors shall constitute a quorum for the transaction
of business.
5. By resolution adopted by a majority of the Directors at any time
constituting the Board of Directors, the Board of Directors may
designate two or more directors to constitute an Executive
Committee or one or more other committees each of which shall have
and may exercise, to the extent permitted by law or in such
resolution, all the authority of the Board of Directors in the
management of the Corporation; but the designation of any such
committee and the delegation of
<PAGE> 5
authority thereto shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed on
it or him by law.
6. Any vacancy in the Board of Directors, however caused or created,
may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of
Directors. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office and until his
successor is duly elected and qualified.
ARTICLE VIII
Officers
The officers of the Corporation shall be prescribed by the Bylaws of
the Corporation.
ARTICLE IX
MEETINGS OF STOCKHOLDERS
------------------------
Meetings of the stockholders of the Corporation shall be held at such
place within or without Delaware and at such times as may be prescribed in the
Bylaws of the Corporation. Special meetings of the stockholders of the
Corporation may be called by the President of the Corporation, the Board of
Directors, or by the record holder or holders of at least ten percent (107.) of
all shares entitled to vote at the meeting. At any meeting of the stockholders,
except to the extent otherwise provided by law, a quorum shall consist of a
majority of the shares entitled to vote at the meeting; and, if a quorum is
present, the affirmative vote of the majority of shares represented at the
meeting and entitled to vote thereat shall be the act of the stockholders unless
the vote of a greater number is required by law.
ARTICLE X
Voting
When, with respect to any action to be taken by stockholders of this
Corporation, the Delaware Corporation Law requires the affirmative vote of the
holders of more than a majority of the outstanding shares entitled to vote
thereon, or of any class or series, such action may be taken by the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote on
such action.
<PAGE> 6
ARTICLE XI
Bylaws
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the stockholders, the power
to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in
the Board of Directors.
ARTICLE XII
Transactions with Directors and
OTHER INTERESTED PARTIES
------------------------
No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniary or otherwise interested in, or
are directors or officers of, such other corporation. Any director of the
corporation, individually, or any firm with which such director is affiliated
may be a party to or may be pecuniary or otherwise interested in any contract or
transaction of the Corporation; provided, however, that the fact that he or such
firm is so interested shall be disclosed or shall have been known to the Board
of Directors of the Corporation, or a majority thereof, at or before the
entering into such contract or transaction; and any director of the Corporation
who is also a director or officer of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested
ARTICLE XIII
LIMITATION OF DIRECTOR LIABILITY
--------------------------------
AND INDEMNIFICATION
-------------------
No director of the Corporation shall have liability to the Corporation
or to its stockholders or to other security holders for monetary damages for
breach of fiduciary duty as a director; provided, however, that such provisions
shall not eliminate or limit the liability of a director to the Corporation or
to Its shareholders or other security holders for monetary damages for: (i) any
breach of the director's duty of loyalty to the Corporation or to its
shareholders or other security holders; (ii) acts or omissions of the director
not in good faith or which involve intentional misconduct or a knowing violation
of the law by such
<PAGE> 7
director; (iii) acts by such director as specified by the Delaware Corporation
Law; or (iv) any transaction from which such director derived an improper
personal benefit.
No officer or director shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
Corporation unless such officer or director was personally involved in the
situation giving rise to the injury or unless such officer or director committed
a criminal offense. The protection afforded in the preceding sentence shall not
restrict other common law protections and rights that an officer or director may
have.
The word "director" shall include at least the following, unless
limited by Delaware law: an individual who is or was a director of the
Corporation and an individual who, while a director of a Corporation is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee or agent of any other foreign or domestic corporation or of any
partnership, joint venture, trust, other enterprise or employee benefit plan. A
director shall be considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties on or
otherwise involve services by him to the plan or to participants in or
beneficiaries of the plan. To the extent allowed by Delaware law, the word
"director" shall also include the heirs and personal representatives of all
directors.
This Corporation shall be empowered to indemnify its officers
and directors to the fullest extent provided by law, including but not
limited to the provisions set forth in the Delaware Corporation Law, or
any successor provision.
ARTICLE XIII
INCORPORATOR
------------
The name and address of the incorporator of the Corporation is as
follows:
Name Address
----------------------------------------------------------------------
Anthony Biondi 1546 1/2 West Ridge Road
Rochester, NY 14615
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed
his signature on the ______________ day of February, 1996.
------------------------
Anthony Biondi
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF THE STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "LA GROUP, INC.", CHANGING ITS NAME FROM "LA GROUP, INC." TO "ONTV,
INC.", FILED IN THIS OFFICE ON THE FOURTEENTH DAY OF MARCH, A.D., 2000, AT 9
O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE SUSSEX COUNTY
RECORDER OF DEEDS.
/S/ EDWARD J. FREEL
2597464 8100 [SEAL] ------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
0314646
001128461 AUTHENTICATION:
DATE: 03-14-00
<PAGE> 8
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 03/14/2000
001128461 - 2597464
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LA GROUP, INC.
LA Group, Inc. (the "Corporation"), 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 the Corporation,
resolutions were duly adopted which proposed and amendment to the Articles of
Incorporation of the Corporation, declaring said amendment to be advisable and
directing that said amendment be considered at a special meeting of or by
consent of the stockholders of the Corporation.
SECOND, that thereafter, pursuant to resolution of its Board of Directors
and Section 228 of the General Corporation Law of the State of Delaware, written
consents voted in favor of said amendment were obtained from the holders of more
than a majority of the outstanding shares of the Corporation
THIRD, that said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH, that the capital of the Corporation shall not be reduced under or
by reason of said amendment.
FIFTH, that in accordance thereunder, the Articles of Incorporation of the
Corporation is hereby amended as follows:
Article I of the Articles of Incorporation of the Corporation shall be
amended by deleting the entire Article and replacing it as follows:
"Article I - Name
The name of the Corporation shall be ONTV, Inc."
Article IV of the Articles of Incorporation of the Corporation shall be
amended by deleting the entire Article and replacing it as follows:
"Article IV - Capital Stock
The authorized capital stock of the Corporation shall consist of
105,000,000 shares of common stock par value $.001 (80,000,000 shares
<PAGE> 9
being Class A Common Shares, and 20,000,000 shares being Class B Common Shares),
and 5,000,000 shares being preferred shares."
Article V of the Certificate of Incorporation of the Corporation shall be
amended as follows:
C. The opening paragraph shall be deleted in its entirety and replaced with
the following;
"No share of the Class A Common Stock shall have any preference over or
limitation with respect to any other share of Class A Common Stock. No
share of the Class B Common Stock shall have any preference over or
limitation with respect to any other share of Class B Common Stock. All
shares of Common Stock shall have the following rights and privileges:"
D. A new paragraph 5 shall be added which reads as follows:
"5. All existing authorized Common Shares of the Corporation shall be
deemed to be Class A Common Shares. The Board of Directors of the
Corporation shall have the right to determine the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of Class B Common Shares. However, none of the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of Class B Common Shares shall be greater than those of the
Class A Common Shares."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment
to be signed by its duly authorized officer the 13th day of March 2000.
LA GROUP, INC.
By: /s/ Daniel M. Fasano
---------------------------
Daniel M. Fasano, President
<PAGE> 1
EXHIBIT 3 (ii)
BYLAWS
OF
THE L.A. GROUP, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. OFFICES:
- --------------------
The principal office of the Corporation shall be at 120 Dean Road,
Spencerport, New York 14559, and the Corporation shall have other offices at
such places as the Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDER' S MEETINGS
-----------------------
SECTION 1. PLACE:
- ------------------
The place of stockholders' meetings shall be the principal office of
the Corporation unless some other place shall be determined and designated from
time to time by the Board of Directors.
SECTION 2. ANNUAL MEETING:
- ---------------------------
The annual meeting of the stockholders of the Corporation for the
election of directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held each year on a date to be determined by the Board of Directors
beginning in the year 1996. If the annual meeting of the stockholders be not
held, or if held and directors shall not have been elected for any reason, then
the election of directors may be held at any meeting of stockholders thereafter
called.
SECTION 3. SPECIAL MEETINGS:
- -----------------------------
Special meetings of the stockholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of ten percent
(10%) or more of all the shares entitled to vote at such meeting, by the giving
of notice in writing as hereinafter described.
SECTION 4. VOTING:
- -------------------
<PAGE> 2
At all meetings of stockholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the stockholder voting, the
number of shares voted, and, if such vote shall be by proxy, the name of the
proxy holder. Voting may be in person or by proxy appointed in writing, manually
signed by the stockholder or his duly authorized attorney--in--fact. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided therein.
Each stockholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty (50) days preceding the meeting, for the
determination of stockholders entitled to vote. The Secretary of the Corporation
shall make, at least ten (10) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten (10) days prior
to such meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting.
SECTION 5. ORDER OF BUSINESS:
- ------------------------------
The order of business at any meeting of stockholders shall be as
follows:
1. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the
meeting and the existence or lack of a quorum.
5. Reading of minutes of last previous meeting and disposal of
any unapproved minutes.
6. Reports of officers.
7. Reports of committees.
8. Election of directors if appropriate.
<PAGE> 3
9. Unfinished business
10. New business.
11. Adjournment.
12. To the extent that these Bylaws do not apply, Roberts' Rules
of Order shall prevail.
SECTION 6. NOTICES:
- --------------------
Written or printed notice stating the place, day, and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than fifty
(50) days before the date of the meeting, either personally or by mail, by or at
the direction of the President, the Secretary, or the officer or persons
calling the meeting, to each stockholder of record 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 address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid.
SECTION 7. QUORUM:
- -------------------
A quorum at any annual or special meeting shall consist of the
representation in person or by proxy of a majority in number of shares of the
outstanding capital stock of the Corporation entitled to vote at such meeting.
In the event a quorum be not present, the meeting may be adjourned by those
present for a period not to exceed sixty (60) days at any one adjournment; and
no further notice of the meeting or its adjournment shall be required. The
stockholders entitled to vote, present either in person or by proxy at such
adjourned meeting, shall, if equal to a majority of the shares entitled to vote
at the meeting, constitute a quorum, and the votes of a majority of those
present in numbers of shares entitled to vote shall be deemed the act of the
shareholders at such adjourned meeting.
SECTION 8. ACTION BY SHAREHOLDERS WITHOUT A MEETING:
- ----------------------------------------------------
Any action required to be or which may be taken at a meeting of the
shareholders of the Corporation may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
<PAGE> 4
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. ORGANIZATION AND POWERS:
- ------------------------------------
The Board of Directors shall constitute the policy-making or
legislative authority of the Corporation. Management of the affairs, property,
and business of the Corporation shall be vested in the Board of Directors, which
shall consist of not less than one nor more than three members, who shall be
elected at the annual meeting of stockholders by a plurality vote for a term of
one (1) year, and shall hold office until their successors are elected and
qualify. Directors need not be stockholders. Directors shall have all powers
with respect to the management, control, and determination of policies of the
Corporation that are not limited by these Bylaws, the Articles of Incorporation,
or by law, and the enumeration of any power shall not be considered a limitation
thereof.
SECTION 2. VACANCIES:
- ----------------------
Any vacancy in the Board of Directors, however caused or created, shall
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board, or at a special meeting of the
stockholders called for that purpose. The directors elected to fill vacancies
shall hold office for the unexpired term and until their successors are elected
and qualify.
SECTION 3. REGULAR MEETINGS:
- -----------------------------
A regular meeting of the Board of Directors shall be held, without
other notice than this Bylaw, immediately after and at the same place as the
annual meeting of stockholders or any special meeting of stockholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place for the holding of additional regular
meetings without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS:
- -----------------------------
Special meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be fixed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting. A resolution in writing signed by
all the directors shall be as valid and effectual as if it had been passed at a
meeting of the directors duly called, constituted, and held.
SECTION 5. NOTICES:
- --------------------
<PAGE> 5
Notices of both regular and special meetings save when held by
unanimous consent or participation, shall be mailed by the Secretary to each
member of the Board not less than five (5) days before any such meeting and
notices of special meetings may state the purposes thereof. No failure or
irregularity of notice of any regular meeting shall invalidate such meeting or
any proceeding thereat.
SECTION 6. QUORUM AND MANNER OF ACTING:
- ----------------------------------------
A quorum for any meeting of the Board of Directors shall be a majority
of the Board of Directors as then constituted. Any 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. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
SECTION 7. EXECUTIVE COMMITTEE:
- --------------------------------
The Board of Directors may by resolution of a majority of the Board
designate two (2) or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation; but the designation of such committee and the delegation of
authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on it or him by law.
SECTION 8. ORDER OF BUSINESS:
- ------------------------------
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows
1. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
6. To the extent that these Bylaws do not apply, Roberts' Rules
of Order shall prevail.
SECTION 9. REMUNERATION:
- -------------------------
<PAGE> 6
No stated salary shall be paid to directors for their services as such,
but, by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board. Members of special or standing committees may be allowed
like compensation for attending meetings. Nothing herein contained shall be
construed to preclude any director from receiving compensation for serving the
Corporation in any other capacity, subject to such resolutions of the Board of
Directors as may then govern receipt of such compensation.
ARTICLE IV
OFFICERS
SECTION 1. TITLES:
- -------------------
The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, and a Treasurer, the last two of which
offices may be combined and held by one person, who shall be elected for one (1)
year by the directors at their first meeting following the annual meeting of
stockholders. Such officers shall hold office until their successors are elected
and qualify. The Board of Directors may appoint from time to time such other
officers as It deems desirable who shall serve during such terms as may be fixed
by the Board at a duly held meeting. The Board, by resolution, shall specify the
titles, duties and responsibilities of such officers.
SECTION 2. PRESIDENT:
- ----------------------
The President shall preside at all meetings of stockholders and, in the
absence of a, or the, Chairman of the Board of Directors, at all meetings of the
directors. He shall be generally vested with the power of the chief executive
officer of the Corporation and shall countersign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors
or required by law. He shall make reports to the Board of Directors and
stockholders and shall perform such other duties and services as may be required
of him from time to time by the Board of Directors.
SECTION 3. VICE PRESIDENT:
- ---------------------------
The Vice President shall perform all the duties of the President if the
President is absent or for any other reason is unable to perform his duties and
shall have such other duties as the Board of Directors shall authorize or
direct.
SECTION 4. SECRETARY:
- ----------------------
The Secretary shall issue notices of all meetings of stockholders and
directors, shall keep minutes of all such meetings and shall record all
pro-
<PAGE> 7
ceedings. He shall have custody and control of the corporate records and books,
excluding the books of account, together with the corporate seal. He shall make
such reports and perform such other duties as may be consistent with his office
or as may be required of him from time to time by the Board of Directors.
SECTION 5. TREASURER:
- ----------------------
The Treasurer shall have custody of all moneys and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all moneys, securities, and other valuable effects of the
Corporation in such banks and depositories as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts and demands against the Corporation, or as they may be ordered by the
Board of Directors, shall render such account of his transactions as may be
required of him by the President or the Board of Directors from time to time and
shall otherwise perform such duties as may be required of him by the Board of
Directors.
The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.
SECTION 6. VACANCIES OR ABSENCES:
- ----------------------------------
If a vacancy in any office arises in any manner, the directors then in
office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate officer as seems advisable to the Board.
SECTION 7. COMPENSATION:
- -------------------------
No officer shall receive any salary or compensation for his services
unless and until the Board of Directors authorizes and fixes the amount and
terms of such salary or compensation.
ARTICLE V
STOCK
-----
<PAGE> 8
SECTION 1. CERTIFICATES OF SHARES.
- -----------------------------------
Each holder of stock of the Corporation shall be entitled to a stock
certificate signed by the President or Vice President and also by the Secretary
or an assistant secretary of the Corporation. The certificates of shares shall
be in such form, not inconsistent with the Certificate of Incorporation or
Articles of Incorporation, as shall be prepared or approved by the Board of
Directors. (All certificates shall be prepared or approved by the Board of
Directors). All certificates shall be consecutively numbered. Each certificate
shall state upon its face that the Corporation is organized under the laws of
this state; the name of the person to whom issued; the number and class of
shares; and the designation of the series, if any, which such certificate
represents; the par value of each share represented by the certificate, or a
statement that the shares are without par value. The name of the person owning
the shares represented thereby, with the number of such shares and the date of
issue, shall be entered on the Corporation's books, and no certificate shall be
valid unless it be signed by the President or Vice President and by the
Secretary or an assistant secretary of the Corporation. The seal of the
Corporation affixed to stock certificates may be a facsimile. The signatures of
officers as above described on any such certificate may be a facsimile if the
certificate is countersigned by a transfer agent, or registered by a registrar,
other than the Corporation itself or an employee of the Corporation.
