U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1998, or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange act of 1934 for the transition period from
to
Commission File No. 0-23015
J-BIRD MUSIC GROUP LTD.
(Name of Small Business Issuer as specified in its charter)
Pennsylvania 06-1411727
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
396 Danbury Road, Wilton, Connecticut 06897
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (203) 761-9393
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
Check whether the issuer (1) filed all reports required to be
filed by sections 13 or 15(d) of the Exchange Act during the past
12 months (or such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues (consisting only of interest income) for
its most recent fiscal year: $432,713.
The aggregate market value of voting stock held by non-affiliates
computed on the basis of the last sale price on April 9, 1999,
was $4,216,123.
As of December 31, 1998, the Registrant had outstanding
14,325,395 shares of Common Stock, par value $0.001.
Documents incorporated by reference: None.
<PAGE>
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION Page
Part I
1. Description of Business 3
2. Description of Properties 6
3. Legal Proceedings 6
4. Submission of Matters to a Vote of Security Holders 7
Part II
5. Market for Common Equity and Related Stockholder 7
Matters
6. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
7. Financial Statements 8
8. Changes in and Disagreements with Accountants 8
on Accounting and Financial Disclosure
Part III
9. Directors, Executive Officers, Promoters and Control 8
Persons; Compliance with Section 16(a) of the
Exchange Act
10. Executive Compensation 9
11. Security Ownership of Certain Beneficial Owners and 10
Management
12. Certain Relationships and Related Transactions 12
13. Exhibits and Reports on Form 8-K 12
FORWARD-LOOKING STATEMENT NOTICE
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27a of the Securities
Act of 1933 and Section 21e of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are
discussed under the headings "Item 1. Description of Business,"
and "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations," and also include general
economic factors and conditions that may directly or indirectly
impact the Company's financial condition or results of
operations.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
J-Bird Records, Inc.("J-Bird") is the first World Wide Web
Recording Label TM. The Company was officially launched on
November 1, 1996 to market, distribute and sell music via a new
medium - the Internet. At its Website, located at http://www.j-
birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their
recordings through its on-line record store.
The Company's Website provides a comprehensive entertainment
and information resource enabling users to search and sample
music and artist information interactively through sound and
graphics, including on-line "sound stations" for each artist and
the J-Bird on-line "radio station". When an artist signs a
recording contract with the Company, such artist's music is
posted on the Company's Website in digital form for streaming
either Real Audio TM or Windows Media Player. The Website
contains a webpage for each of the Company's artists. Users who
are interested in the music they sample may purchase it
immediately on-line. Users can also obtain information on
specific artists and related concert tours, music events and
other promotions and read recent articles on the favorite J-Bird
artists. J-Bird designs, produces and distributes CD's on-line
and in the traditional retail chains around the country.
Artists, either new or established, who want more control over
the production and distribution of their music, select and
contract with J-Bird. J-Bird and the artists then share in the
proceeds of the CD sales. By giving tens of millions of Internet
users worldwide access to the music of these artists, J-Bird
fills a niche not addressed by radio, music videos, and
traditional music retailers.
Each new artist who executes a Recording Contract with J-
Bird is required to produce one compilation of music for J-Bird
during the three-year term of the contract. Pursuant to the
Recording Contract, J-Bird has the exclusive rights, in
perpetuity, to manufacture, advertise, sell and distribute such
compilation. In return, the artist receives a 12% royalty on the
sales of all CDs produced. If the artist enters into a recording
contract with another record label during the three-year term, J-
Bird will receive a royalty of 2% of all sales for the first
album produced by the artist with the new record label. The
contract further requires the artist to purchase either 250 CDs
for $1,000 or 1,000 CDs for $2,250, which the artist is entitled
to sell for $10 each. J-Bird currently has 230 artists in its
catalogue.
J-Bird has chosen the Internet as its primary marketing
vehicle because the Internet provides a low-cost method of
providing, displaying and selling different styles and genres of
music to a worldwide audience. The Internet also allows J-Bird
to target sales to the largest music-buying population, the 15 to
24 age group, which also represents the highest concentration of
Internet users. J-Bird's Website offers content-rich music genre
sites for rock, pop, alternative, country, urban, rap, jazz,
gospel, classical and world music, through the combination of
audio, graphics, and text. J-Bird's genre and artist web pages
allow users to target music and information based on personal
interests. J-Bird believes that this approach provides a
stimulating and entertaining on-line environment which
establishes a community atmosphere and promotes consumer-driven
product sales. J-Bird believes that the Company's business will
greatly benefit from the growth of the Internet.
The Company believes that on-line sales of recorded music
will compliment the traditional retail channel and will expand
overall music sales because of the on-line medium's ability to
capitalize on the ongoing shift in demographics of music buyers;
to reach a growing international consumer market and to offer the
consumer easier access to a broad range of titles. J-Bird also
believes that the ability to gather and process data resulting
from customer purchases and usage will facilitate targeted
promotional efforts in the highly segmented recorded music
market. The Internet also provides access to international
markets for recorded music which are growing faster than the U.S.
market.
In addition, the Company gathers important information about
demographics and consumer preferences from users of its Website.
This information permits the Company to target subsequent
promotions to a particular customer group or geographic area.
The Company believes that this practice will enable the Company
to market its artists in an efficient, cost-effective manner by
targeting the most likely buyers for such artists music. In the
future, the Company expects to promote its artists through the
use of its radio station and on-line "chat-rooms" intended to
spark interest in a particular music genre or artist. The
Company believes that its strategy of interactive sales on the
Internet combined with targeted promotions will enable it to
build a loyal customer base.
Traditional record companies typically incur high
promotional and other costs in the distribution of their music,
providing a strong disincentive to sign unproven bands. J-Bird's
low-cost approach of relying upon listeners' interests will allow
the Company to compete on a cost-effective basis with other
record companies. The Company feels that the use of its
interactive Website, its on-line radio station, and its targeted
advertising, promotion and distribution, creates a new medium for
the music industry that permits it to reach music buyers
throughout the world and that has the potential to shift the way
music is marketed to consumers.
In May 1998, the Company entered into a Download Agreement
with AT&T Corp. Under the agreement the Company granted AT&T a
license to use tracks of music produced by artists under contract
with the Company, encode the tracks for delivery over the
internet using AT&T's "a2b" media player, and promote the music
tracks on AT&T's a2b music website. AT&T also made available
through the Company's website the a2b media player for consumers
to download so that they could retrieve and play encoded tracks.
Consumers are charged an average price of $1.99 for each track
retrieved, which is paid by credit card to AT&T. Under the
Agreement, AT&T is entitled to retain the first $2,000 from music
track purchases, and all subsequent purchases are divided equally
between the Company and AT&T.
In February 1999, the Company entered into a Web Events and
Windows Media Technology Promotion Agreement with Microsoft
Corporation. Under this Agreement, the Company is entitled to
promote and make available the Windows Media Player through its
website and distribute music tracks formatted for the Windows
Media Player. Microsoft will make available through its
"webevents" website a site link to the Company's website and a
content summary of the music products available at the Company.
In November 1997, J-Bird was approached by Navarre
Corporation ("Navarre") with respect to a distribution
arrangement. J-Bird entered into a three-year exclusive retail
distribution Agreement with Navarre. Navarre, one of the leading
independent distributors of music and interactive software,
distributes to retail accounts throughout the nation, including,
Tower Records, The Musicland Group (which includes Media Play,
Sam Goody, Musicland and On-Cue), Blockbuster, Best Buy,
Wherehouse, Camelot, HMV, Borders and Circuit City as well as all
the leading One Stops. Under the Agreement, Navarre distributes
J-Bird products nationally through its retail distribution
relationships, and the Company receives a percentage of each
product sold.
History
On October 7, 1997, the Company entered into a Stock
Purchase Agreement with the shareholders of J-Bird Records, Inc.,
to acquire their shares of J-Bird Records, Inc., for the
equivalent number of shares of the Company. The total number of
shares exchanged in this transaction was 4,480,000. On October
8, 1997, the Company changed its name to J-Bird Music Group LTD.
On April 22, 1997, the Company entered into an Option
Agreement with Feild Technologies,LLC ("FTL"), a company based in
Bangor, Maine. Under this agreement, the Company assigned seven
domestic and foreign valve patents held by the Company to FTL for
a 5% equity position in FTL. In the event the Company does not
receive distributions of at least $100,000 on or before December
31, 2000, it shall be entitled to increase its interest in FTL
from 5% to 10%, and the other members' interests in FTL shall be
reduced on a basis proportionate to their relative interests.
On May 3, 1996, the Company entered into an agreement with
Rhode Island Renal Institute ("RIRI") and Brooks Porter
("Porter"). RIRI and Porter entered into a Development and
Investment Agreement ("D&I Agreement") and pursuant to the D&I
Agreement, RIRI agreed to provide financial support, clinical
testing facilities and supplies to Porter to assist his
development of the Renal Ozone Sterilization System ("ROSS").
Under the agreement with the Company, RIRI and Porter assigned to
the Company the right to manufacture and distribute ROSS, and any
other interests or rights created by the D&I Agreement between or
among Porter and RIRI. In accordance with the agreement between
the Company and RIRI, RIRI received 125,000 shares of restricted
common stock of the Company. In December 1997, the ROSS
Corporation agreed to buy the Company's interest in the ROSS
project for $500,000 represented by a promissory note due
December 10, 1998. In connection with this transaction the
Company recognized a loss of $1,810,000. In November 1998, the
Company settled the $500,000 payment obligation from ROSS
Corporation in exchange for the return to the Company for
cancellation of 125,000 shares of the Company's common stock.
On June 14, 1996, the Company entered into an agreement with
a company called Applied Advanced Technologies, Inc. ("AAT") and
an individual named Tovi Avnery ("Avnery"), owners of an electron
beam technology. Under this agreement, the Company advanced to
AAT a total of $350,000. In return, the Company received 114,546
shares of common stock of AAT, representing 45% ownership in the
company. Avnery also received 130,000 shares of restricted
common stock of the Company. On July 15, 1997, the Company and
AAT entered into a Memorandum of Understanding. In accordance
with this Memorandum of Understanding, AAT was to pay to the
Company $350,000 plus interest, not to exceed $500,000, by July
31, 1999. In September, 1997, the Company executed a Release and
Assignment of Interest in AAT, to be held in escrow until the
amount owed to the Company was paid in full. In May 1998, the
Company and AAT settled the outstanding balance due the Company
for $205,000 in cash and the return of 130,000 shares of the
Company's common stock by Avnery, and the Company transferred all
of its equity interest in AAT to Avnery.
Governmental Regulation
There is no material government regulation of the Company's
business.
Competition
The Company competes for artists and recordings to
distribute with national and regional recording and distributing
companies, which have a competitive edge over the Company by
virtue of their stronger management, promotional, and financial
resources. The Company's strategy is to sign artists who are
unable to obtain recording contracts with larger recording
companies and acquire distributing rights to recordings that
management believes will appeal to consumers interested in
particular music genres. The recording products offered by the
Company compete for consumers who have a wide selection of music
choices within the same music genres offered by the Company. The
Company also competes with other businesses that offer and sell
recordings through the Internet. The Company will compete for
consumer dollars on the basis of the types of music it selects
for distribution and the marketing of its music selections
through the Internet.
Employees
The Company has 5 employees, consisting of 3 management
employees and 2 marketing and office employees.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's principal place of business is an office
located at 396 Danbury Road, Wilton, Connecticut 06897. The
office facility consists of approximately 1800 square feet and is
being leased pursuant to a thirty-six month lease expiring in
July, 2000 for a monthly lease payment of $2638.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings, and to
the best of its knowledge, no such proceedings by or against the
Company have been threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the
fourth quarter of 1998.
PART III
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth for the respective periods
indicated the prices of the Company's Common Stock in the over-
the-counter market, as reported and summarized by the OTC
Bulletin Board. Such prices are based on inter-dealer bid and
asked prices, without markup, markdown, commissions, or
adjustments and may not represent actual transactions.
Calendar Quarter Ended High Bid Low Bid
March 31, 1997 $7.75 $1.25
June 30, 1997 $3.25 $0.5313
September 30, 1997 $2.00 $0.5313
December 31, 1997 $1.875 $0.4063
March 31, 1998 $0.75 $0.3125
June 30, 1998 $1.75 $0.28125
September 30, 1998 $1.59375 $0.5625
December 31, 1998 $1.25 $0.5313
There are approximately 153 shareholders of record, which figure
does not take into consideration those shareholders whose
certificates are held in the name of broker-dealers.
As of the date hereof, the Company has not paid or declared any
cash dividends. The Company can give no assurance that it will
generate future earnings from which cash dividends can be paid.
Management has followed the policy of retaining any and all
earnings to finance the development of the business. Such a
policy is likely to be maintained as long as necessary to provide
working capital for the Company's operations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
Overview
The following discussion and analysis provides information
that management believes is relevant to an assessment and
understanding the Company's consolidated results of operations
and financial condition for the years ended December 31, 1998 and
1997. The discussion should be read in conjunction with the
Company's consolidated financial statements and accompanying
notes.
The Company derives its revenues from three principle
sources: (i) sales of compact disks ("CDs") directly to the
artists for resale to consumers; (ii) CD sales on the Company's
website; and (iii) retail CD sales.
