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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
ISA INTERNATIONALE INC.
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(Name of Small Business Issuer in its charter)
Delaware 41-1890229
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(State of Incorporation) (I.R.S. Employer Identification No)
204 Central Ave., Suite 111, Faribault, Minnesota 55021
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone number - 1-(800)434-3198
Securities to be registered pursuant to Section 12(b) of the Act.
None
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Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, $.0001 par value
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(Title of Class)
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TABLE OF CONTENTS
PART I Page
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Item 1. Description of business . . . . . . . . . . . . . . . . . . 3
Item 2. Management's discussion and analysis of financial
condition and results of operations . . . . . . . . . . . . 10
Item 3. Description of property . . . . . . . . . . . . . . . . . . 14
Item 4. Security ownership of certain beneficial owners
and management . . . . . . . . . . . . . . . . . . . . . . 15
Item 5. Directors and executive officers, promoters and
control persons . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Executive compensation . . . . . . . . . . . . . . . . . . . 16
Item 7. Certain relationships and related transactions . . . . . . . 16
Item 8. Description of securities . . . . . . . . . . . . . . . . . 17
PART II
Item 1. Market price of and dividends on the registrant's
common equity and related stockholder matters . . . . . . . 17
Item 2. Legal proceedings . . . . . . . . . . . . . . . . . . . . . . 18
Item 3. Changes in and disagreements with accountants . . . . . . . . 18
Item 4. Recent sales of unregistered securities . . . . . . . . . . . 18
Item 5. Indemnification of directors and officers . . . . . . . . . . 19
PART F/S
Index to financial statements . . . . . . . . . . . . . . . . . . . . . . . . . 20
PART III
Item 1. Index of exhibits . . . . . . . . . . . . . . . . . . . . . . 20
Item 2. Description of exhibits . . . . . . . . . . . . . . . . . . . 22
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Through its two wholly-owned subsidiary Minnesota corporations,
Internationale Shopping Alliance Incorporated and International Strategic Assets
Inc., ISA is engaged in two distinct businesses: (i) the development of a
multimedia home shopping network primarily for the purpose of generating direct
retail sales of varied products from TV viewers and Internet shoppers, and (ii)
direct sales via outbound telemarketing of precious metals consisting mainly of
gold and silver coins and bars.
As used herein, the term "ISA" refers to ISA Internationale Inc. and its
subsidiaries, unless the context indicates otherwise.
A. Corporate Organization and Recapitalization
ISA was incorporated in Delaware in 1989 under a former name, and was
inactive operationally for some time prior to its May 1998 recapitalization
through a merger with Internationale Shopping Alliance Incorporated which is
now a wholly-owned subsidiary of ISA. ISA acquired its home shopping network
business through this merger, after which the former shareholders of this
subsidiary acquired 89% of the outstanding common stock of ISA through a
stock exchange. ISA issued 11,772,600 shares of its common stock in exchange
for all of the outstanding common stock of Internationale Shopping Alliance
Incorporated. This merger was effected as a reverse merger for financial
statement and operational purposes, and accordingly ISA regards its inception
as being the incorporation of Internationale Shopping Alliance Incorporated
on October 7, 1997.
ISA incorporated its precious metals subsidiary, International Strategic
Assets, Inc., in March 1999.
B. The ISA Home Shopping Network
ISA's primary business strategy has been its development of a multimedia
home shopping network for the purpose of offering in-home shoppers a convenient
electronic shopping experience either via television or the Internet, and
featuring a broad diversity of high-quality, moderately priced consumer
products. Besides its primary market of TV viewers and e-commerce Internet
shoppers, ISA also intends to eventually generate material aftermarket and
secondary market sales through outbound telemarketing and direct sales catalog
operations.
When established, ISA's home shopping network will offer a wide variety of
consumer merchandise, much of which will not be available from other sources.
ISA merchandise will include jewelry, gemstones, watches, varied collectibles,
household appliances and cookware, consumer electronic products, books, art and
antiques, apparel items, sports equipment and memorabilia, and other items which
can be portrayed favorably through television programming or Internet website
presentation. ISA will obtain its merchandise from numerous domestic and
overseas vendors and manufacturers, many of which have been retained by ISA over
the past year.
BACKGROUND OF ISA SHOPPING NETWORK - ISA's multimedia home shopping concept
was commenced in October 1997, and from then until the summer of 1998, ISA
formulated its strategic business plan and obtained its initial capitalization
through a private placement of its common stock with related warrants. During
the last half of 1998, ISA acquired extensive television broadcast and satellite
uplink transmission equipment, leased a satellite transponder site, leased TV
production/broadcast facilities in Knoxville, Tennessee, and retained
programming and technical personnel in order to commence a test launch of its
proprietary TV home shopping network.
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Over a 3-4 month period in early 1999, ISA launched its home shopping
network from Knoxville, Tennessee via satellite transmission to a nationwide
television audience consisting primarily of homeowners having large-dish antenna
satellite receiver systems. During this test launch, ISA thoroughly tested and
debugged its broadcast operations, show programming procedures, customer
ordering and product fulfillment, and sales support and technical TV broadcast
systems. ISA is well satisfied that its program content, broadcast transmission,
and customer ordering and support operations functioned professionally and met
ISA's planned performance standards in all material respects.
Based on the test launch of ISA television broadcasting from Knoxville, in
May 1999 ISA made two strategic decisions: (i) permanent broadcasting of its TV
home shopping network would not commence until ISA raised enough capital to
acquire and support broadcasting to at least 10 million cable TV viewers, and
(ii) all ISA broadcast equipment and operations would be moved from Knoxville to
the Minneapolis/St. Paul metropolitan area where all future TV programming and
broadcast activities would be conducted. ISA is now in the process of raising
additional capital funds and of moving its equipment from Knoxville. Assuming
ISA raises the needed substantial capital, ISA intends to commence permanent
broadcasting of its TV shopping programming from a Minneapolis/St. Paul location
by March 2000. There is no assurance, however, that ISA will be able to raise
the substantial capital needed to commence its TV broadcasting under its current
plan of operations.
MULTIMEDIA BUSINESS STRATEGY - ISA will implement multiple direct sales
operations under its home shopping strategy. TV broadcasting will be transmitted
both to cable TV networks and satellite receivers. Internet e-commerce retailing
will be conducted through a proprietary ISA Website. To address secondary and
aftermarket sales, ISA will establish outbound telemarketing and direct catalog
sales operations. ISA has chosen its multimedia approach because of its belief
that "exposure" to potential consumers is the most important element in creating
sales in the home shopping industry. ISA believes that its ability to realize
substantial and growing sales will be primarily dependent upon achieving a large
amount of merchandise exposure to potential customers through a multimedia
strategy.
ISA TELEVISION NETWORK - Current plans of ISA are to commence full TV home
shopping broadcasting by March 2000, which will be transmitted via
communications satellite to various targeted audiences primarily representing
cable TV subscribers of various cable TV systems with which ISA will enter into
affiliation agreements. ISA believes that sales from TV shopping will constitute
the largest source of its future revenues. ISA television broadcasting will be
transmitted through the use of ISA's complete satellite uplink equipment used in
conjunction with a satellite transponder which will be leased by us. ISA expects
to lease its transponder from Bee Sweet Enterprises, London, Ohio, which is the
company ISA leased its transponder during its test launch broadcasting from
Knoxville, Tennessee in early 1999. ISA currently has a multiple-purpose
contract with Bee Sweet Enterprises providing both for the leasing of
transponder space and for providing affiliation agreements between ISA and cable
system operators which will carry future ISA programming. Bee Sweet Enterprises
will negotiate future affiliation agreements between ISA and cable system
operators, which agreements will require ISA to pay monthly access fees to carry
ISA programming. Bee Sweet Enterprises has agreed to suspend any transponder
payments until ISA commences broadcasting from a Minneapolis/St. Paul location,
since ISA has no need for a transponder until then.
FUTURE TV PRODUCTION AND BROADCAST OPERATIONS - ISA television home
shopping will be presented live from one or more fully equipped production
studios, and will employ modern photography procedures, leading computer
graphics technology and other creative merchandising techniques intended to
present ISA merchandise to TV viewers in a friendly and informal sales
environment. Program format will emphasize an interactive and entertaining
atmosphere intended to effectively describe and demonstrate the merchandise
being offered by show hosts. All ISA tele-
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vision programming will be produced by fulltime ISA production personnel at the
ISA broadcast studio facilities, and transmitted from there via satellite to the
targeted viewing audiences.
ISA merchandise will be presented by professional on-air TV hosts, and TV
viewers can place their orders immediately and directly with ISA via a toll-free
dedicated telephone number shown on their TV screens. Orders will be processed
immediately at the ISA Call Center by trained telemarketing service personnel
using specialized order processing computer equipment which provides real-time
information feedback to on-air show hosts. Home shopping TV programming will
include targeted category, themed and general merchandise presentations, while
emphasizing ISA's main merchandise categories such as jewelry, collectibles and
sports memorabilia. Special themed programs will be aired for established
holidays or events including Mother's Day, Father's Day, Valentine's Day, and
the Christmas season. Programming will be divided into specifically timed
segments, with each segment having a live TV show host who presents the
merchandise and conveys information on specific products such as price, quality,
and special or unique product features. Besides regular programming, ISA intends
to feature occasional celebrity or special guests to promote products they are
associated with, including TV or movie stars, recording artists or recognized
athletes.
Interactive viewer participation will be an important element of ISA
television programming. ISA show hosts will engage in on-air telephone
discussions with selected viewers regarding the merchandise being presented or
the caller's previous TV shopping experience with ISA. ISA will place and
maintain a high priority on the hiring and training of TV show hosts and their
support personnel, since ISA believes they are a key factor for inducing viewers
to make the type of "impulse" purchase decisions characteristic of TV home
shopping. ISA will attempt to attract and retain experienced show hosts with
recognized personalities who already have established a loyal following from
past experience. Show hosts will be encouraged to develop distinct individual
personality traits and presentation techniques to promote positive bonding with
TV viewers.
ISA INTERNET E-COMMERCE - Electronic retail shopping via the Internet,
popularly known as "e-commerce", has experienced explosive growth in the past
few years, and continues to expand fast. Over a recent one-year period,
e-commerce transactions grew from $6 billion in 1997 to over $18 billion in
1998, and are expected to surge past $300 billion by 2002. The Internet is being
recognized increasingly by the general population as an effective retailing
medium, with one of four Americans already having made at least one online
retail purchase. ISA believes that a large and growing segment of the population
now regards e-commerce as a convenient, affordable and pleasing alternative to
other shopping channels.
Accordingly, ISA's business strategy places strong emphasis toward the
development of an effective professional ISA website presence on the Internet,
and to participate fully in this unique retailing channel. ISA has acquired its
proprietary website address, www.shopISA.com, and is now in the process of
developing Internet format and product presentation procedures to offer quality
e-commerce shopping worldwide. ISA intends that its website will continuously
display numerous products from varied merchandise categories, and product
offerings will be changed frequently. ISA will utilize state-of-the-art computer
and server equipment suitable for volume e-commerce retail sales.
ISA will retain professional e-commerce website designers to create its
website presentation, and ISA intends to develop a comprehensive website
presence featuring merchandise portrayed in easy-to-view graphics and
accompanying narrative designed to appeal to Internet online shoppers. ISA
believes that future e-commerce sales
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will represent a substantial portion of its total revenues, and that the ISA
website will become an effective marketing channel both for initial sales to new
customers and for aftermarket sales to the existing ISA customer base.
ISA estimates that its e-commerce website will be fully developed and
operational by March 2000. After becoming operational, ISA intends to actively
promote its Internet website both through ISA television programming and through
considerable independent advertising in various print and electronic media
sources.
PLANNED TELEMARKETING AND CATALOG MERCHANDISING - Besides its primary
electronic retailing via television and e-commerce, ISA intends to target direct
sales through both outbound telemarketing and direct-mail catalog operations.
Telemarketing and catalog sales activities will be targeted both to aftermarket
sales from the existing proprietary ISA customer database, and to certain
secondary markets based on mailing lists purchased from independent sources.
Current plans of ISA provide for telemarketing and catalog sales operations to
be launched in the second half of 2000 in time to participate in the yearend
holiday seasons.
ISA believes that most of the procedures, equipment and personnel needed
for its planned telemarketing and catalog sales, such as order fulfillment and
customer service, will be identical to those already established by ISA for its
television and Internet home shopping operations. Moreover, much of the
merchandise planned to be offered through ISA telemarketing and catalog sales
will be the same products offered via the ISA electronic retail network.
Accordingly, ISA does not expect to encounter much difficulty in coordinating
and integrating future telemarketing and catalog sales operations with its
overall multimedia direct sales business.
For its planned outbound telemarketing, ISA intends to acquire or develop
state-of-the-art automated telephony systems and workstations including the
latest telemarketing functions and procedures such as automatic customer list
dialing, display information on potential customers, immediate credit card
processing and confirmation, and other automated functions. ISA also intends to
train its telemarketing personnel thoroughly in proper and effective outbound
direct sales phone procedures and techniques prior to their beginning sales
calls to potential customers.
Production of planned direct-mail catalogs most likely will be outsourced
to professional firms skilled in direct-mail catalog format and graphics,
product presentation layout, and volume catalog publication. ISA anticipates
publishing periodic general merchandise catalogs with the main one based on each
yearend holiday shopping season, and also publishing and distributing certain
specialty catalogs from time to time featuring a specific merchandise category
such as jewelry.
C. Merchandise Purchasing and Suppliers.
The ISA multimedia home shopping network plans to offer a wide range and
varied mix of quality merchandise, and ISA anticipates that jewelry (including
watches and gemstones) will represent its largest and most offered category. ISA
intends to feature certain jewelry merchandise designed exclusively for sale by
ISA. Types of merchandise planned to be offered by ISA include standard product
lines, products made to specifications from ISA, and certain overstock or
close-out inventory offered by wholesalers and liquidation vendors. ISA also
intends to offer home shoppers new or unique products on a regular basis which
are not available from other home shopping sources. The mix of products and
sources of merchandise will vary from time to time depending upon a variety of
factors such as price and product availability.
ISA intends to obtain its merchandise from numerous domestic and foreign
suppliers, including manufacturers, wholesalers, distributors, importers and
other vendors. ISA already has established purchase arrangements to obtain mer-
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chandise from 45-50 different suppliers, and ISA believes it will never be
dependent upon one or a small number of suppliers for a significant portion of
its merchandise inventory. ISA has developed an extensive database of potential
vendors which can provide a wide variety of goods in many categories which ISA
considers suitable for television shopping presentation. This vendor database
includes many suppliers in the USA as well as others in the United Kingdom,
continental European countries, Africa, Hong Kong and Australia. Based on the
initial test launch of our TV shopping network and the past industry experience
of ISA management, ISA does not anticipate any difficulties obtaining ample and
varied merchandise inventory from our suppliers, nor does ISA expect to
encounter any material delays in having product orders fill by suppliers.
ISA's merchandising department will negotiate directly with the many
suppliers providing products to be sold through the ISA multimedia shopping
network. ISA will strive to obtain the lowest prices available from suppliers
while at the same time ensuring good product quality and durability. Besides
dealing with established vendors and new suppliers who contact ISA to sell their
goods, ISA intends to attend 3-4 major trade shows annually where vendors
display and offer their products to direct sales retailers.
Since there are multiple sources of supply for the various product
categories planned to be offered by ISA's home shopping network, ISA doesn't
plan on entering into any long-term commitments or arrangements with suppliers.
ISA also will attempt to take full advantage of any volume discounts offered by
suppliers.
D. Marketing and Customers
Direct in-home shopping for consumer products has become a huge multimedia
industry, and ISA expects this industry to experience substantial and steady
growth over the coming years. ISA also believes that a significant and growing
portion of the general population now prefers to shop direct from their homes
via television, telephone, Internet or catalog transactions.
ISA plans to offer a wide variety of quality merchandise directly to home
shoppers at retail prices which are lower than, or at a substantial discount
from, standard suggested retail prices. ISA expects to realize sales in its home
shopping network from four sources, (i) new customers from households viewing
ISA television programming or connecting online with the ISA e-commerce website,
(ii) new customers from additional cable TV audiences from added cable TV
affiliations to be entered into by ISA from time to time, (iii) repeat sales to
loyal customers already having purchased products from one or more of ISA's
shopping media, and (iv) aftermarket and secondary market sales from ISA
outbound telemarketing and direct-mail catalog sales. ISA believes that its
multimedia approach will enable it to reach a broad shopping population of
varying income, occupational, socio-economic and cultural levels, and having
widely varying merchandise category preferences.
ISA intends to aggressively promote, advertise and market its electronic
retail operations directly to television viewers and Internet e-commerce
shoppers. ISA TV programming and website presentation will be targeted to both
men and women to assure maximum exposure to both genders. Based on the recent
test launch of ISA TV network programming and certain industry data, ISA
believes that at least 60% of its future customers will represent women shoppers
from households having at least one family member with middle- to upper income
employment. ISA also believes that television shopping sales will represent a
substantial majority of the revenues to be received by ISA.
In order to inform potential customers about ISA TV programming and website
presentation, ISA plans to conduct substantial ongoing advertising and
promotional activities to publicize ISA television scheduling and programming
and website presentation. Such marketing activities will include advertising in
various TV guides and Internet publications, on-air media advertising,
advertising in selected
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periodicals and other print media, direct-mail campaigns to the ISA customer
base and other targeted potential customer groups, and maintaining ISA TV
program scheduling on the ISA Internet website.
E. Merchandise Ordering/Fulfillment and Customer Service
Product ordering and fulfillment will be conducted through ISA's
specialized computer telephony system with its many automated special functions
which will handle customer order entry, interaction with ISA on-air show hosts,
inventory control, and customer order fulfillment including shipping, customer
database record-keeping, and warehousing. The ISA Call Center will be staffed by
live incoming call operators equipped with an active terminal online with the
ISA automated order entry and fulfillment system. ISA's computer telephony
system is capable of handling and processing up to 24 calls simultaneously.
Incoming call online terminals display real-time data on the volume of incoming
calls, the call center representatives on duty, number of calls being processed,
and other material data.
Automated order fulfillment functions of the ISA integrated computer system
will facilitate timely delivery of merchandise to customers by tracking
individual purchase orders, inventory and shipping data, and customer payment
data such as credit verification or other payment terms. Customer payments can
be made through recognized credit cards, personal check or money order, but ISA
anticipates that a substantial majority of customers will pay by credit card.
ISA intends to ship merchandise orders to customers within 48 hours of their
receipt by ISA, via UPS or the U.S. Postal Service, and ISA anticipates product
delivery to customers will occur within 7-10 days of the initial order.
ISA considers customer service as a key element of its overall business
strategy, and the ISA Customer Service department will handle various customer
service functions such as specific customer requests and complaints, product
return policies, warranty matters, and specific product information. ISA intends
to have fulltime trained customer service personnel available always as live
operators to handle customer inquiries directed to ISA via the ISA toll-free
telephone lines. These ISA customer service personnel will be online with the
ISA computerized order entry and fulfillment systems and thus will have
immediate access to each customer's purchase and credit history while on the
phone line with the customer, which ISA believes will enable it to promptly
resolve most inquiries and requests from customers.
F. Precious Metals Direct Sales
ISA conducts outbound direct telemarketing sales of precious metals through
its wholly-owned Minnesota subsidiary, International Strategic Assets Inc.,
which is based in suburban Minneapolis/St. Paul. ISA offers and sells gold,
silver, platinum and palladium in bullion form including bars and coins of
various types and face amounts. Based on sales to date, ISA believes that at
least 75% of ISA precious metals sales will consist of gold bullion, with silver
bullion representing a majority of the remaining 25%.
Precious metals sales are made via direct selling activities of ISA's
fulltime precious metals sales representatives, most of whom are experienced and
already have developed an established customer base over recent years. Their
sales efforts are directed primarily to wealthy or Upper-income persons who
desire to diversify and balance their investment portfolios through the holding
of a core position of precious metals. ISA sales representatives are paid a set
commission based on the amount of their sales.
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After obtaining a customer order for precious metals, ISA purchases the
specific amount of bullion from one of the many precious metals wholesalers or
bullion banks dealing in precious metals, and then arranges for direct shipment
of the order to the ISA customer. Shipments of precious metals by ISA are both
registered and insured, and are made to ISA customers promptly upon receipt of
full payment from the customer. There are many sources of supply available to
ISA for precious metals to fill customer orders, and the loss of one or more of
such sources would not have any material effect on the business of ISA.
G. Competition
All segments of direct retail merchandising are highly competitive, and
numerous competitors of ISA have substantially greater financial, management,
marketing and operational resources than those of ISA. ISA will compete with all
forms of retail businesses including department, discount, mass merchandise,
warehouse and specialty stores, other home shopping channels including TV and
e-commerce and catalog operations, outbound telemarketing organizations,
precious metals sellers of all sizes, and other direct sellers of consumer
merchandise. The television home shopping industry is dominated by two networks,
QVC and Home Shopping Network, and also has other well-established networks
including ValueVision and Shop-at-Home. ISA's planned future Internet
e-commerce, catalog, and outbound telemarketing sales operations also will
encounter a crowded and highly competitive marketplace filled with numerous
organizations including major catalog sales companies, existing and rapidly
emerging e-commerce websites, various types of direct telemarketers, and
conventional retailers having substantial catalog operations and/or established
e-commerce websites.