SECTION 2. NEW CERTIFICATES:
- -----------------------------
All certificates surrendered to the Corporation shall be canceled and
no new certificate shall be issued, except to evidence transfer. of stock from
the unissued stock or treasury of the Corporation, or, in the case of a lost
certificate, except upon posting a bond of indemnity in such form and with such
surety or sureties and for such amount as shall be satisfactory to the directors
and upon producing by affidavit or otherwise such evidence of loss or
destruction as the Board may require, until the former certificates for the same
number of shares have been surrendered and canceled.
SECTION 3. TRANSFER OF SHARES:
- -------------------------------
Shares in the capital stock of the Corporation shall be transferred
only on the books of the Corporation by the holder thereof in person, or by his
attorney, upon surrender and cancellation of certificates for a like number of
shares. The delivery of a certificate of stock of this Corporation to a bona
fide purchaser or pledgee for value, together with a written transfer of the
same or a written power of attorney to sell, assign, and transfer the same,
signed by the owner of the certificate, shall be a sufficient delivery to
transfer the title against all persons except the Corporation. No transfer of
stock shall be valid against the Corporation until it shall have been registered
upon the books of the Corporation.
<PAGE> 9
SECTION 4. CLOSING OF TRANSFER BOOKS OR PROVISIONS FOR RECORD DATE:
- -------------------------------------------------------------------
The stock transfer books may be closed by the Board of Directors for a
period not exceeding fifty (50) days prior to any meeting of the stockholders or
prior to the payment of dividends; or the Board of Directors may fix in advance
a day not more than fifty (50) days prior to the holding of any such meeting of
stockholders or payment of dividends as the day as of which stockholders
entitled to notice of and to vote at such meeting or to payment of dividends, as
the case may be, shall be determined; and only stockholders of record on such
day shall be entitled to notice or to vote at such meeting, or to receive
dividends, as the case may be.
SECTION 5. REGULATIONS:
- ------------------------
The Board of Directors shall have power and authority to take all such
rules and regulations as they deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the Corporation.
The Board of Directors may appoint a Transfer Agent and a Registrar and may
require all stock certificates to bear the signature of such Transfer Agent or
such Registrar.
SECTION 6. RESTRICTIONS ON STOCK:
- ----------------------------------
The Board of Directors may restrict any stock issued by giving the
Corporation or any stockholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the directors may deem necessary and as
are not inconsistent with the Articles of Incorporation or by law. Any stock so
restricted must carry a stamped legend setting out the restriction or
conspicuously noting the restriction and stating where it may be found in the
records of the Corporation.
ARTICLE VI
DIVIDENDS AND FINANCES
SECTION 1. DIVIDENDS:
- ----------------------
Dividends may be declared by the directors and paid out of any funds
legally available therefor, as may be deemed advisable from time to time by the
Board of Directors of the Corporation. Before declaring any dividends, the Board
of Directors may set aside out of net profits or earned or other surplus such
sums as the Board may think proper as a reserve fund to meet contingencies or
for other purposes deemed proper and to the best interests of the Corporation.
SECTION 2. MONEYS:
- -------------------
<PAGE> 10
The moneys, securities, and other valuable effects of the Corporation
shall be deposited in the name of the Corporation in such banks or trust
companies as the Board of Directors shall designate and shall be drawn out or
removed only as may be authorized by the Board of Directors from time to time.
SECTION 3. FISCAL YEAR:
- ------------------------
Unless and until the Board of Directors by resolution shall determine
otherwise, the fiscal year shall begin on the 1st day of January and end on the
31st day of December, and the first fiscal period shall end December 31, 1995.
ARTICLE VII
SEAL
----
The Board of Directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon the name of the
Corporation, and shall be entrusted in the care of the Secretary or such other
officer of the Corporation as the Board of Directors shall designate
ARTICLE VIII
NOTICES
-------
SECTION 1. REQUIREMENTS:
- -------------------------
Whenever a notice shall be required by the statutes of the State of
Delaware or by these Bylaws, such notice may be given in writing by depositing
the same in the United States mails in a postpaid, sealed envelope addressed to
the person for whom such notice is intended to his or her home or other address,
as the same shall appear on the stock transfer books of the Corporation. The
time of mailing shall be deemed to be the time of giving such notice. A waiver
of any notice in writing, signed by a stockholder, director, or officer, whether
before, at, or after the time stated in such waiver for holding a meeting, shall
be deemed the equivalent of duly giving such notice.
SECTION 2. PRESENCE:
- ---------------------
The presence of any officer at a meeting, or the presence of any
stockholder or director at a meeting, unless such presence is for the sole
purpose of objecting to the holding of such meeting on the ground that it is not
duly held or convened, shall in all events be considered a waiver of notice
thereof; and failure to vote thereat shall not defeat the effectiveness of such
waiver.
<PAGE> 11
SECTION 3. RATIFICATION:
- -------------------------
The ratification or approval in writing of the minutes of any meeting
of officers, stockholders, or directors shall have the same force and effect as
if the ratifying or approving officer, director, or stockholder were present in
person at said meeting.
ARTICLE IX
AMENDMENTS
----------
These Bylaws may be altered, amended, or repealed by the Board of
Directors by resolution of a majority of the Board.
ARTICLE X
INDEMNIFICATION
---------------
The Corporation shall indemnify any and all of its directors or
officers, or former directors or officers, or any person who may have served at
its request as a director or officer of another corporation in which this
Corporation owns shares of capital stock or of which it is a creditor and the
personal representatives of all such persons, against expenses actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding in which they, or any of them, were made parties, or a party, by
reason of being or having been directors or officers or a director or officer of
the Corporation, or of such other corporation, except' in relation to matters as
to which any such director or officer or person shall have been adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of any duty owed to the Corporation. Such indemnification shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled, independently of this Article X, by law, under any Bylaw agreement,
vote of stockholders, or otherwise.
ARTICLE XI
CONFLICTS OF INTEREST
No contract or other transaction of the Corporation with any other
persons, firms or corporations, or in which the Corporation is interested, shall
be affected or invalidated by the fact that any one or more of the directors or
officers of the Corporation is interested in or is a director or officer of such
other firm or corporation; or by the fact that any director or officer of the
<PAGE> 12
Corporation, individually or jointly with others, may be a party to or may be
interested in any such contract or transaction; and relieves every person who
may become a director or officer of the Corporation from any liability that
might otherwise arise by reason of his contracting with the Corporation for the
benefit of himself or any firm or corporation in which he may in any way be
interested.
CERTIFICATE
I do hereby certify that I was Secretary of the meeting of the Board of
Directors duly called and held on the 22nd day of February, 1996, and I do
hereby certify that the above and foregoing Bylaws were duly adopted as the
Bylaws of said Corporation at such meeting.
- ---------------------------------
Daniel J. Fasano
(SEAL)
21710
<PAGE> 13
RESTATED
BYLAWS
OF
THE L. A. GROUP, INC.
(A DELAWARE CORPORATION)
EFFECTIVE FEBRUARY 23, 2000
------------------------
ARTICLE I
OFFICES
1.01 PRINCIPAL OFFICE. The principal office of this Corporation
(hereinafter the "Company") shall be selected by the Board of Directors from
time to time and may be within or
without the State of Delaware.
1.02 OTHER OFFICES. The Company may have such other offices,
within or without the State of Delaware as the Board of Directors may, from
time to time, determine.
1.03 REGISTERED OFFICE. The registered office of the Company required
by the General Corporation Law of Delaware to be maintained in Delaware may be,
but need not be, identical with the principal office if in Delaware, and the
address of the registered office may be changed from time to time by the Board
of Directors.
1.04 REPEAL OF INCONSISTENT PROVISIONS. All prior bylaws and
resolutions of the Board of Directors are repealed to the extent in conflict
with the provisions of these Bylaws.
ARTICLE II
STOCK AND THE TRANSFER THEREOF
2.01 STOCK CERTIFICATES. The shares of the Company's capital stock
shall be represented by consecutively numbered certificates signed by the
President or a Vice President and the Secretary or Assistant Secretary of the
Company, and sealed with the seal of the Company, or a facsimile thereof. If
certificates are signed by a transfer agent, acting on behalf of the Company,
and a registrar, the signatures of the officers of the Company may be facsimile.
In case any officer who has signed (by real or facsimile signature) shall have
<PAGE> 14
ceased to be such officer before such certificate is issued, it may be issued by
the Company with the same effect as if he were such officer on the date of its
issue.
Each certificate representing shares shall state upon the face
thereof:
(a) that the Company is organized under the laws of the State of
Delaware;
(b) the name of the person to whom issued;
(c) the number, class (if any) and series (if any) of
shares which such certificate represents; and
(d) the par value, if any, of the shares represented by such
certificate, or a statement that the shares have no par value.
If any class or series of shares is subject to special powers,
designations, preferences or relative, participating or other special rights,
then such (together with all qualifications, limitations or restrictions of such
preferences or rights) shall be set forth in full or summarized on the
certificate representing such class or series. However, in lieu of such
requirement, the certificate may state that the Company will furnish, without
charge, to the registered holder of the shares represented by such certificate
who so requests a statement setting forth such information in full.
Each certificate also shall set forth restrictions upon
transfer, if any, or a reference thereto, as shall be adopted by the Board of
Directors or by the shareholders, or as may be contained in this Article II.
No certificate shall be issued for any share until such share
is fully paid, as defined in the Certificate of Incorporation.
2.02 CONSIDERATION FOR SHARES. Shares shall be issued for such
consideration expressed in dollars as shall be fixed from time to time by the
Board of Directors. Treasury shares may be disposed of by the Company for such
consideration expressed in dollars as may be fixed from time to time by the
Board of Directors. No shares shall be issued for less than the par value
thereof. The consideration for the issuance of shares may be paid, in whole or
in part, in money, in other property, tangible or intangible, or in labor or
services actually performed for the Company, or as permitted in the Certificate
of Incorporation.
2.03 LOST CERTIFICATE. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates
2
<PAGE> 15
theretofore issued by the Company alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, and the Board of Directors when authorizing
such issue of a new certificate or certificates may, in its discretion, and as a
condition precedent to the issuance thereof, require the owner of such lost or
destroyed certificate or certificates or his legal representative to advertise
the same in such manner as it shall require, and/or furnish to the Company a
bond in such sum as it may direct, as indemnity against any claim that may be
made against the Company. Except as hereinabove in this section provided, no new
certificate or certificates evidencing shares of stock shall be issued unless
and until the old certificate or certificates, in lieu of which the new
certificate or certificates are issued, shall be surrendered for cancellation.
2.04 REGISTERED HOLDER AS OWNER. The Company shall be entitled to treat
the holder of record of any share of stock as the owner thereof entitled to
receive dividends and to vote such shares, and accordingly shall not be bound to
recognize any equitable or any other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as may be required by a valid proxy or by the laws of the State
of Delaware.
2.05. RETURNED CERTIFICATES. All certificates for shares changed or
returned to the Company for transfer shall be marked by the Secretary
"Canceled," with the date of cancellation, and the transaction shall be
immediately recorded in the certificate book opposite the memorandum of their
issue. The returned certificate may be inserted in the certificate book.
2.06 TRANSFER OF SHARES. Upon surrender to the Company or to a transfer
agent of the Company of a certificate of stock endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, and such
documentary stamps as may be required by law, it shall be the duty of the
Company to issue a new certificate. Each such transfer of stock shall be entered
on the stock book of the Company.
2.07 TRANSFER AGENT. The Board of Directors shall have the power to
appoint one or more transfer agents and registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars. Any powers or duties with respect to the
transfer and registration of certificates may be delegated to the transfer agent
and registrar.
3
<PAGE> 16
ARTICLE III
SHAREHOLDERS AND MEETINGS THEREOF
3.01 ANNUAL MEETING. The annual meeting of the shareholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held on such date as may be determined by
resolution of the Board of Directors, but if such day be a holiday, then on the
first business day thereafter which is not a holiday; provided, however, that
the Board of Directors may, by resolution, postpone such meeting for a period of
time not in excess of sixty (60) days. The place of the annual meeting shall be
the principal office of the Company or such other place within or without the
State of Delaware as the Board of Directors may determine.
3.02 SPECIAL MEETING. Special meetings of the shareholders may be
called by the President, a Vice President, the Board of Directors, or the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting. Special meetings shall be held at the principal office of the Company,
unless the Board of Directors determines otherwise.
3.03 NOTICE OF MEETINGS. Written or printed notice stating the place,
day, and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten (10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary,
or the officer or persons calling the meeting, to each shareholder or record in
the manner above provided. No business other than that specified in the notice
of special meeting shall be transacted at any such special meeting. The notice
of special meeting may be waived by submitting a signed waiver or by attendance
at the meeting.
3.04 CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the purposes
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the Company may provide that the stock
transfer books shall be closed for a stated period not to exceed in any case
sixty (60) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors 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, and in no event may the
record date precede the date upon which the Directors adopt a resolution fixing
the record date. If the stock transfer books are not
4
<PAGE> 17
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 payment of a dividend, the date on which notice of the
meeting is given (as defined in Article IX hereof) or the date on which the
resolution of the Board of Directors declaring such dividends is adopted, as the
case may be, shall be the record date for such determination of the
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Paragraph, such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjournment. The record date for
determining shareholders entitled to consent to corporate actions without a
meeting shall be fixed as provided in Section 3.12.
3.05 VOTING LIST. The officer or agent having charge of the stock
transfer books for shares of the Company shall make, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the principal office of the Company, and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall not 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.
3.06 QUORUM. A quorum at any meeting of the shareholders shall consist
of one-third (1/3) of the shares entitled to vote represented in person or by
proxy. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting entitled to vote on the subject matter shall
be the act of the shareholders. If less than one-third (1/3) of the shares
entitled to vote be represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time to the same place without
further notice. At such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
a meeting as originally notified. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
3.07 PROXIES. At all meetings of shareholders, a shareholder may vote
by proxy, executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the Company
before or at the time of meeting. No proxy shall be valid after three (3) years
from the date of execution, unless otherwise provided in the proxy.
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<PAGE> 18
3.08 VOTING OF SHARES. Each outstanding share shall be entitled to one
vote and each fractional share shall be entitled to a corresponding fractional
vote on each matter submitted to vote at a meeting of shareholders.
3.09. VOTING OF SHARES by Certain Holders. Neither treasury shares, nor
shares of its own stock held by the Company in a fiduciary capacity, nor shares
held by another Company if the majority of the shares entitled to vote for the
election of directors of such other Corporation is held by the Company, shall be
voted at any meeting or counted in determining the total number of outstanding
shares at any given time.
Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent, or proxy as the bylaws of such
corporation may prescribe, or, in the absence of such provisions, as the board
of directors of such company may determine.
Shares held by an administrator, executor, personal
representative, guardian, or conservator may be voted by him, either in person
or by proxy, without a transfer of such shares into his name. Share standing in
the name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
3.10 CHAIRMAN. The Chairman of the Board of Directors of the Company,
if there is one, or in his absence, the President, shall act as chairman at all
meetings of shareholders.
3.11 SHAREHOLDER VOTING. Voting at any shareholders' meeting shall be
oral or by show of hands; provided, however, that voting shall be by written
ballot if such demand is made by any shareholder present in person or by proxy
and entitled to vote.
3.12 INFORMATION ACTION BY SHAREHOLDERS; RECORD DATE. Any action
required to be taken at a meeting of the shareholders, or any other action which
may be taken at a meeting of the shareholders, except for the election of
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Directors, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of a majority of shares of every class and series entitled
to vote with respect to the subject matter thereof. Each written consent shall
bear the date of every shareholder's signature, and no written consent will be
effective unless written consents, signed by a sufficient number of shareholders
to take action, are delivered to the Company within sixty (60) days of the date
of the earliest such consent. Such consent shall have the same force and effect
as a vote of the shareholders, and may be stated as such in any document filed
with the Secretary of State of Delaware under the General Corporation Law of
Delaware. Prompt notice of such action by written consent of less than all
shareholders entitled to vote shall be given to all shareholders who have not
consented in writing to the action taken.
The record date for determining shareholders entitled to
consent to corporate actions in writing without a meeting (the "consent 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 was adopted; however, in
no consent record date is fixed and prior action by the Board of Directors is
required for the consent to be validly taken, the consent record date shall be
at the close of business on the day the Board of Directors is required, then the
consent record date shall be the first date on which a properly signed and dated
consent setting forth the action taken or proposed to be taken is delivered as
required above.
3.13 ANNUAL REPORT. The President of the Company shall prepare an
annual report which will set forth a statement of affairs of the Company as of
the end of its last fiscal year, including a balance sheet and an income
statement, and present it at the Annual Meeting of Shareholders. Failure to
prepare or present an annual report shall not affect the validity of any
shareholder meeting. No such report need be prepared or presented for any fiscal
year in which the Company was inactive.
