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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
JUMPMUSIC.COM, INC
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(Name of Small Business Issuer in its charter)
Nevada 77-036-3000
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(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
201 San Antonio Circle, Suite 105, Mountain View, California 94040
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(Address of principal executive offices) (Zip Code)
(650) 917-7460
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None None
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Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, par value $.001
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(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. BUSINESS DEVELOPMENT
1. FORM AND YEAR OF ORGANIZATION
JumpMusic.com, Inc. (the "Company") was founded January 26, 1994 as
Jump! Software, Inc., a California corporation. On May 5, 1999, the Company
merged with America's Finest Waters, Inc., a Nevada corporation. As part of that
merger, America's Finest Waters, Inc. changed its name to JumpMusic.com, Inc.
and Jump! Software, Inc., the California corporation, was dissolved.
The principal offices of the company are located at 201 San Antonio
Circle, Suite 105 in Mountain View, California 94040. Whenever we refer to the
"Company" or use the terms "we," "us" or "our" in this report, we are referring
to JumpMusic.com, Inc.
B. BUSINESS OF ISSUER
The Company is an on-line retailer who sells music products to amateur
musicians. The products sold include musical instruments, music accessories,
sound equipment, printed sheet music and music software. Our website is
www.jumpmusic.com.
1. PRINCIPAL PRODUCTS AND SERVICES AND THEIR MARKET.
a. THE MARKET
The United States retail market for music products in 1998 was
estimated to be approximately $6.5 billion in net sales, representing a
five-year compound annual growth rate of 7%.(1) According to NAMM, the music
products market includes retail sales of string and fretted instruments, sound
reinforcement and recording equipment, drums, keyboards, print music (sheet
music), pianos, organs, and school band and orchestral instruments.
The music products industry is highly fragmented. Five music products
retailers (Guitar Center, Sam Ash Music Corp, Brook Mays/C&S/H&H, Schmitt Music
Company and Musician's Friend, Inc.) accounted for approximately 10.9% of the
industry's estimated $6.5 billion in net sales in 1998. Furthermore, 90% of the
industry's estimated 8,400 retailers operate only one or two stores. A typical
music products store averages approximately 3,200 square feet and generates an
average of approximately $0.7 million in annual net sales.
According to NAMM, 25% of the U.S. population, or over 60 million
people, are actively involved in performing music, taking music lessons, playing
in school bands and orchestras, singing in school, church and community choirs,
etc. These amateur musicians are equally divided between men and women, and
cover a broad age range: 33% are from five to 17 years old; 24% are from 18 to
24; 24% are from 35 to 49; and 19% are 50 or
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(1) "MUSIC USA, 1999 Statistical Review of the U.S. Music Products Industry"
published by the International Music Products Association ("NAMM") at 5790
Armada Drive, Carlsbad, California 92008. Telephone: (760) 438-8001.
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older. Further, nearly 40% of US households include at least one person age five
or older who is currently playing a musical instrument. They play the piano
(33%), guitar (18%), flute (6%), drums (5%), clarinet (5%), and other
instruments (38%). Most amateur musicians (69%) first learn to play between the
ages of five and 11. The majority of active amateur musicians play more than
once a week (36%) or once a week (13%).
The introduction of affordable personal computers has dramatically
changed many market dynamics in the music products industry. New generations of
products have been developed to connect to computers. These include hardware and
software for sound recording, processing and reproduction. Products for
performance and enhancing performance have also been integrated with
microprocessors so that non-professional musicians can more easily afford
equipment which results in a more "professional sound."
Parents have also become more aware of the importance of music in the
education of their children. Research at the University of Wisconsin and
University of California, Irvine, reports that music training, specifically
piano instruction, enhances the development of brain functions required for
science, math and engineering. As this becomes common knowledge, we believe the
demand for musical instruction and therefore music products will increase.
There is no e-commerce leader in the music products industry today.
While there are dozens of sites selling different classes of music products,
there is as yet no dominant e-commerce retailer offering an authoritative
selection of music products for amateur and professional musicians.