ISA also anticipates that new entrants will enter this marketplace on a
regular basis, resulting in further competition for customers and for recruiting
and hiring experienced industry personnel. Such new competitors could include
certain major television networks and cable systems, well-capitalized new
e-commerce websites, new catalog and other print media direct sellers, and other
emerging direct and indirect retailers.
ISA believes that the principal competitive factors in its industry are
exposure of broadcasting, product quality and price, TV program and website
presentation, name recognition and customer service. ISA will be at a
competitive disadvantage in attracting TV audiences since it is unknown, its
programming will not be broadcast fulltime, and it will have a much smaller
potential customer viewing audience compared to its main competitors. ISA will
be at a similar disadvantage in its e-commerce operations since many of its
online competitors will have already established their businesses and be well
recognized as an Internet shopping source. ISA also will need to compete with
established companies in hiring and recruiting experienced home shopping
personnel, and in entering into cable television affiliations for broadcast
carriage on their cable systems. ISA cannot predict the degree of success with
which it will be able to meet competition in the future.
H. Governmental Regulations and Environmental Compliance
ISA's home shopping operations will be subject to licensing and other
regulation by federal, state and local governmental authorities regarding
television broadcasting, telemarketing, health and safety conditions, labor and
employment matters, facility sanitation and other matters. ISA does not
anticipate any difficulties or delays in complying with such federal, state or
local licensing and regulations, and ISA believes it will be able to remain in
material compliance with such licensing and regulatory matters regarding all our
planned future operations. Any failure by ISA to satisfy regulatory requirements
could affect the business and financial condition of ISA adversely.
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The television industry in particular is subject to extensive regulations
of the Federal Communications Commission (FCC), which are subject to change
including further legislation. There can be no assurance that laws, rules or
policies of the FCC which could adversely affect ISA will not be enacted at a
future date. ISA holds the necessary license from the FCC to engage in
television home shopping operations. Regarding e-commerce, currently there is
little regulation of the Internet, but there can be no assurance future
legislation will not lead to regulation of e-commerce retailing on the Internet
which would impact ISA adversely.
ISA does not expect that any federal, state or local laws or regulations
relating to environmental matters will have any material effect on ISA's
business or financial condition.
I. Personnel
As of September 15, 1999, ISA had nineteen fulltime employees including
four executive officers, two administrative and accounting personnel, three TV
home shopping technical and development personnel, and ten precious metals sales
representatives.
J. Seasonality
ISA anticipates that all segments of its planned multimedia home shopping
business will be subject to seasonal fluctuations, with the highest sales
activity most likely occurring in the fourth quarter of each calendar year due
to general increased spending of consumers for the yearend holiday season.
K. SEC Reporting
This Form 10-SB is the first filing of ISA with the Securities and Exchange
Commission, and is being made for the purpose of making ISA a "reporting
company" under Section 12(g) of the Securities and Exchange Act of 1934, as
amended. After this Form 10-SB becomes effective, ISA intends to file all of its
required information with the Securities and Exchange Commission (SEC),
including annual 1OKSB filings, quarterly 10QSB filings, and all other forms
that may be or become applicable to ISA with the SEC.
The public may read and copy any materials that are filed by ISA with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington
D.C. 20549. Information on the operation of the SEC Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. All forms filed by ISA with the
SEC also must be electronically filed under the SEC "EDGAR" electronic filing
system, and are available for viewing or copying on the SEC Internet website
that contains reports, proxy and information statements, and other information
regarding reporting companies that file electronically with the SEC. The
Internet address for this SEC website can be found at http://www.sec.gov.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
A. Forward Looking Statements
The information herein contains certain forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward looking statements involve risks and uncertainties,
including, without limitation, the ability of the Company to continue its
business strategy which will require it to obtain significant additional working
capital, changes in costs of doing business and obtaining merchandise products,
changes in governmental
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regulations and labor and employee benefits and costs, competition and pricing,
and general economic and market conditions. Such risks and uncertainties may
cause the Company's actual results, levels of activity, performance or
achievements to be materially different from those future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. Although the Company believes that the assumptions
and expectations reflected in these forward looking statements are reasonable,
any of the assumptions and expectations could prove inaccurate or not be
achieved, and accordingly there can be no assurance the forward looking
statements included in this Form 10SB will prove to be accurate. In view of the
significant uncertainties inherent in these forward looking statements, their
inclusion herein should not be regarded as any representation by the Company or
any other person that the objectives, plans, and projected business results of
the Company will be achieved.
Generally, such forward looking statements can be identified by terminology
such as "may," "anticipate," "expect," "will," "believes," "intends,"
"estimates," "plans," or other comparable terminology.
B. Need For Additional Capital to Implement Business Strategy
Currently ISA derives all its revenues from its precious metals telephone
sales, which is only one element of its overall business strategy to conduct
multimedia direct selling operations of many products. ISA's primary business
development has been its TV home shopping network, which it successfully
launched on a test basis from Knoxville, Tennessee over a five-month period
prior to May 1999. However, ISA will not be able to commence permanent TV
broadcasting unless and until it raises $2-$3 million in working capital to
support its TV home shopping operations and move its broadcast transmission
equipment from Knoxville to the Minneapolis/St. Paul area. Moreover, it will not
be able to implement its planned Internet e-commerce operations either unless it
raises such significant working capital.
ISA's current plans include raising its needed capital through a private
placement of debentures convertible into common stock of ISA, and ISA intends to
commence this private placement in September 1999. Assuming ISA can obtain its
needed additional capital through this private placement, it plans to commence
broadcasting its TV home shopping network from a Minneapolis/St. Paul location
by March 2000. Current plans include affiliations with enough cable TV systems
to provide a potential audience of at least 10 million viewers when broadcasting
is commenced from Minneapolis/St. Paul.
If ISA is unable to raise substantial additional funding, it would not be
able to commence TV broadcasting because of the need for significant working
capital to pay for affiliations with cable TV systems, lease a satellite
transponder for broadcast transmissions, hire and pay salaries for TV home
shopping personnel, and other essential working capital needs. Such an event
would result in a drastic curtailment of ISA's planned business strategy, since
the only business operation of ISA would then be its precious metals sales
operation.
Until ISA obtains additional capital and commences its planned electronic
retailing through TV and e-commerce home shopping, it will continue to derive
all revenues from its sales of precious metals.
C. Liquidity and Capital Resources
ISA has obtained its capitalization primarily through the sale of its
equity securities to a limited group of private investors known to management of
ISA. Between the inception of ISA in 1997 through December 31, 1997, ISA raised
$400,000 in cash through the sale of its common stock with accompanying
warrants;
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<PAGE>
in calendar year 1998, ISA raised an additional $833,376 in cash through
sales of common stock and common stock with accompanying warrants; and during
January-February 1999 ISA raised a total of $1,171,040 through the exercise
of outstanding warrants by existing shareholders, of which $418,002 was in
cash and $753,038 was in gold bullion and coins transferred to ISA. Such gold
bullion and coins were immediately liquid to ISA, and have since been
converted to cash.
The Company does not expect to need any material financing for accounts
receivable or carrying inventory. Precious metals are supplied to the Company
on a pledged basis through a loan payable from suppliers which is paid at the
time the customer pays the Company for the order. Regarding the Company's
planned electronic retailing via TV and e-commerce, any accounts receivable
will be minor in nature since the Company will receive payments from customer
credit card and check purchases prior to having to pay the vendors who are
supplying products. Most merchandise inventory sold in the Company's
multimedia home shopping operations will be available from vendors on a
consignment basis which will not require the Company to pay vendors until the
products are sold and paid for by customers of the Company.
As of September 15, 1999, the Company had current assets of approximately
$208,000 consisting of $58,000 in cash, $143,000 in accounts receivable for
precious metals purchases by customers, and $7,000 in other current assets. At
the same time, the Company had approximately $175,000 in current liabilities
consisting of $114,000 payable to a precious metals supplier, $25,000 in
accounts payable, $32,000 in accrued liabilities and $4,000 in other current
liabilities. Accordingly, the Company's current working capital position is only
approximately $33,000. The Company has no long-term liabilities.
The Company's working capital position is only sufficient to support its
precious metals sales business conducted through International Strategic Assets
Inc. In order to commence any meaningful television or e-commerce direct selling
operations to home shoppers, the Company will need to raise significant
additional capital, and there is no assurance such additional needed capital
will become available to the Company through either debt or equity sources.
D. Capital Expenditures
The Company had no capital expenditures from its inception in October 1977
to yearend 1997. During the year ended December 31, 1998, the Company incurred
capital expenditures totalling $434,614 primarily for data processing hardware
and software systems, telemarketing and computer telephony equipment, and
broadcast and studio equipment for the Company's home shopping TV network
including extensive satellite uplink transmission equipment. During the
six-month period ended June 30, 1999, the Company incurred capital expenditures
of $48,066 primarily for equipment and leasehold improvements for its precious
metals sales and administrative offices in suburban Minneapolis/St. Paul.
The Company does not need to make any additional capital expenditures for
its current operations. Assuming the necessary capital is raised to satisfy
planned TV home shopping network broadcasting from Minneapolis/St. Paul, the
Company will need to make significant capital expenditures for leasehold
improvements and equipment to equip and renovate whatever programming and
broadcast facilities are established in the Minneapolis/St. Paul area.
E. Comparison of Results of Operations
Six Months ended June 30, 1999 and June 30, 1998 & Years Ended December 31,
1998 and December 31, 1997.
-12-
<PAGE>
SALES
Sales for the six months ended June 30, 1999 were $1,140,210 and consisted
primarily of sales of precious metals through the Company's wholly-owned
subsidiary, International Strategic Assets Inc. There is no comparison regarding
the comparable six months of 1998 since the Company had no revenues until late
1998.
Sales for the year ended December 31, 1998 were $35,113 which were all from
the Company's test launch of its TV shopping network which commenced at the end
of 1998. There were no sales from the Company's inception in October 1997 to the
1997 yearend.
LOSSES
Net losses for the six months ended June 30, 1999 were $(1,997,083)
compared to $(232,462) for the comparable six-month period in 1998. This large
increase in net losses was due primarily to the considerable working capital
expenses required incident to conducting a test launch of the Company's TV home
shopping concept during most of the first half of 1999.
Net losses for the year ended December 31, 1998 were $(618,052) compared to
$(125,906) for the period from inception in October 1977 to yearend 1977. This
increase in losses was due primarily to the longer development period in 1998
compared to the 1997 period of only three months since inception of the Company.
EXPENSES
Operating expenses for the six months ended June 30, 1999 were $815,973
compared to $150,229 for the comparable six-month period of 1998. This increase
was due mainly to the increase in working capital needed for (i) the test launch
of TV home shopping network operations, and (ii) expenses to commence precious
metals sales operations in the second quarter of 1999.
Operating expenses for the year ended December 31, 1998 were $570,084
compared to $126,806 in 1997. This increase was due to additional engineering,
TV programming, and administrative expenses necessary to conduct the test launch
of the Company's TV home shopping network.
GROSS PROFIT AND COST OF GOODS SOLD
Cost of goods sold for the six months ended June 30, 1999 were $963,631,
which was mostly attributable to the wholesale cost of purchasing precious
metals, and resulted in a gross margin of $176,579 (15.5%) for that six-month
period. There is no comparison to the comparable six-month period of 1998 since
there were no sales during that period.
Cost of goods sold were $16,155 for the 1998 year ending December 31, 1998,
resulting in a gross margin of $18,958 for that year which only included about
one month of the sales from the Company's TV network test launch. There is no
comparison from 1997 operations since there were no sales in 1997.
F. Income Tax Benefit
The Company has an income tax benefit from net operating losses which is
available to offset any future operating profits. See Note 6 of the audited
financial statements included in this Form 10-SB.
G. Impact of Inflation
The Company believes that inflation has not had any effect on its
development or operations since its inception in 1997. Furthermore, the Company
does not believe inflation will have any material effect for the foreseeable
future. In
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<PAGE>
any event, the Company believes it can offset any future inflationary increases
in the cost of goods and labor by increasing its sales and thereby improving its
operating efficiencies through economies of scale.
H. Impact of Year 2000 (Y2K)
The Year 2000 Issue is the result of computer programs being written over
many years which use two digits rather than four to define the applicable year.
Accordingly, data processing systems with date-sensitive software may recognize
a date using "00" as the year 1900 rather than the correct year 2000. This could
result in system failures or material miscalculations causing disruptions to or
even cessations of business operations, and a corresponding adverse effect to
normal business activities.
Based on an internal analysis by the Company of its data processing and
computer-based telemarketing and telephony hardware and software systems, the
Company does not anticipate that any of its informational or operational
technology systems will be impacted materially by the Year 2000 issue, nor does
the Company expect that it will have to correct or replace any of its present
data processing systems. Moreover, the Company does not expect any problems due
to the Year 2000 involving its suppliers since it will only be obtaining
precious metals until well into 2000, and the key suppliers of its precious
metals have already informed the Company that the Year 2000 will not interfere
with the Company's ability to obtain precious metals from them after 2000.
Any serious disruptions in the general economy caused by the Year 2000
Issue, however, could materially adversely affect the Company's future business
and operations, but it is impossible to predict the degree of harm that the
Company would incur from one or more of such disruptions.
ITEM 3. DESCRIPTION OF PROPERTY
The Company owns considerable TV broadcast and transmission equipment,
studio programming equipment, furniture, data processing and computer telephony
equipment, related to its TV home shopping network activities, which equipment
is currently located in Knoxville, Tennessee. All of this equipment is in good
working condition and suitable for TV broadcast startup operations after it is
moved to Minneapolis/St. Paul as currently planned by the Company. All of this
equipment has been paid for by the Company.
The Company maintains its headquarters in office spaces of 1,500 square
feet in Faribault, Minnesota, under an oral month-to-month lease requiring
monthly rental payments of $200.
The Company leases office and production facilities of approximately
16,000 square feet in Knoxville, Tennessee which were used for its test
launch of its TV home shopping network. These facilities include full
broadcast, studio prouction, order fulfillment and warehousing, and
administrative spaces to conduct a TV home shopping business. These Knoxville
facilities are being leased under a written five-year lease requiring
escalating lease payments from $6,303 to $11,435 per month until expiration
of the lease in 2003. When the Company entered into this lease, it planned to
conduct permanent TV broadcast operations from Knoxville, but since the
Company decision to move its home shopping network to the Minneapolis/St.
Paul area, the Knoxville facility is no longer needed by the Company. The
owner of the Knoxville facility, who is a shareholder of the Company, is in
the process of attempting to sublease these facilities for the Company. In
the event the facilities in Knoxville cannot be subleased on terms similar to
those now binding the Company, the Company would incur a loss for the
resulting difference.
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<PAGE>
The Company's wholly-owned subsidiary, International Strategic Assets Inc.,
leases its sales and administrative facilities for its precious metals sales
operations in a large office complex in Eagan, Minnesota, a suburb of
Minneapolis/St. Paul. These facilities consist of approximately 7,300 square
feet and they are being leased under a five-year lease expiring in 2004 and
requiring current monthly payments of approximately $6,100 including base rental
and the tenant's share of the overall building complex expenses and real estate
taxes. Monthly rental will increase if such operating expenses and real estate
taxes increase. Rental payments under this lease are guaranteed by the Company.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the common stock of the Company as of September 15, 1999, by each
shareholder who is known by the Company to beneficially own more than 5% of the
outstanding Common Stock of the Company, by each director and executive officer
of the Company, and by all executive officers and directors as a group.
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percent of Common
Beneficial Owner(1) Beneficially Owned Stock Owned
------------------- ------------------ -----------------
<S> <C> <C>
Gerald J. Durand(2) ...................... 5,175,300 33.6%
Bernard L. Brodkorb(3) ................... 1,650,000 11.2%
Ronald G. Wolfbauer(4) ................... 918,000 6.2%
Michael G.W. Birch(3) .................... 1,625,000 11.0%
Barbara McLean ........................... 2,295,000 16.0%
All executive officers and
directors(3 persons) ..................... 7,743,300 47.7%
</TABLE>
- -------------------------
(1) The address of Messrs. Durand, Brodkorb, Wolfbauer and Birch is 204 Central
Avenue, Faribault, Minnesota 55021; and the address for Barbara McLean is
2208 North Wilmar Drive, Quincy, Illinois 62301.
(2) Includes warrants to purchase 1,000,000 shares exercisable at $1.00 per
share.
(3) Includes warrants to purchase 400,000 shares exercisable at $1.00 per
share.
(4) Includes warrants to purchase 459,000 shares exercisable at $1.00 per
share.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gerald J. Durand 48 President, Chief Executive Officer and Director
Bernard L. Brodkorb 58 Treasurer, Chief Financial Officer and Director
Ronald G. Wolfbauer 37 Director
</TABLE>
GERALD J. DURAND has been the President, Chief Executive Officer and a
director of the Company since its inception in October 1997. Mr. Durand has over
20 years experience in executive officer or marketing management positions with
various companies involved in direct sales, including considerable involvement
in the TV home shopping industry. Until he commenced fulltime employment with
the Company in early 1999, he was the General Sales Manager of Investment
Rarities Inc., a suburban Minneapolis direct retail seller of precious metals
investments, where he was in charge of over 70 sales representatives offering
products nationwide.
BERNARD L. BRODKORB has been the Treasurer, Chief Financial Officer and a
director of the Company since its inception in October 1997. Mr. Brodkorb has
been an independent practicing Certified Public Accountant(CPA) within the State
of Minnesota for many years, and he has extensive experience in financial and
accounting matters relating to both private and public companies, including
auditing, finan-
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<PAGE>
cial consulting, and advising on corporate taxation. He is a member of the
Minnesota Society of Certified Public Accountants and the American Institute of
Certified Public Accountants.
RONALD G. WOLFBAUER has been a director of the Company since May 1998. Mr.
Wolfbauer also has been the Managing Director of International Strategic Assets
Inc., the Company's wholly-owned subsidiary engaged in precious metals sales,
since its inception in April 1999, where he is in charge of all sales personnel
and general corporate operations. Prior to commencing fulltime employment with
the Company's precious metals subsidiary, Mr. Wolfbauer was a Monetary
Specialist with Investment Rarities, Inc., a large precious metals firm
conducting direct retail sales throughout the USA.
ITEM 6. EXECUTIVE COMPENSATION
The Company did not pay any compensation to any executive officer or
employee from its inception in October 1997 to December 31, 1997; and the
Company did not pay any executive officer or employee total compensation
exceeding $100,000 during the fiscal year ending December 31, 1998. The
following table provides summary information for the fiscal year ended December
31, 1998 regarding all compensation paid to its Chief Executive Officer:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Annual Compensation Long Term Compensation All Other
Principal ----------------------- ---------------------- Compen-
Position Year Salary Bonus Other Awards Payouts sation
- ---------- ---- ------ ----- ----- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald J. Durand 1998 $28,000 -0- -0- -0- -0- -0-
President/CE0
</TABLE>
The Company's directors are not compensated for their services as directors
of the Company. The three directors of the Company were granted warrants in late
1997 to purchase a total of 1,859,000 shares of common stock of the Company at
an exercise price of $1.00 per share over a five-year term, with Mr. Durand
receiving warrants to purchase 1,000,000 of the shares, Mr. Brodkorb receiving
warrants to purchase 400,000 of these shares, and Mr. Wolfbauer receiving
warrants to purchase 459,000 of these shares.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The promoters of the Company are Gerald J. Durand, Bernard L. Brodkorb,
Ronald G. Wolfbauer and Michael G.W. Birch, and they may be otherwise referred
to as founders of the Company. Incident to the founding and organization of the
Company in late 1997, the promoters of the Company received the following shares
of common stock and related warrants incident to services rendered by them
involved with the founding and organization of the Company, which services were
valued on the basis of $.01 per share. All of these warrants have five-year
terms and they can be exercised anytime during such term at a purchase price of
$1.00 per share.
<TABLE>
<CAPTION>
Name of Founder Common Shares Issued Common Shares Exercisable By Warrant
- --------------- -------------------- ------------------------------------
<S> <C> <C>
Gerald J. Durand 6,000,000 1,000,000
Bernard L. Brodkorb 1,750,000 400,000
Ronald G. Wolfbauer 459,000 459,000
Michael G.W. Birch 1,750,000 400,000
</TABLE>
-16-
<PAGE>
In January 1999 the Company redeemed a total of 1,650,000 shares of its
common stock from Messrs. Durand, Brodkorb and Birch as follows, which shares
were returned and contributed to the capital stock account of the Company for no
consideration:
<TABLE>
<CAPTION>
Person Number of Shares Redeemed
------ -------------------------
<S> <C>
Gerald J. Durand ......... 600,000
Bernard L. Brodkorb ...... 525,000
Michael G.W. Birch ....... 525,000
</TABLE>
In February 1999, Barbara McLean exercised warrants to purchase 1,530,000
shares of common stock of the Company for $.50 per share, or total consideration
of $765,000. She exercised these warrants incident to an offer of the Company to
reduce the exercise price from $1.00 to $.50 for a temporary period.
ITEM 8. DESCRIPTION OF SECURITIES
The Company has two classes of authorized shares of capital stock: $.0001
par value Common Stock and $.0001 par value Preferred Stock, consisting of
35,000,000 shares of total capital stock of which 30,000,000 authorized shares
are Common Stock and 5,000,000 authorized shares are Preferred Stock. There are
no outstanding shares of Preferred Stock, and as of September 15, 1999 there
were 14,382,215 shares of Common Stock issued and outstanding.