ARTICLE IV
DIRECTORS, POWERS AND MEETINGS
4.01 GENERAL POWERS. The business and affairs of the Company
shall be managed by its Board of Directors, except as otherwise provided in the
General Corporation Law of Delaware or the Certificate of Incorporation.
4.02 NUMBER, TENURE AND QUALIFICATIONS. The Company's Board of
Directors shall consist of not less than one (1) and not more than nine (9)
Directors, as resolved from time to time by the Board of Directors. If such
number is not so fixed, the Company shall have three (3) Directors. Directors
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<PAGE> 20
shall be elected at each Annual Meeting of Shareholders. Each Director shall
hold office until the next Annual Meeting of Shareholders and thereafter until
his successor shall have been elected and qualified. Directors need not be
residents of Delaware or shareholders of the Company. Directors shall be
removable in the manner provided by the General Corporation Law of Delaware.
Directors shall be elected by plurality vote.
4.03 VACANCIES. Any Director may resign at any time by giving written
notice to the President or to the Secretary of the Company. Such resignation
shall take effect at the time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors though less than a
quorum, or by a sole remaining Director. A Director elected to fill a vacancy
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
shall be filled by the affirmative vote of a majority of the Directors then in
office or by an election at an annual meeting or at a special meeting of
shareholders called for that purpose, and a Director so chosen shall hold office
for the term specified in Paragraph 4.02 of this Article.
4.04 REMOVAL OF DIRECTORS. Any Director may be removed only in the
manner provided in the Company's Certificate of Incorporation, as amended, and
if no such provision appears therein, any Director may be removed either with or
without cause, at any time by a vote of the shareholders holding a majority of
the shares then issued and outstanding and who are entitled to vote for the
election of Directors, present at any special meeting called for that purpose.
In case any vacancy so created shall not be filled by the shareholders at such
meeting, such vacancy may be filled by the Board of Directors as provided
hereinafter.
4.05 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after and at the
same place as the Annual Meeting of Shareholders. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Delaware, for the holding of additional regular meetings without other notice
than such resolution.
4.06 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the President, the Chairman of the Board, or
any two Directors. The person or persons authorized to call special meetings of
the Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
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4.07 TELEPHONIC MEETINGS. Members of the Board of Directors or any
committee designated by the Board may participate in a meeting of the Board of
Directors or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear one another at the same time. Such participation shall constitute presence
in person at the meeting. All participants in any meeting of Directors, by
virtue of their participation and without further action on their part, shall be
deemed to have consented to the recording of such meeting by electronic device
or otherwise, and to the making of a written transcript thereof, in order that
minutes thereof shall be available for the Company's records.
4.08 NOTICE. Notice of any special meeting shall be given at least four
(4) days previous thereto by written notice delivered personally or mailed to
each Director at his business address, or by notice given at least two (2) days
prior to the meeting, in person or by any means specified in Section 9.01(b) or
(c). Any director may waive notice of any meeting. The attendance of a Director
at a meeting shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. 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.
4.09 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.
4.10 COMPENSATION. By resolution of the Board of Directors, any
Director may be paid any one or more of the following: his expenses, if any, of
attendance at a meeting; a fixed sum for attendance at each meeting; or a stated
salary as Director. No such payment shall preclude any Director from serving the
Company in any other capacity and receiving compensation therefor.
4.11 PRESUMPTION OF ASSENT. A Director of the Company who is present at
a meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail to the Secretary of the Company immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
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4.12 EXECUTIVE COMMITTEE. The Board of Directors, by resolution adopted
by a majority of the number of Directors, may designate two (2) or more
Directors to constitute an Executive Committee, which may exercise all of the
authority of the Board of Directors in the management of the Company, during the
period of time between meetings of the Board of Directors; but the designation
of such committee and the delegation thereto of authority shall not operate to
relieve the Board of Directors, or any member thereof, of any responsibility
imposed upon it or him by law.
4.13 ACTION BY DIRECTORS WITHOUT MEETING. Any action required to be
taken at a meeting of the Directors of the Company or any action which may be
taken at such a meeting, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the Directors
entitled to vote with respect to the subject matter thereof. A consent shall be
sufficient for this Paragraph if it is executed in counterparts, in which event
all of such counterparts, when taken together, shall constitute one and the same
consent.
4.14 CHAIRMAN OF THE BOARD. The Chairman of the Board, if such officer
shall be chosen by the Board of Directors, shall preside at all meetings of the
Board of Directors and meetings of shareholders at which he is present. He
shall, subject to the direction of the Board of Directors, have general
supervision over the affairs of the Company, and shall, from time to time,
consult and advise with the President in the direction and management of the
Company's business and affairs, and shall do and perform such other duties as
may, from time to time, be assigned to him by the Board of Directors.
4.15 BANKS ACCOUNTS, ETC. Anything herein to the contrary
notwithstanding, the Board of Directors may, except as may otherwise be required
by law, authorize any officer or officers, agents or agents, in the name of and
on behalf of the Company, to sign checks, drafts, or other orders for the
payment of money or notes or other evidences of indebtedness, to endorse for
deposit, deposit to the credit of the Company at any bank or trust company or
banking institution in which the Company may maintain an account or to cash
checks, notes, drafts, or other bankable securities or instruments, and such
authority may be general or confined to specific instances, as the Board of
Directors may elect.
4.16 INSPECTION OF RECORDS. Every Director shall have the absolute
right at any reasonable time to inspect all books, records, documents of every
kind, and the physical properties, of the Company and of its subsidiaries. Such
inspection may be made personally or by an agent and includes the right to make
copies and extracts.
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ARTICLE V
OFFICERS AND AGENTS
5.01 GENERAL. The officers of the Company shall be the Chairman of the
Board of Directors, a President, one or more Vice Presidents, a Secretary and a
Treasurer. the Board of Directors may appoint such other officers, assistant
officers, as they may consider necessary, who shall be chosen in such manner and
hold their offices for such terms and have such authority and duties as from
time to time may be determined by the Board of Directors. The salaries of all
the officers of the Company shall be fixed by the Board of Directors. One person
may hold any two offices, except that no person may simultaneously hold the
offices of President and Secretary. In all cases where the duties of any
officer, agent or employee are not prescribed by the Bylaws or by the Board of
Directors, such officer, agent or employee shall follow the orders and
instructions of the President.
5.02 ELECTION AND TERM OF OFFICE. The officers of the Company shall be
elected by the Board of Directors annually at the first meeting of the Board
held after each Annual Meeting of the Shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall hold office until the
first of the following to occur: Until his successor shall have been duly
elected and shall have qualified; or until his death; or until he shall resign;
or until he shall have been removed in the manner hereinafter provided.
5.03 REMOVAL. Any officer or agent may be removed by the Board of
Directors or by the Executive Committee whenever in its judgment the best
interest of the Company will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not in itself create
contract rights.
5.04 VACANCIES. A vacancy in any office, however occurring, may
be filled by the Board of Directors for the unexpired portion of the term.
5.05 CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors shall, subject to the direction and supervision of the Board of
Directors, be the Chief Executive Officer of the Company and be responsible for
the general control and supervision over the affairs of the Company and for the
long-term direction of its business. All other officers of the Company shall
report to him and be under his control.
5.06 PRESIDENT. The President shall, subject to the direction and
supervision of the Board of Directors, be the Chief Operating Officer of the
Company and shall, subject to the direction and supervision of the Chairman
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<PAGE> 24
of the Board of Directors, have general and active control of its affairs
and business and general supervision of its officers, agents and employees. He
shall, unless otherwise directed by the Board of Directors, attend in person or
by substitute appointed by him or shall execute in behalf of the Company written
instruments appointing a proxy or proxies to represent the Company, at all
meetings of the stockholders of any other company in which the Company shall
hold any stock. He may, subject to the Directors of the Chairman of the Board of
Directors, on behalf of the Company, in person or by substitute or by proxy,
execute written waivers of notice and consents with respect to any such
meetings. At all such meetings and otherwise, the President, in person or by
substitute or proxy as aforesaid, may vote the stock so held by the Company and
may execute written consent and other instruments and power incident to the
ownership of said stock, subject, however, to the instructions, if any, of the
Board of Directors. The President shall have custody of the Treasurer's bond, if
any.
5.07 VICE PRESIDENTS. The Vice Presidents shall assist the President
and shall perform such duties as may be assigned to them by the President or by
the Board of Directors. In the absence of the President, the Vice President
designated by the Board of Directors or (if there be no such designation)
designated in writing by the President shall have the powers and perform the
duties of the President. If no such designation shall be made, all Vice
Presidents may exercise such powers and perform such duties.
5.08 SECRETARY. The Secretary shall: (a) Keep the minutes of the
proceedings of the shareholders, executive committee and the Board of Directors;
(b) See that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) Be custodian of the corporate records
and of the seal of the Company and affix the seal to all documents when
authorized by the Board of Directors; (d) Keep at its registered office or
principal place of business within or outside Delaware a record containing the
names and addresses of all shareholders and the number and class of shares held
by each, unless such a record shall be kept at the office of the Company's
transfer agent or registrar; (e) Sign with the President, or a Vice President,
certificates for shares of the Company, the issuance of which shall have been
authorized by resolution of the Board of Directors; (f) Have general charge of
the stock transfer books of the Company, unless the Company has a transfer
agent; and (g) In general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or the Board of Directors. Assistant secretaries, if any, shall
have the same duties and power, subject to supervision by the Secretary.
5.09 TREASURER. The Treasurer shall be the Chief Financial Officer of
the Company and shall have the care and custody of all funds, securities,
evidence of indebtedness and other personal property of the Company and shall
deposit the same in accordance with the instructions of the Board of
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<PAGE> 25
Directors. He shall receive and give receipts and acquittances for
monies paid in on account of the Company, and shall pay out of the funds on hand
all bills, payrolls and other just debts of the Company of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
Treasurer and, upon request of the Board, shall make such reports to it as may
be required at any time. He shall, if required by the Board, give the Company a
bond in such sums, and with such sureties as shall be satisfactory to the Board,
conditioned upon the faithful performance of his duties and for the restoration
to the Company of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the Company.
He shall have such other powers and perform such other duties as may be from
time to time prescribed by the Board of Directors or the President. The
assistant treasurers, if any, shall have the same powers and duties, subject to
the supervision of the Treasurer.
The Treasurer shall also be the principal accounting officer
of the Company. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account, prepare
and file all local, state and federal tax returns, prescribed and maintain an
adequate system of internal audit, and prepare and furnish to the President and
the Board of Directors statements of account showing the financial position of
the Company and the results of its operations.
ARTICLE VI
INDEMNIFICATION
Every Director, Officer, employee and agent of the Company, and every
person serving at the Company's request as a director, officer (or in
a position functionally equivalent to that of officer or director), employee or
agent of another corporation, partnership, joint venture, trust or other entity,
shall be indemnified to the fullest extent authorized by law and in the manner
provided by the Company's Certificate of Incorporation, as it may be amended,
against all expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with any threatened,
pending or completed action, suit or proceeding brought by or in the right of
the Corporation or otherwise, to which he was or is a party or is threatened to
be made a party by reason of his current or former position with the Corporation
or by reason of the fact that he is or was serving, at the request of the
Corporation, as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
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ARTICLE VII
MISCELLANEOUS
7.01 DECLARATION OF DIVIDENDS. The Board of Directors, at any regular
or special meeting, may declare dividends payable out of the funds of the
Company, whenever in the exercise of its discretion it may deem such declaration
advisable and such is permitted by law. Such dividends may be paid in cash,
property, or shares of the Company.
7.02 BENEFIT PROGRAMS. Directors shall have the power to install and
authorize any pension, profit sharing, stock option, insurance, welfare,
educational, bonus, health and accident or other benefit program which the Board
deems to be in the interest of the Company, at the expense of the Company, and
to amend or revoke any plan so adopted.
7.03 SEAL. The corporate seal of the Company shall be circular in
form and shall contain the name of the Company and the words "Seal, Delaware."
7.04 FISCAL YEAR. The Board of Directors shall have the power to fix,
and from time to time change, the fiscal year of the Company. Any such
adoption of or change in a fiscal year shall not constitute or require an
amendment to these Bylaws.
ARTICLE VIII
AMENDMENTS TO BYLAWS
8.01 AMENDMENT OF BYLAWS BY BOARD OF DIRECTORS. Except as otherwise
provided in the Certificate of Incorporation, by applicable law or by the
provisions of this Article VIII, the Board of Directors may amend or repeal any
provision of the Bylaws of the Company or adopt any new Bylaw, unless the
shareholders have adopted, amended or repealed a particular Bylaw provision and,
in doing so, have expressly reserved to the shareholders the right of amendment
or repeal therefor. The Board of Directors may adopt, amend, alter or repeal the
Bylaws of the Company only by the vote of a majority of the entire Board.
8.02 SUPERMAJORITY REQUIRED FOR AMENDMENT BY SHAREHOLDERS. The
shareholders of the Company have the right, in accordance with the voting
requirements set forth in this Section 8.02, to amend or repeal any provision of
these Bylaws, or to adopt new Bylaw provisions, even though such provisions may
also be adopted, amended or repealed by the Board. Except as may
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<PAGE> 27
otherwise specifically be required by law, the affirmative vote of the
holders of not less than seventy-five percent (75%) of the total number of votes
entitled to be cast by the holders of all of the shares of capital stock of the
Company then entitled to vote generally in the election of directors shall be
required for the shareholders to adopt, amend, alter or repeal any provision of
the Bylaws of the Company.
ARTICLE IX
NOTICES
9.01 GIVING OF NOTICE. Except as otherwise provided by the General
Corporation Law of Delaware, these Bylaws, the Company's Certificate of
Incorporation, or resolution of the Board of Directors, every meeting notice or
other notice, demand, bill, statement or other communication (collectively,
"Notice") to or from the Company from or to a Director, Officer or shareholder
shall be duly given if it is written or printed and is (a) sent by first class
mail or by overnight service of the U. S. Postal Service, postage prepaid, (b)
sent by any established overnight air courier service such as Federal Express,
Emery, Airborne or UPS, (c) sent by telegraph, tested telex or other tested
facsimile transmission, (d) delivered by any commercial messenger service which
regularly retains its receipts, or (e) personally delivered, provided a receipt
is obtained reflecting the date of delivery. Notice shall not be duly given
unless all delivery or postage charges are prepaid. Notice shall be given to an
addressee's most recent address as it appears on the Company's records. A Notice
shall be deemed "given" when dispatched for delivery, or if mailed, on the date
postmarked. This Section shall not have the effect of shortening any notice
period provided for in these Bylaws.
9.02 WAIVER OF NOTICE. Any Notice required by the General Corporation
Law of Delaware, the Certificate of Incorporation or these Bylaws may be waived
in writing at any time by the person entitled to the Notice, and such waiver
shall be equivalent to the giving of notice. Notice of any meeting shall be
waived by attendance (if a Shareholders' meeting), in person or by proxy) at the
meeting. A Waiver of Notice of a special meeting of Shareholders shall state the
purpose for which the meeting was called or the business to be transacted
thereat.
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<PAGE> 1
EXHIBIT 4
- --------------------------------------------------------------------------------
NUMBER LOGO SHARES
01018 L.A. GROUP, INC.
COMMON STOCK CUSIP 501714 10 9
THIS CERTIFIES THAT
S P E C I M E N
is owner of
FULLY PAID AND NON ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE EACH
OF
L.A. GROUP, INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Delaware,
and to the Certificate of Incorporation and Bylaws of the Corporation, as now
or hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
DATED: CORPORATE SEAL COUNTERSIGNED
L.A. GROUP, INC. COMPANY OFFICERS
DELAWARE
1977
/s/ Daniel J. Fasano /s/ Anthony Biondi
Secretary President
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit 10
LA GROUP, INC. [LA GROUP INC. LOGO]
39 CRYSTAL COMMONS DRIVE
ROCHESTER, NEW YORK 14624
888-499-4030 TEL.
716-426-2223 FAX.
September 28, 1999
Mr. Frank Costanzo
Ronco Inventions LLC
Chief Operating Officer
21344 Superior Street
Chatsworth, CA 91311
RE: RONCO WEB SITE AGREEMENT
Dear Frank:
The LA Group, Inc. (LA) agrees to accept and market the Ronco Inventions LLC
(Ronco) Internet site (www.ronco.com). As per our discussion, we would begin
immediately. LA can offer a great deal of expertise that would help make the
Ronco site become successful. The existing site would receive a quick face-lift
and would have a full online shopping cart incorporated into it. (To see an
example of this go to www.seenontv.com.) We will edit and promote the web site
to over 2,400 search engines and link pages, as well as begin a banner ad link
exchange program.
The shopping cart portion would link each item to an order screen. The online
shoppers would be able to shop for many items before submitting their order.