The Company's strategy to develop products and services for
the music entertainment business was primarily responsible for
its net loss for the years ended December 31, 1998 and 1997. The
Company has only a limited operating history in its operations
upon which an evaluation of J-Bird and its prospects can be
based. Accordingly, J-Bird believes that the results of its
operations in the past, during which time the Company had minimal
revenues, are not meaningful indications of future performance.
The Company incurred losses from continuing operations of,
$3,756,724 and $1,929,865 for the years ended December 31, 1998
and 1997.
In 1997 the Company signed a distribution agreement with
Navarre Corporation which provides the Company with a national
presence in approximately 52,000 traditional retail
establishments. This agreement also provides the Company with a
national sales force that has existing relationships with the
major retail outlets in the country. As a start-up entity in
1997 the Company sold directly to retail markets with minimal
results. In the second half of 1997 the Company was able to
obtain two distribution agreements with regional distributors.
This enabled the Company to establish a regional presence and
provided credentials that assisted in signing the distribution
agreement with Navarre Corporation.
The Company currently intends to increase substantially its
operating expenses to (a) fund increased sales and marketing,
enhance its existing website, and to complete strategic
relationships important to the success of the Company. To the
extent that such expenses precede or are not subsequently
followed by increased revenues, the Company's business, results
of operations, and financial condition will be materially
adversely affected. There can be no assurance that the Company
will be able to generate sufficient revenues from the sale of
music recordings, related merchandise, advertising, and
sponsorship programs to achieve or maintain profitability on a
quarterly or annual basis in the future. The Company expects
negative cash flow from operations to continue for the
foreseeable future as it continues to develop and market its
business.
Liquidity and Capital Resources
The Company has financed its operations and capital
expenditures primarily from equity financing and loans from
shareholders. At December 1998, the Company had a cash balance
of $2,205. In 1998 the Company received $775,000 in cash from
the sale of stock through subscription agreements and collected
$119,750 of the stock subscriptions outstanding at December
31,1997. The amount due under stock subscriptions at December
31, 1998 was $250,000. In 1998 the Company collected $205,000
from a $ 350,000 note receivable that was outstanding at December
31,1998. The Company expects negative cash flow from operations
to continue for the foreseeable future, as it continues to
develop and market its operations. Inflation has not had any
material impact on the Company's operations. The Company is
presently funding its operating deficit through a credit
agreement with IMM International Inc. a shareholder of the
company. The Company had borrowed $113,560 under this agreement
as of December 31,1998 and borrowed an additional $191,000
subsequent to December 31,1998.
The Company is currently pursuing long term financing for
its operating activities. No source of financing has occurred to
date and there can be no assurance that financing will be
available, or if available, that it will be on acceptable terms.
The ability to finance existing and future operations will be
dependent upon external sources.
In January 1999 the Company obtained a $100,000 line of
credit with a commercial bank. The line of credit bears interest
at 2% above the bank's prime rate. Certain officers and
shareholders have personally guaranteed the debt. The Company
has borrowed $100,000 as of March 31,1999 under the line of
credit.
Results of Operations- year ended December 31, 1998 compared to
year ended December 31, 1997
A comparison of the 1998 results to the 1997 results is as
follows
1998 1997
----------- ----------
Net Sales $432,713 $145,248
- ------------
Cost of Sales $238,658 $121,958
Sales increased in 1998 over 1997 primarily as a result of
the distribution agreement with Navarre. Sales also increased
due to the increased number of artists and bands signed by the
Company in 1998, including a nationally recognized performer.
This artist accounted for approximately $240,000 of sales in
1998.
The Company has 230 artists under agreements at December 31,
1998, compared to 183 at December 31, 1997.
Cost of sales in 1998 has increased in accordance with the
increase in sales. In 1997 cost of sales includes $31,000 of
costs that relate to the start up of the Company when no sales
took place. In addition, approximately $177,000 of inventory
became obsolete when the Company changed its distribution network
to Navarre. This was recorded as a separate category in the 1997
financial statements.
1998 1997
----------- -----------
Advertising and Promotion Expenses $440,864 $162,377
- ----------------------------------
The increase in advertising and promotion is due to the
higher level of operations of the Company. The primary increase
from 1997 to 1998 is due to increased services with advertising
agencies as a result of the growth in the number of artists.
Professional Fees
- -------------------- $92,371 $212,255
The decrease in professional fees is due to the reduced
level of legal and consulting fees by approximately $90,000.
Salaries $362,829 $173,225
- ---------
The increase in salaries is due to the increased number of
employees, six in 1998 compared to three in 1997 of the Company.
Financing Fee-Sale of Discounted Stock $1,277,500 $ 868,000
- --------------------------------------
Financing fees related to the non-cash charge for the
purchase of restricted common stock at a discount to the market
value of the stock.
Administrative Expenses $472,466 $264,329
- -----------------------
The increase in administrative expenses is due to the
increased of operations of the Company. Rent expense increased
in 1998 by approximately $32,000 compared to 1997. Printing and
stationary, equipment rental, insurance, postage and general
office supplies increased by approximately $100,000. Travel and
entertainment increased by approximately $88,000.
Interest Expenses $4,260 $ 68,825
- -----------------
The decrease in interest expenses is due to the $65,000
relating to the value of warrants issued below fair market value
of the stock in connection with a $30,000 working capital loan
that was recorded as interest expense in 1997. The 1998 interest
relates to the amounts due on the loan balance in 1998.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company appear at the end of
this report beginning with the Index to Financial Statements on
page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with
accountants in the past three years.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Officers
The following table sets forth the names, ages, and positions
with the Company for each of the directors and officers of the
Company.
Name Age Positions Since
John J. Barbieri 34 President, CEO and Director 1997
Douglas G. McCaskey 43 Chairman and Director 1997
Hope D. Trowbridge 37 Secretary, Treasurer and 1991
Director
Asa L. Fish 32 Director 1997
All executive officers are elected by the Board and hold office
until the next Annual Meeting of stockholders and until their
successors are elected and qualify.
The following is information on the business experience of each
director and officer.
JOHN J. BARBIERI, CEO, President and Director of the Company,
earned a B.F.A. Degree from Paier College of Art in 1986. After
graduating, Mr. Barbieri joined Polygram Records as a Senior
Graphics Manager responsible for the print production and graphic
production budgets as well as implementing domestic production on
product. In May 1993, Mr. Barbieri joined Angel Records, a
division of EMI Records Group, as Vice President of Creative and
Production Services. Until June 1996, he was responsible for
creative services production, operations and new technologies
departments. Involved in creative direction, marketing and label
management, Mr. Barbieri has help pioneer the new multi-media
technology for CD PLUS and Enhanced CDs. He founded J-Bird
Records, Inc. in July 1996, and serves as its CEO, President and
Director as well as serving the same positions for J-Bird Music
Group LTD as of October 7, 1997.
DOUGLAS G. McCASKEY, Chairman and Director of the Company. Mr.
McCaskey is a graduate and MBA candidate of Babson College, where
he earned a B.S./B.A. degree in Accounting/Finance in 1975. In
November, 1975 he joined Readers Digest Association as a Field
Manager. In January, 1982 he joined Shearson American Express as
a Vice President of Investments. He went on to work as Vice
President of Investments for Oppenheimer & Company and Drexel
Burnham Lambert. Mr. McCaskey has over fifteen years of
experience in the field of investments, as a retail and
institutional broker as well as a Registered Investment Advisor.
Mr. McCaskey left the securities industry in 1992, and since
leaving has been a principal owner of several real estate
projects and provided independent consulting services to
businesses in the areas of business development and financing.
From December 1996, to the present Mr. McCaskey has served as the
President and a Director of Marcorp, Inc., an inactive publicly-
held corporation with no assets.
HOPE D. TROWBRIDGE: Secretary, Treasurer and Director of J-Bird
Music Group LTD since June 7, 1991, earned a B.S. Degree in
Business, concentration marketing, from Skidmore College in 1983.
Ms. Trowbridge was employed as an account executive from March,
1986 to November, 1992 at Drexel Burnham Lambert, Access
Securities, Minotaur Securities and Harbor Financial, Inc.
Registered Agent (Series 7 and 63) August, 1983. She left the
securities industry in November 1992. From December 1992, to the
present Ms Trowbridge has served as the Corporate Secretary and a
Director of Marcorp, Inc., an inactive publicly-held corporation
with no assets. She served as President of the Company from
December 1996 to October 1997, and is currently the
Secretary/Treasurer and a director and Secretary/Treasurer of the
Company's subsidiary.
ASA L. FISH, has been a director of the Company since April 1997.
He served as the Secretary from April 1997 until October 1997,
and is presently Vice President and head of Investor Relations
for the Company. For five years prior to his joining the
Company, he was a Nutrition Expert and Fitness Consultant for
Gold's Gym.
Section 16(a) Filing Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires officers and Directors of the Company and persons who
own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in
their ownership on Forms 3, 4, and 5 with the Securities and
Exchange Commission, and forward copies of such filings to the
Company. The Company believes none of its directors, officers,
and beneficial owners of more than ten percent of the equity
securities of the Company have filed any of the required reports
since the Company became a reporting company in 1998.
ITEM 10. EXECUTIVE COMPENSATION
In the year ended December 31,1997 the chief executive
officer, John J. Barbieri received a salary of $31,250 prior to
the date of the acquisition transaction between Caltron, Inc.,
and J-Bird Records, Inc., in October 1997. For the remainder of
1997 he did not receive a salary. In 1996 the Company did not
pay a salary to its chief executive officer.
For the year ending December 31, 1998, Mr. Barbieri was
compensated at the rate of $120,000 per year for his services as
President, which was deferred and not paid in 1998. There is no
employment agreement with Mr. Barbieri or any other executive
officer of the Company.
There were no stock options granted or exercised to the
executive officers in 1996, 1997 or 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of March 19, 1999, the
number and percentage of the outstanding shares of common stock
which, according to the information supplied to the Company, were
beneficially owned by (i) each person who is currently a director
of the Company, (ii) each executive officer, (iii) all current
directors and executive officers of the Company as a group and
(iv) each person who, to the knowledge of the Company, is the
beneficial owner of more than 5% of the outstanding common stock.
Except as otherwise indicated, the persons named in the table
have sole voting and dispositive power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
Common Shares Percent of Class(2)
John J. Barbieri (1) 2,960,000 20.7
396 Danbury Road
Wilton, CT 06897
IMM International, Inc. (2) 1,300,000 9.1
#2 Springhill Road, Suite 17
Norwalk, CT 06851
Douglas G. McCaskey(1)(3) 681,000 4.8
Hope D. Trowbridge (1)(2) 255,000 1.8
Asa L. Fish (1) 135,000 0.9
All Executive officers and 5,331,000 37.2
Directors as a Group (4)
(1) These persons are all of the executive officers and
directors of the Company.
(2) Hope D. Trowbridge is the sole officer, director, and
shareholder of IMM International, Inc. Accordingly, Miss
Trowbridge has voting and investment control over these shares.
(3) Includes 430,000 shares held by Mr. McCaskey through a
general partnership in which he is the general partner and
principal owner. Accordingly, Mr. McCaskey has voting and
investment control over these shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1998 the Company entered into a credit agreement
with IMM International, Inc., ("IMM") a principal stockholder of
the Company, whereby IMM will provide up to $500,000 in financing
to the Company for working capital purposes. Hope Trowbridge, an
officer and director, is the sole officer, director, and
shareholder of IMM. The funding commitment under the agreement
expired on March 31,1999. Amounts outstanding under this
agreement bear interest at 8% and are due on June 30, 2000. At
December 31,1998 the Company had borrowed $113,560 under this
agreement. Subsequent to December 31, 1998 the Company borrowed
an additional $191,000.
In 1998 IMM purchased 2,000,000 shares of the Company's
common stock for $525,000. Other non-affiliate shareholders
purchased 750,000 shares of stock at prices ranging from $.25 to
$.40 per share. The difference between the subscription price
and the fair market value of the stock of $1,277,500 was recorded
as a non-cash charge to operations. In 1998, IMM repaid $119,750
of amounts outstanding under stock subscriptions at December
31,1997. At December 31, 1998, $250,000 in stock subscriptions
receivable were outstanding from IMM for 1,000,000 shares
purchased at a discount to market in 1997.
ITEM 13.
EXHIBITS AND REPORTS ON FORM 8-K
The following documents are included as exhibits to this
report pursuant to Item 601 of Regulation S-B.
Exhibits.
Exhibit SEC Title of Document Location
No. Ref.
No.
1 (3)(i) Articles of Incorporation, as Fm 10-SB
amended (1) Page E-1
2 (3)(ii) By-Laws (1) Fm 10-SB
Page E-8
3 (10) Navarre Corporation Distribution Fm 10-SB
Agreement (1) E-35
4 (10) AT&T Download Agreement dated May This
14, 1998 Filing
Page E-1
5 (10) Assignment Agreement with ROSS This
Corporation dated Filing
December 10, 1997 Page E-9
6 (10) Agreement to Discharge Promissory This
Note with ROSS Corporation dated Filing
November 12, 1998 Page E-11
7 (10) Credit Agreement with IMM This
International, Inc., Filing
Dated October 1, 1998 Page E-13
8 (21) Subsidiaries of the Registrant This
Filing
Page E-31
9 (27) Financial Data Schedules (2) Not
Applicable
(1) Exhibit No.'s 1 and 2 are incorporated herein by this
reference to the Company's Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on December 21,
1998.