The e-commerce market is increasing at a dramatic rate. Over the past
few years, use of the Internet has grown dramatically, as has its infrastructure
for commercial transactions and building "affinity communities." Online
transactions continue to gain a high level of consumer acceptance. Online sales
were projected to reach $4.8 billion in 1998, double that of 1997, according to
Business Week. Further, a recent report by International Data Corporation
predicts that the consumer Internet commerce market will reach $68 billion in
1999 and nearly $1 trillion by 2002.2
b. THE PRODUCTS AND SERVICES
There are hundreds of thousands of music products available for sale.
Our strategy is to offer an authoritative selection of both popular and
hard-to-find musical instruments (pianos, organs, guitars, percussion, wind and
string instruments), sound equipment (loudspeakers, amps, microphones),
accessories (cables, music stands, instrument cases), consumables (guitar
strings, picks, reeds, drumheads), printed music (sheet music, music books, song
collections), music software (recording, editing, performance), music
collectibles (rare and hard to find items) and novelty items (trophies/medals,
note cards, jewelry) on our web site. We currently have over 50,000 items
available for sale on our web site.
We have also developed two award winning piano education software
titles, Piano Discovery and Piano Discovery for Kids. We currently sell these
products on our web site and into retail distribution. Our long term strategy is
to offer these items for sale exclusively on our web site.
We offer secure on-line shopping and have a Verisign Digital ID. Our
customers can check the status of their orders on-line and we notify them by
E-mail when their orders are shipped. While we verify their credit card during
the order process, we do not charge our customers until we ship their order. All
credit card transactions are processed by our e-commerce server.
Customers can contact us by E-mail or phone with product or support
questions.
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2 "IDC Predictions for 1999" http://www.emarketer.com/estats/020199_idc.html
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c. BUSINESS STRATEGY
Our goal is to become the leading music products on-line retailer. The
principal elements of our business strategy are as follows:
EXPANSION STRATEGY. Our expansion strategy is to continue to increase
our market share in the United States and to penetrate strategically selected
overseas markets by creating versions of our web site in multiple languages and
by locating distribution centers overseas.
We also believe there may be attractive opportunities to expand by
selectively acquiring existing music products on-line retailers in the U.S. and
overseas. We are presently investigating this avenue of growth.
AUTHORITATIVE SELECTION OF MERCHANDISE. We offer over 50,000 products
online and plan to extend our product offerings as quickly as possible. The
largest retail outlets carry only an estimated 7,000 products.
HIGHLY INTERACTIVE, MUSICIAN-FRIENDLY ON-LINE STORE. The purchase of
musical instruments is a highly personal decision. We plan to provide on-line
services to our customers that will help them in this decision making.
SUPERIOR CUSTOMER SERVICE. Our strategy is to provide 7 days a week, 24
hours per day on-line customer service worldwide through our web site.
INNOVATIVE ON-LINE MARKETING PROGRAMS AND LEGACY PRODUCT NAMES. We plan
to create on-line promotional programs such as forums, music events, auctions,
locator services, chat rooms, etc. to build a sense of community among our
customers. We believe these programs will help build a loyal customer base and
encourage repeat on-line business. There are over 300,000 Piano Discover/Miracle
Piano owners who can easily access us through key word searches on the Internet.
We plan to work closely with the Internet portals to establish and improve our
priority when potential customers perform key word searches.
PRICING. We plan to offer competitive pricing in our markets. We
generally mark our products down to partially cover shipping costs.
2. DISTRIBUTION
Jump's products are primarily sold via the Internet. Our e-commerce
sever is hosted by Global Center, an ISP that provides redundant connections to
the Internet, backup power, and a secure building. We ship products to our
customers from our Mountain View, CA facility or drop ship to them directly from
the manufacturer.
Our active URLs, JumpMusic.com and miraclepiano.com, are registered
with Yahoo, Infoseek, Alta Vista, and other popular search sites on the
Internet. A subset of our products is listed for sale by iMall.com.
3. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE.
None.