Initially, each order would be sent via email to the email address assigned to
order processing for credit card verification and shipping. As soon as
possible, the site will enable direct credit card verification online. If you
are using UPS online shipping system orders could be uploaded for easy
labeling. The features of the shopping cart are as follows:
SHOPPING CART OPTIONS AND LA GROUP, INC. (LA) RESPONSIBILITIES:
- Cart holds item name, part number, quantity, price, shipping, tax, weight
and custom options.
- Item price, part number, shipping, weight and tax adjustable based on an
option.
- Add multiple items at one time.
- Accepts both billing and shipping addresses.
- Validates credit card numbers and Supports SSL Security.
- Flexible tax options including tax rates for each state or county and
flat tax support.
- Flexible shipping options including shipping by weight, total cost,
number of items and more.
- Customize shopping cart tables, fonts, colors and images.
- Further customize shopping cart output using HTML Templates files.
- Customize the e-mail messages sent to the client and to the customer.
- Orders are written to Carts own database.
- Optional: automatic credit card authorization using CyberCashTM.
- Optional: export orders into tab or comma delimited files for importing
into database or spreadsheet.
- Optional: run an external CGI application and pass it parameters from the
order.
- Setup a status program to track statistics about the site (Hit count,
hourly hit count, best time of day, search engine, referring page,
operating system, screen resolution, Internet browser type, visiting
country, host address, IP address and Java script compatibility).
- Establish the beta site within ten (10) days of acceptance of this
agreement by Ronco Inventions, LLC and establish final site configuration
within twenty days of the execution of this agreement.
<PAGE> 2
LA -- Ronco Agreement Page 2
WEB SITE CONFIGURATION AND CONSIDERATION RONCO INVENTIONS, LLC (RONCO)
RESPONSIBILITIES:
- Ronco shall provide information on the current administrative contact to
move the web site with Internic. Ronco shall provide a list of
all-responsible parties, names, job descriptions or department titles
and telephone numbers. This is to establish user names, passwords and
e-mail addresses to direct orders and customer service questions or
information.
- Ronco will need to be prepared to run at the optimal configuration to
include site promotion and linking in-order to get maximum results. In
addition, Ronco Inventions, LLC shall provide LA with information and
linkages for any related Ronco sites.
- Ronco shall provide a list of all products that will be available on the
shopping cart. This list needs to include item numbers, descriptions and
pricing.
- LA will incorporate some pictures or GIF, and a small amount of live
audio (very little audio -- this will slow down loading and will
discourage potential shoppers.) Ronco will supply appropriate art and
audio.
- LA will, on behalf of Ronco, apply for the CyberCash automatic credit
card processing. Ronco will execute appropriate forms.
TERMS OF THE AGREEMENT:
- Ronco and LA will move the current web site from its present location to
the LA server in order to install a shopping cart system. This is
necessary in order to install a runtime license, credit card secure
encryption systems and perform web site promotions.
- Ronco will pay commissions to LA for each item that is sold, based on the
following Showtime(TM) < > per unit, Food Dehydrator < > per unit,
Pasta/Sausage Maker < > per unit. Commission will be the same if items
are basic or upsell units. For any other items sold, LA will receive
< > of the gross sales amount. No commissions shall be paid on
shipping, handling or sales tax. LA shall not receive any commission on
canceled or unpaid orders.
- All commissions shall be due LA within ten (10) days of the end of the
month in which orders are placed. Any payment not paid within ten days of
the date when due shall be subject to a 1% per month late charge. If any
payments are not made within 30 days of the date due LA shall have the
right to cancel this Agreement. If either party brings legal proceedings
to enforce its rights under this agreement, the successful litigant shall
be entitled to recover its cost and expenses of the litigation, including
reasonable legal fees.
- Ronco shall pay a one time < > fee for the runtime license for the
shopping cart system upon presentation of such an invoice by LA to Ronco.
- Ronco shall, upon execution of this agreement, make a < >
< > payment as a non-refundable advance against commissions for
web site editing, site promotion and banner ad placement (i.e.: update
site for easy navigation, speed when loading, HTML editing, Keywords,
Site description, Meta-tag's, browser compatibility and downloadable
browser updates for Internet Explorer and Netscape.). Ronco shall pay an
additional < > payment as a non-refundable advance
against commissions upon acceptance of the redesigned web site and
implementation of the shopping cart.
- This document, when executed by both parties shall constitute a legally
binding agreement under the laws of the State of California and shall be
in effect for a period of one year (the Term) unless terminated by either
party upon providing a thirty (30) day written notice of termination,
addressed to the above listed addresses. In the event that Ronco elects
to terminate before the expiration of the Term of the Agreement, other
than for cause, then Ronco will pay LA a penalty fee equal to the average
previous two months sales multiplied by the remaining number of month(s)
left under the Term of this Agreement.
- LA Group, Inc. shall maintain and market www.ronco.com with non-exclusive
right's to offer Ronco product's on the www.seenontv.com and
www.seenontv.net web sites.
Footnote - Certain portions of this agreement have been redacted as it contains
confidential information. An application for confidential treatment
of this information has been filed with the Secretary of the
Commission.
<PAGE> 3
LA -- Ronco Agreement Page 3
LA specifically acknowledges that all information provided to LA by Ronco
shall remain the property of Ronco and be used only as directed by Ronco. LA
further acknowledges that should this Agreement be terminated for any reason
that Ronco is the sole owner of all URL's, site locations, site names, and work
product developed under this Agreement and that all such shall be promptly
returned by Ronco.
Agreed to this ___ day of December 1998
For: Ronco Inventions, LLC For: LA Group, Inc.
/s/ Daniel M. Fasano
- ----------------------------- ----------------------------------------
Frank T. Costanzo, COO Daniel M. Fasano, CEO
<PAGE> 4
RONCO INVENTIONS, LLC
21344 Superior Street
Chatsworth, CA 91311
Telephone (818) 775-4602
FAX (818) 775-4664
August 12, 1999
Mr. Dan Fasano
LA Group, Inc.
39 Crystal Commons Dr.
Rochester, NY 14624
Dear Dan:
Per our conversation and as reflected on the March 14, 1999 Addendum to the
December 21, 1998 contract, we are changing the amount you receive on the
Showtime Rotisserie product from < >. This includes any Showtime
unit with or without the accessory package. The remuneration for the other
products will remain the same.
Also, the term of our Agreement as reflected in the March 14, 1999 Addendum
will be changed from 3 years to 1 year.
This document supercedes the previous March 14, 1999 Addendum and will be
effective as of Monday, August 9, 1999.
Please contact me before you come out to California so we can plan on getting
together.
Sincerely, Agreed and Accepted by:
/s/ Ron Popeil /s/ Dan Fasano
- ----------------------------- ------------------------------
Ron Popeil Dan Fasano, CEO
CEO LA Group, Inc.
RP/gmw
<PAGE> 5
LA GROUP, INC. [LA GROUP, INC. LOGO]
39 CRYSTAL COMMONS DRIVE
ROCHESTER, NEW YORK 14624
888-499-4030 TEL.
716-426-2223 FAX.
March 25, 1999
Frank Costanzo
Ronco Inventions, LLC
21344 Superior Street
Chatsworth, CA 91311
Dear Frank,
As we discussed, part of LA Group's responsibility in managing Ronco's web site
and internet activities is to attempt to secure positions on third-party web
sites. These positions can be in the form of direct links to the Ronco web site
from other sites, merchandising Ronco products on third-party sites with link's
to Ronco's order pages, banner ads and any other form of promotion companies
I'm talking with and one is ready to participate.
To that end, I would like to confirm LA Group's contingent right to enter into
sub-licensing agreements in connection with our existing agreement with other
companies to secure such positions. I use the term "contingent" because Ronco
would have the final approval regarding all activities and LA Group agrees to
submit pertinent documents related to potential relationships.
If you are in agreement please indicate below with you signature
Sincerely,
/s/ Daniel Fasano
Daniel Fasano
President
Agreed and accepted
/s/ Frank Costanzo
- -----------------------------
Frank Costanzo
Ronco Inventions LLC
<PAGE> 1
EXHIBIT 21
WHOLLY OWNED SUBSIDIARIES
LA Acquisitions, Inc.
LA Distribution, Inc.
What-A-Product, Inc.
Seen On TV. Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,773
<SECURITIES> 50,000
<RECEIVABLES> 79,254
<ALLOWANCES> 0
<INVENTORY> 11,388
<CURRENT-ASSETS> 161,415
<PP&E> 6,962
<DEPRECIATION> (729)
<TOTAL-ASSETS> 274,321
<CURRENT-LIABILITIES> 113,826
<BONDS> 0
0
0
<COMMON> 15,278
<OTHER-SE> 145,217
<TOTAL-LIABILITY-AND-EQUITY> 274,321
<SALES> 209,754
<TOTAL-REVENUES> 209,754
<CGS> 32,423
<TOTAL-COSTS> 32,243
<OTHER-EXPENSES> 87,359
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314
<INCOME-PRETAX> 89,658
<INCOME-TAX> 645
<INCOME-CONTINUING> 89,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,013
<EPS-BASIC> 0.58
<EPS-DILUTED> 0.58
</TABLE>
<PAGE> 1
Exhibit 99(1)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("AGREEMENT") is entered into effective
January 1, 2000 by and between LA GROUP, INC. ("EMPLOYER") and DANIEL M. FASANO
("EMPLOYEE"), and
PREMISES
1. Employee possesses expertise, experience and skill in the development
and marketing of products via electronic and other means.
2. Employee has demonstrated the ability to run, manage and build a
publicly traded development stage business.
3. Employer desires to employ Employee to serve as its Chief Executive
Officer to run, manage and build its business.
4. Employee desires to perform all of such services as Employer's
employee and both parties want to enter into a written agreement as to
their understanding of the employment relationship.
AGREEMENT
For and in Consideration of the mutual covenants contained herein and
of the mutual benefits to be derived hereunder, the parties agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
a. "Accrued Benefits" shall mean the amount payable not later than
ten (10) days following an applicable Termination Date and which shall be equal
to the sum of the following amounts:
(i) All salary earned or accrued through the Termination
Date;
(ii) Reimbursement for any and all monies advanced in
connection with Employee's employment for reasonable
and necessary expenses incurred by
<PAGE> 2
Employee and approved by the Employer through the
Termination Date; and
(iii) All other payments and benefits to which Employee may
be entitled under the terms of any benefit plan of
the Employer.
b. "Board" shall mean the board of directors of the Employer.
c. "Cause" shall mean any of the following:
(i) The engagement by Employee in fraudulent conduct,
which has a significant adverse impact on the
Employer in the conduct of the Employer' s business;
(ii) Conviction of a felony involving a crime against the
Employer, as evidenced by a binding and final
judgment, order or decree of a court of competent
jurisdiction;
(iii) Gross negligence or refusal by Employee to perform
his duties or responsibilities; or
d. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
e. "Confidential Information" means information (i) disclosed to
or actually known by Employee as a consequence of or through his/her employment
with the Employer, (ii) not generally known outside the Employer, and (iii)
which relates to the Employer's business. Confidential Information includes, but
is not limited to, information of a technical nature, such as methods and
materials, trade secrets, inventions, processes, formulas, systems, computer
programs, and studies, and information of a business nature such as project
plans, market information, costs, customer lists, and so forth.
f. "Disability" shall mean a physical or mental condition whereby
Employee is unable to perform on a full-time basis his customary duties under
this Agreement.
g. "Developments" means all Inventions (defined hereafter),
computer programs, copyright works, mask works, trademarks, Confidential
Information, Works of Authorship (defined hereafter), and other Intellectual
Property (defined hereafter), made, conceived or authored by Employee, alone or
jointly with others, while employed by the Employer; whether or not during
2
<PAGE> 3
normal business hours or on the Employer's premises, that are within the present
scope of the Employer's business at the time such Developments are made,
conceived, or authored, or which result from or are suggested by any work
Employee or others may do for or on behalf of the Employer.
h. "Employer" means LA Group, Inc. and its subsidiaries, divisions
and affiliates as well as majority owned companies of such subsidiaries,
divisions and affiliates, or their successors or assigns.
i. "Invention" means discoveries, concepts, and ideas, whether or
not patentable or copyrightable, including but not limited to improvements,
know--how, data, processes, methods, formulae, and techniques, as well as
improvements thereof, or know--how related thereto, concerning any present or
prospective activities of the Employer which Employee makes, discovers or
conceives (whether or not during the hours of his engagement of with the use of
the Employer's facilities, materials or personnel), either solely or jointly
with others during his engagement by the Employer or any affiliate and, if based
on or related or Proprietary Information, at any time after termination of such
engagement.
j. "Intellectual Property" means Inventions, Confidential
Information, Works of Authorship, patent rights, trademark rights, service mark
rights, copyrights, know-how, Developments and rights of like nature arising or
subsisting anywhere in the world, in relation to all of the foregoing, whether
registered or unregistered.
k. "Notice of Termination" shall mean the notice described in
Section 13 hereof.
l. "Person" shall mean any individual, partnership, joint venture,
association, trust, corporation or other entity, other than an employee benefit
plan of the Employer of an entity organized, appointed of established pursuant
to the terms of any such benefit plan.
m. "Proprietary Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a similar nature related to the
business of the Employer disclosed to the Employee or otherwise made known to
him as a consequence of or through his engagement by the Employer (including
information originated by Employee) in any technological area previously
developed by the Employer or developed, engaged in, or researched, by the
Employer during the term of Employee's engagement, including, but not limited
to, trade secrets, processes, products, formulae, apparatus, techniques,
3
<PAGE> 4
know--how, marketing plans, data, improvements, strategies, forecasts, customer
lists, and technical requirements of customers, unless such information is in
the public domain to such an extent as to be readily available to competitors.
n. "Termination Date" shall mean, except as otherwise provided in
Section 12 hereof.
(i) Employee's date of death;
(ii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment on account of
Disability pursuant to Section 16 hereof, unless
Employee returns on a full-time basis to the
performance of his duties prior to the expiration of
such period;
(iii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by
Employee voluntarily; and
(iv) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by
the Employer for any reason other than death or
Disability.
o. "Termination Payment" shall mean the payment described in
Section 14 hereof.
p. "Works of Authorship" means an expression fixed in a tangible
medium of expression regardless of the need for a machine to make the expression
manifest, and includes, but is not limited to, writings, reports, drawings,
sculptures, illustrations, video recordings, audio recordings, computer
programs, and charts.
2. EMPLOYMENT. Employer hereby employs Employee to perform those duties
generally described in this Agreement, and Employee hereby accepts and agrees to
such employment on the terms and conditions hereinafter set forth.
3. TERM. Subject to the terms and conditions of this Agreement, the
term of this Agreement shall commence retroactively from January 1, 2000,
4
<PAGE> 5
and end on December 31, 2005.
4. DUTIES. During the term of this Agreement, Employee shall be
employed by Employer as its Chief Executive Officer. In addition to the office
of Chief Executive Officer, Employee agrees to serve in such other office or
position with Employer or any subsidiary of Employer and as such shall, from
time to time, be determined by Employer's Board. Employee agrees to serve as a
member of the Employer's Board as Chairman of its Board. Employee shall devote
substantially all of his working time and efforts to the business of Employer
and its subsidiaries and shall not during the term of this Agreement be engaged
in any other substantial business activities which will significantly interfere
or conflict with the reasonable performance of his duties hereunder.
5. COMPENSATION.
a. Salary. For all services rendered by Employee, Employer shall
pay to Employee a base salary of $125,000 for the first year, and the base
salary shall increase by $12,500 per year for each of the remaining four years
of this Agreement, payable in bi-monthly installments. Employee is also due a
back salary from the time of the inception of employment by Employer of the
Employee to the date of this Agreement in the amount of $300,000.00. Employee
has an option to take this past compensation in common shares of the Employer
based on $.15 per share (2,000,000 shares). If Employer's financial constraints
so dictate, Employee agrees to defer a portion of the salary contained in this
Section. This deferred base salary along with any deferred base salary earned
prior to the date of this Agreement shall be paid to Employee at such time or
times as financial constraints allow. All salary payments shall be subject to
withholding and other applicable taxes. The rate of salary may be increased at
any tine, as the Board may determine, based on earnings, increased activities of
the Employer, or such other factors as the Board may deem appropriate from time
to time. Employee shall receive bonus or incentive compensation as approved by
the Board. This option may be exercised at any time prior to the expiration of
this Agreement by written notice to the then President of the Employer, and is
subject to an increase in the authorized capitalization of the Employer from
20,000,000 shares of common stock to 100,000,000 shares of common stock.
b. Incentive Compensation. In the event that Employer achieves
"ADJUSTED GROSS REVENUES" annually in excess of $10,000,000 Employee shall
receive additional compensation equal to 9/10 of 1% of "ADJUSTED GROSS
REVENUES". This Incentive compensation shall be paid on an annual basis within
thirty (30) days of the end of the calendar year based on the preceding calendar
year's "ADJUSTED GROSS REVENUES". "GROSS"
5
<PAGE> 6
and "ADJUSTED GROSS REVENUES" are defined as follows: "GROSS REVENUES" shall
mean all income of Employer from all sources exclusive of sales taxes, use
taxes, value added taxes, and any other taxes imposed upon sales of products.