(2) The Financial Data Schedule for the year ended December 31,
1998, is presented only in the electronic filing with the
Securities and Exchange Commission.
FORM 8-K FILINGS
No reports on Form 8-K were filed in the last calendar quarter of
1998.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
J-BIRD MUSIC GROUP LTD.
Date: April 15, 1999 By: /s/ John J. Barbieri, President
In accordance with the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: April 15, 1999 /s/ John J. Barbieri, Director
Dated: April 15, 1999 /s/ Douglas G. McCaskey, Director
Dated: April 15, 1999 /s/ Hope D. Trowbridge, Director
Dated: April 15, 1999 /s/ Asa L. Fish, Director
J-BIRD MUSIC GROUP LTD.
Financial Statements
December 31, 1998 and 1997
CONTENTS
Independent Auditors' Report F-2
Balance Sheet F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-8
Notes to the Financial Statements F-11
Schnitzer & Kondub P.C.
Certified Public Accountants
550 Mamaroneck Avenue
Harrison, New York 10528
INDEPENDENT AUDITORS' REPORT
Board of Directors
J-Bird Music Group LTD.
We have audited the accompanying balance sheet of J-Bird Music Group
LTD. as of December 31, 1998 and the related statements of operations,
changes in stockholders' equity and cash flows for each of the years
in the two year period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the Company's
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 financial statements referred to above present
fairly, in all material respects, the financial position of J-Bird
Music Group LTD. as of December 31, 1998 and the results of its
operations and cash flows for each of the years in the two year period
ended December 31, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1. to
the financial statements the Company has suffered recurring losses
from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Schnitzer & Kondub P.C.
Harrison, New York
April 7,1999
J-BIRD MUSIC GROUP LTD.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS 1998
Cash $ 2,005
Inventory 198,474
Loans receivable, shareholder 173,500
Recording advances 16,589
Total Current Assets 390,568
Fixed assets, net 128,502
Other assets 7,279
Total Assets $ 526,349
LIABILITIES AND STOCKHOLDERS' EQUITY
Account payable and accrued expenses $ 412,708
Note payable 15,000
Accrued royalties 75,806
Total Current Liabilities 503,514
Due to IMM International, Inc. 113,560
Due to shareholders and officers 30,330
Total Liabilities 647,404
Stockholders' Equity(Deficiency)
Common stock $.001 par value 25,000,000 shares
authorized, 14,325,395 issued and outstanding 14,325
Stock subscriptions receivable (250,000)
Paid in capital 6,161,186
Deficit (6,046,566)
(121,055)
Total Liabilities and Deficit $ 526,349
See accompanying notes to financial statements
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Net sales $ 432,713 $ 145,248
Cost of sales 238,658 121,958
194,055 23,290
Operating expenses:
Advertising and promotion 440,864 162,377
Professional fees 92,371 212,255
Amortization and depreciation 40,489 27,092
Salaries 362,829 173,225
Interest 4,260 68,825
Selling, general and administrative expenses 472,466 264,329
1,413,279 908,103
Net (loss) before other (expenses) (1,219,224) (884,813)
Other income (expense):
Loss from disposition of assets (673,000) -0-
Investment advisory fees (595,000) -0-
Write down of inventory -0- (177,052)
Financing fee- sale of discounted
common stock (1,277,500) (868,000)
(2,545,500) (1,045,052)
Net loss $(3,764,724) $(1,929,865)
Net loss per common share (basic
and diluted) $ (0.29) $ (0.35)
Weighted average common shares
outstanding 13,002,670 5,497,341
See accompanying notes to financial statements
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Cash flows from (used in) operating activities
Adjustments to reconcile net (loss) to net cash
from (used in) operating activities: 1998 1997
Net (loss) $ (3,764,724) $ (1,929,865)
Loss on sale of assets 673,000 -0-
Amortization and depreciation 40,489 27,092
Financing fee- sale of common stock at discount 1,277,500 868,000
Decrease (Increase) in accounts receivable 10,095 (8,143)
(Increase) in inventory (144,708) (5,501)
Stock issued for services 718,945 78,300
Decrease (increase) in recording advances 5,076 (21,665)
Decrease (increase) other assets (5,120) -0-
Compensation expense (non cash) 120,000 88,750
Interest expense (non cash) -0- 65,000
Collection of note receivable 205,000 -0-
Notes payable -0- 40,000
Increase in accrued royalties 58,406 17,400
Increase in accounts payable 51,292 199,526
Net cash (used in) operating activities (754,749) (581,106)
Cash flows from (used in) investing activities
Cash acquired in merger -0- 2,448
Purchase of fixed assets (37,506) (60,936)
Net cash (used in) investing activities (37,506) (58,488)
Cash flows from (used in) financing activities
Stock issued for cash 775,000 553,820
Payment of stock subscription 119,750 -0-
Due from officer and shareholder (138,500) 13,719
Due to shareholders and officers (550) 380
Payments of notes payable (75,000) -0-
Proceeds from notes payable -0- 50,000
Due to IMM International Inc. 113,560 -0-
Net cash from financing activities 794,260 617,919
Net increase (decrease) in cash 2,005 (21,675)
Cash, beginning of year -0- 21,675
Cash, end of year $ 2,005 $ -0-
Supplemental cash flow information:
Cash paid for interest $ 4,600 $ -0-
See accompanying notes to financial statements
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
Common Retained
Common Stock Paid-in Earnings Subscription
Shares Amount Capital (Deficit) Receivable Total
BALANCE AT
January 1, 1997 4,000,000 $4,000 $429,000 $(351,977) $ - $ 81,123
Net loss - - - (1,929,865) - (1,929,865)
Stock
subscription
receivable 1,629,000 1,629 368,121 (369,750) -
Financing fee-
sale of
discounted
common stock - - 868,000 - - 868,000
Issuance of
stock warrant
for note payable - - 65,000 - - 65,000
Fair value of
employment
services-non
Compensated - - 88,750 - - 88,750
Merger of J-Bird
Music Group LTD 4,202,325 4,202 823,264 - - 827,466
Stock issued
for cash 1,074,570 1,074 552,746 - - 553,820
Stock issued
for services 80,000 80 78,220 - - 78,300
BALANCE AT
DECEMBER 31,
1997 10,985,895 10,985 3,273,201 (2,281,842) (369,750) 632,594
Net loss - - - (3,764,724) - (3,764,724)
Payment of
stock
subscription - - - - 119,750 119,750-
Financing fee-
sale of
discounted
common stock - - 1,277,500 - - 1,277,500
Shares cancelled (125,000) (125) - - - (125)
Fair value of
employment
services-non
compensated - - 120,000 - - 120,000
Merger shares 5,000 5 - - - 5
Stock issued for
cash 2,750,000 2,750 772,250 - - 775,000
Stock issued for
services 709,500 710 718,235 - - 718,945
BALANCE AT
DECEMBER 31,
1998 14,325,395 $14,325 $6,161,186 $(6,046,566) $(250,000) $(121,055)
See accompanying notes to financial statements
J- Bird Music Group LTD.
Notes to Consolidated Financial Statements
Years Ended December 31, 1998 and 1997
Note 1. Organization and Significant Accounting Policies
On October 7, 1997, Caltron, Inc. entered into a stock purchase
agreement with the shareholders of J-Bird Records, Inc. to
purchase their shares of J-Bird Records, Inc. for the equivalent
number of shares of the Company. The total number of Caltron
common shares issued to J-Bird Records, Inc. shareholders in
this transaction was 4,480,000 and was valued at $827,466, the
net assets of Caltron at date of acquisition. The number of
shares issued represents approximately 107% of the outstanding
Caltron shares at October 7, 1997. The 4,000,000 shares received
by the founding shareholders of J-Bird Records, Inc. in
connection with the transaction have been shown as outstanding
since the inception of J-Bird Records, Inc. This transaction is
in substance a capital transaction, accompanied by a
recapitalization and has been accounted for as a reverse merger
with J-Bird Records, Inc. being the acquiring company for
accounting purposes. Caltron, Inc. is the acquiring company for
legal purposes. The financial statements include the operations
of Caltron, Inc. since October 7, 1997, date of acquisition. No
goodwill was recorded in this transaction. On October 8, 1997
Caltron changed its name to J-Bird Music Group LTD (the
"Company"). J-Bird Records, Inc. is a wholly owned subsidiary of
J-Bird Music Group LTD.
J-Bird Records, Inc. is the first World Wide Web Recording Label
(TM). The Company was officially launched on November 1, 1996 to
market, distribute and sell music via a new medium - the
Internet. At its Website, located at http://www.j-
birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their
recordings through its on-line record store.
The Company has experienced operating losses since its inception
and has experienced significant cash flow problems. The Company
is in the process of raising capital through various sources to
fund its operations and has implemented certain operating
strategies to obtain profitably.
Amounts shown in the consolidated financial statements differ
from those previously reported to shareholders due to : a change
in the accounting for the merger between Caltron and J-Bird
Records Inc. with J-Bird Records Inc. being the acquiring
company, recording the estimated fair value of officer
compensation at no cost to the Company and accounting for the
issuance of stock in certain subscription agreements at less than
the fair market value of the stock . A reconciliation of sales
and net income is as follows:
1997 1996
Sales:
Sales as previously reported $ 13,226 $ -0-
Adjustments 132,022 6,376
Restated $ 145,248 $ 6,376
Net loss:
Net loss as previously reported $ (3,147,701) $ (473,310)
Adjustments 1,217,836 121,333
Restated $ (1,929,865) $ (351,977)
The previously issued financial statements included gross
goodwill of approximately $2,206,000. Goodwill has not been
recognized in the restated financial statements.
Investments in affiliates
The Company accounts for its investments in affiliates by using
the equity method of accounting, under which the Company's share
of earnings of these affiliates is reflected in the statement of
operations. Investments acquired through the issuance of the
Company's stock are recorded at an average of the most recent
sales price of the stock at the date of acquisition.
Fixed Assets
Fixed assets are recorded at cost and are being depreciated over
their estimated useful lives ( 5 to 15 years).
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, J-Bird Records Inc.
Material intercompany balances and transactions have been
eliminated in consolidation.
Cash
For purposes of the statement of cash flows, the Company
considers cash as cash held in operating accounts and all highly
liquid investments with a maturity of three months or less to be
cash equivalents.
Inventory
Inventory of $ 194,474 and $ 53,766, in 1998 and 1997 stated at
the lower of cost or market (first in, first out), consists of
musical CDs.
Revenue Recognition
Revenue is recorded when CDs are shipped from its fulfillment
center. The Company maintains its inventory at a fulfillment
center, which provides the shipping to customers. Most sales are
made with the right of return of unsold units. Estimated reserves
for returns are established by management based upon historical
and industry experience and the Company's product mix and are
subject to the ongoing review and adjustment by the Company.
Recording Advances
Recording advances represent advances against future royalties of
certain recording artists. When anticipated sales appear to be
insufficient to fully recover the advances, a provision against
current operations is made for anticipated losses
Royalties
Royalties are accrued at an average 12% of an artist's sales.
Mechanical royalties are estimated at approximately 50 cents per
musical CD sold.
Officers' Compensation
In 1998 and 1997 the chief executive officer received $ -0-
and $ 31,250 of cash compensation. The financial statements have
been adjusted to include annual compensation of $120,000, to
reflect the fair value of the services provided, as a charge to
operations. Paid in capital has been increased, accordingly.
Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standard No. 109, "Accounting for Income
Taxes." The Company has a net loss carry forward of
approximately $6,000,000, which expires through 2013.
Earnings Per Share
In 1997 the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share". Earnings per share are
based on the weighted average number of shares outstanding.
Common stock equivalents have not been considered as their effect
would be anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the 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.
Reclassifications and Restatements
In the previously issued financial statements the Company had
accounted for the acquisition of J-Bird Records, Inc. using the
purchase method of accounting with Caltron Inc. being the
acquiring company. The accompany financial statements have been
restated to reflect J-Bird Records, Inc. acquiring Caltron. In
addition certain sales of stock to shareholders at a price below
the market have been adjusted to reflect the difference between
the subscription price and fair market value of the stock as a
financing fee. The financial statements have also been adjusted
to reflect the estimated fair value of services performed by the
chief executive office at no cost to the Company.
Note 2. J-Bird Records Inc.
On October 7, 1997, Caltron, Inc. entered into a stock purchase
agreement with the shareholders of J-Bird Records, Inc. to
purchase their shares of J-Bird Records, Inc. for the equivalent
number of shares of the Company. The total number of Caltron
common shares issued to J-Bird Records, Inc. shareholders in
this transaction was 4,480,000 and was valued at $827,466, the
net assets of Caltron at date of acquisition. In 1997, 4,475,000
shares were issued and 5,000 shares were issued in 1998. The
number of shares issued represents approximately 107% of the
outstanding Caltron shares at October 7, 1997. The 4,000,000
shares received by the founding shareholders of J-Bird Records,
Inc. in connection with this transaction has been shown as
outstanding since the inception of J-Bird Records, Inc. This
transaction is in substance a capital transaction, accompanied by
a recapitalization and has been accounted for as a reverse merger
with. J-Bird Records, Inc being the acquiring company for
accounting purposes. Caltron, Inc. is the acquiring company for
legal purposes.