Authorized common shares not yet outstanding may be issued from time to
time in such amounts and terms as determined by the Board of Directors of the
Company. Holders of common stock are entitled to one vote per share for the
election of directors and on all other matters to be voted upon by shareholders.
There are no preemptive, conversion or redemption rights regarding the Common
Stock of the Company, and all outstanding shares of the Company are duly and
validly issued and fully paid and nonassessable. Holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors, if any. In the event of liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in any assets
remaining after payment of liabilities of the Company and the liquidation
preference of any other securities. Holders of Common Stock do not have
cumulative voting rights, which means the holders of more than 50% of
outstanding shares voting for election of directors can elect all the directors
of the Company. The transfer agent and registrar for the Common Stock of the
Company is Fidelity Transfer Company of Salt Lake City, Utah.
Regarding the Preferred Stock of the Company, the Board of Directors has
the authority, without further action by the shareholders, to issue up to
5,000,000 shares of preferred stock in one or more classes or series, and to fix
the voting rights, liquidation preferences, dividend rights, repurchase rights,
conversion rights, redemption rights and terms, and certain other rights and
preferences, any or all of which may be greater than the rights of the Common
Stock. Without shareholder approval, the Board of Directors of the Company can
issue preferred stock with voting, conversion, or other rights that could
adversely affect the voting power and other rights of holders of Common Stock.
The Company has no present plans to issue any shares of its preferred stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded publicly and quoted over-the-counter
on the NASD Electronic Bulletin Board under the symbol "ISAI." Since the
Company's inception in October 1997, trading has been sporadic, of low volume
and on a very limited basis, and there is no assurance an active trading market
will be
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<PAGE>
established or maintained. The table below sets forth the high and low bid
prices for the Company's Common Stock for each quarter since the Company's
inception in October 1997. These bid quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
<TABLE>
<CAPTION>
Quarter High Bid Low Bid
------- -------- ------
<S> <C> <C>
1997
Fourth(no transactions) $1.50 $1.50
1998
First (no transactions) $1.50 $1.50
Second $2.50 $1.50
Third $3.00 $1.50
Fourth $3.25 $1.50
1999
First $4.25 $3.25
Second $3.25 $0.375
Third(to September 15) $0.375 $0.25
</TABLE>
As of September 15, 1999 there were 271 shareholders of record holding
Common Stock of the Company.
The Company has not declared any cash dividends since its inception, and
does not anticipate declaring or paying any such dividends in the foreseeable
future. Payment of dividends is within the discretion of the Board of Directors
of the Company and any future dividends will depend on a number of factors
including earnings, capital requirements, and general financial condition of the
Company. There are no current restrictions limiting the Company's ability to pay
dividends.
ITEM 2. LEGAL PROCEEDINGS
There are no legal proceedings, including proceedings by governmental
authorities, currently pending against the Company or any of its property.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following information includes all securities sold by the Company
since its inception in October 1997:
A. Incident to the founding and organization of the Company in late
1997, the founders of the Company (which included all current directors of the
Company) and certain persons associated with them received a total of 10,824,000
shares of common stock of the Company based on $.01 per share of value, a total
of $108,240, either for services rendered or settlement of accounts payable
involved with the organization of the Company; and they also received 5-year
warrants to purchase a total of 2,884,000 common shares of the Company
exercisable at $1.00 per share. Exemption for this transaction is claimed under
Section 4(2) of the Securities Act of 1933 since the founding of the Company was
a strictly private transaction not involving a public offering and all of such
founders and their associates acquired the common stock for long-term investment
and all stock certificates were legended to prevent further distribution thereof
unless registered or satisfying an exemption from registration.
B. From November 1997 to June 1998, the Company sold a total of
1,579,535 Units at a purchase price of $.6536 per Unit, a total amount of
$1,032,376, to a limited number of 16 investors (most of whom are accredited
investors) in a private placement, with each Unit consisting of one share of
Common Stock of the Company and a five-year warrant to purchase two shares of
Common Stock exercisable
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<PAGE>
at $1.00 per share. Exemption for this transaction is claimed under Section 4(2)
of the Securities Act of 1933 since it was strictly a private placement whereby
all investors agreed to accept the Units for long-term investment and to have
the certificates therefor legended to prevent further distribution or resale of
the securities unless pursuant to registration or an appropriate exemption
therefrom. Two of these investors were Mr. Durand, the Chief Executive Officer
of the Company, who purchased $10,000 of the Units, and Mr. Brodkorb, the Chief
Financial Officer of the Company, who purchased $16,340 of the Units.
C. In June 1998 the Company issued a total of 370,000 shares of its
Common Stock to four persons who contributed services to the Company based on
$.25 per share. These issuances were as follows:
<TABLE>
<CAPTION>
Person Providing Services Total Value of Services Shares Issued
- ------------------------- ----------------------- -------------
<S> <C> <C>
Mid-America Venture Capital
Fund, Inc .................... $62,500 250,000
Claude Jasper Yow .............. $25,000 100,000
Roger Garmann .................. $ 2,500 10,000
Darrell Bearson ................ $ 2,500 10,000
</TABLE>
Messrs. Garmann and Bearson also received five-year warrants to purchase 10,000
shares of Common Stock apiece exercisable at $1.00 per share. These were all
isolated private transactions with exemptions from registration claimed under
Section 4(2) of the Securities Act of 1933, and all stock certificates were
legended to prevent further distribution unless registered or satisfying an
appropriate exemption from registration.
D. In December 1998 the Company issued 268,000 shares of its Common Stock
to Richard Meyers Family Trust, an accredited investor, in a private sale at
$.75 per share, total consideration of $201,000. This was an isolated private
transaction and exemption from registration is claimed under Section 4(2) of the
Securities Act of 1933, with the stock certificate being legended to prevent
further disposition without registration or an appropriate exemption therefrom.
E. In January 1999 the Company reduced the exercise price of its
outstanding warrants which were sold as part of the Unit private placement in
1998 to $.50 per share from its original $1.00 per share until the end of
February, 1999. Incident thereto, in January-February, 1999 the Company issued a
total of 2,342,080 shares of its Common Stock to certain warrantholders
exercising their warrants at the reduced price of $.50 per share. Consideration
received by the Company for these warrant exercises consisted of $418,002 in
cash and $753,038 in gold bullion and coins. Exemption from registration is
claimed under Section 4(2) of the Securities Act of 1933 since these were
private transactions with existing shareholders not involved in a public
offering, and they accepted their common shares for long-term investment and the
certificates therefor were legended with a restrictive legend preventing further
distribution or resale unless registered or satisfying an appropriate exemption
from registration.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify, to the fullest extent permitted by applicable law, any
person against all liability and expense (including attorney's fees and
settlement costs) incurred by reason of the fact of being a director or officer
of the Company, or by reason of any action alleged to have been taken or omitted
in such capacity. Expenses (including attorney's fees) incurred in defending an
action, suit or proceeding will be paid by the Company in advance of the final
disposition of such action, suit or proceeding to the fullest extent permitted
by the laws of
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<PAGE>
the State of Delaware. The Company also may purchase and maintain insurance on
behalf of any person who is a director or officer of the Company against any
liability asserted against and incurred by such person arising out of such
person's position with the Company, whether or not the Company would have the
power to indemnify against such liability under the provisions of the Company's
Certificate of Incorporation.
The indemnification provided by the Company's Certificate of Incorporation
and Bylaws is not deemed to be exclusive of any other rights to which those
indemnified may be entitled under any agreement, vote of stockholders or
disinterested directors, statutory law, or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to officers and directors of the Company, the Company
has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
PART F/S
The Company's audited financial statements for the period from inception
(October 7, 1997) to December 31, 1997 and the fiscal year ended December 31,
1998, and its unaudited interim financial statements for the six-month period
ended June 30, 1999 are included herewith as pages F-1 through F-16.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Report of independent public accountants ...................................... F-1
Audited consolidated financial statements for the year
ended December 31, 1998 and the period from October 7,
1997 (Inception) to December 31, 1997 ....................................... F-2 through F-12
Unaudited interim financial statements for the six-month
period ended June 30, 1999
............................................................................... F-13 through F-16
</TABLE>
PART III
ITEM 1. EXHIBITS
Exhibits required to be included with this 10SB registration are listed in
the Index to Exhibits beginning on page 22 of this Form 10-SB under "Item 2
Description of Exhibits."
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<PAGE>
[LETTERHEAD]
To the Board of Directors
ISA INTERNATIONALE, INC. AND SUBSIDIARY
Faribault, Minnesota
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of ISA
Internationale, Inc. and Subsidiary as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1998, and the period from October 7, 1997
(inception) to December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ISA Internationale,
Inc. and Subsidiary as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the year ended December 31, 1998, and for
the period from October 7, 1997 (inception) to December 31, 1997, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company incurred a loss of $618,052 in 1998 and at
December 31, 1998, had an accumulated deficit of $747,208. These conditions
raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/Stirtz Bernards Boyden
Surdel & Larter, P.A.
---------------------------
Edina, Minnesota
April 9, 1999
F-1
<PAGE>
ISA INTERNATIONALE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 186,600 $ 401,064
Accounts receivable, no allowance for doubtful accounts
considered necessary 8,373 --
----------- -----------
Total current assets 194,973 401,064
----------- -----------
Property and equipment 434,614 --
Less accumulated depreciation (7,615) --
----------- -----------
426,999 --
----------- -----------
Deposits 115,511 --
----------- -----------
Deferred income taxes 4,000 --
----------- -----------
Total assets $ 741,483 $ 401,064
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,482 $ 250
Accrued liabilities 40,250 --
Deferred income taxes 4,000 --
----------- -----------
Total current liabilities 82,732 250
----------- -----------
Deferred rent 9,529 --
----------- -----------
Stockholders' equity:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized in 1998 and -0- shares authorized in 1997;
-0- shares issued and outstanding -- --
Common stock, $.0001 par value in 1998 and $.01 par
value in 1997, 30,000,000 shares authorized;
13,690,135 shares in 1998 and 10,646,000 shares in
1997 issued and outstanding 1,369 106,460
Common stock subscribed (790,000 shares in 1997) -- 7,900
Additional paid-in capital 1,395,061 412,360
Accumulated deficit (747,208) (125,906)
----------- -----------
Total stockholders' equity 649,222 400,814
----------- -----------
Total liabilities and stockholders' equity $ 741,483 $ 401,064
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
F-2
<PAGE>
ISA INTERNATIONALE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7, 1997
YEAR ENDING (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Net sales $ 35,113 $ --
Cost of goods sold 16,155 --
--------------- ---------------
Gross profit 18,958 --
Operating expenses:
Selling and marketing 48,649 --
Engineering and programming 182,313 --
Warehousing and shipping 47,646 --
General and administrative 206,740 13,800
Depreciation 7,615 --
Pre-operating costs 96,079 113,006
--------------- ---------------
Operating loss (570,084) (126,806)
Other - income (expense):
Interest income 23,221 900
Other charges (71,189) --
--------------- ---------------
Net loss $ (618,052) $ (125,906)
--------------- ---------------
--------------- ---------------
Basic loss per common share $ (.05) $ (.01)
--------------- ---------------
--------------- ---------------
Weighted average shares outstanding 13,074,983 10,156,400
--------------- ---------------
--------------- ---------------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
ISA INTERNATIONALE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------
NUMBER OF PAID-IN ACCUMULATED
SHARES PAR VALUE SUBSCRIBED CAPITAL DEFICIT TOTAL
----------- ------------ ------------ ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, October 7, 1997 (inception) -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock in settlement of
accounts payable 5,048,000 50,480 -- -- -- 50,480
Issuance of common stock for services 4,986,000 49,860 -- -- -- 49,860
Common stock subscribed for services (790,000
shares) -- -- 7,900 -- -- 7,900
Donated services on October 16, 1997 -- -- -- 18,480 -- 18,480
Issuance of common stock for cash 612,000 6,120 -- 393,880 -- 400,000
Net loss -- -- -- -- (125,906) (125,906)
----------- ------------ ------------ ----------- ------------- ---------
BALANCE, December 31, 1997 10,646,000 106,460 7,900 412,360 (125,906) 400,814
Issuance of common stock 79,000 7,900 (7,900) -- -- --
Issuance of common stock and common stock
warrants for cash 336,600 3,366 -- 216,634 -- 220,000
Recapitalization of Company upon merger with
Internationale Shopping Alliance Inc.
(Note 3) 1,400,100 (116,409) -- 121,008 -- 4,599
Issuance of common stock and common stock
warrants for cash 898,935 90 -- 613,286 -- 613,376
Offering costs -- -- -- (8,015) -- (8,015)
Issuance of common stock and common stock
warrants for services 370,000 37 -- 96,463 -- 96,500
Redemption of common stock and common
stock warrants for cash (751,500) (75) -- (56,675) (3,250) (60,000)
Net loss -- -- -- -- (618,052) (618,052)
----------- ------------ ------------ ----------- ------------- ---------
BALANCE, December 31, 1998 13,690,135 $ 1,369 $ -- $ 1,395,061 $ (747,208) $ 649,222
----------- ------------ ------------ ----------- ------------- ---------
----------- ------------ ------------ ----------- ------------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
ISA INTERNATIONALE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 7, 1997
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1998 1997
--------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (618,052) $ (125,906)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Common stock issued in settlement of accounts
payable = 50,480
Common stock and warrants issued for services 96,500 49,860
Common stock subscribed for services = 7,900
Donated services by common stockholders = 18,480
Depreciation 7,615 =
Accounts receivable (8,373) =
Deposits (115,511) =
Accounts payable 38,232 250
Accrued liabilities 40,250 =
Deferred rent 9,529 =
------------- ------------
Net cash flows from operating activities (549,810) 1,064
------------- ------------
Cash flows from investing activities:
Property and equipment purchases (434,614) =
------------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants,
net of offering costs 825,361 400,000
Recapitalization of the Company upon merger with
Internationale Shopping Alliance, Inc. 4,599 =
Redemption of common stock (60,000) =
------------- ------------
Net cash flows from financing activities 769,960 400,000
------------- ------------
Net increase (decrease) in cash and cash
equivalent (214,464) 401,064
Cash and cash equivalents - beginning of period 401,064 =
------------- -----------
Cash and cash equivalents - end of period $ 186,600 $ 401,064
------------- ------------
------------- ------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
ISA INTERNATIONALE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
AND THE PERIOD FROM OCTOBER 7, 1997 (INCEPTION)
TO DECEMBER 31, 1997
1. GOING CONCERN
As shown in the accompanying consolidated financial statements, the Company
incurred a net loss of $618,052 during the year ended December 31, 1998, and
as of that date had an accumulated deficit of $747,208. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. Subsequent to December 31, 1998, the Company raised equity through
a private placement and management's plans include raising additional equity
and increasing revenues through marketing and distribution efforts. However,
there can be no assurance that the Company will raise additional funds to
meet its future financing requirements or that future operations will be
successful. These consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classifications of liabilities that might be
necessary in the event the Company cannot continue in existence.
2. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
ISA Internationale, Inc. (the Company) was incorporated on June 2, 1989,
under the laws of the state of Delaware and is a non-reporting
publicly-held corporation. The Company develops, produces and broadcasts
home shopping programming nationally and internationally via satellite,
cable, and the internet.
On May 8, 1998, Internationale Shopping Alliance Incorporated
(Internationale), a Minnesota corporation, was merged with the Company
(ISA), a Delaware corporation, pursuant to a merger agreement, dated
April 23, 1998. Upon consummation of the merger of Internationale with
ISA, Internationale became a wholly-owned subsidiary of
ISA (see Note 3).
In 1997, the Company was in the development stage and its efforts were
principally devoted to organizational activities, raising capital and
pre-operating activities. The Company commenced operations in November
1998.
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant intercompany
transactions and accounts have been eliminated in consolidation.
(Continued)
F-6
<PAGE>
2. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the 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 revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, cash in banks and money
market funds with maturities of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed
over the estimated useful lives of the assets using the straight-line
method. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized. The cost of maintenance and
repairs are expensed as incurred and significant renewals and
betterments are capitalized.
NET SALES
Sales include merchandise sales and are reduced by incentive discounts
and sales returns to arrive at net sales. Sales are recorded for credit
card sales upon transaction authorization, and for check sales upon
receipt of customer payment, which does not vary significantly from the
time goods are shipped. The Company's sales policy allows merchandise to
be returned at the customer's discretion, generally up to 30 days.
Allowances for returned merchandise and other adjustments are provided
based upon past experience.
INCOME TAXES
The Company follows FASB Statement No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets
and liabilities are computed for differences between the financial and
tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Items with differences between financial and
income tax bases include net operating loss carryforwards and the
treatment of start-up costs. Valuation allowances are established when
necessary to reduce deferred income tax assets to the amount expected to
be realized.
(Continued)
F-7
<PAGE>
2. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIC LOSS PER COMMON SHARE
Basic loss per common share is computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted and basic
loss per common share are the same amounts for each of the periods
presented. In loss periods, dilutive common equivalent shares are
excluded as the effect would be anti-dilutive.
ADVERTISING
Advertising costs are expensed as incurred. Advertising costs were
$3,980 in 1998 and $-0- in 1997.
3. RECAPITALIZATION
On May 8, 1998, Internationale Shopping Alliance, Inc. (Internationale) was
merged with ISA Internationale, Inc. (ISA), pursuant to a merger agreement
dated April 23, 1998. Upon consummation of the merger of Internationale with
ISA, Internationale became a wholly-owned subsidiary of ISA. ISA remains the
continuing legal entity and registrant for Securities and Exchange
Commission reporting purposes.
Under terms of the merger agreement, the stockholders of Internationale
exchanged all of the issued and outstanding shares and warrants for
11,772,600 shares of common stock of ISA, and 4,781,200 warrants to purchase
common stock at $1.00 per share for a period of five years. Immediately
after consummation of the agreement, the former stockholders of
Internationale owned 89% of the outstanding shares of ISA's common stock.
Accordingly, for financial statement purposes, the transaction has been
accounted for as if Internationale had acquired ISA. The consolidated
financial statements present operations of Internationale from inception and
include ISA's operations only from the date of acquisition.
For accounting and financial reporting purposes, the merger was treated as a
recapitalization of ISA. Since ISA had no business operations other than the
search for a suitable target business, ISA's assets were recorded in the
balance sheet at book value. At the time of the merger, ISA had $8,599 of
net assets, principally cash, which was recorded as equity. Additional
transaction costs totaling $4,000, represent legal fees related to the
merger. These charges constitute transaction fees and, accordingly, have
been recorded as a charge and an offsetting credit to additional paid-in
capital.
(Continued)
F-8
<PAGE>
4. CONCENTRATIONS
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents in bank accounts which, at times, may exceed federally insured
limits. The Company has not experienced any losses on these accounts.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------------------- ----------------
<S> <C> <C>
Broadcast equipment $ 322,304 $ -
Furniture and fixtures 39,125 -
Computer and telephone equipment 50,185 -
Leasehold improvements 23,000 -
--------------- ------------
$ 434,614 $ -
--------------- ------------
--------------- ------------
</TABLE>
Depreciation charged to operations was $7,615 in 1998 and $-0- in 1997.
6. INCOME TAXES
The tax effects of temporary differences that give rise to significant portions
of the deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------- ----------------
<S> <C> <C>
Deferred income tax assets:
Current:
Accrued liabilities $ 2,000 $ -
-------------- ------------
Non-current:
Net operating loss carryforward 261,000 5,000
Pre-operating costs recorded as an asset for
tax and expensed in the financial
statements 33,000 38,000
Deferred rent 4,000 -
Less valuation allowance (291,000) (43,000)
--------------- ------------
7,000 -
--------------- ------------
$ 9,000 $ -
--------------- ------------
--------------- ------------
</TABLE>
(Continued)
F-9
<PAGE>
6. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
-------------------- ----------------
<S> <C> <C>
Deferred income tax liabilities:
Current:
Prepaid rent deposits $ 6,000 $ -
Non-current:
Depreciation for tax in excess of financial
statements 3,000 -
-------------- ------------
$ 9,000 $ -
-------------- ------------
-------------- ------------
</TABLE>
As of December 31, 1998, the Company had approximately $671,000 of net operating
loss carryforwards for federal and state income tax purposes that are available
to offset future taxable income through the year 2013. Certain restrictions
caused by the change in ownership resulting from sales of stock may limit annual
utilization of the net loss carryforwards.
7. LEASES
The Company leases office and production facilities under an operating lease
agreement with an entity owned by a shareholder, which expires in September
2003, and calls for escalating rent payments from $6,303 to $11,435 per
month over the term of the agreement. The lease provides for a five-year
renewal term at the option of the Company, with rent increases of five
percent per year. Rent expense was $28,439 for the year ended December 31,
1998.
Total future minimum lease payments are as follows:
<TABLE>
<S> <C>
1999 $ 81,920
2000 106,686
2001 126,021
2002 132,325
2003 102,919
-----------
$ 549,871
-----------
-----------
</TABLE>
(Continued)
F-10
<PAGE>
8. EQUITY
PREFERRED STOCK
The preferred stock may be issued from time to time in one or more
series. Each series is to be distinctly designated. All shares of any
series of the preferred stock shall be alike in all rights, except for
different dates. Each series will identify the rights to preference in
liquidations, voting rights, dividend and other powers, qualifications,
or restrictions.