"ADJUSTED GROSS REVENUES" shall mean Employer's Gross Revenues from sales of the
Products less all of the following:
(i) refunds, credits or other allowances on account of
return or rejection of goods or otherwise granted in
the ordinary course of business as actually incurred
and as reserved for ("Returns");
(ii) uncollectible accounts due to credit card charge
backs, bad checks or other reasons of
uncollectability, as actually incurred and as
reserved for ("Uncollectibles"); and
(iii) sales made at or below LA Group's cost of goods for
purposes of liquidation or close-out ("Liquidation
Sales").
c. Insurance Benefits. Employer shall provide health and medical
insurance for Employee in a form and program to be chosen by Employer for
certain of its full-time employees. Alternatively, at Employee's discretion,
Employer may reimburse Employee for Employee's health and medical insurance
coverage for Employee and his family. Employer shall provide Employee with
directors and officers liability insurance in the minimal amount of $2,000,000
and life and disability insurance in amounts approved by the Board.
d. Other Benefits. Employee shall be entitled to participate in
any retirement, pension, profit-sharing, or other plan as may be put in effect
from time to time by the Board, including the following:
(i) Qualified Stock Option Plan. Pursuant to a Qualified
Stock Option Plan authorized by the Board and
approved by the Shareholders of Employer, Employee
shall have the option to purchase up to 400,000
shares of the Employer's common shares on the
following terms: up to 100,000 shares of Employer's
stock in six months at $1.00 per share, up to 100,000
shares of Employer's stock in 12 months at $2.00 per
share, up to 100,000 shares of Employer's stock in
eighteen months at $3.00 per share and up to 100,000
shares of Employer's stock in twenty-four months at
6
<PAGE> 7
$4.00 per share. These options are cumulative and
fully vested upon execution of this Agreement; and
(ii) Revenue Performance Bonuses. Employee shall be issued
100,000 shares of Employer's stock for each
$10,000,000 in Gross Income received by Employer on
an annual basis with a maximum of 3,000,000 shares to
be issued during the term of this Agreement Gross
Income shall mean total revenue less sales taxes
collected, returns and allowances; and
(iii) Stock Performance Options. Employee shall have the
option to purchase additional shares of the
Employer's common stock upon the happening of the
following: if the public trading price closes at a
minimum of $2.00 per share for five (5) consecutive
days, Employee shall have the option to purchase
150,000 shares at $1.00 per share; if the public
trading price closes at a minimum of $4.00 per share
for five (5) consecutive days, Employee shall have
the option to purchase an additional 150,000 shares
at $2.00 per share; if the public trading price
closes at a minimum of $6.00 per share for five (5)
consecutive days, Employee shall have the option to
purchase an additional 200,000 shares at $3.00 per
share. These options are cumulative and fully vested
upon execution of this Agreement. These options must
be executed prior to the expiration of this Agreement
by written notice to the President of the Employer.
e. Automobile / Transportation. Employer shall pay for or
reimburse Employee for his insurance, monthly automobile payment, not to exceed
$1,000 per month, including applicable taxes, fuel, oil, insurance, repairs and
maintenance.
6. EXPENSES. Employer will reimburse Employee for ordinary and
necessary expenses incurred in connection with Employer's business, including
expenses for travel, lodging, meals, beverages, entertainment, and other items
of Employee's periodic presentation of an account of such expenses. Employer
shall reimburse Employee for the following expenses whether incurred or to be
incurred on behalf of Employer.
7. WORKING FACILITIES. Employer shall provide to Employee offices
7
<PAGE> 8
and facilities appropriate to Employee's position and suitable for the
performance of Employee's duties as set forth in this Agreement.
8. NONDISCLOSURE OF PROPRIETARY AND CONFIDENTIAL INFORMATION
Recognizing that the Employer is presently engaged, and may hereafter continue
to be engaged in the research and development of processes, the manufacturing of
products or performance of services, which involve experimental and inventive
work and that the success of the Employer's business depends upon the protection
of the processes, products and services by patent, copyright or by secrecy and
that Employee has had, or during the course of his engagement may have, access
to Proprietary and Confidential Information, as herein defined, of the Employer
or other information and data of a secret or proprietary nature of the Employer
which the Employer wishes to keep confidential and Employee has furnished, or
during the course of his engagement may furnish such information to the
Employer, Employee agrees and acknowledges that:
a. The Employer has exclusive property rights to all
Proprietary and Confidential Information and Employee hereby assigns all rights
he might otherwise possess in any Proprietary and Confidential Information to
the Employer. Except as required in the performance of his duties to the
Employer, Employee will not at any time during or after the term of his
engagement, which term shall include any time in which Employee may be retained
by the Employer as a consultant, directly or indirectly use, communicate,
disclose or disseminate any Proprietary or Confidential Information of a secret,
proprietary, confidential or generally undisclosed nature relating to the
Employer, its products, customers, processes and services, including information
relating to testing, research development, manufacturing, marketing and selling.
b. All documents, records, notebooks, notes, memoranda and
similar repositories of, or containing, Proprietary and Confidential Information
or any other information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Employer or its operations and activities
made or compiled by Employee at any time or made available to him prior to or
during the term of his engagement by the Employer, including any and all copies
thereof, shall be the property of the Employer, shall be held by him in trust
solely for the benefit of the Employer, and shall be delivered to the Employer
by him on the termination of his engagement or at any other time on the request
of the Employer.
c. Employee will not assert any rights under any inventions,
trademarks, copyrights, discoveries, concepts or ideas, or improvements thereof,
8
<PAGE> 9
or know--how related thereto, as having been made or acquired by him during the
term of his engagement if based on or otherwise related to Proprietary or
Confidential Information.
9. ASSIGNMENT OF INVENTIONS.
a. All Inventions shall be the sole property of the Employer, and
Employee agrees to perform the provisions of the Section 9 with respect thereto
without the payment by the Employer of any royalty or any consideration therefor
other than the regular compensation paid to Employee in the capacity of any
employee or consultant.
b. Employee shall apply, at the Employer's request and expense,
for United States and foreign letters patent or copyrights either in Employee' s
name or otherwise an the Employer shall desire.
c. Employee hereby assigns to the Employer all of his rights to
such Inventions, and to applications for United States and/or foreign letters
patent or copyrights and to United States and/or foreign letter patent or
copyrights granted upon such Inventions.
d. Employee shall acknowledge and deliver promptly to the
Employer, without charge to the Employer, but at its expense, such written
instruments (including applications and assignments) and do such other acts,
such as giving testimony in support of Employee' s inventorship, as may be
necessary in the opinion of the Employer to obtain, maintain, extend, reissue
and enforce United States and/or foreign letters patent and copyrights relation
to the Inventions and to vest the entire right and title thereto in the Employer
of its nominee. Employee acknowledges and agrees that any copyright developed or
conceived of, by Employee during the term of his employment that is related to
the Business of the Employer shall be a " work for hire" under the copyright law
of the United States and other applicable jurisdictions.
e. Employee represents that his performance of all the terms of
this Agreement and as an employee of or consultant to the Employer does not and
will not breach any trust prior to his employment by the Employer. Employee
agrees not to enter into any agreement either written or oral in conflict
herewith and represents and agrees that he has not brought and will not bring
with to the Employer or use in the performance of his responsibilities at the
Employer any materials or documents of a former employer which are not generally
available to the public, unless he has obtained written authorization from the
former employer for their possession and use, a copy of which has been provided
to the Employer.
9
<PAGE> 10
f. No provisions of the Paragraph shall be deemed to limit the
restrictions applicable to Employee under Section 8 and 9.
10. SHOP RIGHTS. The Employer shall also have the royalty-free right to
use in its business, and to make, use and sell products, processes and/or
services derived from any inventions, discoveries, concepts and ideas, whether
or not patentable, including but not limited to processes, methods, formulas and
techniques, as well as improvements thereof or know-how related thereto, which
are not within the scope of Inventions as defined herein but which are conceived
of or made by Employee during the period he is engaged by the Employer or with
the use or assistance of the Employer's facilities, materials or personnel.
11. NON-COMPETE. Employee hereby agrees that during the term of this
Agreement and for a period of one year thereafter, Employee will not:
a. Within any jurisdiction or marketing area in the United States
or Canada in which the Employer or any subsidiary thereof is doing business,
own, manage, operate, or control any business of the type and character engaged
in and competitive with the Employer or any subsidiary thereof. For purposes of
this paragraph, ownership of securities of not in excess of five percent (5%) of
any class of securities of a public employer listed on a national securities
exchange or on the National Association of Securities Dealers Automated
Quotation System (NASDAQ) shall not be considered to be competition with the
Employer or any subsidiary thereof;
b. Within any jurisdiction or marketing area in the United States
in which the Employer or any subsidiary thereof is doing business, act as, or
become employed as an officer, director, employee, consultant or agent of any
business of the type and character engaged in and competitive with the Employer
or any of its subsidiaries;
c. Solicit any similar business to that of the Employer's for, or
sell any products that are in competition with the Employer's products to which
is, as of the date hereof, a customer or client of the Employer or any of its
subsidiaries, or was such a customer or client thereof within two years prior to
the date of this Agreement; or
d. For up to six months following the termination of this
Agreement solicit the employment of, or hire, any full time employee employed by
the Employer or its subsidiaries as of the date of termination of this
Agreement.
10
<PAGE> 11
12. TERMINATION. Employer may not terminate this Agreement during its
term without Cause as defined herein. If this Agreement is terminated without
Cause, Employee shall be entitled to the Termination Payments set forth in
Section 14 hereof. Any termination by Employer of Employee of Employee's
employment during the term hereof shall be communicated by written Notice of
Termination to Employee, if such Notice of Termination is delivered by the
Employer, and to the Employee, if such Notice of Termination is delivered by
Employee, all in accordance with the following procedures:
a. The Notice of termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances alleged to provide a basis for
termination;
b. Any Notice of Termination by the Employer shall be approved by
a resolution duly adopted by a majority of the members of the Employer;
c. If Employee shall provide the president or chief executive
officer with a Notice of Termination at least 30 days prior to leaving the
employment of the Employer. Upon the end of the thirty days, all compensation
provisions of this Agreement shall cease.
13. TERMINATION UPON TRANSFER OF BUSINESS. Notwithstanding any
provision this Agreement to the contrary, Employee may terminate this Agreement
upon the happening of any of the following events: (a) the sale by Employer of
substantially all of its assets to a single purchaser or to a group of
associated purchasers; (b) the sale, exchange, or other disposition to a single
entity or group of entities under common control in one transaction or series of
related transactions of greater than 50% of the outstanding shares of Employer's
common stock; (c) the decision by Employer to terminate its business and
liquidate its assets; or (d) the merger or consolidation of Employer in a
transaction in which the shareholders of the Employer immediately prior to such
merger or consolidation receive less than 50% of the outstanding voting shares
of the new or continuing corporation. In the event Employee does not elect to
terminate this Agreement upon the happening of any of the events noted above,
and as a result of such event, Employer is not the surviving entity, then the
provisions of this Agreement shall inure to the benefit of and be binding upon
the surviving or resulting entity. If as a result of the merger, consolidation,
transfer of assets, or other event listed above, the duties of Employee are
increased, then the compensation of Employee provided for in paragraph 5 of this
Agreement shall be reasonably adjusted upward for
11
<PAGE> 12
the additional duties and responsibilities assumed. In the event of the
occurrence of (a) (b) or (d) above and Employee elects to terminate this
Agreement, Employee shall be entitled to a bonus equal to three (3) times the
base salary provided for in Paragraph 5(a). Said payment to be paid at time of
closing.
14. TERMINATION PAYMENTS. In the event the Employee's employment is
terminated by the Employer during the term hereof for reasons other than Cause,
as defined herein, Employee shall be paid any sums owed under this Agreement,
including but not limited to any salary, any deferred compensation, accrued
benefits, bonuses and options, and for any potential actions for breach of this
Agreement by Employer. Other than any payments set forth in this Section 14,
Employee shall be entitled to no further compensation nor any other payments
after termination. Employee shall receive no further payments if terminated for
Cause other than Accrued Benefits.
15. DEATH DURING EMPLOYMENT. If Employee dies during the term of this
Agreement, Employer shall have no further obligations to pay Employee other than
any Accrued Benefits.
16. ILLNESS OR INCAPACITY. If Employee is unable to perform Employee's
services by reason of illness or incapacity for a period of more than two (2)
consecutive months the compensation thereafter payable to Employee during the
next two (2) consecutive months shall be 50% of the compensation provided for
herein. During such period of illness or incapacity, Employee shall be entitled
to receive incentive compensation if any Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within a four (4) consecutive
month period, Employee shall not be entitled to receive any further compensation
nor any payments for such illness or incapacity, and Employer may terminate this
Agreement without further liability to Employee. Any existing options to
purchase Employer's common stock held by Employee at the time termination shall
be governed by the terms of the option and not affected by this provision. At
the termination of such illness or incapacity, Employee shall be entitled to
receive Employee's full compensation payable pursuant to the terms of this
Agreement.
17. NON-TRANSFERABILITY. Neither Employee, Employee's spouse,
Employee's designated contingent beneficiary, nor their estates shall have any
right to anticipate, encumber, or dispose of any payment due under this
Agreement. Such payments and other rights are expressly declared non-assignable
and nontransferable except as specifically provided herein.
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<PAGE> 13
18. INDEMNIFICATION. Employer shall indemnify, defend and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against such liability.
19. ASSIGNMENT. This Agreement may not be assigned by either party
without the prior written consent of the other party.
20. ENTIRE AGREEMENT. This Agreement is and shall be considered to be
the only agreement or understanding between the parties hereto with respect to
the employment of employee by employer. All negotiations, commitments, and
understandings acceptable to both parties have been incorporated herein. No
letter, telegram, or communication passing between the parties hereto covering
any matter during this contract period, or any plans or periods thereafter,
shall be deemed a part of this Agreement; nor shall it have the effect of
modifying or adding to this Agreement unless it is distinctly stated in such
letter, telegram, or communication that is to constitute a part of this
Agreement and is attached as an amendment to this Agreement and is signed by the
parties to this Agreement.
21. ENFORCEMENT. Each of the parties to this Agreement shall be
entitled to any remedies available in equity or by statute with respect to the
breach of the terms of this Agreement by the other party. Employee hereby
specifically acknowledges and agrees that a breach of the agreements, covenants
and conditions of this Agreement will cause irreparable harm and damage to the
Employer, that the remedy at law, for the breach or threatened breach of this
Agreement will be adequate, and that, in addition to all other remedies
available to the Employer for such breach or threatened breach (including,
without limitation the right to recover damages), the Company shall be entitled
to injunctive relief for any breach or threatened breach of this Agreement.
22. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York.
23. SEVERABILITY. If and to the extent that any court of competent
jurisdiction holds any provision or any part thereof of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
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<PAGE> 14
24. WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach hereof shall constitute
a waiver of any such breach or of any covenant, agreement, term, or condition.
25. LITIGATION EXPENSES. In the event that it shall be necessary or
desirable for the Employee or Employer to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
provisions of this Agreement, the prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees, costs, and expenses incurred by
the prevailing party in connection with the enforcement of this Agreement.
Payment shall be made upon the conclusion of such action.
26. SURVIVABILITY. The provisions of Section 8, 9, 10, 11 and 12 shall
survive termination of this Agreement.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: EMPLOYEE:
LA GROUP, INC.
By: /s/ Ronald J. Axelrod, SEC /s/ Daniel M. Fasano
------------------------------ ----------------------------
Duly Authorized Officer DANIEL M. FASANO
<PAGE> 1
Exhibit 99(2)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("AGREEMENT") is entered into effective
January 1, 2000 by and between LA
GROUP, INC. ("EMPLOYER") and FRANK COSTANZO ("EMPLOYEE"), and
PREMISES
1. Employee possesses expertise, experience and skill in the development
and marketing of products via electronic and other means.
2. Employee has demonstrated the ability to run, manage and build a
publicly traded development stage business.
3. Employer desires to employ Employee to serve as its President to run,
manage and build its business.
4. Employee desires to perform all of such services as Employer's employee
and both parties want to enter into a written agreement as to their
understanding of the employment relationship.