The financial statements include the operations of Caltron, Inc.
since October 7, 1997, date of acquisition. At the date of
acquisition Caltron's gross assets were comprised primarily of
two notes receivable valued at $850,000. No goodwill was
recorded in this transaction.
The following table summarizes the unaudited pro forma results of
operations of the Company for the year ended December 31, 1997
assuming the acquisition of Caltron, Inc. had occurred on January
1, 1997. The unaudited pro forma financial information presented
is not necessarily indicative of the results of operations that
would have occurred had the acquisition taken place on January 1,
1997 or of future results of operations.
Net Sales $ 145,248
Net (Loss) $ (4,390,758)
Net (loss) per share $ (.50)
Weighted average shares 8,784,010
Note 3. Disposition of Long Term Assets and Investments
Laminar Fluid Controls
On April 22, 1997, the Caltron entered into an option agreement
with Field Technologies, LLC ("FTL"), a company based in Bangor,
Maine. Under this Agreement, the Caltron merged its patents into
FTL for a five percent (5%) equity position in FTL. FTL is an
operating company run by the original inventor of the patented
valve technology.
In accordance with Statement of Financial Accounting Standard 121
"Accounting for the Impairment of Long Lived Assets and for Long
Lived Assets to be Disposed Of" no value was assigned to the
patents at the date of acquisition.
Rhode Island Renal Institute
On May 3, 1996, the Caltron entered into an agreement with Rhode
Island Renal Institute ("RIRI") and Brooks Porter ("Porter").
RIRI and Porter entered into a development and investment
agreement and pursuant to this agreement, RIRI agreed to provide
financial support, clinical testing facilities and supplies to
Porter to assist his development of the Renal Ozone Sterilization
System ("ROSS:"). Under the agreement with Caltron RIRI and
Porter assigned to Caltron the right to manufacture and
distribute ROSS and any interests created by the development and
investment agreement among Porter and RIRI. In accordance with
the agreement, RIRI received 125,000 shares of restricted common
stock of Caltron.
In December 1997, the ROSS Corporation signed an agreement with
the Company where the ROSS Corporation is going to buy the
Company's interest in the ROSS Project for $500, 000. In
connection with this transaction Caltron wrote down the value of
its investment to $500,000 as of the date of acquisition October
7,1997. A $500,000 note receivable was recorded by the Company
as of the date of acquisition.
In November 1998 the Company and the ROSS Corporation agreed to
exchange 125,000 shares of the Company's stock owned by ROSS for
the $500,000 note receivable in the accompanying financial
statements. The Company has recorded this transaction as a
$500,000 loss on disposition of assets in 1998. The shares have
been recorded as treasury stock.
Applied Advanced Technology
On June 14, 1996, Caltron entered into an Agreement with Applied
Advanced Technologies, Inc. ("AAT") and Tovi Avnery ("Avnery") to
acquire an interest in AAT and for AAT to acquire an equity
interest in Caltron Under the terms of this agreement, Caltron
received an interest in the rights, title and interest in and to
an electron beam technology. Under this Agreement, Caltron was
to advance a total of $300,000 dollars to AAT. AAT received a
total of $350,000. In return, the Company received 114,546
shares of common stock of AAT, representing 45% ownership in the
company. Avnery also received 130,000 shares of restricted
common stock of the Company.
On July 15, 1997, Caltron and AAT entered into a memorandum of
understanding to terminate its relationship whereby AAT will pay
Caltron $350,000 plus interest, not to exceed $500,000, by July
31, 1999. In September, 1997, Caltron executed a release and
assignment of interest in AAT, to be held in escrow until said
monies owed to Caltron have been paid in full. Caltron and AAT
entered into a pledge agreement in favor of the Company, wherein
AAT permitted the pledge of all issued and outstanding shares of
capital stock of AAT, as well as its patent/patent pending in a
certain electron beam accelerator, to secure AAT's obligation to
make certain deferred payments to the Company under the $350,000
promissory note. AAT also executed a release and assignment of
interest in Caltron. All shares of common stock of Caltron owned
by AAT or Avnery are to be returned to Caltron and are not
included in the outstanding shares of the Company at December 31,
1997.
In May of 1998 $205,000 was received for full settlement of the
$350,000 note due from AAT. The difference of $145,000 was
recorded as a loss on disposal of assets in the 1998. All shares
issued in this transaction have been returned to the original
issuing parties. The Company's shares have been recorded as
treasury stock.
Note 4. Related Party Transactions
In October 1998 the Company entered into a credit agreement with
IMM International, Inc., ("IMM") a company that owns
approximately 50% of the outstanding shares of the Company,
whereby IMM will provide up to $500,000 in financing to the
Company for working capital purposes. The agreement expired on
March 31,1999. Amounts outstanding under this agreement bear
interest at 8% and are due on June 30,2000. At December 31,1998
the Company had borrowed $113,560 under this agreement.
Subsequent to December 31,1998 the Company borrowed an additional
$ 191,000 under the credit agreement .
In April and July of 1997, an officer of Caltron entered into
stock subscription agreements with Caltron, Inc. to purchase
135,000 shares of stock at $.10 per share. The difference between
the subscription price and the fair market value of the stock,
$562,800, was recorded as consulting fees prior to the merger
with J Bird Records Inc.
In July of 1997, a shareholder of Caltron entered into a stock
subscription agreement with Caltron, Inc. to purchase 250,000
shares of stock at $.10 per share. The difference between the
subscription price and the fair market value of the stock,
$347,500, was recorded as financing fees prior to the merger with
J-Bird Records Inc.
In December of 1997, certain shareholders of the Company entered
into stock subscription agreements with the Company, to purchase
2,000,000 shares of stock at $.25 per share. The difference
between the
subscription price and the fair market value of the stock,
$868,000 was recorded as a non-cash charge to operations,
"financing fee-sale of discounted stock".
In 1998, certain shareholders of the Company entered into stock
subscription agreements with the Company, to purchase 2,750,000
shares of stock at prices ranging from $.25 to $.40 per share.
The difference between the subscription price and the fair market
value of the stock, $1,277,500 was recorded as a non-cash charge
to operations, "financing fee-sale of discounted stock". IMM
purchased 2,000,000 shares for $525,000 in 1998 and repaid
$119,750 of amounts outstanding under stock subscriptions at
December 31,1997. At December 31, 1998, $250,000 in stock
subscriptions receivable were outstanding from IMM who had
purchased the stock at a discount to market in 1997.
Note 5. Downloading Agreement
In 1998 the Company and a2b Music, a subsidiary of AT&T, entered
into an agreement whereby certain J-Bird artists would have
single musical productions available to be downloaded from a J-
Bird and a2B Music co - branded web site( that is hosted and
promoted as part of the a2b Music web site). The agreement allows
for approximately 15 musical titles from the J-Bird catalog to be
added to the web site each calendar quarter .The charge to
consumers for downloading the music is $1.99 per song track. A2b
is responsible for collecting the fees and maintaining the web
site. Revenues will be shared equally after a2b recovers its cost
for developing the web site not to exceed $2,000. J-Bird is
responsible to pay its artists 12% of its revenue share as a
royalty fee and $.071 on each download as part of the mechanical
license. Certain artists such as Billy Squier share equally the J-
Bird revue as a royalty fee. There was no revenue or costs
associated with this agreement in 1998.
Note 6. Fixed Assets
Fixed assets consist of:
Computer equipment and software $ 171,265
Leasehold improvement 8,571
Furniture and fixtures 22,836
202,672
Accumulated depreciation (74,170)
$ 128,502
=======
Note 7. Note Payable
The amount due at December 31, 1998 consist of a $15,000 note
payable to an individual, bearing interest at the prime rate to
provide the Company working capital.
In connection with the loan described above, warrants to purchase
2% of the J Bird Records Inc. outstanding common stock prior to a
merger or acquisition were issued. The warrants are exercisable
through March 2002 at $.25 per share. The number of warrants to
be issued is 87,140 based upon the merger with Caltron Inc. The
difference between the exercise price of the warrants and the
fair market value of the stock at the date of the loan, $65,000,
was recorded as interest expense in 1997.
Note 8. Common Stock
In 1998, the Company entered into investment advisory agreements
with two firms to assist the Company in raising capital. The
firms were issued 600,000 shares for their services. The Company
recorded a charge to operations for $ 595,000 in connection with
these agreements. The value of the stock issued was based upon
the current market price of the stock at the date the agreements
ere entered into.
At December 31, 1998, warrants to purchase 87,140 shares of
common stock exercisable through March 2002 at $.25 per share
were outstanding. See note
At December 31, 1998, options to purchase $260,000 shares of
stock at $1 per share exercisable through 2002 were outstanding.
No expense was recorded as the option price exceeded the market
price of the Company's stock at date of grant.
An original J-Bird records Inc. stockholder was granted an option
to purchase shares, under the same terms of future subscription
agreements for stock to be issued under fair market value, to
maintain a 2.3 % ownership percentage of the Company. No options
have been exercised under this agreement. Approximately 30,000
shares may be issued upon exercise of the option.
Note 9. Commitments and Contingencies
(a) Leases
The Company has an operating lease agreements for an office
condominium. Aggregate annual minimum future rental payments
under the leases are $31,650, in 1999 and $ 18,466 in 2000. The
Company has an option to purchase the office condominium for
$379,800 at the end of the lease. Fifty percent of the aggregate
lease payments would be applied to the purchase price. Rent
expense was approximately $ 31,000 and $ 8,000 in 1998 and 1997,
respectively.
(b) Operating Agreements
The Company has a one year agreement with a public relations firm
that requires monthly payments of $4,500 in 1999.
(c) Common Stock
During the years ended December 31, 1998 and 1997, the Company
issued shares of its common stock. These shares were not
registered under the Securities Act of 1933 based on the
exemption from registration thereunder provided by section 4 (2),
thereof for offerings not involving a public offering.
Note 9. Subsequent Events
In January 1999 the Company obtained a $100,000 line of credit
with a commercial bank. The line of bears interest at 2% above
the bank's prime rate. Certain officers and shareholders have
personally guaranteed the debt. The Company has borrowed
$100,000 as of March 31,1999 under the line of credit.
E-1
Exhibit 4
J-Bird Music Group Ltd.
Form 10-KSB
File No. 0-24449
J-BIRD MUSIC GROUP LTD. DOWNLOAD AGREEMENT
THIS AGREEMENT ("Agreement") is entered into by and
between AT&T Corp. ("AT&T"), 635 Madison Avenue, New York, New
York 10022, and J-Bird Music Group Ltd. ("J-Bird"), 396 Danbury
Road, Wilton, Connecticut 06897. The Agreement is made effective
as of the date that the last party to the Agreement signs it
where provided below (the "Effective Date"). In consideration of
the mutual promises contained herein, the parties agree as
follows:
WHEREAS, AT&T has developed a new technology (the
"Technology") for: (i) taking sound recordings (each, a "Track")
and creating encoded versions thereof (each, an "Encoded Track");
(ii) the delivery of Encoded Tracks via the Internet to
interested Internet users (each, a "Consumer"); and (iii) the
storage of Encoded Tracks in the hard drive of a Consumer's
general purpose computer and the playback of such Encoded Tracks
from such Consumer's hard drive (such transmission, reception,
storage and playback being referred to as a "Music Download");
and,
WHEREAS, AT&T and J-Bird wish to enhance awareness of
their respective products and services by making available to
Consumers via co-branded promotional pages (the "Promotional
Pages") created by AT&T and hosted on AT&T a2b musicsm website
(the "AT&T Website") Music Downloads of certain Encoded Tracks as
performed by certain musical performers (each, an "Artist"), for
the purpose of enabling Consumers to effect Music Downloads of
the Encoded Tracks;
NOW, THEREFORE, in consideration of the mutual promises
contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are acknowledged hereby, the
parties agree as follows:
1. License.
(a) J-Bird hereby grants to AT&T during the Term,
as defined in paragraph 3 below, the worldwide right to use: (i)
the Tracks set forth in Schedule A hereto (as such Schedule A may
be amended from time to time by mutual agreement of the parties)
for the purpose of preparing Encoded Tracks; (ii) the Encoded
Tracks for Music Downloads; (iii) the artwork from the albums
from which the applicable Tracks were taken (each, an "Album")
and the underlying musical compositions and lyrics (together, the
"Composition") embodied on the applicable Tracks (the artwork and
Compositions are together referred to herein as the "Album
Materials") in connection with such encoding and Music Downloads;
and, (iv) the name, approved likeness and biography of each
Artist performing one or more Tracks and such Artists' logos (if
any) (together, the "Artist Property"), in connection with such
encoding, Music Downloads and advertising and/or promotion of the
Music Downloads. The schedule of delivery by J-Bird of the
Tracks, Album Materials and Artist Property, and the availability
to Consumers on the Promotional Pages of the corresponding Music
Download, shall be in accordance with Schedule A. Prior to
delivery to AT&T, J-Bird shall obtain all necessary approvals and
clearances respecting any Album Materials and Artist Property
from all interested parties for the purposes contemplated herein.