4. COMPETITION.
Potential competition for the Company falls into the following
categories:
TRADITIONAL INDEPENDENT MUSIC STORES. The National Association of Music
Merchants (NAMM) reports that there were 8,443 "brick & mortar" music stores in
the U.S. in 1998, which each generated average revenues of about $700,000
annually.
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RETAIL MUSIC PRODUCT CHAINS. There are numerous small retail chains
selling music products. For perspective, the leading 91 chain merchants have a
total of 606 outlets, or an average of just over 6 stores each. Guitar Center,
Mars, and Sam Ash are the best-known, and combined, control a little over 10% of
the total market. Of these, Guitar Center is the largest and the only one which
is publicly held (GTRC), with 1998 revenues of just under $391 million - a 6%
market share - via 48-some stores located in 24 major markets. These chains are
expanding their retail operations by adding new physical stores, and are slowly
replacing the smaller chains and single location stores.
MUSIC PRODUCTS CATALOGS. There are several music products catalogers,
including Musician's Friend, American Music Supply, Sweetwater Sound, and
Thoroughbred Music. We believe that the largest of these is Musician's Friend, a
privately-held company based in San Francisco with estimated retail sales of $80
million. Musician's Friend and Guitar Center announced they had merged on May
28, 1999. Sam Ash acquired Thoroughbred Music in the second quarter of 1999.
MUSIC PRODUCTS PUBLISHERS/MANUFACTURERS. These companies are suppliers
to the music products distribution channel and view this relationship as a
distribution partnership. Therefore, it is unlikely that most of them would
choose to compete directly with us, or the thousands of traditional music stores
through which they obtain the vast majority of their revenues. However, some
publishers and manufacturers may decide to offer their products for sale through
their web sites.
OTHER E-COMMERCE WEB SITES. There are dozens if not hundreds of web
sites selling some music products needed by some amateur musicians, with no site
yet having emerged as a market leader in music products. Below is a summary of
the most visible sites:
Amazon.com is a well-funded publicly-traded company that primarily
sells books via the internet although it has expanded its product line to
include auction merchandise, electronics, toys, and recorded music products such
as CD's. Amazon.com sells some printed music that it has acquired through its
book publishers. This printed music is primarily classical compositions in the
public domain. At the present time, however, Amazon.com remains focused on book
sales.
Sunhawk.com, a publicly-traded company, was founded by two former
Microsoft engineers to publish and distribute digital music scores. They have
developed a proprietary music publishing and notation engine called Solero.
Their catalog of several thousand titles is available for downloading and
printing, including extensive classical listings in the public domain plus a
number of Warner properties. Sunhawk is focused on allowing its site visitors to
listen to the printed music available on its site and enabling purchasers to
download sheet music to their local computers for printing. We believe that most
amateur musicians prefer to order traditional paper-based printed music. The
vast majority of sales in the printed music category are books of songs, not
individual pieces of sheet music, reflecting a customer preference for
pre-selected collections of material. To further support our belief, Sunhawk has
recently started offering traditional paper-based printed music for sale on
their site.
Sheet-music.com is a California-based privately-held company
positioning itself as "The Marketplace for Musicians" offering printed music.
Musicianstore.com is based in San Francisco, CA and positions itself as
"Music and Supplies for the Music Maker." They are privately held and sell
printed music and a limited selection of other products.
According to NAMM, printed music sales in 1997 were $452.9 million or
just under 7% of the total music products market.
5. SOURCES AND AVAILABILITY OF INFORMATION AND PRINCIPAL SUPPLIERS.
We obtain internet services from several customers including Global
Center, Best Internet and Wolfe
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Internet. Products on our site are provided by a variety of companies including
Hal Leonard, Warner Brothers, Yamaha, and Music Sales. Our e-commerce site has
the capability to send new orders electronically or by fax to our suppliers.
6. DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS. We sell primarily
to the end customer, and are not dependent on one or a few major customers.
7. PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS,
ROYALTY AGREEMENTS AND/OR LABOR CONTRACTS.