AGREEMENT
For and in Consideration of the mutual covenants contained herein and of
the mutual benefits to be derived hereunder, the parties agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms shall
have the meanings set forth below:
a. "Accrued Benefits" shall mean the amount payable not later than ten
(10) days following an applicable Termination Date and which shall be equal to
the sum of the following amounts:
(i) All salary earned or accrued through the Termination Date;
(ii) Reimbursement for any and all monies advanced in connection with
Employee's employment for reasonable and necessary expenses
incurred by
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Employee and approved by the Employer through the
Termination Date; and
(iii) All other payments and benefits to which Employee may be
entitled under the terms of any benefit plan of the Employer.
b. "Board" shall mean the board of directors of the Employer.
c. "Cause" shall mean any of the following:
(i) The engagement by Employee in fraudulent conduct, which has a
significant adverse impact on the Employer in the conduct of the
Employer' s business;
(ii) Conviction of a felony involving a crime against the Employer, as
evidenced by a binding and final judgment, order or decree of a
court of competent jurisdiction;
(iii) Gross negligence or refusal by Employee to perform his duties or
responsibilities; or
d. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
e. "Confidential Information" means information (i) disclosed to or
actually known by Employee as a consequence of or through his/her employment
with the Employer, (ii) not generally known outside the Employer, and (iii)
which relates to the Employer's business. Confidential Information includes, but
is not limited to, information of a technical nature, such as methods and
materials, trade secrets, inventions, processes, formulas, systems, computer
programs, and studies, and information of a business nature such as project
plans, market information, costs, customer lists, and so forth.
f. "Disability" shall mean a physical or mental condition whereby
Employee is unable to perform on a full-time basis his customary duties under
this Agreement.
g. "Developments" means all Inventions (defined hereafter), computer
programs, copyright works, mask works, trademarks, Confidential Information,
Works of Authorship (defined hereafter), and other Intellectual Property
(defined hereafter), made, conceived or authored by Employee, alone or jointly
with others, while employed by the Employer; whether or not during
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<PAGE> 3
normal business hours or on the Employer's premises, that are within the present
scope of the Employer's business at the time such Developments are made,
conceived, or authored, or which result from or are suggested by any work
Employee or others may do for or on behalf of the Employer.
h. "Employer" means LA Group, Inc. and its subsidiaries, divisions and
affiliates as well as majority owned companies of such subsidiaries, divisions
and affiliates, or their successors or assigns.
i. "Invention" means discoveries, concepts, and ideas, whether or not
patentable or copyrightable, including but not limited to improvements,
know--how, data, processes, methods, formulae, and techniques, as well as
improvements thereof, or know--how related thereto, concerning any present or
prospective activities of the Employer which Employee makes, discovers or
conceives (whether or not during the hours of his engagement of with the use of
the Employer's facilities, materials or personnel), either solely or jointly
with others during his engagement by the Employer or any affiliate and, if based
on or related or Proprietary Information, at any time after termination of such
engagement.
j. "Intellectual Property" means Inventions, Confidential Information,
Works of Authorship, patent rights, trademark rights, service mark rights,
copyrights, know-how, Developments and rights of like nature arising or
subsisting anywhere in the world, in relation to all of the foregoing, whether
registered or unregistered.
k. "Notice of Termination" shall mean the notice described in Section 13
hereof.
l. "Person" shall mean any individual, partnership, joint venture,
association, trust, corporation or other entity, other than an employee benefit
plan of the Employer of an entity organized, appointed of established pursuant
to the terms of any such benefit plan.
m. "Proprietary Information" shall mean any and all methods, inventions,
improvements or discoveries, whether or not patentable or copyrightable, and any
other information of a similar nature related to the business of the Employer
disclosed to the Employee or otherwise made known to him as a consequence of or
through his engagement by the Employer (including information originated by
Employee) in any technological area previously developed by the Employer or
developed, engaged in, or researched, by the Employer during the term of
Employee's engagement, including, but not limited to, trade secrets, processes,
products, formulae, apparatus, techniques, know-how, marketing plans, data,
improvements, strategies, forecasts,
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<PAGE> 4
customer lists, and technical requirements of customers, unless such information
is in the public domain to such an extent as to be readily available to
competitors.
n. "Termination Date" shall mean, except as otherwise provided in
Section 12 hereof.
(i) Employee's date of death;
(ii) Thirty (30) days after the delivery of the Notice of Termination
if Employee's employment on account of Disability pursuant to
Section 16 hereof, unless Employee returns on a full-time basis
to the performance of his duties prior to the expiration of such
period;
(iii) Thirty (30) days after the delivery of the Notice of Termination
if Employee's employment is terminated by Employee voluntarily;
and
(iv) Thirty (30) days after the delivery of the Notice of Termination
if Employee's employment is terminated by the Employer for any
reason other than death or Disability.
o. "Termination Payment" shall mean the payment described in Section 14
hereof.
p. "Works of Authorship" means an expression fixed in a tangible medium
of expression regardless of the need for a machine to make the expression
manifest, and includes, but is not limited to, writings, reports, drawings,
sculptures, illustrations, video recordings, audio recordings, computer
programs, and charts.
2. EMPLOYMENT. Employer hereby employs Employee to perform those duties
generally described in this Agreement, and Employee hereby accepts and agrees to
such employment on the terms and conditions hereinafter set forth. e
3. TERM. Subject to the terms and conditions of this Agreement, the term of
this Agreement shall commence retroactively from January 1, 2000,
and end on December 31, 2001.
4. DUTIES. During the term of this Agreement, Employee shall be
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<PAGE> 5
employed by Employer as its Chief Operating Officer. In addition to the office
of Chief Operating Officer, Employee agrees to serve in such other office or
position with Employer or any subsidiary of Employer and as such shall, from
time to time, be determined by Employer's Board. Employee agrees to serve as a
member of the Employer's Board. Employee shall devote substantially all of his
working time and efforts to the business of Employer and its subsidiaries and
shall not during the term of this Agreement be engaged in any other substantial
business activities which will significantly interfere or conflict with the
reasonable performance of his duties hereunder.
5. COMPENSATION.
a. Salary. For all services rendered by Employee, Employer shall pay to
Employee a base salary of $100,000 for the term of this Agreement. If Employer's
financial constraints so dictate, Employee agrees to defer a portion of the
salary contained in this Section. This deferred base salary shall be paid to
Employee at such time or times as financial constraints so allow, but in no
event will payments be made after January 1, 2002. All salary payments shall be
subject to withholding and other applicable taxes. The rate of salary may be
increased at any time, as the Board may determine, based on earnings, increased
activities of the Employer, or such other factors as the Board may deem
appropriate. Employee shall receive bonus or incentive compensation as approved
by the Board.
b. Insurance Benefits. Employer shall provide health and medical
insurance for Employee in a form and program to be chosen by Employer for
certain of its full-time employees. Alternatively, at Employee's discretion,
Employer may reimburse Employee for Employee's health and medical insurance
coverage for Employee and his family. Employer shall provide Employee with
directors and officers liability insurance in the minimal amount of $2,000,000
and life and disability insurance in amounts approved by the Board.
c. Other Benefits. Employee shall be entitled to participate in any
retirement, pension, profit-sharing, or other plan as may be put in effect from
time to time by the Board, including the following:
(i) Qualified Stock Option Plan. Pursuant to a Qualified Stock Option
Plan authorized by the Board and approved by the Shareholders of
Employer, Employee shall have the option to purchase up to
400,000 shares of the Employer's common shares on the following
terms: up to 100,000 shares of Employer's
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<PAGE> 6
stock in six months at $1.00 per share, up to 100,000 shares of
Employer's stock in 12 months at $2.00 per share, up to 100,000
shares of Employer's stock in eighteen months at $3.00 per share
and up to 100,000 shares of Employer's stock in twenty-four
months at $4.00 per share. These options are cumulative and
fully vested upon execution of this Agreement; and
(ii) Revenue Performance Bonuses. Employee shall be issued 100,000
shares of Employer's stock for each $10,000,000 in Gross Income
received by Employer on an annual basis with a maximum of
3,000,000 shares to be issued during the term of this Agreement
Gross Income shall mean total revenue less sales taxes collected,
returns and allowances; and
(iii) Stock Performance Options. Employee shall have the option to
purchase additional shares of the Employer's common stock upon
the happening of the following: if the public trading price
closes at a minimum of $2.00 per share for five (5) consecutive
days, Employee shall have the option to purchase 150,000 shares
at $1.00 per share; if the public trading price closes at a
minimum of $4.00 per share for five (5) consecutive days,
Employee shall have the option to purchase an additional 150,000
shares at $2.00 per share; if the public trading price closes at
a minimum of $6.00 per share for five (5) consecutive days,
Employee shall have the option to purchase an additional 200,000
shares at $3.00 per share. These options are cumulative and fully
vested upon execution of this Agreement. These options must be
executed prior to the expiration of this Agreement by written
notice to the President of the Employer.
e. Automobile / Transportation. Employer shall pay for Employees
insurance. monthly automobile payment, not to exceed $1,000 per month, including
applicable taxes, fuel, oil, repairs and maintenance.
6. EXPENSES. Employer will reimburse Employee for expenses incurred in
connection with Employer's business, including expenses for travel, lodging,
meals, beverages, entertainment, and other items of Employee's periodic
presentation of an account of such expenses. Employer shall
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<PAGE> 7
reimburse Employee for the following expenses whether incurred or to be incurred
on behalf of Employer.
7. WORKING FACILITIES. Employer shall provide to Employee offices and
facilities appropriate to Employee's position and suitable for the performance
of Employee's duties as set forth in this Agreement.
8. NONDISCLOSURE OF PROPRIETARY AND CONFIDENTIAL INFORMATION Recognizing
that the Employer is presently engaged, and may hereafter continue to be engaged
in the research and development of processes, the manufacturing of products or
performance of services, which involve experimental and inventive work and that
the success of the Employer's business depends upon the protection of the
processes, products and services by patent, copyright or by secrecy and that
Employee has had, or during the course of his engagement may have, access to
Proprietary and Confidential Information, as herein defined, of the Employer or
other information and data of a secret or proprietary nature of the Employer
which the Employer wishes to keep confidential and Employee has furnished, or
during the course of his engagement may furnish such information to the
Employer, Employee agrees and acknowledges that:
a. The Employer has exclusive property rights to all Proprietary and
Confidential Information and Employee hereby assigns all rights he might
otherwise possess in any Proprietary and Confidential Information to the
Employer. Except as required in the performance of his duties to the Employer,
Employee will not at any time during or after the term of his engagement, which
term shall include any time in which Employee may be retained by the Employer as
a consultant, directly or indirectly use, communicate, disclose or disseminate
any Proprietary or Confidential Information of a secret, proprietary,
confidential or generally undisclosed nature relating to the Employer, its
products, customers, processes and services, including information relating to
testing, research development, manufacturing, marketing and selling.
b. All documents, records, notebooks, notes, memoranda and similar
repositories of, or containing, Proprietary and Confidential Information or any
other information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Employer or its operations and activities
made or compiled by Employee at any time or made available to him prior to or
during the term of his engagement by the Employer, including any and all copies
thereof, shall be the property of the Employer, shall be held by him in trust
solely for the benefit of the Employer, and shall be delivered to the Employer
by him on the termination of his engagement or at any other time on
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<PAGE> 8
the request of the Employer.
c. Employee will not assert any rights under any inventions, trademarks,
copyrights, discoveries, concepts or ideas, or improvements thereof, or
know--how related thereto, as having been made or acquired by him during the
term of his engagement if based on or otherwise related to Proprietary or
Confidential Information.
9. ASSIGNMENT OF INVENTIONS.
a. All Inventions shall be the sole property of the Employer, and
Employee agrees to perform the provisions of this Section 9 with respect thereto
without the payment by the Employer of any royalty or any consideration therefor
other than the regular compensation paid to Employee in the capacity of any
employee or consultant, with the exception that Employee shall continue to
receive royalties from sales of any and all products currently distributed by
Coordinated Strategic Alliances of Chester, New York.
b. Employee shall apply, at the Employer's request and expense, for
United States and foreign letters patent or copyrights either in Employee' s
name or otherwise an the Employer shall desire.
c. Employee hereby assigns to the Employer all of his rights to such
Inventions, and to applications for United States and/or foreign letters patent
or copyrights and to United States and/or foreign letter patent or copyrights
granted upon such Inventions.
d. Employee shall acknowledge and deliver promptly to the Employer,
without charge to the Employer, but at its expense, such written instruments
(including applications and assignments) and do such other acts, such as giving
testimony in support of Employee' s inventorship, as may be necessary in the
opinion of the Employer to obtain, maintain, extend, reissue and enforce United
States and/or foreign letters patent and copyrights relation to the Inventions
and to vest the entire right and title thereto in the Employer of its nominee.
Employee acknowledges and agrees that any copyright developed or conceived of,
by Employee during the term of his employment that is related to the Business of
the Employer shall be a " work for hire" under the copyright law of the United
States and other applicable jurisdictions.
e. Employee represents that his performance of all the terms of this
Agreement and as an employee of or consultant to the Employer does not and will
not breach any trust prior to his employment by the Employer. Employee agrees
not to enter into any agreement either written or oral in conflict
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<PAGE> 9
herewith and represents and agrees that he has not brought and will not bring
with to the Employer or use in the performance of his responsibilities at the
Employer any materials or documents of a former employer which are not generally
available to the public, unless he has obtained written authorization from the
former employer for their possession and use, a copy of which has been provided
to the Employer.
f. No provisions of the Paragraph shall be deemed to limit the
restrictions applicable to Employee under Section 8 and 9.
10. SHOP RIGHTS. The Employer shall also have the royalty-free right to use
in its business, and to make, use and sell products, processes and/or services
derived from any inventions, discoveries, concepts and ideas, whether or not
patentable, including but not limited to processes, methods, formulas and
techniques, as well as improvements thereof or know-how related thereto, which
are not within the scope of Inventions as defined herein but which are conceived
of or made by Employee during the period he is engaged by the Employer or with
the use or assistance of the Employer's facilities, materials or personnel.
11. NON-COMPETE. Employee hereby agrees that during the term of this
Agreement and for a period of one year thereafter, Employee will not:
a. Within any jurisdiction or marketing area in the United States or
Canada in which the Employer or any subsidiary thereof is doing business, own,
manage, operate, or control any business of the type and character engaged in
and competitive with the Employer or any subsidiary thereof. For purposes of
this paragraph, ownership of securities of not in excess of five percent (5%) of
any class of securities of a public employer listed on a national securities
exchange or on the National Association of Securities Dealers Automated
Quotation System (NASDAQ) shall not be considered to be competition with the
Employer or any subsidiary thereof;
b. Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, act as, or
become employed as an officer, director, employee, consultant or agent of any
business of the type and character engaged in and competitive with the Employer
or any of its subsidiaries;
c. Solicit any similar business to that of the Employer's for, or sell
any products that are in competition with the Employer's products to which is,
as of the date hereof, a customer or client of the Employer or any of its
subsidiaries, or was such a customer or client thereof within two years prior to
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<PAGE> 10
the date of this Agreement; or
d. For up to six months following the termination of this Agreement
solicit the employment of, or hire, any full time employee employed by the
Employer or its subsidiaries as of the date of termination of this Agreement.
12. TERMINATION. Employer may not terminate this Agreement during its term
without Cause as defined herein. If this Agreement is terminated without Cause,
Employee shall be entitled to the Termination Payments set forth in Section 14
hereof. Any termination by Employer of Employee of Employee's employment during
the term hereof shall be communicated by written Notice of Termination to
Employee, if such Notice of Termination is delivered by the Employer, and to the
Employee, if such Notice of Termination is delivered by Employee, all in
accordance with the following procedures:
a. The Notice of termination shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances alleged to provide a basis for termination;
b. Any Notice of Termination by the Employer shall be approved by a
resolution duly adopted by a majority of the members of the Employer;
c. If Employee shall provide the president or chief executive officer
with a Notice of Termination at least 30 days prior to leaving the employment of
the Employer. Upon the end of the thirty days, all compensation provisions of
this Agreement shall cease.
13. TERMINATION UPON TRANSFER OF BUSINESS. Notwithstanding any provision
this Agreement to the contrary, Employee may terminate this Agreement upon the
happening of any of the following events: (a) the sale by Employer of
substantially all of its assets to a single purchaser or to a group of
associated purchasers; (b) the sale, exchange, or other disposition to a single
entity or group of entities under common control in one transaction or series of
related transactions of greater than 50% of the outstanding shares of Employer's
common stock; (c) the decision by Employer to terminate its business and
liquidate its assets; or (d) the merger or consolidation of Employer in a
transaction in which the shareholders of the Employer immediately prior to such
merger or consolidation receive less than 50% of the outstanding voting shares
of the new or continuing corporation. In the event Employee does not elect to
terminate this Agreement upon the happening of
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any of the events noted above, and as a result of such event, Employer is not
the surviving entity, then the provisions of this Agreement shall inure to the
benefit of and be binding upon the surviving or resulting entity. If as a result
of the merger, consolidation, transfer of assets, or other event listed above,
the duties of Employee are increased, then the compensation of Employee provided
for in paragraph 5 of this Agreement shall be reasonably adjusted upward for the
additional duties and responsibilities assumed. In the event of the occurrence
of (a) (b) or (d) above and Employee elects to terminate this Agreement,
Employee shall be entitled to a bonus equal to three (3) times the base salary
provided for in Paragraph 5(a). Said payment to be paid at time of closing.