Album cover art, Artist logos and any other graphical material
shall be delivered to AT&T in JPEG bitmap format or any other
format approved by AT&T. After the Term, AT&T will: (i) have no
rights to the Tracks or Encoded Tracks, Album Materials and
Artist Property; (ii) remove the Encoded Tracks, Album Materials
and Artist Property from the AT&T Website; and (iii) return to J-
Bird or destroy any and all copies of the Tracks and Encoded
Tracks, Album Materials and Artist Property in AT&T's possession,
except that AT&T may retain copies of Encoded Tracks for
demonstration purposes which shall not include any transmission
to the general public and, with J-Bird's approval, retain and use
the Encoded Tracks for promotional purposes.
(b) Music Downloads of Encoded Tracks will only
be permitted from the Promotional Pages and other such websites
which may be mutually agreed to in writing by the parties. AT&T
shall be responsible for the content and operation of the
Promotional Pages. Access to the Promotional Pages shall be
permitted to all Consumers at no charge and without
discrimination or precondition, except that Consumers may be
required to furnish certain information, such as the Consumer's e-
mail address, zip code and other demographic information
("Consumer Data"), and to accept the "Limited Use and Software
License Agreement" for the Consumer's download and use of the
software needed to play the Encoded Track (the "Player
Software"). J-Bird agrees that during the Term any website
operated by J-Bird or under J-Bird's control shall feature
exclusively the AT&T Technology and a2b music method of Music
Download.
(c) J-Bird shall promptly notify AT&T whether any
of the Compositions embodied on any of the Tracks furnished to
AT&T are in the public domain. If a Composition is not in the
public domain, J-Bird agrees that it has obtained, or shall
obtain prior to such delivery to AT&T, all necessary rights
relating to such Composition for the uses contemplated in
subparagraphs (a) and (b) above, and J-Bird shall be responsible
for any consideration due to any third parties (e.g., music
publishers) for use of such Composition in accordance herewith.
(d) AT&T will display a credit for J-Bird on the
Promotional Pages to be mutually agreed by the parties.
2. Warranties and Indemnities.
(a) J-Bird represents and warrants that it is the
owner of, or has obtained such rights necessary for AT&T to
exercise the rights herein granted to, the Tracks, Album
Materials and Artist Property, and that it has the full right and
authority to enter into this Agreement and grant the rights
herein granted, including, but not limited to, all United States
and worldwide Internet online rights (e.g., public performance,
adaptation, reproduction, transmission and distribution rights)
in the Tracks, Album Materials and Artist Property. J-Bird
further represents and warrants that it operates a website,
currently located at URL address www.jbirdrecords.com, and that J-
Bird shall maintain its website in accordance with the terms
hereof for the duration of the Term. J-Bird shall indemnify and
hold harmless AT&T, its parents, its past, present and future
agents, subsidiaries and affiliates, and their respective
employees, officers, agents and directors, against any and all
third party claims, actions and proceedings settled with J-Bird's
consent or reduced to final judgment (including reasonable
attorneys fees and expenses) that the Tracks, Album Materials,
Artist Property and/or Encoded Tracks (but only to those portions
of the Encoded Tracks embodying the sound recording and not the
Technology), and/or the use thereof as contemplated herein,
infringes on any third party copyrights, trademarks or other
intellectual property rights. This obligation shall survive the
termination of this Agreement.
(b) AT&T represents and warrants that it either
is the owner of the Technology or has the rights thereto required
to perform its obligations hereunder, and that it has the full
right and authority to enter into this Agreement, to grant the
rights granted herein and to render the services to be rendered
hereunder. AT&T shall indemnify and hold harmless J-Bird, its
parents, its past, present and future agents, subsidiaries and
affiliates, and their respective employees, officers, agents and
directors, against any and all third party claims, actions and
proceedings settled with ATU's consent or reduced to final
judgment (including reasonable attorneys fees and expenses) that
the Technology and/or those portions of the Encoded Tracks
embodying the Technology (and not the sound recordings) infringe
on any patent, copyright, trademark or other intellectual
property right. This obligation shall survive the termination of
this Agreement.
3. Term. The Term shall commence on the Effective
Date and continue for a period of one year. The Term shall
thereafter be renewable for successive one-year periods upon
mutual agreement of the parties. The foregoing notwithstanding,
AT&T may terminate this Agreement at any time upon written notice
to J-Bird in the event J-Bird has breached any of the terms,
conditions, representations or warranties hereof or if
continuation of the Agreement would expose AT&T to legal
liability.
4. Promotion and Marketing.
(a) If AT&T furnishes J-Bird with the AT&T a2b
music branded banner (the "AT&T Banner"), or if J-Bird furnishes
AT&T with the J-Bird Records branded banner (the "J-Bird
Banner"), then the receiving party shall use the furnished banner
as a linking icon on its website. Any link through the AT&T
Banner on J-Bird's website will permit interested Consumers to be
transferred to the home page of the AT&T Website, and any link
through the J-Bird Banner on the AT&T Website will permit
interested Consumers to be transferred to the home page of J-
Bird's website. J-Bird agrees that the AT&T Banner shall receive
prominent placement on any and all websites operated by J-Bird or
under J-Bird's control for as long as Music Downloads of any of
the Encoded Tracks are made available during the Term hereof.
AT&T shall have approval, not to be unreasonably withheld, over
the appearance of the J-Bird Banner. Both the J-Bird website and
the AT&T Website shall feature a co-branded AT&T a2b musicsm/J-
Bird Records banner which will link Consumers to the Promotional
Pages, and the Promotional Pages will feature both the AT&T
Banner and the J-Bird Banner linking Consumers to the respective
home pages of AT&T and J-Bird.
(b) AT&T agrees to brand with J-Bird's logo (or
other specified J-Birdrelated image) the Player Software
downloaded from the Promotional Pages devoted to the J-Bird
promotion (the "Custom Player Software"), which logo or image
shall be furnished to AT&T in JPEG bitmap format or any other
format approved by AT&T within a reasonable period of time prior
to the scheduled date the Custom Player Software is to be made
available by AT&T for download. AT&T shall have approval, not to
be unreasonably withheld, over the appearance of the J-Bird logo
or image on the graphical display of the Custom Player Software.
The J-Bird logo or image will appear whenever a Consumer opens
the Custom Player Software.
(c) Music Downloads of Encoded Tracks will include
an autoresponder e-mail coupon offering Consumers a discount of
One Dollar ($1.00) off the retail price of the Album from which
the Encoded Track was taken at selected brick-and-mortar retail
outlets to be determined by J-Bird ("Retail Outlets"). J-Bird
shall be responsible for furnishing AT&T with a digital version
of the coupon in JPEG format within a reasonable period of time
prior to the date said coupon will be made available to
Consumers, the form of which coupon shall be subject to AT&T's
approval. J-Bird shall further be responsible for any
arrangements made with Retail Outlets for discounts on Albums
(including, but not limited to, reimbursements of discounted
amounts and promotions), and J-Bird shall indemnify and hold
harmless AT&T, its parents, its past, present and future agents,
subsidiaries and affiliates, and their respective employees,
officers, agents and directors, against any and all third party
claims, actions and proceedings arising from any such
arrangements. This indemnity shall survive the termination of
this Agreement
(d) Except as provided herein, no use may be made
of the trademarks, service marks, logos, trade names and/or other
insignia or symbols of either AT&T or J-Bird without the written
approval of the owner thereof. Each party shall have reasonable
approval over press releases, promotion and advertising of the
other party.
5. Compensation and Fees. Music Downloads from the
Promotional Pages shall be made available to Consumers at a cost
to be determined by J-Bird (but in no event less than $0.99 per
Music Download), payable by credit card. AT&T shall collect all
monies from the sale of Music Downloads and shall retain for
itself the first Two Thousand Dollars ($2,000) thereof, net of
credit card fees, returns and taxes. Thereafter, AT&T and J-Bird
shall share equally in amounts collected from the sale of Music
Downloads, after deducting credit card fees, returns and taxes.
6. Limits of Liability. Notwithstanding anything to
the contrary herein, each party's liability to the other for any
and all claims and damages incurred by such party relating to or
arising out of the subject matter of this Agreement, whether in
contract, tort, implied warranty, strict liability or other form
of action, (except for real or tangible property damage or
personal injury or death and any claims or damages relating to or
arising out of any claim, action or proceeding which is subject
to the above-referenced rights of indemnity); shall be limited to
Fifty Thousand Dollars ($50,000).
7. General.
(a) Paragraph Headings. Paragraph headings
contained in this Agreement are for convenience only and shall
not be considered for any purpose in governing the provisions of
this Agreement and shall not otherwise be given any legal effect.
(b) Assignments. AT&T may assign this Agreement
or any of its rights or delegate any of its duties under this
Agreement without limitation. J-Bird may not make such an
assignment or delegation hereunder to any entity without the
prior written consent of AT&T. Any purported assignment or
delegation of any such rights or duties hereunder without such
required consent shall be null and void.
(c) Waive . No term or provision hereof will be
considered waived by either party, and no breach excused by
either party, unless such waiver or consent is in writing signed
by the party against whom the waiver is asserted. No consent by
either party to, or waiver of, a breach by either party, whether
express or implied, will constitute a consent to, waiver of, or
excuse of any other, different, or subsequent breach by either
party-
(d) Severability. If any part of this Agreement
is found invalid or unenforceable, that part will be amended to
achieve as nearly as possible the same economic effect as the
original provision and the remainder of this Agreement will
remain in full force.
(e) Governing Law. This Agreement shall be
governed by the law of the State of New York, without regard to
conflicts of law principles. If a dispute arises out of, or
relates to, this Agreement, and is not resolved by the parties,
the parties agree to submit such dispute to non-binding mediation
to be held in accordance with the Commercial Mediation Rules of
the American Arbitration Association ("AAA"). The parties agree
that their participation in a mediation and the entire mediation
proceeding, including but not limited to all statements,
discussions, conducts, rulings, findings or determinations in
that mediation proceeding or related to it, will be confidential,
will constitute settlement negotiations under Rule 408 of the
Federal Rules of Evidence and will not be admissible in any
proceeding or any action of any kind, and that neither party will
introduce or attempt to introduce the above in any proceeding or
action. The parties agree to perform whatever steps are necessary
to ensure that each mediation proceeding complies with this
paragraph. If not thus resolved, it shall be referred to a sole
arbitrator selected by the parties within thirty (30) days of
mediation or, in the absence of such selection, to AAA
arbitration which shall be governed by the United States
Arbitration Act. The award shall be made within six (6) months of
selection of the arbitrator and may be entered in any court
having jurisdiction. The mediation and arbitration shall be held
in New York City. The arbitrator shall determine issues of
arbitrability but may not limit, expand or otherwise modify the
terms of the Agreement nor have authority to award punitive or
other damages in excess of compensatory damages and each party
irrevocable waives any claim thereto. Each party shall bear its
own expenses but those related to the compensation of the
mediator and arbitrator shall be borne equally. The parties,
their representatives, other participants and the mediator and
arbitrator shall hold the existence, content and result of
mediation and arbitration in confidence. Issues of intellectual
property shall not be subject to mediation or arbitration.
(f) Entire Agreement. This Agreement (including
any exhibits and schedules which are attached hereto and made a
part hereof by this reference) shall constitute the entire
understanding of the parties with respect to the subject matter,
superseding all prior and contemporaneous promises, agreements
and understandings, whether written or oral, pertaining thereto
and cannot be modified, amended or rescinded, other than as
provided by its terms, except by a writing duly executed by an
authorized representative of the party to be charged.
(g) Survival. The termination or expiration of
this Agreement, howsoever occasioned, shall not affect any of the
provisions of this Agreement which are expressly or by
implication to come into or continue in force after such
termination or expiration, including without limitation all
warranties and indemnities.
(h) Counterparts. This Agreement may be executed
in one or more counterpart copies, each of which shall be
considered an original, and all of which when taken together
shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page by telecopier shall be
as effective as delivery of an original manually executed
counterpart.
(i) Relationship of the Parties. There is no
relationship of agency, partnership, joint venture, employment or
franchise between the parties, and neither party has the
authority to bind the other or to incur any obligation on its
behalf.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as the Effective Date.
AT&T Corp. J-Bird Music Group Ltd.
By: /s/ By: /s/
Date: 5/14/98 Date: 5/11/98
AT&T
Schedule A
Tracks for AT&T Downloads.
Artist Song Track # Album
1. Jimmy Stewart Rainbow Track # 1 Memrobilia
2. The Guess Who ? These Eyes Track # 15 Greatest Hits
3. Sugarpop Heavy Duty Jones Track # 1 Give Up Your Sister
4. Lovechild All your Oceans Track # 1 Lovechild
5. Alan St. Jon Kick Track # 3 Sky Daddy
6. Fraternal Order Greetings From Track # 1 Greetings from
Planet Love Planet Love
7. Greg Serrato Child of the Blues Track # 10 Child of the Blues
8. Dress Code Power Surge Track # 9 About Time
9. Harlem Gospel Choir Jesus Is His Name Track # 1 Harlem Gospel Choir
10. Jak Tweed Shining Through & Tracl # 1 Outer Shell
E-9
Exhibit 5
J-Bird Music Group Ltd.