We have a patent, 5,183,398 "Apparatus and Method for Interactive
Instruction of a Student", on teaching music using a musical instrument
connected to a computer. This patent was issued on February 2, 1993.
We have registered the following web domain names: JumpMusic.com,
miraclepiano.com piano-offer.com, 800music.com, 800-music.com,
musicsuperstore.com, guitar-offer.com, guitardiscovery.com,
music-superstore.com, everything-music.com and topvalues.com.
We own the Piano Discovery-Registered Trademark- and Miracle
Piano-Registered Trademark- trademarks.
8. GOVERNMENT APPROVAL.
No government approval is required for any of our current products or
services.
9. EFFECT OF ANY EXISTING OR PROPOSED GOVERNMENT REGULATIONS.
We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to access to online
commerce. However, due to the increasing popularity and use of the Internet and
other online services, it is possible that a number of laws and regulations may
be adopted with respect to the Internet or other online services covering issues
such as user privacy, pricing, content, copyrights, distribution and
characteristics and quality of products and services. The adoption of any
additional laws or regulations may decrease the growth of the Internet or other
online services, which could, in turn, decrease the demand for our products and
services and increase the our cost of doing business, or otherwise have a
material adverse effect on our business, prospects, financial condition and
results of operations. Moreover, the applicability to the Internet and other
online services of existing laws in various jurisdictions governing issues such
as property ownership, sales and other taxes, libel and personal privacy is
uncertain and may take years to resolve. Any such new legislation or regulation,
the application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
Permits or licenses may be required from federal, state or local
government authorities to operate on the Internet. No assurances can be made
that such permits or licenses will be obtainable. We may be required to comply
with future national and/or international legislation and statutes regarding
conducting commerce on the Internet in all or specific countries throughout the
world.
10. RESEARCH AND DEVELOPMENT COSTS
Research and development expenses consist primarily of personnel and
equipment costs required to conduct the our development efforts on our website.
To date, we have spent approximately $300,000 in developing our website. We
expect to incur an additional $500,000 to $1,500,000 in additional development
costs over the next two years. Software development costs are expended as
incurred.
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11. COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND
REGULATIONS
We are not involved in a business which involves the use of materials
in a manufacturing stage where such materials are likely to result in the
violation of any existing environmental rules and/or regulations. Further, we do
not own any real property that would lead to liability as a land owner.
Therefore, we does not anticipate that there will be any costs associated with
the compliance of environmental laws and regulations.
12. EMPLOYEES
As of the date hereof, we employed 6 full-time employees and 7
part-time employees. We hire independent contractors on an "as needed" basis
only. We have no collective bargaining agreements with our employees. We believe
that our employee relationships are satisfactory. Long term, we will attempt to
hire additional employees as needed based on its growth rate.
13. KEY PERSONNEL
Our success depends to a significant extent on the services of Richard
Mathews, our President, and Jan Mathews, our Chief Operating Officer, as well as
our ability to attract and retain additional key personnel with the skills
necessary to manage our existing business and growth plans. The loss of one or
more of these individuals or other key personnel could have a material adverse
effect on our business, results of operations, liquidity and financial position.
On May 5, 1999, we entered into a three-year employment contract with both Mr.
Mathews and Ms. Mathews. Additionally, we carry "key-man" insurance on the lives
of Mr. Mathews and Ms. Mathews in the amount of $250,000 each. In order to
achieve our growth plans, we will depend upon our ability to find and recruit
new personnel with the skills and expertise to manage our business and to retain
such employees. If we cannot hire and retain qualified personnel, our business,
results of operations, financial condition and prospects could be adversely
affected.
14. YEAR 2000
We have begun to address possible remedial efforts in
connection with computer software that could be affected by the Year 2000 "Y2K"
problem. The Y2K problem is the result of computer programs being written using
two digits rather than four to define the applicable year. Any programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations.