14. TERMINATION PAYMENTS. In the event the Employee's employment is
terminated by the Employer during the term hereof for reasons other than Cause,
as defined herein, Employee shall be paid any sums owed under this Agreement,
including but not limited to any salary, any deferred compensation, accrued
benefits, bonuses and options, and for any potential actions for breach of this
Agreement by Employer. Other than any payments set forth in this Section 14,
Employee shall be entitled to no further compensation nor any other payments
after termination. Employee shall receive no further payments if terminated for
Cause other than Accrued Benefits.
15. DEATH DURING EMPLOYMENT. If Employee dies during the term of this
Agreement, Employer shall have no further obligations to pay Employee other than
any Accrued Benefits.
16. ILLNESS OR INCAPACITY. If Employee is unable to perform Employee's
services by reason of illness or incapacity for a period of more than two (2)
consecutive months the compensation thereafter payable to Employee during the
next two (2) consecutive months shall be 50% of the compensation provided for
herein. During such period of illness or incapacity, Employee shall be entitled
to receive incentive compensation if any Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within a four (4) consecutive
month period, Employee shall not be entitled to receive any further compensation
nor any payments for such illness or incapacity, and Employer may terminate this
Agreement without further liability to Employee. Any existing options to
purchase Employer's common stock held by Employee at the time termination shall
be governed by the terms of the option and not affected by this provision. At
the termination of such illness or incapacity, Employee shall be entitled to
receive Employee's full compensation payable pursuant to the terms of this
Agreement.
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17. NON-TRANSFERABILITY. Neither Employee, Employee's spouse, Employee's
designated contingent beneficiary, nor their estates shall have any right to
anticipate, encumber, or dispose of any payment due under this Agreement. Such
payments and other rights are expressly declared non-assignable and
nontransferable except as specifically provided herein.
18. INDEMNIFICATION. Employer shall indemnify, defend and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against such liability.
19. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other party.
20. ENTIRE AGREEMENT. This Agreement is and shall be considered to be the
only agreement or understanding between the parties hereto with respect to the
employment of employee by employer. All negotiations, commitments, and
understandings acceptable to both parties have been incorporated herein. No
letter, telegram, or communication passing between the parties hereto covering
any matter during this contract period, or any plans or periods thereafter,
shall be deemed a part of this Agreement; nor shall it have the effect of
modifying or adding to this Agreement unless it is distinctly stated in such
letter, telegram, or communication that is to constitute a part of this
Agreement and is attached as an amendment to this Agreement and is signed by the
parties to this Agreement.
21. ENFORCEMENT. Each of the parties to this Agreement shall be entitled to
any remedies available in equity or by statute with respect to the breach of the
terms of this Agreement by the other party. Employee hereby specifically
acknowledges and agrees that a breach of the agreements, covenants and
conditions of this Agreement will cause irreparable harm and damage to the
Employer, that the remedy at law, for the breach or threatened breach of this
Agreement will be adequate, and that, in addition to all other remedies
available to the Employer for such breach or threatened breach (including,
without limitation the right to recover damages), the Company shall be entitled
to injunctive relief for any breach or threatened breach of this Agreement.
22. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
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23. SEVERABILITY. If and to the extent that any court of competent
jurisdiction holds any provision or any part thereof of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
24. WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach hereof shall constitute a waiver of
any such breach or of any covenant, agreement, term, or condition.
25. LITIGATION EXPENSES. In the event that it shall be necessary or
desirable for the Employee or Employer to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
provisions of this Agreement, the prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees, costs, and expenses incurred by
the prevailing party in connection with the enforcement of this Agreement.
Payment shall be made upon the conclusion of such action.
26. SURVIVABILITY. The provisions of Section 8, 9, 10, 11 and 12 shall
survive termination of this Agreement.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: EMPLOYEE:
LA GROUP, INC.
By: /s/ Daniel M. Fasano, CEO /s/ Frank Costanzo
-------------------------- --------------------
Duly Authorized Officer Frank Costanzo
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<PAGE> 1
Exhibit 99(3)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("AGREEMENT") is entered into effective
January 1, 2000 by and between LA GROUP, INC. ("EMPLOYER") and CURT WESTROM
("EMPLOYEE"), and
PREMISES
1. Employee has demonstrated the ability to run, manage and
supervise the finances of a development stage publicly
traded business, and coordinate financing and tax issues
with outside auditors and attorney.
2. Employer desires to employ Employee to serve as Treasurer
and Chief Financial Officer.
AGREEMENT
For and in Consideration of the mutual covenants contained herein and
of the mutual benefits to be derived hereunder, the parties agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
a. "Accrued Benefits" shall mean the amount payable not later than
ten (10) days following an applicable Termination Date and which shall be equal
to the sum of the following amounts:
(i) All salary earned or accrued through the Termination
Date;
(ii) Reimbursement for any and all monies advanced in
connection with Employee's employment for reasonable
and necessary expenses incurred by Employee and
approved by the Employer through the Termination
Date; and
(iii) All other payments and benefits to which Employee may
be entitled under the terms of any benefit plan of
the Employer.
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<PAGE> 2
b. "Board" shall mean the board of directors of the Employer.
c. "Cause" shall mean any of the following:
(i) The engagement by Employee in fraudulent conduct,
which has a significant adverse impact on the
Employer in the conduct of the Employer' s business;
(ii) Conviction of a felony involving a crime against the
Employer, as evidenced by a binding and final
judgment, order or decree of a court of competent
jurisdiction;
(iii) Gross negligence or refusal by Employee to perform
his duties or responsibilities; or
d. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
e. "Confidential Information" means information (i) disclosed to
or actually known by Employee as a consequence of or through his/her employment
with the Employer, (ii) not generally known outside the Employer, and (iii)
which relates to the Employer's business. Confidential Information includes, but
is not limited to, information of a technical nature, such as methods and
materials, trade secrets, inventions, processes, formulas, systems, computer
programs, and studies, and information of a business nature such as project
plans, market information, costs, customer lists, and so forth.
f. "Disability" shall mean a physical or mental condition whereby
Employee is unable to perform on a full-time basis his customary duties under
this Agreement.
g. "Developments" means all Inventions (defined hereafter),
computer programs, copyright works, mask works, trademarks, Confidential
Information, Works of Authorship (defined hereafter), and other Intellectual
Property (defined hereafter), made, conceived or authored by Employee, alone or
jointly with others, while employed by the Employer; whether or not during
normal business hours or on the Employer's premises, that are within the present
scope of the Employer's business at the time such Developments are made,
conceived, or authored, or which result from or are suggested by any work
Employee or others may do for or on behalf of the Employer.
h. "Employer" means LA Group, Inc. and its subsidiaries,
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<PAGE> 3
divisions and affiliates as well as majority owned companies of such
subsidiaries, divisions and affiliates, or their successors or assigns.
i. "Invention" means discoveries, concepts, and ideas, whether or
not patentable or copyrightable, including but not limited to improvements,
know--how, data, processes, methods, formulae, and techniques, as well as
improvements thereof, or know--how related thereto, concerning any present or
prospective activities of the Employer which Employee makes, discovers or
conceives (whether or not during the hours of his engagement of with the use of
the Employer's facilities, materials or personnel), either solely or jointly
with others during his engagement by the Employer or any affiliate and, if based
on or related or Proprietary Information, at any time after termination of such
engagement.
j. "Intellectual Property" means Inventions, Confidential
Information, Works of Authorship, patent rights, trademark rights, service mark
rights, copyrights, know-how, Developments and rights of like nature arising or
subsisting anywhere in the world, in relation to all of the foregoing, whether
registered or unregistered.
k. "Notice of Termination" shall mean the notice described in
Section 13 hereof.
l. "Person" shall mean any individual, partnership, joint venture,
association, trust, corporation or other entity, other than an employee benefit
plan of the Employer of an entity organized, appointed of established pursuant
to the terms of any such benefit plan.
m. "Proprietary Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a similar nature related to the
business of the Employer disclosed to the Employee or otherwise made known to
him as a consequence of or through his engagement by the Employer (including
information originated by Employee) in any technological area previously
developed by the Employer or developed, engaged in, or researched, by the
Employer during the term of Employee's engagement, including, but not limited
to, trade secrets, processes, products, formulae, apparatus, techniques,
know--how, marketing plans, data, improvements, strategies, forecasts, customer
lists, and technical requirements of customers, unless such information is in
the public domain to such an extent as to be readily available to competitors.
n. "Termination Date" shall mean, except as otherwise
provided
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<PAGE> 4
in Section 12 hereof.
(i) Employee's date of death;
(ii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment on account of
Disability pursuant to Section 16 hereof, unless
Employee returns on a full-time basis to the
performance of his duties prior to the expiration of
such period;
(iii) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by
Employee voluntarily; and
(iv) Thirty (30) days after the delivery of the Notice of
Termination if Employee's employment is terminated by
the Employer for any reason other than death or
Disability.
o. "Termination Payment" shall mean the payment described in
Section 14 hereof.
p. "Works of Authorship" means an expression fixed in a tangible
medium of expression regardless of the need for a machine to make the expression
manifest, and includes, but is not limited to, writings, reports, drawings,
sculptures, illustrations, video recordings, audio recordings, computer
programs, and charts.
2. EMPLOYMENT. Employer hereby employs Employee to perform those duties
generally described in this Agreement, and Employee hereby accepts and agrees to
such employment on the terms and conditions hereinafter set forth.
3. TERM. Subject to the terms and conditions of this Agreement, the term of
this Agreement shall commence retroactively from January 1, 2000, and end on
December 31, 2001.
4. DUTIES. During the term of this Agreement, Employee shall be employed by
Employer as its Chief Financial Officer. In addition to the office of Chief
Financial Officer, Employee agrees to serve in such other office or position
with Employer or any subsidiary of Employer and as such shall, from time to
time, be determined by Employer's Board. Employee agrees to serve as
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<PAGE> 5
a member of the Employer's Board. Employee shall devote substantially all of his
working time and efforts to the business of Employer and its subsidiaries and
shall not during the term of this Agreement be engaged in any other substantial
business activities which will significantly interfere or conflict with the
reasonable performance of his duties hereunder.
5. COMPENSATION.
a. Salary. For all services rendered by Employee, Employer shall pay to
Employee a base salary of $100,000 for the term of this Agreement. If Employer's
financial constraints so dictate, Employee agrees to defer a portion of the
salary contained in this Section. This deferred base salary shall be paid to
Employee at such time or times as financial constraints so allow, but in no
event will payments be made after January 1, 2002. All salary payments shall be
subject to withholding and other applicable taxes. The rate of salary may be
increased at any time, as the Board may determine, based on earnings, increased
activities of the Employer, or such other factors as the Board may deem
appropriate. Employee shall receive bonus or incentive compensation as approved
by the Board.
b. Insurance Benefits. Employer shall provide health and medical
insurance for Employee in a form and program to be chosen by Employer for
certain of its full-time employees. Alternatively, at Employee's discretion,
Employer may reimburse Employee for Employee's health and medical insurance
coverage for Employee and his family. Employer shall provide Employee with
directors and officers liability insurance in the minimal amount of $2,000,000
and life and disability insurance in amounts approved by the Board.
c. Other Benefits. Employee shall be entitled to participate in any
retirement, pension, profit-sharing, or other plan as may be put in effect from
time to time by the Board, including the following:
(i) Qualified Stock Option Plan. Pursuant to a Qualified Stock
Option Plan authorized by the Board and approved by the
Shareholders of Employer, Employee shall have the option to
purchase up to 400,000 shares of the Employer's common
shares on the following terms: up to 100,000 shares of
Employer's stock in six months at $1.00 per share, up to
100,000 shares of Employer's stock in 12 months at $2.00
per
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<PAGE> 6
share, up to 100,000 shares of Employer's stock in eighteen
months at $3.00 per share and up to 100,000 shares of
Employer's stock in twenty-four months at $4.00 per share.
These options are cumulative and fully vested upon
execution of this Agreement; and
(ii) Revenue Performance Bonuses. Employee shall be issued
100,000 shares of Employer's stock for each $10,000,000 in
Gross Income received by Employer on an annual basis with a
maximum of 3,000,000 shares to be issued during the term of
this Agreement Gross Income shall mean total revenue less
sales taxes collected, returns and allowances; and
(iii) Stock Performance Options. Employee shall have the option
to purchase additional shares of the Employer's common
stock upon the happening of the following: if the public
trading price closes at a minimum of $2.00 per share for
five (5) consecutive days, Employee shall have the option
to purchase 150,000 shares at $1.00 per share; if the
public trading price closes at a minimum of $4.00 per share
for five (5) consecutive days, Employee shall have the
option to purchase an additional 150,000 shares at $2.00
per share; if the public trading price closes at a minimum
of $6.00 per share for five (5) consecutive days, Employee
shall have the option to purchase an additional 200,000
shares at $3.00 per share. These options are cumulative and
fully vested upon execution of this Agreement. These
options must be executed prior to the expiration of this
Agreement by written notice to the President of the
Employer.
e. Automobile / Transportation. Employer shall pay for Employees
insurance, monthly automobile payment, not to exceed $1,000 per month, including
applicable taxes, fuel, oil, repairs and maintenance.
6. EXPENSES. Employer will reimburse Employee for expenses incurred in
connection with Employer's business, including expenses for travel, lodging,
meals, beverages, entertainment, and other items of Employee's periodic
presentation of an account of such expenses. Employer shall reimburse Employee
for the following expenses whether incurred or to be incurred on behalf of
Employer.
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7. WORKING FACILITIES. Employer shall provide to Employee offices and
facilities appropriate to Employee's position and suitable for the performance
of Employee's duties as set forth in this Agreement.
8. NONDISCLOSURE OF PROPRIETARY AND CONFIDENTIAL INFORMATION
Recognizing that the Employer is presently engaged, and may hereafter
continue to be engaged in the research and development of processes, the
manufacturing of products or performance of services, which involve experimental
and inventive work and that the success of the Employer's business depends upon
the protection of the processes, products and services by patent, copyright or
by secrecy and that Employee has had, or during the course of his engagement may
have, access to Proprietary and Confidential Information, as herein defined, of
the Employer or other information and data of a secret or proprietary nature of
the Employer which the Employer wishes to keep confidential and Employee has
furnished, or during the course of his engagement may furnish such information
to the Employer, Employee agrees and acknowledges that:
a. The Employer has exclusive property rights to all Proprietary and
Confidential Information and Employee hereby assigns all rights he might
otherwise possess in any Proprietary and Confidential Information to the
Employer. Except as required in the performance of his duties to the Employer,
Employee will not at any time during or after the term of his engagement, which
term shall include any time in which Employee may be retained by the Employer as
a consultant, directly or indirectly use, communicate, disclose or disseminate
any Proprietary or Confidential Information of a secret, proprietary,
confidential or generally undisclosed nature relating to the Employer, its
products, customers, processes and services, including information relating to
testing, research development, manufacturing, marketing and selling.
b. All documents, records, notebooks, notes, memoranda and similar
repositories of, or containing, Proprietary and Confidential Information or any
other information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Employer or its operations and activities
made or compiled by Employee at any time or made available to him prior to or
during the term of his engagement by the Employer, including any and all copies
thereof, shall be the property of the Employer, shall be held by him in trust
solely for the benefit of the Employer, and shall be delivered to the Employer
by him on the termination of his engagement or at any other time on the request
of the Employer.
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<PAGE> 8
c. Employee will not assert any rights under any inventions,
trademarks, copyrights, discoveries, concepts or ideas, or improvements thereof,
or know--how related thereto, as having been made or acquired by him during the
term of his engagement if based on or otherwise related to Proprietary or
Confidential Information.