Form 10-KSB
File No. 0-24449
ASSIGNMENT AGREEMENT
This Assignment Agreement, made this 10th day of December,
1997 by and among J-BIRD MUSIC GROUP LTD, a Pennsylvania
corporation with its principle place of business at 396 Danbury
Road, Wilton, CT 06897 ("J-Bird"), and ROSS CORPORATION, a Rhode
Island coporation with offices at 7 Wilson Street, Narragansett,
R1 02882 ("Ross Corporation").
WHEREAS, pursuant to an Assignment Agreement dated May 3,
1996 by and between Caltron, Inc., Brooks Porter ("PORTER"), and
Rhode Island Renal Ozone Sterilaization System ("ROSS") and any
rights that Porter and RIRI had pursuant to a Development and
Investment Agreement dated Nevember4 21, 1995 (hereinafter the
Assigned Rights:
WHEREAS, pursuant to a merger by and between Caltron and J-
Bird, J-Bird has assumed certain of Caltron rights, including
Caltron's right to the Assigned Rights.
WHRERAS, PORTER and RIRI, by executing this Assignment
Agreement do hereby consent to J-Bird's assumption of Caltron's
rights to the Assignee Rights.
WHEREAS, J-Bird now desires to assign its interests in the
Assigned Rights to Ross Corporation and Ross Corporation desires
to accept such assignment in exchange for said monies described
in Section 2.
NOW THEREFORE, in consideration of the mutual premises and
promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledge, the signatory parties agree hereto as follows:
1. Assignment
J-BIRD hereby assigns all of its rights, title and interests
in said Assignments Agreement dated May 3, 1996 to Ross
Corporation. Under said Assignment. Ross Corporation must comply
with any and all conditions outlined is said Assignment Agreement
and Ross Corporation specifically agrees to perform all
obligations of Caltron pursuant to said Assignment Agreement,
(See Exhibit A attached hereto.) Notwithstanding the foregoing, J-
Bird, Ross Corporation, RIRI, and Porter hereby agree that the
reversion right provided in Section 10 of the Assignment
Agreement dated May 3, 1996 shall be triggered within five (5)
years of the date of this Assignment Agreement rather than within
five (5) years of the Assignment Agreement dated May 3, 1996.
2. Consideration for Assignement.
In consideration of the foregoing, Ross Corporation shall
pay to J-Bird five hundred thousand dollars ($500,000). Said
monies shall be paid pursuant to the promissory note and pledge
agreement attached hereto as Exhibit B.
IN WITNESS WHEREOF, the parties have set their hands and
seal this day, month, and year above written.
J-BIRD MUSIC GROUP LTD
/s/
John J. Barbieri
President
ROSS CORPORATION
/s/
Robert Cooke
President
RHODE ISLAND RENAL INSTITUTE
/s/
James Cook
Executive Director
/s/
Brooks S. Porter
E-11
Exhibit 6
J-Bird Music Group Ltd.
Form 10-KSB
File No. 0-24449
AGREEMENT
TO
DISCHARGE PROMISSORY NOTE
AND
RELEASE COLLATERAL
AGREEMENT entered into this 12th day of November, 1998 by and
between ROSS CORPORATION, a Rhode Island corporation having a
principal place of business located at Allens Avenue, Wakefield,
Rhode Island (Hereinafter Ross) and J-BIRD MUSIC GROUP, LTD., a
Pennsylvania corporation having a principal place of business at
396 Danbury road, Wilton, Connecticut (Hereinafter J-Bird).
WHEREAS J-Bird assigned all of its right, title and interest in
and to the technology and patents pending in a renal ozone
sterilization system (Hereinafter the assigned rights) by an
assignment which purports to have been executed in February, 1998
(EXHIBIT A and hereinafter the assignment) and;
WHEREAS Ross, in return for said assignment, executed a
promissory note dated December 10, 1997 (EXHIBIT B and
hereinafter the note) in the amount of five hundred thousand
dollars ($500,000) and;
WHEREAS Ross secured the note by pledging the assigned rights as
collateral by executing a pledge agreement dated December 10,
1997 (EXHIBIT C and hereinafter the pledge) and;
WHEREAS J-Bird is desirous of obtaining more shares of its own
stock and;
WHEREAS the parties are now desirous of solidifying and
reaffirming the transactions contemplated by Exhibits A, B and C
and this agreement;
NOW THEREFORE, in consideration of the mutual premises and
promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. REAFFIRMATION OF PREVIOUS DOCUMENTS
The parties agree that EXHIBITS A, B, and C are hereby
reaffirmed. The date of the assignment is hereby amended to read
December 10, 1997 and any other assignments relating to the same
transaction which may have been executed by the parties is hereby
declared null and void.
2. SATISFACTION OF THE NOTE
Ross shall transfer to J-Bird on hundred twenty-five thousand
(125,000) shares of J-Bird common stock full performance,
satisfaction and payment of all of its obligations under the
note.
3. DISCHARGE OF THE NOTE AND RELEASE OF PLEDGED COLLATERAL
J-Bird shall completely discharge and cancel the note and release
the assigned rights pledged as collateral to secure the note. J-
Bird shall return the originals of those documents with the
appropriate acknowledgments of full satisfaction, payment and
release contemporaneously with the execution of this agreement.
4. REPRESENATIONS OF J-BIRD
A. J-Bird represents and warrants that it has not encumbered
the assigned rights either prior to the assignment or subsequent
to the pledge as collateral to secure the note.
B. J-Bird represents and warrants that it is duly authorized by
all necessary corporate action relating to the execution of this
agreement and the consummation of the transaction contemplated
hereby as well as those transactions contemplated by EXHIBITS A,
B and C. This agreement as well as EXHIBITS A, B and C have been
duly executed and delivered and constitutes the legal, valid and
binding obligations of J-Bird.
C. J-Bird remises, releases and forever quitclaims unto Ross,
its heirs, assigns, executors and administrators, any and all
manner of actions, causes of actions, debts, dues, claims and
demand arising out of its ownership of the assigned rights and
the transactions contemplated hereby and agrees to defend any
claims that may be raised that may be raised against Ross by
anyone arising out of the time that J-Bird owned said assigned
rights or held them as collateral to secure the note.
5. REPRESENTATIONS OF ROSS
Ross has been duly authorized by all necessary corporate actions
relating to the execution, delivery and performance of this
agreement and the consummation of the transactions contemplated
hereby. This agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligations of Ross.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals this day, month and year above written.
ROSS CORPORATION
BY: /s/
J-BIRD MUSIC GROUP, LTD
BY: /s/
E-30
Exhibit 7
J-Bird Music Group Ltd.
Form 10-KSB
File No. 0-24449
CREDIT AGREEMENT
Dated as of October 1, 1998
by and among
J-BIRD MUSIC GROUP, LTD.
as Borrower,
and
IMM INTERNATIONAL, INC.
as Lender
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 1, 1998, by and
among J-BIRD MUSIC GROUP, LTD., a Pennsylvania corporation as
"Borrower", and IMM INTERNATIONAL, INC., a Pennsylvania
corporation, as "Lender."
WITNESSETH:
RECITALS.
A. The Borrower desires to obtain from the Lender Term
Loans in the aggregate principal amount of up to $500,000; and
B. The Lender is willing, on the terms and conditions set
forth herein, to make the Term Loans;
NOW, THEREFORE, for good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Defined Terms. The following terms
(whether or not underscored) when used in this Agreement,
including its preamble and recitals, shall, except where the
context otherwise requires, have the following meanings (such
meanings to be equally applicable to the singular and plural
forms thereof):
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under
common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan).
A Person shall be deemed to be "controlled by" any other Person
if such other Person possesses, directly or indirectly, power (a)
to vote 5% or more of the securities having ordinary voting power
for the election of directors of such Person, or (b) to direct or
cause the direction of the management or policies of such Person
whether by contract or otherwise; provided that the Lender shall
not be deemed to constitute an Affiliate of the Borrower.
"Business Day" means any day, which is neither a Saturday
nor Sunday, nor a legal holiday on which banks are authorized or
required to be closed in New York, New York.
"Charges" means all federal, state, county, city, municipal,
local, foreign or other governmental (a) taxes at the time due
and payable and (b) levies, assessments, charges, liens, claims
or encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) the Borrower's ownership or use of its assets,
or (iv) any other aspect of the Borrower's business.
"Commitment Period" means the period beginning on the date
of this Agreement and ending March 31, 1999.
"Contract" means any agreement or agreements pursuant to or
under which any Person shall be obligated to pay for services
rendered or merchandise sold to any Person from time to time.
"Contractual Obligation" means, relative to any Person, any
provision of any security issued by such Person or of any
Instrument or undertaking to which such Person is a party or by
which it or any of its property is bound.
"Default" means any Event of Default or any condition or
event, which, after notice or lapse of time or both, would
constitute an Event of Default.
"Event of Default" means any of the events set forth in
Section 6.1.
"Funding Date" means the date on which each Term Loan is
made pursuant to Section 2.1.
"herein", "hereof", "hereto", "hereunder" and similar terms
contained in this Agreement or any other Loan Document refer to
this Agreement or such other Loan Document, as the case may be,
as a whole and not to any particular Section, clause or provision
of this Agreement or such other Loan Document.
"including" means including without limiting the generality
of any description such term.
"Instrument" means any contract, agreement, letter of
credit, indenture, mortgage, deed, certificate of title, document
or writing (whether by formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken,
any Lien (or right or interest therein) is granted or perfected,
or any property (or right or interest therein) is conveyed.
"Lien" means any mortgage, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, lien
(statutory or other), adverse claim or preference, priority or
other security agreement or preferential arrangement of any kind
or nature whatsoever (including any conditional sale or other
title retention agreement, any financing lease involving
substantially the same economic effect as any of the foregoing
and the filing of any financing statement under the UCC or
comparable law of any jurisdiction).
"Loan" means, collectively, the Term Loans.
"Loan Document" means, collectively, this Agreement and the
Term Notes entered into by the Borrower and Lender, and each
other Instrument executed and delivered by the Borrower as of the
date hereof or any time thereafter, in connection with the
transactions contemplated by this Agreement, in each case, as
amended, modified or supplemented from time to time.
"Material Adverse Change" means a material adverse change in
(a) the condition (financial or otherwise), operations,
performance, business, properties or prospects of the Borrower;
or (b) the rights and remedies of the Lender under the Loan
Documents; or (c) the ability of the Borrower to repay the
Obligations or of the Borrower to perform its obligations under
the Loan Documents; or (d) the legality, validity or
enforceability of any Loan Document.
"Maturity" means relative to any Loan or portion thereof,
the earlier of such Loan's Stated Maturity Date or such other
date when such Loan or portion thereof shall be or become due and
payable in accordance with the terms of this Agreement, whether
by required repayment, prepayment, declaration or otherwise.
"Obligations" means all payment and performance obligations
of the Borrower (monetary or otherwise) arising under or in
connection with this Agreement, the Term Notes and other Loan
Documents.
"Organic Document" means, relative to any Person, its
articles or certificate of incorporation or organization or
certificate of limited partnership or organization, its bylaws,
partnership or operating agreement or other organizational
documents, and all stockholders agreements, voting trusts and
similar arrangements applicable to any of its common stock or
partnership interests or other ownership interests.
"Person" means any natural person, corporation, partnership,
limited liability company, firm, association, government,
governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Requirements of Law" means, as to any Person, the Organic
Documents of such Person, and all federal, state and local laws,
rules, regulations, orders, decrees or other determinations of an
arbitrator, court of other governmental authority.
"Stated Maturity Date" means, with respect to the Loan, June
30, 2000.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the
common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Taxes" means all taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of the Lender, taxes imposed on
or measured by its net income and franchise taxes imposed on it.
"Term Loans" means the advances to be made by Lender to
Borrower pursuant to Section 2.1.
"Term Notes" means the promissory notes of the Borrower
substantially in the form of Exhibit A, and shall also refer to
all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"written" or "in writing" means any form of written
communication or a communication by means of telephone facsimile
device.
ARTICLE 2
COMMITMENTS
SECTION 2.1. Term Loans. The Lender will make Term Loans
to Borrower under this Agreement, as requested by Borrower from
time to time during the Commitment Period. Borrower shall be
deemed to have made a request for a Term Loan on and as of the
second business day following the day on which Borrower gives
Lender telephonic notice (confirmed in writing) of each requested
Term Loan (the "Funding Date") by calling Hope Trowbridge (Tel.
No. 203-255-3721). Each telephonic notice and written
confirmation shall contain an affirmation by a duly authorized
officer of Borrower to the effect that the conditions under
Article 3 of this Agreement are satisfied as of the date of the
request and that the funds will be used to satisfy outstanding
obligations incurred and for working capital purposes. No later
than 3:00 P.M. (Eastern time) on the Funding Date, Lender will
wire transfer to Borrower in immediately available funds an
amount equal to the requested Term Loan, subject in each instance
to the satisfaction of the conditions set forth in Article 3
hereof.