The Y2K problem can affect any modern technology used by a business in
the course of its day. Any machine that uses embedded computer technology is
susceptible to this problem, including for example, telephone systems, postage
meters and scales, and of course, computers. The impact on a company is
determined to a large extent by the company's dependence on these technologies
to perform their day to day operations.
Internally, we have begun reviewing all such equipment and have
determined that many of our systems are Y2K compliant. We anticipate that all
system and software will be fully reviewed and brought into compliance by
November 1999. If certain systems are not brought up to Y2K compliance by the
end of November 1999, then the non-compliant technology will be disabled so as
not to have an impact on the systems that are compliant. Any such events would
not have a serious impact on our day to day operations, nor would any valuable
information be lost. Our company backs up all computer systems daily to protect
us against data loss.
The costs of bringing our company technology up to Y2K compliance is
expected to be less than $5,000. This is because the majority of the "patches"
or programs designed to make software Y2K compliant can be obtained over the
Internet from manufacturers for little or no cost and we do not expect to rely
heavily on outside consultants to upgrade our systems as most of the work can be
performed in-house.
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Externally the Year 2000 problem may impact other entities with which
we transact business, and we cannot predict the effect of the Year 2000 problem
on such entities on us. With regard to those companies that we do business with
on a daily basis, we cannot guarantee that they will be vigilant about their Y2K
plan of action.
In the event that we do experience Y2K problems, it could result in a
suspension of our revenues. A suspension of revenues could result in material
losses from operations and a reduction in our working capital. Management is
unable at this time to quantify the impact that the Y2K problem could have on
our results of operations and financial condition.
15. ECONOMIC CONDITIONS
Our business is sensitive to consumer spending patterns, which in turn,
can be affected by prevailing economic conditions. A downturn in economic
conditions in our market could have a material adverse effect on our results of
operations, financial condition, business and prospects. Although we attempt to
stay informed of consumer preferences for musical products and accessories
typically offered for sale on our site, any sustained failure on our part to
identify and respond to trends would have a material adverse effect on our
results of operations, financial condition, business and prospects.
16. STOCK PRICE
We have a limited history of trading as a public company; our stock
price could be volatile. On May 5, 1999, we merged with a private company, Jump!
Software, Inc. dba Jump! Music. In the merger, the shareholders of Jump!
Software Inc. became the majority shareholders in the Company, and the officers
and directors of Jump! Software, Inc. took over control of the Company. Since
the merger, the trading volume in our stock has been minimal with no shares
trading on most trading days. The market price of our shares of common stock may
be subject to significant fluctuations in response to our new business strategy,
operating results and other factors, including announcements by our competitors,
and those fluctuations may continue in the future. In addition, the stock market
in recent years has experienced significant price and volume fluctuations that
often have been unrelated or disproportionate to the operating performance of
particular companies. These fluctuations, as well as a shortfall in sales or
earnings compared to public market analysts' expectations, changes in analysts'
recommendations or projections, and general economic and market conditions, may
adversely effect the market price of our common stock.
17. RISKS RELATED TO THE BUSINESS
Described below are some of the risks and uncertainties facing our
company. There may be additional risks that we do not presently know of or that
we currently consider immaterial. All of these risks could adversely affect our
business, results of operations, liquidity and financial position.
WE MAY BE UNABLE TO MEET OUR GROWTH STRATEGY: Our growth strategy
requires that we raise additional capital: $3 million in 1999; $12 million in
2000; and $12 million in 2001. Our strategy requires that we use these funds to
capture new customers ($50.00 per customer and estimated to decrease to $20.00
over 5 years) and retain current customers ($12.50 and estimated to decrease to
$5.00 over 5 years). We may be unable to raise sufficient capital and our
estimates of the costs to acquire and retain customers may be low. Our growth
strategy also requires that we have a comprehensive offering of music products
on our site. We may not be able to negotiate deals with a sufficient number of
the music product vendors that we need to acquire these products.
WE MAY BE FACED WITH NEW AND WELL FUNDED ON-LINE COMPETITION: Currently
the larger retail chains are focused on growing their retail presence in the
music products market. It is possible that one of these chains will make a major
investment in the Internet. It is also possible that another Internet focused
retailer of music products will emerge and raise capital before us. To date, to
the best of our knowledge, neither of these events has happened.