WARRANTS
Between October 1997 and June 1998, the Company issued warrants that are
exercisable over 5 years, to purchase 6,513,070 shares of $.0001 par
value common stock at $1.00 per share. These warrants were issued as
part of common stock transactions. In December 1998, 553,000 warrants
were canceled as part of a common stock redemption.
ADDITIONAL PAID-IN CAPITAL
During 1997, the Company received donated services from its
stockholders. Accordingly, these services have been recorded at fair
market value of $18,480 and additional paid-in capital has been
increased by a corresponding amount.
SHARES RESERVED FOR FUTURE ISSUANCE
At December 31, 1998, common stock was reserved for the following
purposes:
<TABLE>
<S> <C>
Exercise of stock warrants 5,960,070
-------------
-------------
</TABLE>
9. OTHER CHARGES
In 1998, the Company incurred other charges of $71,189, of which $62,500
represented common stock issued for services. These charges represent costs
associated with a withdrawn private placement offering in which no proceeds
were raised.
(Continued)
F-11
<PAGE>
10. SUBSEQUENT EVENTS
The Company entered into the following transactions subsequent to December
31, 1998.
EQUITY TRANSACTIONS
Subsequent to December 31, 1998, the Company agreed to change the price
warrant-holders could exercise warrants to purchase $.0001 par value
common stock, for a temporary period from $1.00 per share to $.50 per
share. In connection with this offer, 2,342,080 warrants to purchase
$.0001 par value common stock were exercised for $418,002 in cash and
$753,038 in gold bullion and coins.
Subsequent to December 31, 1998, the Company and three stockholders
agreed to redeem 1,650,000 shares of $.0001 par value common stock for
no consideration.
SUBSIDIARY
Subsequent to December 31, 1998, the Company incorporated a wholly-owned
subsidiary for the purpose of selling product through telemarketing and
for trading in gold bullion and coins.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of cash and cash equivalents approximates carrying
amounts as of December 31, 1998 and 1997.
F-12
<PAGE>
ISA INTERNATIONALE INC.
And Subsidiaries
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1999
----------------
<S> <C>
ASSETS
------
Current assets: $
Cash and cash equivalents 27,695
Accounts receivable 313,505
Inventory, precious metals(pledged) 339,640
Prepaid expense 3,969
-------
Total current assets 684,809
-------
Property and equipment 482.680
Less accumulated depreciation (46,872)
-------
Other assets: 435,808
-------
Deposits 17,008
Deferred income taxes 4,000
-------
Total assets $ 1,141,625
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities: $
Loan payable to precious metals supplier(secured) 285,408
Accounts payable 229,307
Accrued liabilities 42,994
Deferred income taxes 4,000
-------
Total current liabilities 561,709
-------
Deferred rent 9,529
-------
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized, none outstanding
Common stock, $.0001 par value, 30,000,000 shares authorized, ---
14,382,215 shares issued and outstanding 1,438
Additional paid-in capital 2,566,032
Accumulated deficit (1,997,083)
----------
Total stockholders' equity 570,387
----------
Total liabilities and stockholders' equity 1,141,625
---------
</TABLE>
See Notes to Unaudited Financial Statements
F-13
<PAGE>
ISA INTERNATIONALE INC.
And Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For Three Months Ended
----------------------
June 30, June 30,
1999 1998
---------- ---------
<S> <C> <C>
Net sales $1,140,210 $ -0-
Cost of goods sold 963,631 -0-
---------- ---------
Gross margin 176,579 -0-
Operating expenses:
Selling and marketing 46,899 -0-
Engineering and programming 339,694 -0-
Warehousing and shipping 54,870 -0-
General and administrative 353,899 150,229
Depreciation 20,611 -0-
---------- ---------
Operating loss (639,394) (150,229)
Other income(interest) 211 5,571
Net loss $ (639,183) $(144,658)
---------- ---------
---------- ---------
Basic loss per common share $ (.04) $ (.01)
------- ------
------- ------
Weighted average shares outstanding 14,823,115 13,721,150
---------- ----------
---------- ----------
<CAPTION>
For Six Months Ended
----------------------
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Net sales $1,251,465 $ -0-
Cost of goods sold 1,055,307 -0-
---------- ---------
Gross margin 196,158 -0-
Operating expenses:
Selling and marketing 105,051 -0-
Engineering and programming 641,287 -0-
Warehousing and shipping 85,680 -0-
General and administrative 575,715 118,968
Depreciation 39,237 -0-
---------- ---------
Operating loss (1,250,812) (118,968)
Other income - interest 937 12,296
---------- ---------
Net loss $(1,249,875) $(106,672)
---------- ---------
---------- ---------
Basic loss per common share $ (.08) $ (.01)
------- ------
------- ------
Weighted average shares outstanding 14,823,115 13,721,150
---------- ----------
---------- ----------
</TABLE>
See Notes to Unaudited Financial Statements
F-14
<PAGE>
ISA INTERNATIONALE INC.
And Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,249,875) $(232,462)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Stock issued for services 200,400
Accounts receivable increase (305,132) -0-
Inventory increase (339,640) -0-
Prepaid expense increase (3,969) -0-
Depreciation 39,237 -0-
Deposit decrease 98,503 -0-
Loan payable, supplier 285,408 -0-
Accounts payable increase 190,845 259
Accrued liabilities increase 2,744 -0-
---------- -------
Net cash flows from operating activities (1,281,879) (31,803)
---------- -------
Cash flows from investing activities:
Equipment acquisition and leasehold improvements (48,066) -0-
---------- -------
Cash flows from financing activities
Proceeds from issuance of common stock
incident to warrant conversions 1,171,040 -0-
Proceeds from issuance of common stock
less notes receivable due -0- 503,440
---------- -------
Net cash flows from financing activities 1,171,040 503,440
---------- -------
Net increase(decrease) in cash and cash equivalent (158,905) 471,637
Cash and cash equivalent, beginning of period 186,600 401,064
---------- -------
Cash and cash equivalent, end of period $ 27,695 $872,701
---------- --------
---------- --------
</TABLE>
See Notes to Unaudited Financial Statements
F-15
<PAGE>
ISA INTERNATIONALE INC.
And Subsiidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
For The Six Months Ended June 30, 1999
1. CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned two subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions contained in Regulation S-B. In
the opinion of management of the Company, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended June 30,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. The unaudited financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's audit report for the years ended December 31, 1998 and 1997.
2. INVENTORIES
Inventories are carried at the lower of cost or market and consist of precious
metals owned by the Company at June 30, 1999. These inventories were pledged as
collateral to a short term loan from the supplier. At August 31, 1999, the loan
had been paid in full.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 1999:
<TABLE>
<S> <C>
Broadcast equipment and uplink transmitters $ 331,670
Furniture and fixtures 56,673
Computer and telephony equipment 71,337
Leasehold improvements 23,000
----------
$ 482,680
</TABLE>
Depreciation charges to operations was $39,257 in 1999.
4. INCOME TAX
As of June 30, 1999, the Company had approximately $1,928,000 of net operating
loss carryforwards for federal and state income tax purposes that are available
to offset future taxable income through the year 2014. Certain restrictions
caused by the change in ownership resulting from sales of stock may limit annual
utilization of the net loss carryforwards.
5. LEASES
The Company and its subsidiaries lease office and production facilities under
operating lease agreements (i) in Knoxville, Tennessee with an entity owned by a
shareholder, which expires in September 2003, and calls for escalating rent
payments from $6,303 to $11,435 per month over the term of the lease, and (ii)
in Eagan, Minnesota under a lease which expires in April 2004, and calls for
payments from $6,180 per month over the term of the lease, subject to "BLS"
increases. Rent expense for the first six months of 1999 was $63,280
<TABLE>
<S> <C> <C>
Total future minimum lease payments 1999 $ 76,360
are as follows: 2000 252,846
2001 240,181
2002 206,483
2003 177,079
-------
$ 952,949
</TABLE>
F-16
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, this 15 day of September, 1999.
ISA INTERNATIONALE INC.
By
------------------------------
Gerald J. Durand, President
and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in their
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Gerald J. Durand
- ------------------------ President, CEO and Director September 15, 1999
Gerald J. Durand
/s/ Bernard L. Brodkorb
- ------------------------ Treasurer, Chief Financial Officer and Director September 15, 1999
Bernard L. Brodkorb
/s/ Ronald G. Wolfbauer
- ------------------------ Director September 15, 1999
Ronald G. Wolfbauer
</TABLE>
-21-
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO. DESCRIPTION
- ----------- -------- -----------
<S> <C> <C>
2(i) Articles of Incorporation and Amendments thereto of
registrant.
2(ii) Bylaws of registrant.
3 Common stock certificate of registrant.
5 - Not applicable.
6(i) Agreement and Plan of Business Combination dated
April 11, 1998 between the registrant (formerly
known as 1-800 Consumer International Inc.), a
Delaware corporation, and Internationale Shopping
Alliance, Inc., a Minnesota corporation (now a
wholly-owned subsidiary of registrant).
6(ii) Contract Agreement with Bee Sweet Enterprises
6(iii) Commercial lease between registrant and Claude Yow
7 - Not applicable
</TABLE>
-22-
<PAGE>
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
1-800-Consumer International, Inc., a corporation organized and
existing under and by virtue of General Corporation Law of the State of
Delaware.
DOES HEREBY CERTIFY THAT:
FIRST: That by unanimous written consent of the Board of Directors of
1-800-Consumer International, Inc. resolutions were duly adopted setting forth
proposed amendments of the Certificate of Incorporation of said corporation,
declaring said amendments to be advisable and recommending that said resolutions
be submitted to the stockholders of the corporation for consideration thereof.
The resolutions setting forth the proposed amendments are as follows:
RESOLVED, that the Certificate of Incorporation of said corporation be
amended by changing "Article 1. Name" so that, as amended, said Article shall be
and read as follows:
The name of the corporation (the "Corporation") shall be: ISA
INTERNATIONALE INC.
SECOND: That thereafter, the foregoing amendments were duly adopted,
authorized and consented to in accordance with Section 228 of the General
Corporation Law of Delaware by the written consent of shareholders holding
1,440,604 shares of the Corporation's Common Stock, or approximately 74.56% of
the shares which were issued and outstanding on the record date. The undersigned
does further certify that written notice of the foregoing amendment has been or
will be mailed to those stockholders of record of the Corporation who did not
sign the consent to the actions described above.
DATED the 24th day of April, 1998.
1-800-Consumer International, Inc.
By: /s/ Keith P. Rowland
-------------------------------------
Keith P. Rowland, President
<PAGE>
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
H.Z.T., Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
FIRST: That by unanimous written consent of the Board of Directors of
H.Z.T., Inc. resolutions were duly adopted setting forth proposed amendments of
the Certificate of Incorporation of said corporation, declaring said amendments
to be advisable and recommending that said resolutions be submitted to the
stockholders of the corporation for consideration thereof. The resolutions
setting forth the proposed amendments are as follows:
RESOLVED, that the Certificate of Incorporation of said corporation be
amended by changing "Article 1. Name" so that, as amended, said Article shall be
and read as follows:
The name of the corporation (the "Corporation") shall be:
1-800-Consumer International, Inc.
FURTHER RESOLVED, that the Certificate of Incorporation of said
corporation be amended by deleting the first seven lines of "Article IV.
Capitalization" and inserting the following so that the first seven lines of
said Article shall be and read as follows:
The Corporation shall have the authority to issue an aggregate of
35,000,000 shares, of which 5,000,000 shall be preferred stock,
$0.0001 par value (hereinafter the "Preferred Stock"), and 30,000,000
shares shall be common stock, par value $0.0001 (hereinafter the
"Common Stock"). The powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the shares of
stock of each class and series which the Corporation shall be
authorized to issue, is as follows:
[Continue with the balance of Article IV as set forth in the
Certificate of Incorporation]
SECOND: That thereafter, the foregoing amendments were duly adopted,
authorized and consented to in accordance with Section 228 of the General
Corporation Law of Delaware by the written consent of shareholders holding
8,803,802 shares of the Corporation's Common Stock, or approximately 69.55% of
the 12,658,900 shares which were issued and outstanding on the record date. The
undersigned does further certify that written notice of the foregoing amendment
has
<PAGE>
been or will be mailed to those stockholders of record of the Corporation who
did not sign the consent to the actions described above.
DATED the 9th day of April, 1997.
H.Z.T., Inc.
By: /s/ Hagop Tashjian
--------------------------------
Hagop Tashjian, President
STATE OF FLORIDA )
)ss.
COUNTY OF BROWARD )
On this 11th day of April, 1997, personally appeared before me Hagop
Tashjian, who before me did say that he is the President of H.Z.T., Inc., a
Delaware corporation, that he is the person who executed the foregoing Amendment
to the Certificate of Incorporation on behalf of said corporation by authority
of resolutions of a majority of its stockholders, and he duly acknowledged that
said corporation executed the same.
/s/ Anne M. Nornholm
-------------------------------
Notary Public
(SEAL)
<PAGE>
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
MEDICAL COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
MEDICAL COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended
by changing the Article thereof numbered "Article 1. Name" so that, as amended,
said Article shall be and read as follows:
The name of the corporation (the "Corporation") shall be H.Z.T., Inc.
- --------------------------------------------------------------------------------
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and held
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware at which meeting the necessary number of shares as required by
statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said President has caused this certificate to be signed by
Hagop Z. Tashjian, an Authorized Officer, this day of October, 1996.
BY: /s/ Hagop Z. Tashjian
----------------------------------
TITLE OF OFFICER: President
----------------------------------
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MEDICAL COMMUNICATIONS, INC.
ARTICLE I
NAME
The name of the corporation (the "Corporation") shall be:
Medical Communications, Inc.
ARTICLE II
DURATION
The Corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE III
PURPOSES
The purposes for which the Corporation is organized are to engage in
any and all lawful purposes, activities, and pursuits for which corporations may
be organized under the General Corporation Law of Delaware and to exercise all
powers allowed or permitted thereunder.
ARTICLE IV
CAPITALIZATION
The Corporation shall have authority to issue an aggregate of
35,000,000 shares, of which 5,000,000 shares shall be preferred stock, $0.01 par
value (hereinafter the "Preferred Stock"), and 30,000,000 shares shall be common
stock, par value $0.01 (hereinafter the "Common Stock"). The powers,
preferences, and rights, and the qualifications, limitations, or restrictions
thereof, of the shares of stock of each class and series which the Corporation
shall be authorized to issue, is as follows:
(a) PREFERRED STOCK. Shares of Preferred Stock may be issued from time
to time in one or more series as may from time to time be determined by the
board of directors. Each series shall be distinctly designated. All shares of
any one series of the Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends thereon, if any, shall be
cumulative, if made cumulative. The powers, preferences, participating,
optional, and other rights of each such series and qualifications, limitations,
or restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding. Except as hereinafter provided, the board of
directors of this Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any shares of each
particular series of Preferred Stock, the designation, powers, preferences, and
relative participating, optional, and other rights and the qualifications,
limitations, and restrictions thereof, if any, of such series, including,
without limiting the generality of the foregoing, the following:
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<PAGE>
(i) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute each series, which number may
be increased (except as otherwise fixed by the board of directors) or
decreased (but not below the number of shares thereof outstanding)
from time to time by action of the board of directors;
(ii) The rate and times at which and the terms and conditions on
which, dividends, if any, on the shares of the series shall be paid;
the extent of preferences or relation, if any, of such dividends to the
dividends payable on any other class or classes of stock of this
Corporation or on any series of Preferred Stock; any limitations,
restrictions, or conditions on the payment of such dividends; and
whether such dividends shall be cumulative or noncumulative;
(iii) The right, if any, of the holders of the shares of the same
series to convert the same into, or exchange the same for, any other
class or classes of stock of this Corporation and the terms and
conditions of such conversion or exchange;
(iv) Whether shares of the series shall be subject to redemption
and the redemption price or prices, including, without limitation, a
redemption price or prices payable in shares of any other class or
classes of stock of the Corporation, cash, or other property and the
time or times at which, and the terms and conditions on which, shares
of the series may be redeemed;
(v) The rights, if any, of the holders of shares of the series on
voluntary or involuntary liquidation, merger, consolidation,
distribution, or sale of assets, dissolution, or winding up of this
Corporation;
(vi) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series;
(vii) The voting powers, if any, of the holders of shares of the
series which may, without limiting the generality of the foregoing,
include (A) the right to more or less than one vote per share on any
or all matters voted on by the shareholders, and (B) the right to vote
as a series by itself or together with other series of Preferred Stock
or together with all series of Preferred Stock as a class, on such
matters, under such circumstances, and on such conditions as the board
of directors may fix, including, without limitation, the right, voting
as a series by itself or together with other series of Preferred Stock
or together with all series of Preferred Stock as a class, to elect
one or more directors of this Corporation in the event there shall
have been a default in the payment of dividends on any one or more
series of Preferred Stock or under such other circumstances and upon
such conditions as the board of directors may determine;
(viii) The restrictions, limitations, and conditions, if any,
upon issuance of indebtedness of the Corporation so long as any shares
of such series are outstanding; and
(ix) Any other preferences and relative, participating, optional,
or other special rights and qualifications, limitations, and
restrictions not inconsistent with law, the provisions of this
article, or any resolution of the board of directors of the
Corporation pursuant hereto.
-2-
<PAGE>
(b) COMMON STOCK. The Common Stock shall have the following powers,
preferences, rights, qualifications, limitations, and restrictions:
(i) After the requirements with respect to preferential dividends
of Preferred Stock, if any, shall have been met and after this
Corporation shall comply with all the requirements, if any, with
respect to the setting aside of funds as sinking funds or redemption
or purchase accounts and subject further to any other conditions which
may be required by the General Corporation Law of Delaware, then, but
not otherwise, the holders of Common Stock shall be entitled to
receive such dividends, if any, as may be declared from time to time
by the board of directors without distinction as to series;
(ii) After distribution in full of any preferential amount to be
distributed to the holders of Preferred Stock, if any, in the event of
a voluntary or involuntary liquidation, distribution or sale of
assets, dissolution, or winding up of this Corporation, the holders of
the Common Stock shall be entitled to receive all of the remaining
assets of the Corporation, tangible and intangible, of whatever kind
available for distribution to stockholders, ratably in proportion to
the number of shares of Common Stock held by each without distinction
as to series; and
(iii) Except as may otherwise be required by law or this
Certificate of Incorporation, in all matters as to which the vote or
consent of stockholders of the Corporation shall be required or be
taken, including, any vote to amend this Certificate of Incorporation,
to increase or decrease the par value of any class of stock, effect a
stock split or combination of shares, or alter or change the powers,
preferences, or special rights of any class or series of stock, the
holders of the Common Stock shall have one vote per share of Common
Stock on all such matters and shall not have the right to cumulate
their votes for any purpose.
(c) CONSIDERATION FOR SHARES. The board of directors of the Corporation
shall have authority to authorize the issuance, from time to time without any
vote or other action by the stockholders, of any or all shares of the
Corporation of any class at any time authorized, and any securities convertible
into or exchangeable for such shares, in each case to such persons and for such
consideration and on such terms as the board of directors from time to time in
its discretion lawfully may determine; PROVIDED, however, that the consideration
for the issuance of shares of stock of the Corporation having par value shall
not be less than such par value. Shares so issued, for which the full
consideration determined by the board of directors has been paid to the
Corporation, shall be fully paid stock, and the holders of such stock shall not
be liable for any further call or assessments thereon.
(d) NO PREEMPTIVE RIGHTS. Unless otherwise provided in the resolution
of the board of directors providing for the issue of any series of Preferred
Stock, no holder of shares of any class of the Corporation or of any security of
obligation convertible into, or of any warrant, option, or right to purchase,
subscribe for, or otherwise acquire, shares of any class of the Corporation,
whether now or hereafter authorized, shall, as such holder, have any preemptive
right whatsoever to purchase, subscribe for, or otherwise acquire shares of any
class of the Corporation, whether now or hereafter authorized.
-3-
<PAGE>
(e) UNCLAIMED PROPERTY. Anything herein contained to the contrary
notwithstanding, any and all right, title, interest, and claim in and to any
dividends declared or other distributions made by the Corporation, whether in
cash, stock, or otherwise, which are unclaimed by the stockholder entitled
thereto for a period of six years after the close of business on the payment
date, shall be and be deemed to be extinguished and abandoned; and such
unclaimed dividends or other distributions in the possession of the Corporation,
its transfer agents, or other agents or depositories shall at such time become
the absolute property of the Corporation, free and clear of any and all claims
of any person whatsoever.
(f) INCREASE OR DECREASE IN AUTHORIZED SHARES. Except as otherwise
provided in this article or resolutions to the board of directors providing for
the issue of any series of Preferred Stock, the number of authorized shares of
any class or classes of stock of the Corporation may be increased or decreased
(but not below the number of shares of such class or series then outstanding) by
the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote, voting as a single class.