9. ASSIGNMENT OF INVENTIONS.
a. All Inventions shall be the sole property of the Employer, and
Employee agrees to perform the provisions of this Section 9 with respect thereto
without the payment by the Employer of any royalty or any consideration therefor
other than the regular compensation paid to Employee in the capacity of any
employee or consultant, with the exception that Employee shall continue to
receive royalties from sales of any and all products currently distributed by
Coordinated Strategic Alliances of Chester, New York.
b. Employee shall apply, at the Employer's request and expense,
for United States and foreign letters patent or copyrights either in Employee' s
name or otherwise an the Employer shall desire.
c. Employee hereby assigns to the Employer all of his rights to
such Inventions, and to applications for United States and/or foreign letters
patent or copyrights and to United States and/or foreign letter patent or
copyrights granted upon such Inventions.
d. Employee shall acknowledge and deliver promptly to the
Employer, without charge to the Employer, but at its expense, such written
instruments (including applications and assignments) and do such other acts,
such as giving testimony in support of Employee' s inventorship, as may be
necessary in the opinion of the Employer to obtain, maintain, extend, reissue
and enforce United States and/or foreign letters patent and copyrights relation
to the Inventions and to vest the entire right and title thereto in the Employer
of its nominee. Employee acknowledges and agrees that any copyright developed or
conceived of, by Employee during the term of his employment that is related to
the Business of the Employer shall be a " work for hire" under the copyright law
of the United States and other applicable jurisdictions.
e. Employee represents that his performance of all the terms of
this Agreement and as an employee of or consultant to the Employer does not and
will not breach any trust prior to his employment by the Employer. Employee
agrees not to enter into any agreement either written or oral in conflict
herewith and represents and agrees that he has not brought and will not bring
with to the Employer or use in the performance of his responsibilities at the
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<PAGE> 9
Employer any materials or documents of a former employer which are not generally
available to the public, unless he has obtained written authorization from the
former employer for their possession and use, a copy of which has been provided
to the Employer.
f. No provisions of the Paragraph shall be deemed to limit the
restrictions applicable to Employee under Section 8 and 9.
10. SHOP RIGHTS. The Employer shall also have the royalty-free right to use
in its business, and to make, use and sell products, processes and/or services
derived from any inventions, discoveries, concepts and ideas, whether or not
patentable, including but not limited to processes, methods, formulas and
techniques, as well as improvements thereof or know-how related thereto, which
are not within the scope of Inventions as defined herein but which are conceived
of or made by Employee during the period he is engaged by the Employer or with
the use or assistance of the Employer's facilities, materials or personnel.
11. NON-COMPETE. Employee hereby agrees that during the term of this
Agreement and for a period of one year thereafter, Employee will not:
a. Within any jurisdiction or marketing area in the United States or
Canada in which the Employer or any subsidiary thereof is doing business, own,
manage, operate, or control any business of the type and character engaged in
and competitive with the Employer or any subsidiary thereof. For purposes of
this paragraph, ownership of securities of not in excess of five percent (5%) of
any class of securities of a public employer listed on a national securities
exchange or on the National Association of Securities Dealers Automated
Quotation System (NASDAQ) shall not be considered to be competition with the
Employer or any subsidiary thereof;
b. Within any jurisdiction or marketing area in the United States in
which the Employer or any subsidiary thereof is doing business, act as, or
become employed as an officer, director, employee, consultant or agent of any
business of the type and character engaged in and competitive with the Employer
or any of its subsidiaries;
c. Solicit any similar business to that of the Employer's for, or sell
any products that are in competition with the Employer's products to which is,
as of the date hereof, a customer or client of the Employer or any of its
subsidiaries, or was such a customer or client thereof within two years prior to
the date of this Agreement; or
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<PAGE> 10
d. For up to six months following the termination of this Agreement
solicit the employment of, or hire, any full time employee employed by the
Employer or its subsidiaries as of the date of termination of this Agreement.
12. TERMINATION. Employer may not terminate this Agreement during its term
without Cause as defined herein. If this Agreement is terminated without Cause,
Employee shall be entitled to the Termination Payments set forth in Section 14
hereof. Any termination by Employer of Employee of Employee's employment during
the term hereof shall be communicated by written Notice of Termination to
Employee, if such Notice of Termination is delivered by the Employer, and to the
Employee, if such Notice of Termination is delivered by Employee, all in
accordance with the following procedures:
a. The Notice of termination shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances alleged to provide a basis for termination;
b. Any Notice of Termination by the Employer shall be approved by a
resolution duly adopted by a majority of the members of the Employer;
c. If Employee shall provide the president or chief executive officer
with a Notice of Termination at least 30 days prior to leaving the employment of
the Employer. Upon the end of the thirty days, all compensation provisions of
this Agreement shall cease.
13. TERMINATION UPON TRANSFER OF BUSINESS. Notwithstanding any provision
this Agreement to the contrary, Employee may terminate this Agreement upon the
happening of any of the following events: (a) the sale by Employer of
substantially all of its assets to a single purchaser or to a group of
associated purchasers; (b) the sale, exchange, or other disposition to a single
entity or group of entities under common control in one transaction or series of
related transactions of greater than 50% of the outstanding shares of Employer's
common stock; (c) the decision by Employer to terminate its business and
liquidate its assets; or (d) the merger or consolidation of Employer in a
transaction in which the shareholders of the Employer immediately prior to such
merger or consolidation receive less than 50% of the outstanding voting shares
of the new or continuing corporation. In the event Employee does not elect to
terminate this Agreement upon the happening of any of the events noted above,
and as a result of such event, Employer is not the surviving entity, then the
provisions of this Agreement shall inure to the benefit of and be binding upon
the surviving or resulting entity. If as a result of
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<PAGE> 11
the merger, consolidation, transfer of assets, or other event listed above, the
duties of Employee are increased, then the compensation of Employee provided for
in paragraph 5 of this Agreement shall be reasonably adjusted upward for the
additional duties and responsibilities assumed. In the event of the occurrence
of (a) (b) or (d) above and Employee elects to terminate this Agreement,
Employee shall be entitled to a bonus equal to three (3) times the base salary
provided for in Paragraph 5(a). Said payment to be paid at time of closing.
14. TERMINATION PAYMENTS. In the event the Employee's employment is
terminated by the Employer during the term hereof for reasons other than Cause,
as defined herein, Employee shall be paid any sums owed under this Agreement,
including but not limited to any salary, any deferred compensation, accrued
benefits, bonuses and options, and for any potential actions for breach of this
Agreement by Employer. Other than any payments set forth in this Section 14,
Employee shall be entitled to no further compensation or any other payments
after termination. Employee shall receive no further payments if terminated for
Cause other than Accrued Benefits.
15. DEATH DURING EMPLOYMENT. If Employee dies during the term of this
Agreement, Employer shall have no further obligations to pay Employee other than
any Accrued Benefits.
16. ILLNESS OR INCAPACITY. If Employee is unable to perform Employee's
services by reason of illness or incapacity for a period of more than two (2)
consecutive months the compensation thereafter payable to Employee during the
next two (2) consecutive months shall be 50% of the compensation provided for
herein. During such period of illness or incapacity, Employee shall be entitled
to receive incentive compensation if any Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within a four (4) consecutive
month period, Employee shall not be entitled to receive any further compensation
nor any payments for such illness or incapacity, and Employer may terminate this
Agreement without further liability to Employee. Any existing options to
purchase Employer's common stock held by Employee at the time termination shall
be governed by the terms of the option and not affected by this provision. At
the termination of such illness or incapacity, Employee shall be entitled to
receive Employee's full compensation payable pursuant to the terms of this
Agreement.
17. NON-TRANSFERABILITY. Neither Employee, Employee's spouse, Employee's
designated contingent beneficiary, nor their estates shall have any right to
anticipate, encumber, or dispose of any payment due under this
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Agreement. Such payments and other rights are expressly declared non-assignable
and nontransferable except as specifically provided herein.
18. INDEMNIFICATION. Employer shall indemnify, defend and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against such liability.
19. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other party.
20. ENTIRE AGREEMENT. This Agreement is and shall be considered to be the
only agreement or understanding between the parties hereto with respect to the
employment of employee by employer. All negotiations, commitments, and
understandings acceptable to both parties have been incorporated herein. No
letter, telegram, or communication passing between the parties hereto covering
any matter during this contract period, or any plans or periods thereafter,
shall be deemed a part of this Agreement; nor shall it have the effect of
modifying or adding to this Agreement unless it is distinctly stated in such
letter, telegram, or communication that is to constitute a part of this
Agreement and is attached as an amendment to this Agreement and is signed by the
parties to this Agreement.
21. ENFORCEMENT. Each of the parties to this Agreement shall be entitled to
any remedies available in equity or by statute with respect to the breach of the
terms of this Agreement by the other party. Employee hereby specifically
acknowledges and agrees that a breach of the agreements, covenants and
conditions of this Agreement will cause irreparable harm and damage to the
Employer, that the remedy at law, for the breach or threatened breach of this
Agreement will be adequate, and that, in addition to all other remedies
available to the Employer for such breach or threatened breach (including,
without limitation the right to recover damages), the Company shall be entitled
to injunctive relief for any breach or threatened breach of this Agreement.
22. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
23. SEVERABILITY. If and to the extent that any court of competent
jurisdiction holds any provision or any part thereof of this Agreement to be
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invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
24. WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach hereof shall constitute a waiver of
any such breach or of any covenant, agreement, term, or condition.
25. LITIGATION EXPENSES. In the event that it shall be necessary or
desirable for the Employee or Employer to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
provisions of this Agreement, the prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees, costs, and expenses incurred by
the prevailing party in connection with the enforcement of this Agreement.
Payment shall be made upon the conclusion of such action.
26. SURVIVABILITY. The provisions of Section 8, 9, 10, 11 and 12 shall
survive termination of this Agreement.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: EMPLOYEE:
LA GROUP, INC.
By: /s/ Daniel M. Fasano, CEO /s/ Curt Westrom
----------------------------------- --------------------------------
Duly Authorized Officer CURT WESTROM
<PAGE> 1
Exhibit 99(4)
LA GROUP INC. AND SUBSIDIARIES
(A DELAWARE CORPORATION)
SCHEDULE OF CONSOLIDATED INTANGIBLES
JUNE 30, 1999
<TABLE>
<CAPTION>
LA LA LA SEEN WHAT A
GROUP DISTRIBUTION ACQUISITION ON TV PRODUCT
Note INC. INC. INC. INC. INC. TOTAL
---- ----- ------------ ----------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
ORGANIZATION EXPENSES
---------------------
Legal and Incorporation Fees (1) $ 2,500 $ - $300 $ - $ - $ 2,800
Amortization Expense for Period (167) - (50) - - (217)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1996 2,333 - 250 - - 2,583
Legal and Incorporation Fees - 375 - - - 375
Amortization Expense for Period 500 (138) (60) - - (698)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1997 1,833 237 190 - - 2,260
Amortization Expense for Period (500) (75) (60) - - (635)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1998 1,333 162 130 - - 1,625
Legal and Incorporation Fees - - - 400 - 400
Amortization Expense for Period (500) (75) (60) (40) - (675)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1999 $ 833 $ 87 $ 70 $360 $ - $ 1,350
======= ===== ==== ==== ======= =======
GOODWILL
--------
Issuance of 15,226,900 shares of LA Group Inc.
Stock in a 1:1 Exchange with Kent Toys, Inc. $40,527 - - - - 40,527
Amortization Expense for Period (788) - - - - (788)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1996 39,739 - - - - 39,739
Issuance of 100,000 shares of LA Group Inc. as
Additional consideration to Kent Toys, Inc. 5,000 - - - - 5,000
Amortization Expense for Period (2,757) - - - - (2,757)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1997 41,982 - - - - 41,982
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998 1999 TOTAL
----- ----- ------ ----- --------
<S> <C> <C> <C> <C> <C>
ORGANIZATION EXPENSES
---------------------
Legal and Incorporation Fees 2,800
Amortization Expense for Period
BALANCES - June 30, 1996
Legal and Incorporation Fees 375
Amortization Expense for Period
BALANCES - June 30, 1997
Amortization Expense for Period
BALANCES - June 30, 1998
Legal and Incorporation Fees 400
Amortization Expense for Period
BALANCES - June 30, 1999
GOODWILL
--------
Issuance of 15,226,900 shares of LA Group Inc.
Stock in a 1:1 Exchange with Kent Toys, Inc. 40,527
Amortization Expense for Period
BALANCES - June 30, 1996
Issuance of 100,000 shares of LA Group Inc.
Additional consideration to Kent Toys, Inc. 5,000
Amortization Expense for Period
BALANCES - June 30, 1997
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
LA LA LA SEEN WHAT A
GROUP DISTRIBUTI0N ACQUISITION ON TV PRODUCT
Note INC. INC. INC. INC. INC. TOTAL
----- ----- ------------ ----------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of 300,000 shares of LA Group Inc. as
Additional consideration to Kent Toys, Inc. 15,000 - - - - 15,000
Issuance of 790,000 shares of LA Group Inc. as
in Connection with Acquisition of
What A Product, Inc. 34,618 34,618
Amortization Expense for Period (3,118) - - - (1,154) (4,272)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1998 53,864 - - - 33,464 87,328
Amortization Expense for Period (4,035) - - - (2,307) (6,342)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1999 $49,829 $ - $ - $ - $31,157 $80,986
======= ===== ==== ==== ======= =======
TRADEMARKS
----------
BALANCES - June 30, 1996 $ - $ - $ - $ - $ - $ _
BALANCES - June 30, 1997 - - - - - -
Issuance of 790,000 shares of LA Group Inc. as
in Connection with Acquisition of - - - - 15,382 15,382
What A Product, Inc.
Amortization Expense for Period - - - - (769) (769)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1998 - - - - 14,613 14,613
Amortization Expense for Period - - - - (1,538) (1,538)
------- ----- ---- ---- ------- -------
BALANCES - June 30, 1999 $ - $ - $ - $ - $13,075 $13,075
======= ===== ==== ==== ======= =======
TOTAL COST
LESS: AMORTIZATION
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998 1999 TOTAL
<S> <C> <C> <C> <C> <C>
Issuance of 300,000 shares of LA Group Inc. as
Additional consideration to Kent Toys, Inc. 15,000
Issuance of 790,000 shares of LA Group Inc. as
in Connection with Acquisition of
What A Product, Inc. 34,618
Amortization Expense for Period
BALANCES - June 30, 1998
Amortization Expense for Period
BALANCES - June 30, 1999
TRADEMARKS
BALANCES - June 30, 1996
BALANCES - June 30, 1997
Issuance of 790,000 shares of LA Group Inc. as
in Connection with Acquisition of 15,382
What A Product, Inc.
Amortization Expense for Period
BALANCES - June 30, 1998
Amortization Expense for Period
BALANCES - June 30, 1999
TOTAL COST $43,327 $ 5,375 $65,000 $ 400 $114,102
LESS: AMORTIZATION (1,005) (3,455) (5,676) (8,555) (18,691)
------- -------- ------- ------- --------
$42,322 $ 1,920 $59,324 $(8,155) $ 95,411
======= ======== ======= ======= ========
COMMENT #52 - STATEMENT OF CASH FLOWS
THE STATEMENT OF CASH FLOWS HAS BEEN RESTATED TO RECORD THE EFFECTS OF
INTANGIBLE ASSETS RECORDED IN NON-CASH TRANSACTIONS. IN ADDITION, THE STATEMENT
OF CASH FLOWS HAS BEEN RESTATED TO PROPERLY REFLECT AMORTIZATION EXPENSE
ERRONEOUSLY RECORDED IN OTHER "OTHER EXPENSES" FINALLY, THE STATEMENT HAS BEEN
REVISED TO REFLECT THE EFFECTS OF A MINORITY INTEREST IN EQUITY AT JUNE 30, 1997.
</TABLE>
<PAGE> 1
Exhibit 99(5)
LA GROUP INC., & SUBSIDIARIES
SCHEDULE OF CONSOLIDATED GOODWILL
JUNE 30, 1999
COMMENT #59 - ORIGIN OF GOODWILL
On March 15, 1996 the Company completed an acquisition of all of the
outstanding stock of Kent Toys, Inc., a publicly traded Utah Corporation.
The Company issued 15,226,900 of its common stock (Par Value $.001) in
exchange for the assets and also assumed liabilities of Kent Toys, Inc., in
the amount of $25,300. The Company also agreed to issue an additional
400,000 shares of its common stock during the next two fiscal years;
100,000 in 1997 and 300,000 shares in 1998. The amount of goodwill
recorded was computed by adding the fair market value of the common stock
issued to the amount of liabilities assumed. The following illustrates the
transaction:
AT JUNE 30, 1996
----------------
Fair Value of Stock Issued
15,226,900 X $.001(Par Value) $ 15,227
Plus:
Liabilities Assumed 25,300
----------
Amount of Goodwill Recorded 40,527
AT JUNE 30, 1997
----------------
Fair Value of Stock Issued
100,000 X $.05(Fair Market Value) 5,000
AT JUNE, 30, 1998
-----------------
Fair Value of Stock Issued
300,000 X $.05(Fair Market Value) 15,000
----------
Total Amount of Goodwill Recorded $60,527
===========
AMORTIZATION OF GOODWILL
The cost of goodwill is being amortized using the straight line method over the
period to be benefited which has been estimated by the company to be fifteen
years. The primary criterion used by the company is determining the fifteen year
useful life is that it most closely reflects the average service lives of the
employees that are critical to the realization of the asset, as outlined under
apb - 17.