SECTION 2.2. Notes. Each Term Loan made by Lender shall
be evidenced by a Term Note payable to the order of the Lender in
the principal amount of the Term Loan.
SECTION 2.3. Principal Payments. The Borrower will make
payment in full of all unpaid principal of the Loan at its Stated
Maturity Dated (or such earlier date as such Loan may become or
be declared due and payable pursuant to Article 6). Prior
thereto, the Borrower may, from time to time on any Business Day,
make a voluntary prepayment in whole or in part, of the
outstanding principal amount of the Loan. Payments under this
Section 2.3.1 shall be applied first to the payment of Interest
under Section 2.4.1, and next to the payment of principal.
SECTION 2.4. Interest. Interest on the outstanding
principal amount of the Loan and other outstanding Obligations
shall accrue and be payable at the rate of 8% per annum. The
Borrower will make payment in full of all accrued and unpaid
Interest on the Loan at its Stated Maturity Dated (or such
earlier date as such Loan may become or be declared due and
payable pursuant to Article 6). Prior thereto, the Borrower may,
from time to time on any Business Day, make a voluntary
prepayment in whole or in part, of the outstanding accrued and
unpaid Interest on the Loan.
SECTION 2.5. Payments, Interest Rate Computations, Other
Computations, etc. All such payments required to be made to the
Lender shall be made, without setoff, deduction or counterclaim,
not later than 2:00 p.m., Eastern time, on the date due, in
immediately available funds, to such accounts as the Lender shall
specify from time to time by notice to the Borrower. Funds
received after that time shall be deemed to have been received by
the Lender on the next following Business Day. All interest and
fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring
during the period for which such interest or fee is payable over
a year comprised of 360 days. Whenever any payment to be made
shall otherwise be due on a day, which is not a Business Day,
such payment shall be made on the immediately preceding Business
Day.
SECTION 2.6. Use of Proceeds. The Borrower shall use the
proceeds of the Term Loans for working capital needs.
ARTICLE 3.
CONDITIONS TO LOANS
SECTION 3.1. Initial Loan. The obligation of the Lender
to fund the first Term Loan and each subsequent Term Loan shall
be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Section 3.1.
SECTION 3.1.1. Resolutions, etc. The Lender shall have
received:
(a) a certificate, dated the Closing Date, of the secretary
of the Borrower as of the Closing Date as to:
(i) resolutions of its Board of Directors, then in full
force and effect authorizing the execution, delivery and
performance of the Loan Documents and the related transactions
contemplated thereby, and
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to the Loan Documents;
(b) such other documents (certified if requested) as the
Lender may reasonably request, with respect to this Agreement,
the Note, any other Loan Document, the transactions contemplated
hereby and thereby, or any Organic Document or Contractual
Obligation.
SECTION 3.1.2. Notes. The Lender shall have received a Term
Note executed and delivered pursuant to Section 2.2.
SECTION 3.1.3. No Contest, etc. No litigation, arbitration,
governmental investigation, injunction, proceeding or inquiry
shall be pending or, to the knowledge of the Borrower, threatened
which:
(a) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of,
the transactions contemplated by or in connection with the
Agreement or any Loan Document; or
(b) would, in the opinion of the Lender, be materially
adverse to any of the parties hereto with respect to the
transactions contemplated hereby.
ARTICLE 4
WARRANTIES, ETC.
In order to induce the Lender to enter into this Agreement,
to engage in the transactions contemplated herein and in the
other Loan Documents and to make the Loans, the Borrower
represents and warrants to the Lender as set forth in this
Article 4.
SECTION 4.1. Organization, Power, Authority, etc. The
Borrower (i) is a corporation validly organized and existing and
in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where
the failure to so qualify could result in a Material Adverse
Change, and (iii) has full power and authority, and holds all
governmental licenses, permits, regulations and other regulatory
approvals required under all Requirements of Law, to own and hold
under lease its property and to conduct its business as conducted
prior and subsequent to the date hereof. The Borrower has full
power and authority to enter into and perform its Obligations
under this Agreement, the Notes and each other Loan Document
executed or to be executed by it and to obtain Loans hereunder.
SECTION 4.2. Due Authorization. The execution and
delivery by Borrower of each Loan Document executed or to be
executed by it, and the incurrence and performance by the
Borrower of the Obligations have been duly authorized by all
necessary corporate action, do not require any regulatory
approval (except those regulatory approvals already obtained), do
not and will not conflict with, result in any violation of, or
constitute any default under, any provision of any Organic
Document or Contractual Obligation of the Borrower or any law or
governmental regulation or court decree or order, and will not
result in or require the creation or imposition of any such Lien
on the Borrower's properties pursuant to the provision of any
Contractual Obligation.
SECTION 4.3. Validity, etc. Each of this Agreement, the
Term Notes and the other Loan Documents constitutes, the legal,
valid and binding obligation of the Borrower enforceable in
accordance with its terms subject to the effect of any applicable
bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally, and the effect of general principles
of equity (regardless of whether considered in a proceeding in
equity or at law).
SECTION 4.4. Absence of Default. The Borrower is not in
default in the payment of (or in the performance of any material
obligation applicable to) any indebtedness, or is in material
default under any regulation of any governmental agency or court
decree or order, or is in default under any Requirements of Law
which default could result in a Material Adverse Change.
SECTION 4.5. Litigation, Legislation, etc. There is no
pending or, to the knowledge of the Borrower, threatened
litigation, arbitration or governmental investigation, proceeding
or inquiry which, if adversely determined, could result in a
Material Adverse Change. To the knowledge of the Borrower, there
is no legislation, governmental regulation or judicial decision
that could result in a Material Adverse Change.
SECTION 4.6. Ownership of Properties. The Borrower owns
good title to all of its material personal properties and assets
of any nature whatsoever, free and clear of all Liens.
SECTION 4.7. Accuracy of Information. All factual
information heretofore or contemporaneously furnished by or on
behalf of the Borrower in writing to the Lender for purposes of
or in connection with this Agreement or any transaction
contemplated hereby is true and accurate in every material
respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this
Agreement by the Lender and such information is not incomplete by
omitting to state any material fact necessary to make such
information not misleading. Neither this Agreement nor any
document or statement furnished to the Lender by or on behalf of
the Borrower contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the
statements contained herein or therein not materially misleading.
ARTICLE 5
COVENANTS
SECTION 5.1. Affirmative Covenants. The Borrower agrees
with the Lender that until all Obligations (other than
Obligations that expressly survive the termination of this
Agreement pursuant to Section 7.4) have been paid and performed
in full, the Borrower will perform the Obligations set forth in
this Section 5.1.
SECTION 5.1.1. Maintenance of Corporate Existence, etc. The
Borrower will cause to be done at all time all things necessary
to maintain and preserve the corporate existence of the Borrower.
SECTION 5.1.2. Foreign Qualification. The Borrower will
cause to be done at all times all things necessary to be duly
qualified to do business and be in good standing as a foreign
corporation in each jurisdiction where the failure to so qualify
could result in a Material Adverse Change.
SECTION 5.1.3. Payment of Taxes, etc. The Borrower will pay
and discharge, as the same become due and payable, (a) all
Charges against it or on any of its property, as well as claims
of any kind which, if unpaid, might become a Lien upon any one of
its properties, and (b) all lawful claims for labor, materials,
supplies, services or otherwise before any thereof become a
Default; provided, however, that the foregoing shall not require
the Borrower to pay or discharge any such Charge or claim so long
as it shall be diligently contesting the validity thereof in good
faith by appropriate proceedings and shall have set aside on its
books adequate reserves in accordance with GAAP.
SECTION 5.1.4. Notice of Default, Litigation, etc. Upon
learning thereof, the Borrower will give prompt written notice
(with a description in reasonable detail) to the Lender of:
(a) the occurrence of any Default;
(b) the occurrence of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed
in writing by the Borrower to the Lender which has been
instituted or, to the knowledge of the Borrower, is threatened
against, the Borrower or to which any of its properties, assets
or revenues is subject which, if adversely determined, could
result in a Material Adverse Change; and
(c) the occurrence of any other circumstances which could
result in a Material Adverse Change.
SECTION 5.1.5. Books and Records. The Borrower will keep
books and records reflecting all of its business affairs and
transactions in accordance with GAAP and permit the Lender or any
of its representatives, during normal business hours, to visit
all of its offices, to discuss its financial matters with its
officers and independent public accountants and to examine (and,
at the expense of the Borrower, photocopy extracts from) any of
its books or other corporate records. The Borrower shall pay any
fees of its independent public accountants incurred in connection
with the Lender's exercise of its rights pursuant to this Section
5.1.6.
SECTION 5.1.6. Maintenance of Properties, Etc. The Borrower
will maintain and preserve all of its properties (real and
personal and including all intangible assets), except obsolete
properties, which are used or necessary in the conduct of its
business in good working order and condition, ordinary wear and
tear excepted.
SECTION 5.1.7. Maintenance of Licenses and Permits. The
Borrower will maintain and preserve all rights, permits,
licenses, regulatory approvals and privileges issued under or
arising under any Requirements of Law to the extent material to
the conduct of the business of the Borrower.
SECTION 5.1.8. Compliance with Laws. The Borrower will
comply with all applicable Requirements of Law; provided,
however, that this Section 5.1.8 shall not apply to any
circumstances of noncompliance that together with all other
noncompliance could not result in a Material Adverse Change.
SECTION 5.2. Negative Covenants. The Borrower agrees with
the Lender that until all Obligations (other than Obligations
that expressly survive the termination of this Agreement pursuant
to Section 7.4) have been paid and performed in full, the
Borrower will perform the Obligations set forth in this Section
5.2.
SECTION 5.2.1. Indebtedness. The Borrower will not create,
incur, assume or suffer to exist or otherwise become or be liable
in respect of any indebtedness other than:
(a) indebtedness in respect of the Loans and other
Obligations;
(b) indebtedness in respect of liabilities resulting from
(i) endorsements of negotiable instruments in the ordinary course
of business; and (ii) surety bonds and other bonds issued for the
Borrower's account in the ordinary course of business;
(c) indebtedness of the Borrower existing on the Closing
Date;
(d) capitalized lease liabilities;
(e) Purchase money indebtedness;
(f) extensions, refinancings, replacements and renewals of
any of the foregoing Indebtedness described in clauses (c)
through (e) of this Section 5.2.1, provided that the principal
amount thereof is not increased, and such extension, refinancing,
replacement or renewal does not impose more burdensome terms upon
the Borrower than the indebtedness being extended, refinanced,
replaced or renewed.
SECTION 5.2.2 Liens. The Borrower will not create, incur,
assume or suffer any Lien upon any of its property, revenues or
assets, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter
payable with penalty or being contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books; and
(b) Liens existing as of the Closing Date.
SECTION 5.2.3 Consolidation, Merger, Subsidiaries, etc.
(a) The Borrower will not liquidate or dissolve,
consolidate with, or merge into or with, any Person, or purchase
or otherwise acquire all or substantially all of the assets or
stock of any Person (or of any operating division or unit
thereof).
(b) The Borrower will not create any subsidiary or transfer
any assets to any subsidiary.
SECTION 5.2.4 Asset Dispositions, etc. The Borrower will
not sell, transfer, lease or otherwise dispose of, or grant
options, warrants or other rights with respect to, any of its
assets (including accounts receivable) to any Person in excess of
$10,000 in the aggregate, unless (a) such disposition is made in
the ordinary course of business and consists of inventories; or
(b) such disposition constitutes a disposition of obsolete or
retired assets no longer used in the business of the Borrower.
SECTION 5.2.5 Modification of Organic Documents, etc. The
Borrower will not consent to any amendment, supplement or other
modification of any of the terms or provisions contained in, or
applicable to, the charter or the by-laws of the Borrower.
SECTION 5.2.6 Inconsistent Agreements. The Borrower will
not enter into any material agreement containing any provision
which would be violated or breached in any material respect by
any Loan or by the performance by the Borrower of its obligations
hereunder or under any Loan Document.
ARTICLE 6
EVENTS OF DEFAULT
SECTION 6.1 Events of Default. The Term "Event of
Default" shall mean any of the events set forth in this Section
6.1.
SECTION 6.1.1. Non-Payment of Obligations. The Borrower
shall default:
(a) in the payment or prepayment when due of any principal
of any Loan;
(b) in the payment when due of the interest payable in
respect of any Loan or any other Obligations and such default
shall continue unremedied for a period of five (5) days.
SECTION 6.1.2. Non-Performance of Certain Covenants. The
Borrower shall default in the due performance and observance of
any of its obligations under Section 5.1 and such default shall
continue unremedied for a period of ten (10) days after notice
thereof shall have been given to the Borrower by the Lender (or
if such default is not reasonably susceptible to cure within 10
days and so long as the Borrower promptly commences and
diligently pursues such cure, such longer period as is reasonably
needed to effect such cure, but in no event longer than 30 days
from the date notice is given), or shall default in the due
performance or observation of any of its obligations under
Section 5.2.