ARTICLE V
MEETINGS OF STOCKHOLDERS
Subject to the rights of the holders of any series of Preferred Stock,
special meetings of stockholders of the Corporation may be called only by the
board of directors pursuant to a resolution duly adopted by a majority of the
total number of directors which the Corporation would have if there were no
vacancies. At any annual meeting or special meeting of stockholders of the
Corporation, only such business shall be conducted as shall have been brought
before such meeting in the manner provided by the bylaws of the Corporation.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify, in accordance with and to the full
extent now or hereafter permitted by law, 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,
by reason of the fact that he is or was a director or an officer of the
Corporation (and the Corporation, in the discretion of the board of directors,
may so indemnify a person by reason of the fact that he is or was an 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 for or on behalf of the Corporation)
against any liability or expense (including attorneys' fees), judgments, fines,
and amounts paid in settlement actually and reasonably incurred by such person
in respect thereof. Such indemnification is not exclusive of any other right to
indemnification provided by law or otherwise.
ARTICLE VII
BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed and
controlled by or under the direction of a board of directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by this
-4-
<PAGE>
Certificate of Incorporation directed or required to be exercised or done by the
stockholders of the Corporation.
(a) NUMBER. The number of directors of the Corporation shall not
be less than three nor more than nine, the exact number of directors to
be fixed from time to time only by the vote of a majority of the
entire board of directors. No decrease in the number of directors shall
shorten the term of any incumbent director.
Notwithstanding the provisions of the foregoing paragraph,
whenever the holders of any class or series of Preferred Stock shall have
the right, voting as a class or series or otherwise, to elect directors,
the then authorized number of directors of the Corporation shall be
increased by the number of the additional directors so to be elected, and
the holders of such Preferred Stock shall be entitled, as a class or
series or otherwise, to elect such additional directors. Any directors so
elected shall hold office until their rights to hold such office
terminate pursuant to the provisions of such Preferred Stock. The
provisions of this paragraph shall apply notwithstanding the maximum
number of directors hereinabove set forth.
(b) QUALIFICATION. The board of directors may, by the vote of a
majority of the entire board, prescribe qualifications of candidates for
the office of director of the Corporation, but no director then in office
shall be disqualified from office as a result of the adoption of such
qualification.
(c) TENURE. The directors shall be divided into three classes:
class A, class B, and class C. Such classes shall be as nearly equal in
number as possible. The term of office of the initial class A directors
shall expire at the annual meeting of the stockholders in 1990, the term
of office of the initial class B directors shall expire at the annual
meeting of the stockholders in 1991, and the term of office of the
initial class C directors shall expire at the annual meeting of
stockholders in 1992, or thereafter in each case when their respective
successors are elected and have qualified. At each annual election, the
directors chosen to succeed those whose terms then expire shall be
identified as being of the same class as the directors they succeed and
shall be elected for a term expiring at the third succeeding annual
meeting or thereafter when their respective successors in each case are
elected and have qualified. If the number of directors is changed, any
increase or decrease in directors shall be apportioned among the classes
so as to maintain all classes as nearly equal in number as possible and
any individual director elected to any class shall hold office for a term
which shall coincide with the term of such class.
(d) REMOVAL. At a meeting of stockholders called expressly for
that purpose, one or more members of the board (including the entire
board) may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
(e) VACANCIES. Vacancies and newly created directorships resulting
from any increase in the number of directors may be filled by a majority
of the directors then in office though less than a quorum, and each
director so chosen shall hold office until his successor is elected and
qualified or until his earlier resignation or removal. If there are no
directors in office, then an election of directors may be held in the
manner provided by law.
-5-
<PAGE>
(f) LIMITATION ON LIABILITY. A director of the Corporation shall
have no personal liability to the Corporation or its stockholders for
monetary damages or breach of fiduciary duty as a director, except (i)
for any breach of a director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
section 174 of the General Corporation Law of Delaware as it may from
time to time be amended or any successor provisions thereto, or (iv) for
any transaction from which a director derived an improper personal
benefit.
ARTICLE VIII
REGISTERED OFFICE AND REGISTERED AGENT
The name and address of the Corporation's registered agent in the state
of Delaware is The Corporation Trust Company, 1209 Orange Street, in the city of
Wilmington, county of New Castle, Delaware. Either the registered office or the
registered agent may be changed in the manner provided by law.
ARTICLE IX
AMENDMENT TO CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in any manner now or
hereafter permitted or prescribed by statute.
ARTICLE X
ADOPTION AND AMENDMENT OF BYLAWS
The initial bylaws of the Corporation shall be adopted by the board of
directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws
shall be vested in the board of directors, but the stockholders of the
Corporation may also alter, amend, or repeal the bylaws or adopt new bylaws. The
bylaws may contain any provisions for the regulation or management of the
affairs of the Corporation not inconsistent with the laws of the state of
Delaware now or hereafter existing.
ARTICLE XI
INCORPORATOR
The name and mailing address of the incorporator signing this certificate
of incorporation is as follows:
Dennis D. Postma
20355 Harrow Avenue North
Forest Lake, Minnesota 55025
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<PAGE>
The undersigned, being the sole incorporator herein before named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
state of Delaware, makes this certificate, hereby declaring and certifying that
this is his act and deed and that the facts herein stated are true, and
accordingly has hereunto set his hand this 30th day of May, 1989.
/s/ Dennis D. Postma
--------------------------
Dennis D. Postma
STATE OF MN. )
-----------------
:SS
COUNTY OF ANOKA )
----------------
I, a notary public, hereby certify that on the 30TH day of May, 1989,
personally appeared before me Dennis D. Postma, who being by me first duly
sworn, declared that he signed such instrument as his own act and deed and that
the facts stated therein are true.
WITNESS MY HAND AND OFFICIAL SEAL
[SEAL] /s/ [ILLEGIBLE]
----------------------------------
Notary Public
My Commission Expires: Residing in Anoka Co.
-------------------
7/26/89
- ----------------------
-7-
<PAGE>
BYLAWS
OF
ISA INTERNATIONALE INC.
ARTICLE I
OFFICES
Section 1.01 REGISTERED OFFICE. The registered office shall be in the
city of Wilmington, county of New Castle, state of Delaware.
Section 1.02 LOCATIONS OF OFFICES. The corporation may also have offices
at such other places both within and without the state of Delaware as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
STOCKHOLDERS
Section 2.01 ANNUAL MEETING. The annual meeting of the stockholders
shall be held within 180 days after the end of the corporation's fiscal year at
such time as is designated by the board of directors and as is provided for in
the notice of the meeting. If the election of directors shall not be held on the
day designated herein for the annual meeting of the stockholders, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the stockholders as soon thereafter as may be
convenient.
Section 2.02 SPECIAL MEETINGS. Special meetings of the stockholders may
be called at any time in the manner provided in the certificate of
incorporation. At any time special meeting of the stockholders, only such
business shall be conducted as shall have been stated in the notice of such
special meeting.
Section 2.03 PLACE OF MEETINGS. The board of directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or for any special meeting called by the board of
directors. A waiver of notice signed by all stockholders entitled to vote at a
meeting may designate any place, either within or without the state of
incorporation, as the place for the holding of such meeting. If no designation
is made, or if a special meeting be otherwise called, the place of meeting shall
be at the principal office of the corporation.
Section 2.04 NOTICE OF MEETINGS. The secretary or assistant secretary,
if any, shall cause notice of the time, place, and purpose or purposes of all
meetings, of the stockholders (whether annual or special), to be mailed at least
ten (10) but not more than sixty (60) days prior to the meeting, to each
stockholder of record entitled to vote.
Section 2.05 WAIVER OF NOTICE. Any stockholder may waive notice of any
meeting of stockholders (however called or noticed, whether or not called or
noticed, and whether before, during, or after the meeting), signing a written
waiver of notice or a consent to the holding of such meeting, or an approval of
he minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of notice regardless of whether waiver,
consent, or approval is signed or any objections are made, unless attendance is
solely for the purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. All such waivers, consents, or approvals shall be made a part of the
minutes of the meeting.
Section 2.06 FIXING RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to
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<PAGE>
corporate action in writing without a meeting, or stockholder entitled to
receive payment of any dividend or other distribution or allotment of any rights
or entitled to exercise any rights in respect to any change, conversion, or
exchange of stock, or for the purpose of any other lawful action, the board of
directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than sixty
(60) days and, in case of a meeting of stockholders, not less than ten (10) days
prior to the date on which the particular action requiring such determination of
stockholders is to be taken. If no record date is fixed for the determination of
stockholders entitled to notice of or to vote at a meeting, the day preceding
the date on which notice of the meeting is mailed shall be the record date. For
any other purpose, the record date shall be the close of business on the date on
which the resolution of the board of directors pertaining thereto is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof. Failure to comply with this section shall not
affect the validity of any action taken at a meeting of stockholders.
Section 2.07 VOTING LISTS. The officers of the corporation shall cause
to be prepared from the stock ledger at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The original stock ledger shall be the only evidence
as to who are the stockholders entitled to examine the stock ledger, the list
required by this section, or the books of the corporation, or to vote in person
or by proxy at any meeting of stockholders.
Section 2.08 QUORUM. Stock representing a majority of the voting power
of all outstanding stock of the corporation entitled to vote, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder or record entitled to vote at the meeting.
Section 2.09 VOTE REQUIRED. When a quorum is present at any meeting, the
vote of the holders of stock having a majority of the voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one on which by express provision of the
statutes of the state of Delaware or of the certificate of incorporation a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 2.10 VOTING OF STOCK. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, subject to the
modification of such voting rights of any class or classes of the corporation's
capital stock by the certificate of incorporation.
Section 2.11 PROXIES. At each meeting of the stockholders, each
stockholder entitled to vote shall be entitled to vote in person or by proxy;
PROVIDED, however, that the right to vote by proxy shall
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<PAGE>
exist only in case the instrument authorizing such proxy to act shall have been
executed in writing by the registered holder or holders of such stock, as the
case may be, as shown on the stock ledger of the corporation or by his attorney
thereunto duly authorized in writing. Such instrument authorizing a proxy to act
shall be delivered at the beginning of such meeting to the secretary of the
corporation or to such other officer or person who may, in the absence of the
secretary, be acting as secretary of the meeting. In the event that any such
instrument shall designate two or more persons to act as proxy, a majority of
such persons present at the meeting, or if only one be present, that one shall
(unless the instrument shall otherwise provide) have all of the powers conferred
by the instrument on all persons so designated. Persons holding stock in a
fiduciary capacity shall be entitled to vote the stock so held and the persons
whose shares are pledged shall be entitled to vote, unless the transfer by the
pledgor in the books and records of the corporation shall have expressly
empowered the pledgee to vote thereon, in which case the pledgee, or his proxy,
may represent such stock and vote thereon. No proxy shall be voted or acted on
after three years from its date, unless the proxy provides for a longer period.
Section 2.12 NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the procedures set forth in this section shall be eligible for
election as directors. Nominations of persons for election to the board of
directors of the corporation may be made at a meeting of stockholders at which
directors are to be elected only (i) by or at the direction of the board of
directors or (ii) by any stockholder of the corporation entitled to vote for the
election of directors at a meeting who complies with the notice procedures set
forth in this section. Such nominations, other than those made by or at the
direction of the board of directors, shall be made by timely notice in writing
to the secretary of the corporation. To be timely, a stockholder's notice must
be delivered or mailed to and received at the principal executive offices of the
corporation not less than 30 days prior to the date of the meeting; provided, in
the event that less than 40 days' notice of the date of the meeting is given or
made to stockholders, to be timely, a stockholder's notice must be so received
not later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed. Such stockholder's notice
shall set forth (i) as to each person whom such stockholder proposes to nominate
for election or reelection as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including each such
person's written consent to serving as a director if elected); and (ii) as to
the stockholder giving the notice (x) the name and address of such stockholder
as it appears on the corporation's books, and (y) the class and number of shares
of the corporation's capital stock that are beneficially owned by such
stockholder. At the request of the board of directors, any person nominated by
the board of directors for election as a director shall furnish to the secretary
of the corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the provisions of this section. The officer of the corporation or other
person presiding at the meeting shall, if the facts so warrant, determine and
declare to the meeting that a nomination was not made in accordance with such
provisions and, if such officer should so determine, such officer shall so
declare to the meeting, and the defective nomination shall be disregarded.
Section 2.13 INSPECTORS OF ELECTION. There shall be appointed two
inspectors of the vote. Such inspectors shall first take and subscribe an oath
or affirmation faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of their ability. Unless
appointed in advance of any such meeting by the board of directors, such
inspectors shall be appointed for the meeting by the presiding officer. No
director or candidate for the office of director shall be appointed as such
inspector. Such inspectors shall be responsible for tallying and certifying each
vote required to be tallied and certified by them as provided in the resolution
of the board of directors appointing them or in their appointment by the person
presiding at such meeting, as the case may be.
Section 2.14 ELECTION OF DIRECTORS. At all meetings of the stockholders
at which directors are to be elected, except as otherwise set forth in any
preferred stock designation (as defined in the
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certificate of incorporation) with respect to the right of the holders of any
class or series of preferred stock to elect additional directors under specified
circumstances, directors shall be elected by a plurality of the votes cast at
the meeting. The election need not be by ballot unless any stockholder so
demands before the voting begins. Except as otherwise provided by law, the
certificate of incorporation, any preferred stock designation, or these bylaws,
all matters other than the election of directors submitted to the stockholders
at any meeting shall be decided by a majority of the votes cast with respect
thereto.
Section 2.15 BUSINESS AT ANNUAL MEETING. At any annual meeting of the
stockholders, only such business shall be conducted as shall have been
brought before the meeting (i) by or at the direction of the board of
directors or (ii) by any stockholder of the corporation who is entitled to
vote with respect thereto and who complies with the notice procedures set
forth in this section. For business to be properly brought before an annual
meeting by a stockholder, the stockholder shall have given timely notice
thereof in writing to the secretary of the corporation. To be timely, a
stockholder's notice shall be delivered or mailed to and received at the
principal executive offices of the corporation not less than 30 days prior to
the date of the annual meeting; PROVIDED, in the event that less than 40
days' notice of the date of the meeting is given or made to stockholders, to
be timely, a stockholder's notice shall be so received not later than the
close of business on the 10th day following the day on which such notice of
the date of the annual meeting was mailed. A stockholder's notice to the
secretary shall set forth as to each matter such stockholder proposes to
bring before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation's capital
stock that are beneficially owned by such stockholder, and (iv) any material
interest of such stockholder in such business. Notwithstanding anything in
these bylaws to the contrary, no business shall be brought before or
conducted at an annual meeting except in accordance with the provisions of
this section. The officer of the corporation or other person presiding at the
annual meeting shall, if the facts so warrant, determine and declare to the
meeting that business was not properly brought before the meeting in
accordance with such provisions and, if such presiding officer should so
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with such provisions and, if such presiding
officer should so determine, such presiding officer shall so declare to the
meeting and any such business so determined to be not properly brought before
the meeting shall not be transacted.
Section 2.16 BUSINESS AT SPECIAL MEETING. At any special meeting of the
stockholders, only such business shall be conducted as shall have been stated in
the notice of such special meeting.
Section 2.17 WRITTEN CONSENT TO ACTION BY STOCKHOLDERS. Unless otherwise
provided in the certificate of incorporation, any action required to be taken at
any annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice, and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporation action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 2.18 PROCEDURE FOR MEETINGS. Meeting of the stockholders shall
be conducted pursuant to such reasonable rules of conduct and protocol as the
board of directors may prescribe or, if no such rules are prescribed, in
accordance with the most recent published edition of ROBERT'S RULES OF ORDER.
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ARTICLE III
DIRECTORS
Section 3.01 GENERAL POWERS. The business of the corporation shall be
managed under the direction of its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by statute or by the certificate of incorporation or by these bylaws directed or
required to be exercised or done by the stockholders.
Section 3.02 NUMBER, TERM, AND QUALIFICATIONS. The number of directors
which shall constitute the board, subject to the limitations set forth in the
certificate of incorporation, shall be determined by resolution of a majority of
the total number of directors if there were no vacancies (the "Whole Board") or
by the stockholders at the annual meeting of the stockholders or a special
meeting called for such purpose, except as provided in section 3.03 of this
article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be residents of the state of
incorporation or stockholders of the corporation.
Section 3.03 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office, though
less than a quorum of the Whole Board, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify. If there are no directors
in office, then an election of directors may be held in the manner provided by
statute.
Section 3.04 REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
following and at the same place as the annual meeting of stockholders. The board
of directors may provide by resolution the time and place, either within or
without the state of incorporation, for the holding of additional regular
meetings without other notice than such resolution.
Section 3.05 SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the president, vice president,
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 incorporation, as the place for holding any special meeting of the board of
directors called by them.
Section 3.06 MEETINGS BY TELEPHONE CONFERENCE CALL. Members of the board
of directors may participate in a meeting of the board of directors or a
committee of the board of directors by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
Section 3.07 NOTICE. Notice of any special meeting shall be given at
least 72 hours prior thereto by written notice delivered personally or sent by
facsimile transmission confirmed by registered mail or certified mail, postage
prepaid, or by overnight courier to each director. Each director shall register
his or her address and telephone number(s) with the secretary for purpose of
receiving notices. Any such notice shall be deemed to have been given as of the
date so personally delivered or sent by facsimile transmission or as of the day
following dispatch by overnight courier. Any director may waive notice of any
meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting solely for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. An entry of the service of notice
given in the manner and at the time provided for in this section may be made in
the minutes of the proceedings of the board of directors, and such entry, if
read and approved at a subsequent meeting of the board of directors, shall be
conclusive on the issue of notice.
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Section 3.08 QUORUM. A majority of the Whole Board shall constitute a
quorum for the transaction of business at any meeting of the board of directors,
PROVIDED, that the directors present at a meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors if any action taken is approved by a majority of the required quorum
for such meeting. If less than a majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time without further
notice.
Section 3.09 MANNER OF ACTING. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, and individual directors shall have no power as such.
Section 3.10 COMPENSATION. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 3.11 PRESUMPTION OF ASSENT. A director of the corporation 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, 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 corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 3.12 RESIGNATIONS. A director may resign at any time by
delivering a written resignation to either the president, a vice president, the
secretary, or assistant secretary, if any. The resignation shall become
effective on giving of such notice, unless such notice specifies a later time
for the effectiveness of such resignation.
Section 3.13 WRITTEN CONSENT TO ACTION BY DIRECTORS. Any action required
to be taken at a meeting of the directors of the corporation or any other action
which may be taken at a meeting of the directors or of a committee, 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, or all of the members of the committee,
as the case may be. Such consent shall have the same legal effect as a unanimous
vote of all the directors or members of he committee.
Section 3.14 REMOVAL. Subject to any limitations set forth in the
certificate of incorporation, at meeting expressly called for that purpose, one
or more directors may be removed by a vote of a majority of the shares of
outstanding stock of the corporation entitled to vote at an election of
directors.
ARTICLE IV
OFFICERS
Section 4.01 NUMBER. The officers of the corporation shall be a
president, one or more vice presidents, as shall be determined by resolution of
the board of directors, a secretary, a treasurer, and such other officers as may
be appointed by the board of directors. The board of directors may elect, but
shall not be required to elect, a chairman of the board, and the board of
directors may appoint a general manager.
Section 4.02 ELECTION, TERM OF OFFICE, AND QUALIFICATIONS. The officers
shall be chosen by the board of directors annually at its annual meeting
immediately following the annual meeting of
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stockholders. In the event of failure to choose officers at an annual meeting of
the board of directors, officers may be chosen at any regular or special meeting
of the board of directors. Each such officer (whether chosen at an annual
meeting of the board of directors to fill a vacancy or otherwise) shall hold his
office until the next ensuing annual meeting of the board of directors and until
his successor shall have been chosen and qualified, or until his death or until
his resignation or removal in the manner provided in these bylaws. Any one
person may hold any two or more of such offices, except that the president shall
not also be the secretary. No person holding two or more offices shall act in or
execute any instrument in the capacity of more than one office. The chairman of
the board, if any, shall be and remain director of the corporation during the
term of his office. No other officer need be a director.
Section 4.03 SUBORDINATE OFFICERS, ETC. The board of directors from time
to time may appoint such other officers or agents as it may deem advisable, each
of whom shall have such title, hold office for such period, have such authority,
and perform such duties as the board of directors from time to time may
determine. The board of directors from time to time may delegate to any officer
or agent the power to appoint any such subordinate officer or agents and to
prescribe their respective titles, terms of office, authorities, and duties.
Subordinate officers need not be stockholders or directors.
Section 4.04 RESIGNATIONS. Any officer may resign at any time by
delivering a written resignation to the board of directors, the president, or
the secretary. Unless otherwise specified therein, such resignation shall take
effect on delivery.
Section 4.05 REMOVAL. Any officer may be removed from office at any
special meeting of the board of directors called for that purpose or at a
regular meeting, by the vote of a majority of the directors, with or without
cause. Any officer or agent appointed in accordance with the provisions of
section 4.03 hereof may also be removed, either with or without cause, by any
officer on whom such power of removal shall have been conferred by the board of
directors.
Section 4.06 VACANCIES AND NEWLY CREATED OFFICES. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification,
or any other cause, or if anew office shall be created, then such vacancies or
newly created offices may be filled by the board of directors at any regular or
special meeting.
Section 4.07 THE CHAIRMAN OF THE BOARD. The chairman of the board, if
there be such an officer, shall have the following powers and duties:
(a) He shall preside at all stockholders' meetings;
(b) He shall preside at all meetings of the board of directors; and
(c) He shall be a member of the executive committee, if any.
Section 4.08 THE PRESIDENT. The president shall have the following
powers and duties:
(a) He shall be the chief executive officer of the corporation and,
subject to the direction of the board of directors, shall have general
charge of the business, affairs, and property of the corporation and
general supervision over its officers, employees, and agents;
(b) If no chairman of the board has been chosen or if such officer
is absent or disabled, he shall preside at meetings of the stockholders and
board of directors;
(c) He shall be a member of the executive committee, if any;
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(d) He shall be empowered to sign certificates representing stock
of the corporation, the issuance of which shall have been authorized by the
board of directors; and
(e) He shall have all power and perform all duties normally
incident to the office of a president of a corporation and shall exercise
such other powers and perform such other duties as from time to time may be
assigned to him by the board of directors.
Section 4.09 THE VICE PRESIDENTS. The board of directors may, from time
to time, designate and elect one or more vice presidents, one of whom may be
designated to serve as executive vice president. Each vice president shall have
such powers and perform such duties as from time to time may be assigned to him
by the board of directors or the president. At the request or in the absence or
disability of the president, the executive vice president or, in the absence or
disability of the executive vice president, the vice president designated by the
board of directors or (in the absence of such designation by the board of
directors) by the president, as senior vice president, may perform all the
duties of the president, and when so acting, shall have all the powers of, and
be subject to all the restrictions on, the president.
Section 4.10 THE SECRETARY. The secretary shall have the following
powers and duties:
(a) He shall keep or cause to be kept a record of all of the
proceedings of the meetings of the stockholders and of the board of
directors in books provided for that purpose;
(b) He shall cause all notices to be duly given in accordance
with the provisions of these bylaws and as required by statute;
(c) He shall be the custodian of the records and of the seal of
the corporation, and shall cause such seal (or a facsimile thereof) to
be affixed to all certificates representing stock of the corporation
prior to the issuance thereof and to all instruments, the execution of
which on behalf of the corporation under its seal shall have been duly
authorized in accordance with these bylaws, and when so affixed, he may
attest the same;
(d) He shall see that the books, reports, statements,
certificates, and other documents and records required by statute are
properly kept and filed;
(e) He shall have charge of the stock ledger and books of the
corporation and cause such books to be kept in such manner as to show at
any time the amount of the stock of the corporation of each class issued
and outstanding, the manner in which and the time when such stock was
paid for, the names alphabetically arranged and the addresses of the
holders of record thereof, the amount of stock held by each holder and
time when each became such holder of record; and he shall exhibit at all
reasonable times to any director, on application, the original or
duplicate stock ledger. He shall cause the stock ledger referred to in
section 6.04 hereof to be kept and exhibited at the principal office of
the corporation, or at such other place as the board of directors shall
determine, in the manner and for the purpose provided in such section;
(f) He shall be empowered to sign certificates representing
stock of the corporation, the issuance of which shall have been
authorized by the board of directors; and
(g) He shall perform in general all duties incident to the
office of secretary and such other duties as are given to him by these
bylaws or as from time to time may be assigned to him by the board of
directors or the president.
Section 4.11 THE TREASURER. The treasurer shall have the following
powers and duties:
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(a) He shall act as the chief financial officer of the corporation
and, as such, have charge and supervision over and be responsible for the
monies, securities, receipts, and disbursements of the corporation;
(b) He shall cause the monies and other valuable effects of the
corporation to be deposited in the name and to the credit of the
corporation in such banks or trust companies or with such banks or other
depositories as shall be selected in accordance with section 5.03 hereof;
(c) He shall cause the monies of the corporation to be disbursed by
checks or drafts (signed as provided in section 5.04 hereof) drawn on the
authorized depositories of the corporation, and cause to be taken and
preserved property vouchers for all monies disbursed;
(d) He shall act as the chief accounting officer of the corporation
and, as such, shall render to the board of directors or the president,
whenever requested, a statement of the financial condition of the
corporation and of all of his transactions as treasurer, and render a full
financial report at the annual meeting of the stockholders, if called on to
do so;
(e) He shall cause to be kept correct books of account of all the
business and transactions of the corporation and exhibit such books to any
directors on request during business hours;
(f) He shall be empowered from time to time to require from all
officers or agents of the corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the corporation; and
(g) He shall perform in general all duties incident to the office
of treasurer and such other duties as are given to him by these bylaws or
as from time to time may be assigned to him by the board of directors or
the president.
Section 4.12 SALARIES. The salaries or other compensation of the
officers of the corporation shall be fixed from time to time by the board of
directors, except that the board of directors may delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
section 4.03 hereof. No officer shall be prevented from receiving any such
salary or compensation by reason of the fact that he is also a director of the
corporation.
Section 4.13 SURETY BONDS. In case the board of directors shall so
require, any officer or agent of the corporation, shall execute to the
corporation a bond in such sums and with such surety or sureties as the board of
directors may direct, conditioned on the faithful performance of his duties to
the corporation, including responsibility for negligence and for the accounting
of all property, monies, or securities of the corporation which may come into
his hands.
ARTICLE V
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS
Section 5.01 EXECUTION OF INSTRUMENTS. Subject to any limitation
contained in the certificate of incorporation or these bylaws, the president or
any vice president or the general manager, if any, may, in the name and on
behalf of the corporation, execute and deliver any contract or other instrument
authorized in writing by the board of directors. The board of directors may,
subject to any limitation contained in the certificate of incorporation or in
these bylaws, authorize in writing any
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officer or agent to execute and deliver any contract or other instrument in the
name and on behalf of the corporation; any such authorization may be general or
confined to specific instances.
Section 5.02 LOANS. No loan or advance shall be contracted on behalf of
the corporation, no negotiable paper or other evidence of its obligation under
any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated, transferred, or conveyed
as security for the payment of any loan, advance, indebtedness, or liability of
the corporation, unless and except as authorized by the board of directors. Any
such authorization may be general or confined to specific instances.
Section 5.03 DEPOSITS. All monies of the corporation not otherwise
employed shall be deposited from time to time to its credit in such banks or
trust companies or with such bankers or other depositories as the board of
directors may select, or as from time to time may be selected by any officer or
agent authorized to do so by the board of directors.
Section 5.04 CHECKS, DRAFTS, ETC. All notes, drafts, acceptances,
checks, endorsements, and, subject to the provisions of these bylaws, evidences
of indebtedness of the corporation shall be signed by such officer or officers
or such agent or agents of the corporation and in such manner as the board of
directors from time to time may determine. Endorsements for deposit to the
credit of the corporation in any of its duly authorized depositories shall be in
such manner as the board of directors from time to time may determine.
Section 5.05 BONDS AND DEBENTURES. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed with
the seal of the corporation. The seal may be a facsimile, engraved or printed.
Where such bond or debenture is authenticated with the manual signature of an
authorized officer of the corporation or other trustee designated by the
indenture of trust or other agreement under which such security is issued, the
signature of any of the corporation's officers named thereon may be a facsimile.
In case any officer who signed, or whose facsimile signature has been used on
any such bond or debenture, shall cease to be an officer of the corporation for
any reason before the same has been delivered by the corporation, such bond or
debenture may nevertheless be adopted by the corporation and issued and
delivered as through the person who signed it or whose facsimile signature has
been used thereon had not ceased to be such officer.
Section 5.06 SALE, TRANSFER, ETC. OF SECURITIES. Sales, transfers,
endorsements, and assignments of stocks, bonds, and other securities owned by or
standing in the name of the corporation, and the execution and delivery on
behalf of the corporation of any and all instruments in writing incident to any
such sale, transfer, endorsement, or assignment, shall be effected by the
president, or by any vice president, together with the secretary, or by any
officer or agent thereunto authorized by the board of directors.
Section 5.07 PROXIES. Proxies to vote with respect to stock of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any vice
president and the secretary or assistant secretary of the corporation, or by any
officer or agent thereunder authorized by the board of directors.
ARTICLE VI
CAPITAL STOCK
Section 6.01 STOCK CERTIFICATES. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by the president or
any vice president and the secretary or assistant secretary, and sealed with the
seal (which may be a facsimile, engraved or printed) of the corporation,
certifying the number and kind, class or series of stock owned by him in the
corporation; PROVIDED,
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however, that where such a certificate is countersigned by (a) a transfer agent
or an assistant transfer agent, or (b) registered by a registrar, the signature
of any such president, vice president, secretary, or assistant secretary may be
a facsimile. In case any officer who shall have signed, or whose facsimile
signature or signatures shall have been used on any such certificate, shall
cease to be such officer of the corporation, for any reason, before the delivery
of such certificate by the corporation, such certificate may nevertheless be
adopted by the corporation and be issued and delivered as through the person who
signed it, or whose facsimile signature or signatures shall have been used
thereon, has not ceased to be such officer. Certificates representing stock of
the corporation shall be in such form as provided by the statutes of the state
of incorporation. There shall be entered on the stock books of the corporation
at the time of issuance of each share, the number of the certificate issued, the
name and address of the person owning the stock represented thereby, the number
and kind, class or series of such stock, and the date of issuance thereof. Every
certificate exchanged or returned to the corporation shall be marked "canceled"
with the date of cancellation.
Section 6.02 TRANSFER OF STOCK. Transfers of stock of the corporation
shall be made on the books of the corporation by the holder of record thereof,
or by his attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the secretary of the corporation or any of
its transfer agents, and on surrender of the certificate or certificates,
properly endorsed or accompanied by proper instruments of transfer, representing
such stock. Except as provided by law, the corporation and transfer agents and
registrars, if any, shall be entitled to treat the holder of record of any stock
as the absolute owner thereof for all purposes, and accordingly shall not be
bound to recognize any legal, equitable, or other claim to or interest in such
stock on the part of any other person whether or not it or they shall have
express or other notice thereof.
Section 6.03 REGULATIONS. Subject to the provisions of articles IV and V
of the certificate of incorporation, the board of directors may make such rules
and regulations as they may deem expedient concerning the issuance, transfer,
redemption, and registration of certificates for stock of the corporation.
Section 6.04 MAINTENANCE OF STOCK LEDGER AT PRINCIPAL PLACE OF BUSINESS.
A stock ledger (or ledgers where more than one kind, class, or series of stock
is outstanding) shall be kept at the principal place of business of the
corporation, or at such other place as the board of directors shall determine,
containing the names alphabetically arranged of original stockholders of the
corporation, their addresses, their interest, the amount paid on their shares,
and all transfers thereof and the number and class of stock held by each. Such
stock ledgers shall at all reasonable hours be subject to inspection by persons
entitled by law to inspect the same.
Section 6.05 TRANSFER AGENTS AND REGISTRARS. The board of directors may
appoint one or more transfer agents and one or more registrars with respect to
the certificates representing stock of the corporation, and may require all such
certificates to bear the signature of either or both. The board of directors may
from time to time define the respective duties of such transfer agents and
registrars. No certificate for stock shall be valid until countersigned by a
transfer agent, if at the date appearing thereon the corporation had a transfer
agent for such stock, and until registered by a registrar, if at such date the
corporation had a registrar for such stock.
Section 6.06 CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE
(a) The board of directors shall have power to close the stock
ledgers of the corporation for a period of not to exceed sixty (60) days
preceding the date of any meeting of stockholders, or the date for payment
of any dividend, or the date for the allotment of rights, or capital stock
shall go into effect, or a date in connection with obtaining the consent of
stockholders for any purpose.
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(b) In lieu of closing the stock ledgers as aforesaid, the board of
directors may fix in advance a date, not less than ten (10) days and not
exceeding sixty (60) days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection
with obtaining any such consent, as a record date for the determination of
the stockholders entitled to a notice of, and to vote at, any such meeting
and any adjournment thereof, or entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the rights in
respect of nay such change, conversion or exchange of capital stock, or to
give such consent.
(c) If the stock ledgers shall be closed or a record date set for
the purpose of determining stockholders entitled to notice of or to vote at
a meeting of stockholders, such books shall be closed for or such record
date shall be at least ten days immediately preceding such meeting.
Section 6.07 LOST OR DESTROYED CERTIFICATES. The corporation may issue a
new certificate for stock of the corporation in place of any certificate
theretofore issued by it, alleged to have been lost or destroyed, and the board
of directors may, in their discretion, require the owner of the lost or
destroyed certificate or his legal representatives, to give the corporation a
bond in such form and amount as the board of directors may direct, and with such
surety or sureties as may be satisfactory to the board, to indemnify the
corporation and its transfer agents and registrars, if any, against any claims
that may be made against it or any such transfer agent or registrar on account
of the issuance of such new certificate. A new certificate may be issued without
requiring any bond when, in he judgment of the board of directors, it is proper
to do so.
ARTICLE VII
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 7.01 EXECUTIVE COMMITTEE. The board of directors, by resolution
adopted by a majority of the Whole Board, may appoint from its membership an
executive committee of not less than three (3) members (whose members shall
include the chairman of the board, if any, and the president, one of whom shall
act as chairman of the executive committee, as the board may designate). The
board of directors shall have the power at any time to dissolve the executive
committee, to change the membership thereof, and to fill vacancies thereon.
When the board of directors is not in session, the executive committee
shall have and may exercise all of the powers vested in the board of directors,
except the following powers: to fill vacancies in the board of directors; to
appoint, change membership of, or fill vacancies in any committee of the board
of directors; to declare dividends or other distributions to stockholders; to
adopt, amend, or repeal the certificate of incorporation or these bylaws; to
approve any action that also requires stockholder approval; to amend or repeal
any resolution of the board of directors which by its express terms is not so
amendable or repealable; to fix the compensation of directors for serving on
the board of directors or on any committee; to adopt an agreement of merger or
consolidation under section 251 or 252 of the Delaware General Corporation Law;
to recommend to the stockholders the sale, lease, or exchange of all or
substantially all of the Corporation's property and assets; to recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution;
to recommend to stockholders an amendment of bylaws; to authorize the issuance
of stock (provided that the executive committee may determine the number of
shares of stock not in excess of the number of authorized to be issued by the
board of directors and the amount of consideration for which such shares shall
be issued); and to adopt a certificate of ownership and merger pursuant to
section 253 of the Delaware General Corporation Law.
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Section 7.02 OTHER COMMITTEES. The board of directors, by resolution
adopted by a majority of the Whole Board, may appoint such other committees as
it may, from time to time, deem proper and may determine the number of member,
frequency of meetings, and duties thereof.
Section 7.03 PROCEEDINGS. The executive committee, and such other
committees as may be designated hereunder by the board of directors may fix
their own presiding and recording officer or officers and may meet at such place
or places, at such time or times, and on such notice (or without notice) as it
shall determine from time to time. Each committee may make rules for the conduct
of its business as it shall from time to time deem necessary. It will keep a
record of its proceedings and shall report such proceedings to the board of
directors at the meeting of the board of directors next following.
Section 7.04 QUORUM AND MANNER OF ACTING. At all meetings of the
executive committee and of such other committees as may be designated hereunder
by the board of directors, the presence of members constituting a majority of
the total authorized membership of the committee shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the act
of a majority of the members present at any meeting at which a quorum is present
shall be the act of such committee. The members of the executive committee and
of such other committees as may be designated hereunder by the board of
directors shall act only as a committee, and the individual members thereof
shall have no powers as such.
Section 7.05 RESIGNATIONS. Any member of the executive committee and of
such other committees as may be designated hereunder by the board of directors
may resign at any time by delivering a written resignation to either the
president, the secretary, or assistant secretary, or to the presiding officer of
the committee of which he is a member, if any shall have been appointed and
shall be in office. Unless otherwise specified therein, such resignation shall
take effect on delivery.
Section 7.06 REMOVAL. The board of directors may, by resolutions adopted
by a majority of the Whole Board, at any time remove any member of the executive
committee or of any other committee designated by it hereunder either for or
without cause.
Section 7.07 VACANCIES. If any vacancy shall occur in the executive
committee or of any other committee designated by the board of directors
hereunder, by reason of disqualification, death, resignation, removal, or
otherwise, the remaining members shall, until the filling of such vacancy,
constitute the then total authorized membership of the committee and continue to
act, unless such committee consisted of more than one member prior to the
vacancy or vacancies and is left with only one member as a result thereof. Such
vacancy may be filled at any meeting of the Whole Board.
Section 7.08 COMPENSATION. The Whole Board may allow a fixed sum and
expenses of attendance to any member of the executive committee, or of any other
committee designated by it hereunder, who is not an active salaried employee of
the corporation for attendance at each meeting of the said committee.
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ARTICLE VIII
INSURANCE AND OFFICER
AND DIRECTOR CONTRACTS
Section 8.01 INDEMNIFICATION: THIRD PARTY ACTIONS. The corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, 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 or officer of the corporation (and, in the discretion of the board of
directors, may so indemnify a person by reason of the fact that he is or was an
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), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with any such
action, suit, or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, 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, he had
reasonable cause to believe that his conduct was unlawful.
Section 8.02 INDEMNIFICATION: CORPORATE ACTIONS. The corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit 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 or officer of the
corporation (and, in the discretion of the board of directors, may so indemnify
a person by reason of the fact that he is or was an 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, 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 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 as the court deems proper.
Section 8.03 DETERMINATION. To the extent that a director, officer,
employee, or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in sections
8.01 and 8.02 hereof, 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. Any other indemnification
under sections 8.01 or 8.02 hereof, unless ordered by a court, shall be made by
the corporation only in the specific case on a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he has met the applicable standard or conduct set forth in
sections 8.01 or 8.02 hereof. Such determination shall be made either (i) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit, or proceeding, (ii) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders by a majority vote of a quorum of stockholders at any meeting duly
called for such purpose.
Section 8.04 ADVANCES. Expenses incurred by an officer or director in
defending a civil or criminal action, suit, or proceeding may be paid by the
corporation in advance of the final disposition
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of such action, suit, or proceeding on 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 by this section. Such expenses incurred by other employees and agents
may be so paid on such terms and conditions, if any, as the board of directors
deems appropriate.
Section 8.05 SCOPE OF INDEMNIFICATION. The indemnification and
advancement of expenses provided by, or granted pursuant to, sections 8.01,
8.02, and 8.04:
(a) Shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of 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; and
(b) Shall, unless otherwise provided when authorized or ratified,
continue as to a person who ceased to be a director, officer, employee,
or agent of the corporation and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Section 8.06 INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, 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 any such liability.
Section 8.07 OFFICER AND DIRECTOR CONTRACTS. No contract or other
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any corporation, partnership,
association, or other organization in which one or more of the corporation's
directors or officers are directors, officers, or have a financial interest, is
either void or voidable solely on the basis of such relationship or solely
because any such director or officer is present at or participates in the
meeting of the board of directors or a committee thereof which authorizes the
contract or transaction, or solely because the vote or votes of each director or
officer are counted for such purpose, if:
(a) The material facts of the relationship or interest are
disclosed or known to the board of directors or committee and the board
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even
though the disinterested directors be less than a quorum;
(b) The material facts of the relationship or interest is
disclosed or known to the stockholders and they approve or ratify the
contract or transaction in good faith by a majority vote of the shares
voted at a meeting of stockholders called for such purpose or written
consent of stockholders holding a majority of the shares entitled to vote
(the votes of the common or interested directors or officers shall be
counted in any such vote of stockholders); or
(c) The contract or transaction is fair as to the corporation at
the time it is authorized, approved, or ratified by the board of
directors, a committee thereof, or the stockholders.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Whole Board.
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ARTICLE X
DIVIDENDS
The board of directors may from time to time declare, and the
corporation may pay, dividends on its outstanding stock in the manner and on the
terms and conditions provided by the certificate of incorporation and by laws.
ARTICLE XI
AMENDMENTS
All bylaws of the corporation, whether adopted by the board of directors
or the stockholders, shall be subject to amendment, alteration, or repeal, and
new bylaws may be made by the board of directors, but the stockholders may also
amend or repeal the bylaws or adopt new bylaws.
CERTIFICATE OF SECRETARY
The undersigned does hereby certify that he is the secretary of ISA
Internationale Inc., a Delaware corporation (formerly 1-800-Consumer
International, Inc., H.Z.T., Inc., and Medical Communications, Inc.), that the
foregoing Bylaws of said corporation were duly and regularly adopted as such by
the duly elected Board of Directors of said corporation, and that the foregoing
Bylaws are now in full force and effect and supersede and replace any and all
prior Bylaws of said corporation.
DATED this 11th day of November, 1998
/s/ Robert O. Knutson
----------------------------
Robert 0. Knutson, Secretary
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NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER SHARES
** **
ISA INTERNATIONALE INC.