SECTION 6.1.3. Defaults Under Other Loan Documents; Non-
Performance of Other Obligations. Any "Event of Default" shall
occur under the other Loan Documents; or the Borrower shall
default in the due performance and observance of any other
obligation, covenant or agreement contained herein or in any
other Loan Document and such default shall continue unremedied
for a period of ten (10) days after notice thereof shall have
been given to the Borrower by the Lender (or if such default is
not reasonably susceptible to cure within 10 day and so long as
the Borrower promptly commences and diligently pursues such cure,
such longer period as is reasonably needed to effect such cure,
but in no event longer than 30 days from the date notice is
given).
SECTION 6.1.4 Bankruptcy, Insolvency, etc. The Borrower or
any of its Subsidiaries shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for any
of any of the Borrower or its Subsidiaries or any of its property
or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent of
acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for any of the
Borrower or its Subsidiaries or for a substantial part of its
property, and such trustee, receiver, sequestrator or other
custodian shall not be discharged within sixty (60) days;
(d) permit or suffer to exist the commencement of any
bankruptcy, plan reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of
any of the Borrower or its Subsidiaries and, if such case or
proceeding is not commenced by the Borrower or its Subsidiaries,
as the case may be, such case or proceeding shall be consented to
or acquiesced in or shall result in the entry of an order for
relief or shall remain for sixty (60) days undismissed; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 6.1.5. Breach of Warranty. Any representation or
warranty of the Borrower hereunder or in any other Loan Document
or in any other writing furnished by or on behalf of the Borrower
to the Lender for the purposes of or in connection with this
Agreement or any such Loan Document is or shall be incorrect when
made in any material respect.
SECTION 6.1.6. Default on Other Indebtedness, etc. (a) Any
indebtedness of the Borrower in an aggregate principal amount
exceeding $25,000 (i) shall be duly declared to be or shall
become due and payable prior to the stated maturity thereof, or
(ii) shall not be paid as and when the same becomes due and
payable including any applicable grace period; or (b) there shall
occur and be continuing any event under any Instrument relating
to any indebtedness of the Borrower in an aggregate principal
amount exceeding $25,000, the effect of which is to cause such
indebtedness to become due prior to its stated maturity or to
permit the holder or holders of such indebtedness, or a trustee,
agent or other representative on behalf of such holder or
holders, to cause such indebtedness to become due prior to its
stated maturity or to require (or permit the holder or holders to
require) the Borrower to redeem, repurchase or otherwise acquire
or retire such indebtedness for value.
SECTION 6.1.7. Judgments. A final judgment which, with
other such outstanding final judgments against the Borrower (in
each case to the extent not covered by insurance), exceeds an
aggregate of $25,000, shall be entered against the Borrower and,
within 30 days after entry thereof, such judgment shall not have
been discharged or execution thereof stayed pending appeal, or,
within 30 days after the expiration of any such stay, such
judgment shall not have been discharged or stayed.
SECTION 6.2. Action if Bankruptcy. If any Event of
Default described in subsection (d) of Section 6.1.4 shall occur,
the outstanding principal amount of all outstanding Loans and all
other Obligations shall automatically be and become immediately
due and payable without notice, demand or presentment.
SECTION 6.3. Action if Other Event of Default. If any
Event of Default (other than any Event of Default described in
Section 6.1.4) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Lender may, upon notice or
demand declare all or any portion of the outstanding principal
amount of the Loans to be due and payable and any or all other
Obligations to be due and payable, whereupon the full unpaid
amount of such Loans and any and all other Obligations which
shall be so declared due and payable shall be and become
immediately due and payable without further notice, demand, or
presentment.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Waivers, Amendments, etc. (a) The provisions
of this Agreement and of each Loan Document may from time to time
be amended, modified or waived, if such amendment, modification
or waiver is in writing and, (x) in the case of an amendment or
modification, is consented to by the Borrower and the Lender and
(y) in the case of a waiver of obligation of the Borrower or
compliance with any prohibition contained in this Agreement or
any other Loan Document, is consented to by the Lender.
(b) No failure or delay on the part of the Lender in
exercising any power or right under this Agreement or any other
Loan Document shall operate as a wavier thereof, nor shall any
single or partial exercise of any such power or right preclude
any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on the Borrower in
any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Lender to any
other Loan Document shall, except as may be otherwise stated in
such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or regulatory approval thereafter to
be granted hereunder.
(c) The Lender shall be under no obligation to marshal any
assets in favor of the Borrower or any other party or against or
in payment of any or all of the Obligations. Recourse for
security shall not be required at any time. To the extent that
the Borrower makes a payment or payments to the Lender that are
subsequently for any reason invalidated, set aside or required to
be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable
cause, then to the extent of such recovery, the obligation or
part thereof originally intended to be satisfied, and all rights
and remedies therefor, shall be revived and continue in full
force and effect as if such payment had not been made.
SECTION 7.2. Notices. All notices hereunder shall be in
writing or by telecopy and shall be sufficiently given to the
Lender or the Borrower if addressed or delivered to them at the
following addresses:
If to Lender: IMM International, Inc.
Attn: Hope Trowbridge, President
#2 Springhill Road, Suite 17
Norwalk, CT 06851
Telecopy No. 203-255-2291
If to Borrower: J-Bird Music Group, Ltd.
Attn: Jay Barbieri, President
396 Danbury Road
Wilton, Connecticut 06897
Telecopy No. 203-761-8809
or at such other address as any party may designate to any other
party by written notice. All such notices and communications
shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; when received, if deposited in
the mail, postage prepaid; when transmission is verified, if
telecopied; and on the next Business Day, if timely delivered to
an air courier guaranteeing overnight delivery.
SECTION 7.3. Costs and Expenses. The Borrower agrees to
pay and hold the Lender harmless from any stamp, documentary,
intangibles, transfer or similar taxes or charges, and all
recording or filing fees with respect to the Loan Documents or
any payments to be made thereunder, and to reimburse the Lender
upon demand for all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred by the Lender
in enforcing the Obligations of the Borrower under this Agreement
or any other Loan Document or related Document or in connection
with any restructuring or "work-out" of any Obligations.
SECTION 7.4. Survival. The obligations of the Borrower
under Sections 2.5 and 7.3, shall in each case survive any
termination of this Agreement. The representations and
warranties made by the Borrower in this Agreement, the Term Notes
and each other Loan Document shall survive the execution and
delivery of this Agreement, the Term Notes and each such other
Loan Document.
SECTION 7.5. Severability. Any provision of this
Agreement, the Term Notes or any other Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement, the Term Notes or such other Loan Document or
affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 7.6. Headings. The various headings of this
Agreement, the Term Notes and of each other Loan Document are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement, the Notes or such other Loan
Document or any provisions hereof or thereof.
SECTION 7.7. Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and
all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when
counterparts hereof executed on behalf of the Borrower and the
Lender shall have been received by the Lender.
SECTION 7.8. Governing Law; Entire Agreement. (a) THIS
AGREEMENT AND THE TERM NOTES SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF CONNECTICUT. This Agreement, the Term Notes and the
other Loan Documents constitute the entire understanding among
the parties hereto with respect to the subject matter hereof and
supersede any prior agreements, written or oral, with respect
thereto.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY CONNECTICUT STATE OR FEDERAL COURT
SITTING IN CONNECTICUT IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
RELATED DOCUMENT, AND EACH HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH CONNECTICUT STATE OR FEDERAL COURT. THE
BORROWER AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE WITH
RESPECT TO ANY SUCH ACTION OR PROCEEDING BROUGHT BY IT AGAINST
THE LENDER. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING.
(c) The Borrower irrevocably consents to the service of
process in the State of Connecticut when and as such legal
actions or proceedings may be brought in the courts of the State
of Connecticut or of the United States of America sitting in
Connecticut by the mailing of the copies thereof by certified
mail, return receipt requested, postage prepaid, to it at its
address set forth herein, such service to become effective upon
the earlier of (i) the date 10 calendar days after such mailing
or (ii) any earlier date permitted by applicable law. Nothing in
this Section 7.8 shall affect the right of the Lender to bring
proceedings against the Borrower in the courts of any other
jurisdiction or to serve process in any other manner permitted by
applicable law.
SECTION 7.9. Successors and Assigns. This Assignment
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns;
provided, however, that the Borrower may not assign or transfer
its rights or obligations hereunder without the prior written
consent of the Lender.
SECTION 7.10. Other Transactions. Nothing contained herein
shall preclude the Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other
Loan Document, with the Borrower or any of its Affiliates in
which the Borrower or such Affiliate is not restricted hereby
from engaging with any other Person.
SECTION 7.11. Waiver of Jury Trail, etc., THE LENDER AND
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE LENDER OR THE
BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER
ENTERING INTO THIS AGREEMENT.
SECTION 7.12. Usury Savings Clause. Notwithstanding
anything to the contrary in this Agreement or any other Loan
Document, if at any time any rate of interest accruing on any
Obligation, when aggregated with all amounts payable by the
Borrower under any of the Loan Documents that are deemed or
construed to be interest accrued or accruing on such Obligation
under applicable law, exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable to the Lender
with respect to such Obligation (each a "Maximum Lawful Rate"),
then in such event and so long as the Maximum Lawful Rate would
be so exceeded, such rate of interest shall be reduced to the
Maximum Lawful Rate; provided that if at any time thereafter such
rate of interest accruing on Obligations held by the Lender is
less than the Maximum Lawful Rate, the Borrower shall continue to
pay interest to the Lender at the Maximum Lawful Rate until such
time as the total interest received by the Lender in respect of
the Obligations held by it is equal to the total interest which
the Lender would have received had interest on all Obligations
held by the Lender (but for the operation of this Section 7.12)
accrued at the rate otherwise applicable under this Agreement and
the other Loan Documents. Thereafter, interest payable to the
Lender in respect of the Obligations held by it shall accrue at
the applicable rate set forth in this Agreement or other Loan
Documents unless and until such rate again exceeds the Maximum
Lawful Rate, in which event this Section 7.12 shall apply again.
In no event, shall the total interest received by the Lender
pursuant to the terms hereof exceed the amount which the Lender
could lawfully have received had interest been calculated for the
full term of this Agreement at the Maximum Lawful Rate. In the
event that the Maximum Lawful Rate is calculated pursuant to this
Section 7.12, (a) if required by applicable law, such interest
shall be calculated at a daily rate equal to the Maximum Lawful
Rate divided by the number of days in the year in which such
calculation is made, and (b) if permitted by applicable law, the
Borrower and the Lender shall (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effect thereof, and
(iii) amortize, prorate, allocate and spread in equal or unequal
parts that total amount of interest throughout the entire
contemplated term of the Loans so that interest for the entire
term of the Loans shall not exceed the Maximum Lawful Rate. In
the event that a court of competent jurisdiction, notwithstanding
the provisions of this Section 7.12 shall make a final
determination that the Lender has received interest in excess of
the Maximum Lawful Rate, the Lender shall, to the extent
permitted by applicable law, promptly apply such excess, first to
any interest due and outstanding under this Agreement and the
other Loan Documents, second to any principal due and payable
under this Agreement and the Term Notes, third to the remaining
principal amount of the Notes and fourth to other unpaid
Obligations held by the Lender, and thereafter shall refund any
excess to the Borrower or as a court of competent jurisdiction
may otherwise order.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
J-BIRD MUSIC GROUP, LTD.
By: /s/
Name: John J. Barbieri
Title: President
IMM INTERNATIONAL, INC.,
By: /s/
Name: Hope D. Trowbridge
Title: President
Exhibit A
TERM NOTE
$_____________
_________, 1998
FOR VALUE RECEIVED, the undersigned J-BIRD MUSIC GROUP,
LTD., a Pennsylvania corporation (the "Borrower"), promises to
pay to the order IMM INTERNATIONAL, INC., a Pennsylvania
corporation (the "Lender"), at the times and in the manner
provided in the Credit Agreement referenced hereinafter, the
principal sum of
________________________________________________________ AND
NO/100 DOLLARS ($_________________) or, if less, the outstanding
principal amount of the Term Loan made by the Lender pursuant to
that certain Credit Agreement, dated as of ___________________,
1998 (as amended, restated, supplemented or otherwise modified
form time to time, the "Credit Agreement"; capitalized terms used
herein and not defined herein shall have the meaning ascribed to
them in the Credit Agreement), by and among the Borrower, and the
Lender.
The unpaid principal amount of this Note from time to time
shall bear interest as provided in Section 2.4 of the Credit
Agreement. All payments of principal of and interest on this
Note shall be payable in lawful currency of the United States of
America to the account designated by the Lender in immediately
available funds in accordance with Sections 2.3 and 2.4 of the
Credit Agreement.
This note is a Term Note referenced in, and evidences
indebtedness incurred under, the Credit Agreement, to which
reference is made for a statement of the terms and conditions on
which the Borrower is permitted and required to make prepayments
and repayments of principal of the indebtedness evidenced by this
Note and on which such indebtedness may be declared to be or may
automatically become immediately due and payable.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CONNECTICUT.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind
with respect to this Note. All amounts owing hereunder are
payable by the Borrower without relief from any valuation or
appraisal laws.
J-BIRD MUSIC GROUP, LTD.
By:
________________________________
Name:
Title:
E-31
Exhibit 8
J-Bird Music Group Ltd.
Form 10-KSB
File No. 0-24449
Subsidiaries of the Registrant
J-Bird Records, Inc., a Connecticut corporation
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