AUTHORIZED STOCK: 30,000,000 COMMON SHARES
PAR VALUE $.0001 FULLY PAID AND NON-ASSESSABLE
CUSIP NO. 450083 10 0
This Certifies that
is the owner of
Shares of ISA INTERNATIONALE INC. Common Stock
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED
FIDELITY TRANSFER COMPANY (SALT LAKE CITY, UTAH)
By /s/ Illegible
TRANSFER AGENT AND REGISTRAR - AUTHORIZED SIGNATURE
[SEAL]
/s/ Robert O. Knutson /s/ Gerald J. Durand
SECRETARY PRESIDENT
<PAGE>
AGREEMENT AND PLAN OF BUSINESS COMBINATION
THIS AGREEMENT, made and entered into this 11 day of April, 1998, by and
between 1-800-CONSUMER INTERNATIONAL, INC., a Delaware corporation ("1-800"),
and INTERNATIONALE SHOPPING ALLIANCE, INC., a Minnesota corporation ("ISA");
WITNESSETH, whereas 1-800 is an inactive public corporation which has
recently reorganized and discontinued its former operational business, and for
some time it has been evaluating various active businesses for acquisition by
1-800; and further whereas ISA is a development stage corporation which is in
the process of becoming engaged in the business of development and marketing a
diversified multi-media shopping business employing electronic interactive home
shopping through a television home shopping network as well as telemarketing and
internet shopping channels for general consumers nationally and even the
worldwide retail marketplace;
FURTHER WHEREAS the parties hereto now mutually desire to enter into a
business combination pursuant to the terms of this Agreement which provide for a
stock exchange merger whereby 1-800 common stock will be exchanged for all of
the outstanding common stock of ISA on the terms and conditions contained
herein, after which ISA shall become a wholly-owned subsidiary of 1-800 under
its new name - "ISA Internationale Inc."
NOW THEREFORE, for valuable consideration and upon the mutual
representations, warranties, covenants, conditions and understandings contained
herein, the parties hereto agree as follows:
1. PLAN OF BUSINESS COMBINATION - It is the agreement and intention of
both parties hereto that all of the outstanding common capital stock of ISA
shall be transferred and exchanged hereunder solely for voting common stock of
1-800, and it is also the intention and understanding of both parties hereto
that this transaction shall qualify as a tax-free reorganization under Section
368(a)(1)(B) of the Internal Revenue Code of 1954, as amended, and any related
sections thereunder.
2. RESTRICTED SECURITIES - All common shares of 1-800 issued incident to
this Agreement shall be "restricted securities" as that term is defined in
federal and relevant state securities laws and regulations, basically meaning
that such shares will not be registered under either federal or any state
securities laws, and will be taken by the shareholders of ISA for long-term
investment in the combined business of the parties hereto, and not with a view
toward further transfer, resale or other disposition thereof; and accordingly
any future transfer or disposition of such shares must either (i) be registered
under relevant federal and state securities laws, or (ii) satisfy an appropriate
exemption from such registration such as Rule 144 of the Securities Act of 1933.
Any share certificates issued by 1-800 to consummate this business combination
will bear a standard restrictive legend as appropriate to evidence such
investment intent of the current shareholders of ISA.
3. EXCHANGE OF SECURITIES - Both parties hereto agree that all of the
outstanding common stock of ISA shall be exchanged for common stock of 1-800
on the basis of one share of 1-800 common stock for each share of outstanding
ISA common stock; provided, however, that (i) 1-800 shall not be required to
issue any more than 17,100,000 common shares of 1-800 incident to this stock
exchange, and (ii) this one-for-one exchange ratio is based on the common
shares of 1-800 after it completes its pending 1-for-2 reverse stock split.
Upon completion of this stock exchange, ISA shall become a wholly-owned
subsidiary of 1-800.
<PAGE>
4. DELIVERY OF SECURITIES - On the Closing Date of this business
combination, ISA shall deliver to 1-800 certificates for all outstanding common
capital stock of ISA duly endorsed for transfer to 1-800; and simultaneously
thereto 1-800 shall submit an appropriate instruction letter to its independent
transfer agent which instructs such independent transfer agent to issue fully
paid and nonassessable restricted common stock certificates to all current
shareholders of ISA as necessary to effect the complete stock exchange required
by this business combination.
5. CLOSING DATE - The Closing Date of this business combination shall be
within five (5) days after this Agreement has been approved by the shareholders
and/or directors of the parties hereto as required by the respective corporation
laws of their states of incorporation and their respective bylaws.
6. SUBMISSION OF AGREEMENT TO SHAREHOLDERS AND DIRECTORS - Approval of
this Agreement shall be obtained from the Boards of Directors of each
constituent corporation hereto as required by their respective bylaws either by
Written Action or duly held directors' meetings, which respective Board
resolutions shall require this Agreement to be submitted to their respective
shareholders (either by Written Action or a duly held shareholders' meeting)
for shareholder approval of each party hereto pursuant to Delaware or Minnesota
corporate law, as the case may be, and the provisions of the respective Bylaws
of each party hereto. Accordingly, the respective and appropriate officers of
each corporation hereto shall prepare the necessary documents, resolutions and
Notices to Shareholders required to effectuate this business combination
promptly, with the intention of both parties hereto being that this business
combination snail be consummated as soon as possible.
7. MANAGEMENT OF 1-800 AFTER CLOSING - A new Board of Directors shall
replace the current Board of Directors of 1-800 effective upon the closing of
this Agreement with the number and members of such new Board of Directors being
those nominees selected by ISA, provided that one of the current members of the
1-800 Board of Directors shall remain on the post-closing Board of Directors.
Such new Board of Directors also shall immediately elect the executive officers
of the combined company to serve after the closing of this Agreement.
8. CONDUCT OF BUSINESS - Between the date of this Agreement and the
Closing Date, ISA shall conduct its business in a normal and customary manner in
accordance with its existing preoperating policies and practices and shall (i)
preserve its business organization and business plan intact, (ii) not sell any
assets other than in accordance with its current business plan or in the
ordinary course of business, (iii) not incur any liabilities or obligations
other than in the ordinary course of its preoperating business, (iv) not issue
any shares of capital stock which would cause ISA to have outstanding capital
stock exceeding 17,100,000 shares, and (v) preserve all financing relationships
with which its is engaged in obtaining working capital for future business
operations.
Between the date of this Agreement and the Closing Date, 1-800 shall
remain inactive regarding any business transactions and shall (i) preserve it
business organization and corporate structure intact, (ii) not sell or encumber
any assets without the written consent of ISA, (iii) not incur any further
liabilities or obligations, except for expenses incident to this business
combination, (iv) preserve any goodwill with its shareholders and associates,
and (v) not issue any shares of capital stock which would cause 1-800 to have
outstanding capital stock exceeding 1,400,000 shares after completing its
pending 1-for-2 reverse stock split
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9. CONSUMMATION OF TRANSACTION - Each of 1-800 and ISA and their
respective executive officers shall use theiR best efforts to cause all
conditions precedent to their respective obligations under this Agreement to
close this business combination, or any transactions contemplated hereby to be
satisfied prior to closing, to be completed or satisfied as promptly as
possible, including but not limited to obtaining all required consents, waivers,
amendments, modifications, approvals, authorizations and meetings.
10. CONDITIONS PRECEDENT - The following shall be completed prior to
consummating this business combination:
a) 1-800 shall have changed its name to ISA Internationale Inc.
b) 1-800 shall have completed its 1-for-2 reverse stock split.
c) 1-800 shall have obtained a new CUSIP number for its common stock
certificates and shall have notified the NASD Bulletin Board of
the new name and the reverse stock split as required by their rules.
d) Both 1-800 and ISA shall have commenced their respective audits for
the 1997 yearend period in order to position the combined
company to make a filing for a Form 10 SEC registration as soon
as possible.
11. DUE DILIGENCE INVESTIGATIONS - Between the date of this Agreement and
the Closing Date, the parties hereto and their respective representatives may
make such investigations of each other and their respective businesses and
records, affairs, financial positions and assets and liabilities as each of the
parties deems necessary or advisable in furtherance of this Agreement and its
terms, including having access to the premises and books of each other at all
reasonable times; and the executive officers of each corporation hereto shall
furnish to each other whatever financial and operational data and information
with respect to each other as is reasonably requested by the other party.
Neither 1-800 or ISA or any of their management or other representatives
shall disclose any private or confidential information on the other party which
was obtained or discovered in connection with their respective due diligence
review and investigation of each other incident hereto. In the event this
business combination does not take place as contemplated for any reason
whatsoever, 1-800 and ISA shall then return to each other all documents, papers
and any other written and graphic materials obtained by them during the due
diligence reviews and investigations carried on pursuant hereto.
12. REPRESENTATIONS AND WARRANTIES OF PARTIES - The parties hereto
jointly and severally represent and warrant to each other the following:
a) All respective outstanding capital stock of each corporation has been
legally and validly issued and is fully paid and nonassessable, and none of such
shares of either corporation have been issued in violation of any preemptive or
similar rights, or in violation of any relevant federal or state securities law.
b) None of the common shares of either corporation is subject to any
voting trust or other such restrictive agreement which would restrict their
transfer.
c) There are no options or warrants outstanding in either corporation,
and none are contemplated, other than those which have been already disclosed
prior to entering into this Agreement.
d) Neither corporation hereto owns, directly or indirectly, any shares of
capital stock or other equity interest of any other corporation or
unincorporated business entity; nor does either corporation hereto have any
obligations, direct or indirect, to purchase or subscribe for any such equity
interest in a third party; nor does either corporation hereto have any
obligation to advance or loan money to any third party corporation, associate,
affiliate, individual or unincorporated entity.
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e) Each corporate party hereto is duly organized, validly existing and in
good standing in its state of incorporation, and each has full corporate power
and authority to own and operate their properties and assets and carry on any
business presently and formerly conducted by each of them.
f) This Agreement is a valid and binding agreement of each party hereto,
and compliance with the terms and conditions of this Agreement by each party
hereto will not result in (i) a breach or default under the Articles of
Incorporation or Bylaws of either party, (ii) a breach or violation under any
lien, pledge, security interest or other encumbrance on assets to which either
party is subject, (iii) a breach or default of any term or provision of any
agreement, lease, contract, note, mortgage or other obligation of either
corporation, or of any law, rule, ordinance or regulation, or governmental
judgment or decree or license to which either party is subject, unless such
breach is of a technical or minimal nature so as to not have a material adverse
effect on the financial condition, properties, business or results of operations
of either corporation hereto.
g) Neither corporation hereto is subject to any pending litigation or
governmental proceedings not reflected in their financial statements or
otherwise disclosed to the other party incident to negotiating this agreement;
and no litigation, claims, assessments or proceedings have been threatened
against either party unless disclosed to the other party prior to entering into
this Agreement.
h) The officers of each corporation executing this Agreement are duly
authorized to execute this Agreement on behalf of their respective corporations.
i) All financial statements which have been submitted to either party by
the other party incident to this business combination agreement and any
negotiations in respect thereto, and any financial statements to be submitted to
perform future due diligence by either party, have been, or will be, complete
and accurate for the dates and periods indicated thereon and fairly present the
financial condition and operations for the periods covered; and there are no
material liabilities, either fixed or contingent, not reflected in such
financial statements.
j) There have been no material changes in the financial position of
either corporate party hereto since the time of the most current financial
statements submitted to each other, other than changes in the ordinary course of
business transactions.
k) Neither party hereto has any material governmental taxes or
assessments due incident to its properties or business operations other than
what has already been disclosed to the other party on financial statements
already provided to the other party. Each party hereto has paid any and all
income or other taxes due in respect to its business and properties, and neither
party is in material default in filing any tax returns, forms or reports which
are required to have been filed prior to the date of this Agreement.
l) Each corporation has good and marketable title to any assets owned by
it, free and clear of all mortgages, liens or encumbrances except for any
reflected in the financial statements of either party hereto.
m) All corporation record books, financial records, minute books and
other corporate documents or financial statements of each party hereto shall be
made available to the other party prior to the closing of this business
combination.
n) Each party hereto has complied with all state and federal laws and
regulations regarding their respective incorporations and past issuances and/or
sales of securities, and no contingent liability exists against either corporate
party hereto regarding such incorporations or issuances of securities.
o) Neither corporate party hereto has any material outstanding debt other
than what has been disclosed to the other party in financial statements or other
written disclosure provided prior to the execution of this Agreement.
p) As of the date hereof, and as of the Closing Date, each corporate
party hereto will have, to the best of their respective knowledge and belief,
disclose to each other all events, conditions and facts materially affecting the
business
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and prospects of each corppration hereto; and neither party has now, and will
not at the Closing Date, have withheld knowledge of any such events, conditions
and facts which it knows, or has reasonable grounds to know, may materially
affect the business, worth or prospects of such party.
q) The record of all issuances and transfers of common stock of 1-800
have been maintained by its independent transfer agent in good and current order
and accurately reflects the record ownership of all issued and outstanding
common stock of 1-800. In addition, prior to closing of this Agreement, ISA will
sumbit a record of all stock ownership of ISA common stock which will likewise
reflect the record ownership of all issued and outstanding common stock of ISA
in good, current, and accurate order.
r) 1-800 is in good standing with the NASD Bulletin Board and its stock
is available for quoting by market makers who desire to enter such quotation
system and conduct market-making transactions in 1-800 common stock.
13. MUTUAL COVENANTS - 1-800 and ISA both hereby covenant, warrant and
agree that from the date hereof to the Closing Date of this Agreement, unless
express written permission is obtained from the other party, each party shall:
(i) conduct their respective business and operations pursuant to their
respective business plans and not outside the normal and ordinary course of
business;
(ii) not make any material increase in debt or encumbrances against any
assets or properties owned by either party, and shall not transfer or sell any
of such assets or properties;
(iii) not make any termination, change or violation of any lease, contract,
license or other commitment having a material adverse effect on the business or
assets of either party;
(iv) neither party shall declare any cash dividend or stock dividend;
neither shall either party make any distribution to shareholders of any kind by
way of liquidation dividend, partial distribution, redemption or otherwise;
(v) pay no bonuses or salary increases or extraordinary compensation to
officers or directors or enter into employment contracts unless consented to by
the other party in writing;
(vi) not make any loan, advance or material transaction with any officer,
director, affiliate or associate without the express written consent of the
other party;
(vii) make no purchase of real property or material personal property other
than in the ordinary course of business or with the written consent of the other
party;
(viii) not amend any bylaws, articles of incorporation or make any material
changes in accounting or financial practices other than contemplated by the
terms of this Agreement;
(ix) not borrow any money unless consented to in writing by the other
party;
(x) not enter into any other business combination or letter of intent
thereto for a merger or similar arrangement with a third party, or offer assets
or capital stock to a third party in a business combination, unless this
Agreement has been terminated in accordance with its terms;
(xi) Each party hereto warrants and represents hereby that any information
or data supplied to the other party from the date hereof for the purpose of
furthering or consummating this business combination, shall not contain any
statement which, at the time and in the light of the circumstances under which
it is offered or made, is false or misleading with respect to any material fact.
14. SURVIVAL AND ACCURACY OF REPRESENTATIONS AND WARRANTIES - Prior to
the Closing Date of this Agreement, neither party hereto shall enter into any
transaction or take any action, and each party hereto shall use its best efforts
to
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<PAGE>
prevent the occurrence of any event, which would result in any of the
representations, warranties or covenants contained herein (or in any agreement,
document, or instrument delivered pursuant hereto) not to be true and correct,
or not to be performed as contemplated, at and as of the time immediately after
the occurrence of such transaction or event.
All representations, covenants and warranties contained herein shall
survive the Closing Date of this Agreement and the consummation of the
transactions hereby for two years from the date hereof; provided, however, that
the parties hereto agree that no officer, shareholder, or director of either
party hereto shall be personally liable for any damages, liabilities or expenses
resulting from the inaccuracy or incompleteness of any representation or
warranty contained herein which is made in good faith.
15. CLOSING CONDITIONS - Unless waived in writing, all obligations of the
parties hereto under this Agreement are subject to fulfillment of the following
conditions prior to or as of the Closing Date:
i) The representations and warranties herein and in any documents or
certificates delivered incident hereto shall be true and correct in all material
respects at and as of the Closing Date as though such warranties and
representations were made at and as of such time;
ii) all conditions precedent to the consummation of this Agreement shall
be satisfied or waived by the other party;
iii) Both parties shall have complied with and performed all material terms
of this Agreement necessary to complete this business combination;
iv) This Agreement shall have been approved by the directors/shareholders
of the parties hereto as required by their respective corporate laws;
v) The common shares being issued by 1-800 in this transaction shall be
issued pursuant to all corporate action legally taken for their issuance, and
shall be fully paid and nonassessable and issued in whatever certificate amounts
are required to exchange for all outstanding common stock of ISA, and such
certificates shall be in proper form and amount and carry the standard
restrictive legend to satisfy the requirements of securities laws regarding
their exemption from registration;
vi) As of the Closing Date, neither party shall have any outstanding
securities other than one class of common shares;
vii) Each party hereto shall have completed its due diligence review of the
business and financial records of the other party and shall be satisfied
therewith;
viii) There shall be no pending action or proceeding seeking to enjoin or
impair the consummation of this business combination; and
ix) There shall have been no material adverse change in the business or
financial condition of either corporate party hereto; and
x) No material claim, suit action or governmental proceeding shall be
pending or threatened against either corporate party hereto, which if adversely
determined would prevent or materially hinder the consummation of this business
combination, or result in the payment of substantial damages as a result
thereof.
16. EXPENSES OF PARTIES AND NO FINDER - Each party hereto shall pay its
legal, accounting and any other incidental expenses incident to the
negotiation, entering into, and consummation of this business combination; and
each party hereto also shall pay its respective audit expenses to complete their
respective audits for the planned Form 10 registration with the SEC. Each party
hereto also hereby represents that no finder or similar person is involved in
this business combination, and each party thereby owes no fees to any "finding"
person as to the business combination.
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<PAGE>
17. CLOSING - Upon the Closing of this Agreement, the following
transactions shall occur or have occurred, all of which shall be deemed to be
simultaneous:
a) ISA and its shareholders shall have delivered to 1-800 all stock
certificates representing outstanding common stock of ISA, duly endorsed
thereon for exchange pursuant to this Agreement; and
b) 1-800 shall have delivered appropriate instructions to its
independent transfer agent to cause the issuance promptly of certificates for
all shareholders of ISA exchanging their ISA common stock hereby, in the same
amount as currently held pursuant to the one-for-one share exchange under this
Agreement; and
c) If required by either party hereto, each party shall deliver to
the requesting party a Certificate of President and Certificate of Incumbency
(which may be on the same document) certifying that all representations and
warranties made in this Agreement by such party are true and correct as of the
Closing Date, and certifying and including the current signatures of all
officers and directors of the party.
d) Each corporate party hereto shall deliver at Closing Date
certified copies of resolutions of the respective Boards of Directors and
Shareholders of each party adopting and approving this Agreement and business
combination; and
e) Each party hereto also shall furnish the other party with
whatever instruments and documents as are required to be delivered pursuant to
this Agreement, or which may be reasonably requested in furtherance of the
intent and provisions hereof.
18. TERMINATION - This Agreement and the transactions contemplated hereby
may be terminated at any time prior to Closing Date:
i) by written mutual consent of both parties hereto; or
ii) by either party hereto, if there has been a material
misrepresentation or breach of the warranties herein of a material
nature by the other party; provided, however, that if such breach
can and is cured by the breaching party within 15 days of
notification in writing to the breaching party by the other party,
it shall not constitute grounds for termination; or
iii) by either party hereto, if a material term of the closing conditions
or conditions precedent are not satisfied, unless the party not
required to perform such condition has waived its performance in
writing; or
iv) by either party hereto if the Closing has not taken place by May 15,
1998.
19. GENERAL -
I. NOTICES - Any and all notices required hereunder shall be in writing
and hand-delivered or sent by certified mail, directed as follows:
If to 1-800: Dennis Postma If to ISA: Gerald Durand
20355 Harrow Ave. 218 Central Ave-Suite 111
Forest Lake, MN 55025 Faribault, MN 55021
II. SEVERABILITY - If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
III. WAIVER - Any failure on the part of a party hereto to comply with
any of the terms and conditions of this Agreement may be waived in writing by
the other party hereto.
IV. ENTIRE AGREEMENT - This Agreement constitutes the entire agreement for
this business combination, and supersedes and cancels any prior written or oral
agreements or understandings regarding the subject matter hereof; and this
Agreement cannot be amended or modified unless by mutual written consent of
all parties hereto.
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<PAGE>
V. PARTIES IN INTEREST AND ASSIGNMENT - This Agreement shall inure to the
benefit of and bind the parties hereto, and their respective successors, legal
representatives or authorized assigns, as the case may be; provided, however,
that neither party hereto shall assign any interest in this Agreement without
the express written consent of the other party hereto.
VI. EXPENSES IF ABANDONED OR TERMINATED - In the event this Agreement is
terminated incident to its terms, or abandoned by mutual consent of both parties
hereto for any reason or purpose, each party hereto shall pay its own expenses
incident to preparation for and any other matters related to the subject matter
of this Agreement.
VII. GOVERNING LAW - This Agreement shall be governed by the laws of the
State of Minnesota, except as Delaware corporate law is relevant to the
corporate approval and filing of this business combination due to 1-800 being a
Delaware corporation.
VIII. COUNTERPARTS - This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same document.
IN WITNESS WHEREOF, the above parties hereto have executed this Agreement
as of the day and year first above written.
1-800 Consumer International, Inc.
By /s/ Keith P. Rowland,
------------------------------------
Keith P. Rowland, President
And /s/ Dennis D. Postma
-----------------------------------
Dennis D. Postma, Secretary
Internationale Shopping Alliance, Inc.
By /s/ Gerald J. Durand
-----------------------------------
Gerald J. Durand, President
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<PAGE>
6626-ISA lease
COMMERCIAL LEASE
Persons and Premises
Claude Yow, hereinafter referred to as "Lessor", hereby leases to ISA
Internationale INC. Guarantor, hereinafter referred to as "Lessee, those
certain premises, hereinafter referred to as "said premises," and further
described as 6626 CENTRAL AVENUE PIKE, KNOXVILLE, TN, 37912 CONTAINING
APPROXIMATELY 17,800 Square Foot and shown on exhibit A and exhibit B on the
following terms and conditions: of this lease.
Right of first refusal
Lessor agrees to give lessee a right of first refusal option on an additional
5,000 square feet at 6626 central ave pike Knoxville Tn 37912, when such
space becomes available.
Term of Lease
The term of this lease shall be commencing at 12:01 A.M. on OCT 1,
1998 and ending at 12:01 A.M. on OCT 1 2003 unless sooner terminated as provided
herein. Rent to begin on completion of building space.
Option to Renew
An additional 5 year term with a 5% annual inflation factor will be
added to the lease if lessee notifies lessors of intent to renew within 60 days
of expiration date.
Rent
Lessee agrees to pay and lessors agree to accept, as rent for the use
and occupancy of said premises the total amount of $112,896.00 for the first
year of this lease, with a 5% increase annually. Rent is payable in advance on
the 1st day of each and every month in the discounted amount of $6,303.36 for
the first year of the lease, and the discounted amount of $8,396.64 for the
second year, $10,372 for the third year, $10,890.93 for the fourth year and
$11,435.48 for the fifth year paid monthly. Payment shall be made at the address
specified in this lease for the service of notices to lessors or at such other
addresses as served upon lessee.
Real tax and insurance
This is a net lease lessor pays real estate tax and fire insurance on
building with all other expenses paid by the tenant with liability insurance in
amounts of 1,000,000 with Lessors named as additional insured and certificates
provided to Lessors.
Deposit
On execution of this lease, Lessee deposits with Lessors the sum of
$9408.00 (CK# 5033) plus the first months rental of $6,303.36 The deposit is
used as security for the faithful
page 1 of 8
<PAGE>
performance of the provisions of this lease relating to rent, repairs, or
cleaning, and to be returned to Lessee on the full performance of those
provisions following the termination of this lease. Nothing contained in this
paragraph shall give Lessee the right to withhold the rent, or shall prohibit
Lessors from exercising any of the rights hereunder in respect to the
non-payment of rent.
Condition and Maintenance of Premises
Lessee acknowledges that the plans have been examined as well as all
the equipment and personal property subject to this lease and that said
premises, equipment and personal property are in good, safe, and clean condition
and repair. Lessee further agrees to:
(a) Keep inside premises in good order and outside in a clean, no
outside storage, condition and on expiration or sooner termination of this lease
to surrender them to Lessors in as good condition as they are on the date of
this lease, reasonable wear and tear or damage by the elements excepted
(b) Immediately notify Lessors of any defects, dilapidations, or
dangerous conditions;
(c) The obligation with respect to maintenance of the premises and
repairs is that lessor agrees to maintain and repair the outside structural
walls of the building existing on the premises and maintain and repair the roof
with drains and waterspouts, provided that no damage is occasioned by the
activities of lessee, and or agents, customers, guests, invitees, employees, or
others engaged in business or other activities with lessee,. No glass surfaces
or windows or doors shall be maintained by lessor, but is the responsibility of
lessee. All other maintenance and repairs-shall be the responsibility of the
lessee. The lessee shall promptly reimburse lessors for the cost of any repairs
to the premises or equipment or personal property subject to the lease,
undertaken by lessor that are not the responsibility of the lessor. Lessee is
liable for expenses caused by lessees negligence or misuse, or the negligence or
misuse of any of lessees invitees, licensees or guests use. and
(d) Lessee shall not permit the demised premises or any part thereof
to be used for (1) the conduct of any offensive, noisy, or dangerous activity
that would increase the premiums for fire insurance on the demised premises; (2)
the creation or maintenance of a public nuisance; (3) anything which is against
the laws or rules and regulations of any public authority including county codes
at any time applicable to the demised premises; or (4) any purpose or in any
manner which will obstruct, interfere with, or infringe on the rights of other
tenants of the Lessors. Building space shall be finished according to lessee
requirements shown in (Build out) section of this lease.
utilities
Lessee shall pay all charges incurred for the furnishing of public
utilities , Gas, Water, Sewer, and electricity to said premises, including any
deposits required for any utilities.
page 2 of 8
<PAGE>
Alterations and Improvements
Everything accepted subject to build-out in an "as-is" condition.
Lessee shall make no alterations or improvements to said premises nor do any
painting or redecorating of said premises without the express written consent of
Lessors first had and obtained. Should Lessee make any alterations or
improvements to said premises or do any painting or redecorating of said
premises without the express written consent of Lessors first had and obtained,
or should Lessee damage or depreciate said premises, when the full cost of
restoring said premises to their prior condition shall be borne by Lessee and
promptly paid, on written demand, to Lessors. Any and all alterations and
improvements made to said premises by Lessee with the consent of Lessors,
including any wall-to-wall carpeting and draperies installed by Lessee, shall
become the property of Lessors and remain on said premises on the expiration or
sooner termination of this lease, unless otherwise agreed upon by the parties
hereto.
Hold-Harmless Clause
Lessee agrees to indemnify and hold Lessors and the property of
Lessors, including said premises free and harmless from any and all liability,
claims, loss, damages, or expenses, including any attorney's fees and/or costs,
arising by reason of the death or injury of any person, including Lessee or any
person who is an employee or agent of Lessee, or by reason of damage to or
destruction of any property, including property owned by Lessee or any person
who is an employee or agent of Lessee, caused or allegedly caused by some
condition of said premises, the fault of Lessee, or some act or omission,
whether or not negligent or intentional, of Lessee or any person in, on, or
about said premises as a guest, licensee or invitee of Lessee. This section
shall not apply in area of build-out until lessee occupies said area.
Assignment and Subletting
Lessee shall not assign this lease or sublet all or any portion of
said premises without the prior written consent of Lessors. Any assignment or
subletting without the prior written consent of Lessors shall be void and shall,
at the option of Lessors, terminate this lease. Lessors' consent to any such
assignment of this lease or subletting of said premises by Lessee shall not be
unreasonably withheld, but the consent of Lessors to any one such assignment or
subletting shall not be deemed a consent by Lessors to any subsequent assignment
or subletting.
Destruction of Premises
Should any part of said premises be destroyed by fire, casualty, or
other cause not the fault of Lessee, Lessors shall promptly repair and restore
said premises to their former condition at Lessors' sole cost and expense.
During the making of the repairs and the restoration work, the rent payable
under this lease shall be abated for the time and to the extent that Lessee is
prevented from
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<PAGE>
fully occupying and enjoying said premises under this lease in Lessee's usual
and normal manner. However, in lieu of making such repairs and performing such
restoration work, Lessors may terminate this lease where either;
(a) the necessary repair or restoration work cannot reasonably be
completed under applicable laws and regulations within 30 working days after it
is commenced, or
(b) the loss is not covered by Lessors' then existing fire and
extended coverage insurance policies, provided that such policies are of an
adequate and reasonable nature. If Lessors chooses to terminate this lease under
the provisions of this paragraph, any security deposits and/or unused rent shall
promptly be returned to the Lessee. ;; if the premises should be damaged or
destroyed by fire or other casualty so as to cause a material alteration in the
character of the premises and prevent the lessee from using it in substantially
the manner theretofore used, and such condition can not be repaired for a period
of more than thirty (30) days. either lessor or lessee may terminate this lease
upon giving notice to the other within fifteen (15) days after the casualty
occurs.
Multiple Occupancy
Should more than one person execute this lease as Lessee, all such
persons shall be jointly and severally liable for all of the terms, condition,
covenants, and provisions of this lease; provided, however, that any act or
signature of one or more of the persons executing this lease as Lessee and any
notice or refund given to or served on one of the persons executing this lease
as Lessee shall be fully binding on each and all of the persons executing this
lease as Lessee.
Default by Lessee
Should Lessee be in default for a period of more than 10 days in the
payment of any rent payable under this lease or in the performance of any other
provision of this lease, Lessors may terminate this lease and regain possession
of the demised premises in the manner provided by the laws of unlawful detainer
of this state in effect at the date of such default.
Lessors' Election to Continue During Breach
At Lessors' option, if Lessee has breached this lease and abandoned
the property, this lease shall continue in effect for so long as Lessors does
not terminate Lessee's right to possession, and Lessors may enforce all of the
available rights and remedies under this lease, including the right to recover
the rent as it becomes due.
Holdover by Lessee
Should Lessee remain in possession of the demised premises with the
consent of Lessors after the natural expiration of this lease, a
page 4 of 8
<PAGE>
new tenancy from month-to-month shall be created between Lessors and Lessee
which shall be subject to all of the terms and conditions of this lease but
shall be terminable by thirty days written notice served by either the Lessors
or the Lessee on the other party to this lease.
Acts Constituting Breach by Lessee
Lessee shall be guilty of a material breach of this lease should Lessee:
(a) Fail to pay any rent or other sum becoming payable under this lease
on the date it becomes due;
(b) Default in the performance of or breach any provision, term,
covenant, or condition of this lease;
(c) Breach this lease and abandon said premises before expiration of the
full term of this lease;
(d) Allow a receiver to be appointed to take possession of all or
substantially all of Lessee's property unless the receiver is discharged within
30 days after his appointment; or
(e) Allow any judgment against the Lessee to remain unsatisfied and
unbonded for a period of more than 60 days.
Lessors' Remedies for Breach of Lease
Should Lessee be guilty of a material breach of this lease as defined
herein, Lessors, in addition to any other remedies given Lessors by law or
equity, may:
(a) Continue this lease in effect by not terminating Lessee's right to
possession of said premises and thereby be entitled to enforce all of Lessors'
rights and remedies under this lease including the right to recover the rent
specified in this lease as it becomes due under this lease; or
(b) Terminate this lease and Lessee's right to possession of said
premises and commence action against Lessee to recover from Lessee: (1) The
worth of the unpaid rent which had been earned at the time of termination of
this lease; (2) The worth of the amount by which the unpaid rent which would
have been earned but for termination of this lease exceeds the amount of
rental loss that Lessee proves could have been reasonably avoided; (3) Any
other amount necessary to compensate the Lessors for all detriment
proximately caused by Lessee's failure to perform Lessee's obligations under
this Lease; or
(c) Commence, in lieu of or in addition to the action described in above,
an action to reenter and regain possession of said premises in the manner
provided by the laws of unlawful detainer of this state.
Notices
Except as otherwise expressly provided by law, any and all notices or
other communications required or permitted by this lease
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<PAGE>
or by law to be served on or given to either party hereto by the other party
hereto shall be in writing and shall be deemed duly served and given when
personally delivered to the party, Lessors or Lessee, to whom it is directed or,
in lieu of such personal service, when deposited in the United States mail,
first-class postage prepaid, addressed to Lessee at the address of said premises
or to Lessors at the addresses specified below. Either party, Lessors or Lessee,
may change their address for purposes of this paragraph by giving written notice
of the change to the other party in the manner provided in this paragraph.
Attorney's Fees
Should any litigation be commenced between the parties to this lease
concerning said premises, this lease, or the rights and duties of either in
relation thereto, the party, Lessors or Lessee, prevailing in such litigation
shall be entitled to, in addition to such other relief as may be granted, a
reasonable sum as and for attorney's fees to be determined by the court in such
litigation or in a separate action brought for that purpose.
Binding on Heirs and Successors
This lease shall be binding on and shall inure to the benefit of the
heirs, executors, administrators, and successors of the parties, Lessors and
Lessee, hereto, but nothing in this paragraph shall be construed as a consent by
Lessors to any assignment of this lease by Lessee.
Time of the Essence
Time is expressly declared to be of the essence for all purposes of this
lease.
Waiver
The waiver of any breach of any of the provisions of this lease by
Lessors or Lessee shall not constitute a continuing waiver or a waiver of any
subsequent breach by Lessors or Lessee either of the same or of another
provision of this lease.
Sole and Only Agreement
This instrument constitutes the sole and only agreement between Lessors
and Lessee respecting said premises or the leasing of said premises and any
equipment or personal property subject to this lease to Lessee by Lessors. It
correctly sets forth the obligations of Lessors and Lessee to each other as of
its date, and any agreements or representations respecting said premises, the
equipment or personal property subject to this lease, or their leasing by
Lessors to Lessee not expressly set forth herein are null and void.
Late payment penalty
A 5% of the monthly amount penalty will be added monthly if rental is not
received by Lessors within 10 days of due date of payment.
page 6 of 8
<PAGE>
Build-out
Lessee and lessor agree that changes and additions need to be done for
the operation of lessee business. See exhibit (A) for locations of same. lessee
agrees to pay for this work, lessor agrees to do the work, estimated cost of the
work is $23,000.00 paid in advance and non refundable and paid at the time the
lease is signed. work to be done is as follows; Double Door are eliminated and
add door from room 11 to 12, paint staff and laundry room, steel bars and or
frame and drywall at all adjoining doors, and stick built walls. 2 each 5 ton
and 1 each 4 ton air conditioning units installed in rooms 1,2,3,4,5
6,7,8,9,10,11,12,14 area including duct work and electrical hook ups.
Cooler and freezer, plus laundry and all other storage materials will be removed
from the building. Items requested to be left will be a list and it will be an
addendum part of the lease before occupancy at no charge to lessee on loan to
lessee for the term of the lease.
1) wall between room 1 and 2 taken out and disposed of.
2) ceiling, lighting, and plugs in room 2 removed, install lighting ceiling and
plugs in room 6,7, 14, and hall way.
3) floor tile and base trim added to room 5, 7, 14, and hall. carpet and base to
room 6,
4) Steel bar secure and or remove and wall up all adjoining doors.
5) Install 4 commodes and a sink with towel and tissue holders, hot water
heater, lighting and doors on stalls installed. ceiling and floor completed.
6) painting on room 14, 7,6, staff laundry and hallway.
7) sprinklers added rooms 6,7, 14, and hall, low pipes removed in room 2
8) finish high wall in studio, and remove wall between reception in main
entrance.
9) install door from room 11 to 12, also exit light if needed.
10) Remove door in hall way between room 1 and room 2.
ADDENDUM
1) One Silent knight - Ranger 8900 DL Security Control center plus Fire Control
Communications, and in additional consisting of airphone Communications system
2) One N.E.C. Dterm Series 11 Telephone system, including Bogan P.A. System and
all communications office units.
3) One 1 SDN line 4 conversion boxes
4) One Generac 20 KVA Stand-by Generator
These items 1 thru 4 are as is on loan to lessee during term of this lease and
can only be removed by lessor
page 7 of 8
<PAGE>
Executed on 8-14-98, at
LESSORS: /s/ Claude Yow
---------------------------
Claude Yow Guarantor
1 423 689-6600 ext 712
SS: ###-##-#### Claude Yow and Associates
6712 Central Avenue Pike
Knoxville, TN 37912
LESSEE: /s/ Gerald J. Durand S.S. OR FEID#.65-0278645
----------------------
ISA Internationale Inc. (ISAI)
1 800 434 3198 office fax 1 507 334 2396 ph 1 507 332 6955
204 central ave. st 111
Faribault Minn. 55021
State of Tennessee
County of Knox
On August 14, 1998, before me, Jeana Partin a notary public for the State of
Tennessee, personally appeared Claude Yow, known to me or proved to me to be the
person whose name is subscribed to the within commercial lease, and acknowledged
to me that he or she executed the same.
/s/ Jeane M. Partin
- -------------------- Notary Public for the State of Tennessee
(seal)
State of Minnesota
County of Rice
On August 13, 1998, before me, a notary public for the State of Minnesota,
personally appeared Gerald J. Durand, known to me or proved to me to be the
person whose name is subscribed to the within commercial lease, and acknowledged
to me that he or she executed the same.
/s/ Jill M. Finstuen
- --------------------- Notary Public for the State of Minnesota
(seal)
[STAMP]
JILL M. FINSTUEN
NOTARY PUBLIC - MINNESOTA
My Commission Expires Jan. 31, 2000
Page 8 of 8
<PAGE>
CONTRACT AGREEMENT
------------------
BEE SWEET ENTERPRISES INTERNATIONAL SHOPPING ALLIANCE
3732 Old Columbus Road N.W. 6626 Central Avenue Pike
London, Ohio 43140 Knoxville, TN 37912
(740) 845-0341 (423) 688-5255
TERMS AND TEXT OF AGREEMENT
DIGITAL SATELLITE
G3R - Transponder number at our discretion
LENGTH OF CONTRACT
14 months beginning May 01, 1999
MONTHLY COST
Forty Two Thousand Dollars ($42,000.00)
LEASED EQUIPMENT INCLUDED IN PRICE
10 IRD's from Wegener Communications - Model #DVR 2000
01 Encoder from Wegener Communications - Model #DVT 2000
Our lease period is for the first 14 months of this contract. After 14 months
the equipment becomes the property of ISA for a purchase price of one dollar
per unit. ISA is given the ability to back out of this contract after the first
6 months with a 30 day notice of that intention. If ISA does execute the back
out option after the first six months, all leased equipment will remain in the
ownership of Bee Sweet Enterprises. The equipment is all brand new state of the
art equipment and will carry all manufactures technical guarantees and
warrantees.
RENEWAL CLAUSE
After the first 14 months have gone by and all payments have been paid by ISA,
ISA can renew this contract at a rate of $37,000 a month for 4 additional 6
month periods, one six month period at a time.
INSTALLATION OF DIGITAL EQUIPMENT
Be Sweet Enterprises will handle all the installation and the testing of the new
digital signal. The cost for the installation and testing is included in the
$42,000 monthly fee. No other cost should be incurred by ISA unless some of
their equipment isn't up to the standards of putting out the best digital
signal. Our engineers have investigated your present equipment and feel the only
questionable piece of equipment will be your up-converter. To show you what the
signal should look like we will put up your signal using our truck and
equipment. We will transfers everything over to your equipment for a comparison.
Again, everything you presently have on hand now should do the trick. If for
some reason it doesn't, ISA will be out the cost of obtaining better equipment.
If that does become the case, ISA can buy from Bee Sweet at our actual invoice
price. Last time we purchased a up-converter it cost us $8,100. We feel you will
not need to purchase anything additional. All are in agreement your equipment
should be sufficient.
<PAGE>
DIGITAL AIR TIME
09:00pm to 09:00am Eastern time - Seven days a week, throughout the entire
contract. There will be no buy back option of unused air time. Additional air
time can be obtained at preferred rates from Bee Sweet if needed.
ADDITIONAL IRD'S ALSO KNOWN AS DECODERS
IRD's above the initial 10 units can be purchased by ISA from Bee Sweet
Enterprises for the purchase price of $1,500.00. We will also offer a lease to
own program where ISA can obtain additional IRD's at $200 a month per unit for 8
months. ISA can then purchase the unit for one dollar each.
ADDITIONAL ENCODER
An additional encoder can be purchased from Bee Sweet Enterprises for
Seventy-seven Thousand Dollars. The second option is given to ISA on a rental
basis. The rent is Two Thousand Dollars a month ($2,000) and that price is not
negotiable at all. The rental unit must remain in it's original box and can only
be opened in case of an emergency.
GRANDFATHER RIGHTS ON CABLE
ISA will have 45 days from the signing of this contract to finalize any and all
existing deals they have in progress for obtaining cable. A detailed list of
companies approached must be given to Bee Sweet Enterprises in order for them be
eligible for Grandfather rights. All future cable contracts used by ISA which
were brought to them by sources other than Bee Sweet will earn Bee Sweet a
commission of 3% of the gross figure paid by ISA.
CABLE EXCLUSIVITY FOR BEE SWEET ENTERPRISES
Bee Sweet will be given the rights to be the sole provider of cable for ISA
(unless the 3% rule outlined above comes into play). All cable proposals will be
presented to ISA on a net "all in" basis, which is industry standards. There
will be no commissions due anyone, under no circumstances. All cable contracts
will be signed off by ISA and they can pick, choose, or deny any deal that Bee
Sweet presents to them for approval.
MONTHLY PAYMENT SCHEDULE
The monthly payments of $42,000 or $37,000 must be in Bee Sweet's office no
later than the 27th of the month. For example: Your May 1999 payment must be in
Bee Sweets office no later than April 27, 1999.
DOWN PAYMENT NEEDED TO SECURE EQUIPMENT FOR START UP DATE
In order to guarantee the new digital equipment would arrive to ISA for our
scheduled kick off date a down payment of $13,212 was paid on March 25, 1999.
The payment was made using my personal funds and I would appreciate being
reimbursed immediately. The remaining balance of $28,788 must be paid to Bee
Sweet by April 27, 1999.
STOCK FOR AUGIE BLEVINS
ISA will issue Augie Blevins a fair amount of it's stock for services rendered.
The number issued to Blevins is at the discretion of ISA.
<PAGE>
BY SIGNING THIS CONTRACT BOTH PARTIES AGREE AND ACCEPT THE TERMS AS IS.
BEE SWEET ENTERPRISES
By: /s/ Augie Blevins Chief Operations Officer
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Augie Blevins Title
Date signed: 3/26/99 Fred Walker
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Witness
INTERNATIONAL SHOPPING ALLIANCE
By: /s/ Gerald Durand President/CEO
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Gerald Durand Title
Date signed: 3/29/99 Jill Finstuen
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Witness