18. FORWARD-LOOKING STATEMENTS
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Except for the historical information contained in this Report, the
matters discussed herein, particularly those identified with the words
"expects," "believes," "anticipates," "strategy" and similar expressions, are
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, and such
statements are subject to the safe harbors created thereby. These
forward-looking statements include the plans and objectives of management for
future operations, including plans and objectives relating to (a) the
acquisition of music products, (b) the expansion of on line domestic and
international sales (c) the continued protection of proprietary technologies and
(d) the ability to fund continued operations out of existing working capital,
additional capital infusion and cash flow from future operations. The
forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions that we will continue to acquire and
introduce new music products on it's web site in a timely basis, that rapid
changes in technology will not make our website obsolete or otherwise reduce our
ability to compete in the marketplace, that competitive conditions within the
industry will not change materially or adversely, that the use of multimedia
PC's in homes and small offices will continue to grow, that management's
decision to focus our resources on the Internet will reduce certain expenses
from the levels which were experienced in 1997 and 1998, and that there will be
no material adverse change in our operations or business. Assumptions relating
to the foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions, and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond our control. Although we believe that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, there can be no assurance that the forward-looking information
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking information included herein, the inclusion of such
information should not be regarded as a representation by us or anyone else that
our objectives or plans will be achieved.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
OVERVIEW
Over the last two years, we have instituted far-reaching changes in our
plan of operation. We have transitioned from being a music software company to
becoming an Internet e-commerce retail business specializing in consumer music
products. For the most part, this transition occurred in 1998.
A. RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, selected
financial information for the Company:
<TABLE>
<CAPTION>
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SIX MONTHS YEAR ENDED
ENDING JUNE 30 DECEMBER 31
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1999 1998 1998 1997
(UNAUDITED) (UNAUDITED) (AUDITED) (AUDITED)
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<S> <C> <C> <C> <C>
Revenues $527,192 $775,545 $1,738,367 $3,530,154
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Cost of Sales 219,073 383,613 806,417 1,936,675
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Gross Profit 308,119 391,931 931,950 1,593,477
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General, Administrative, and 554,378 1,278,267 2,085,941 5,042,184
Selling Expenses
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Other Income (Expenses) (198,508) (114,111) (276,200) (583,611)
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Income (Loss) Before Taxes (444,767) (1,000,447) (1,430,191) (4,032,316)
- ---------------------------------------------------------------------------------------------
Provisions for Taxes 400 400 800 800
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Net Income (Loss) (445,167) (1,000,847) (1,430,991) (4,033,116)
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</TABLE>
B. SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AS COMPARED TO SIX
MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
We generated revenues of $527,192 for the six months ended June 30,
1999, as compared to revenues of $775,545 for the six months ended June 30,
1998. This decrease in revenues was a result of our transition from the software
business to the e-commerce retail business. The decrease in revenues is
partially offset by decreased general, administrative and selling expenses,
which declined from $1,278,267 for June 30, 1998 to $554,378 for June 30, 1999.
Likewise, the cost of sales declined from $383,613 for June 30, 1998 to $219,073
for June 30, 1999. The net loss of $1,000,847 for June 30, 1998 was reduced to
$445,167 for June 30, 1999.
C. FISCAL YEAR ENDED DECEMBER 31, 1998 (AUDITED) AS COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1997 (AUDITED)
We generated revenues of $1,738,367 for the year ended December 31,
1998 as compared to revenues of $3,530,154 for the year ended December 31, 1997.
This decrease in revenue is due to our transition from a software company to a
e-commerce retail business, as discussed above. The decrease in revenue is
partially offset by a significant decrease in the general administrative and
selling expenses which were reduced from $5,042,184 to $2,085,941. This
reduction in the general administrative and selling expenses was due primarily
to a reduction in overhead inherent in running a software business, as we
transitioned to becoming an e-commerce retail business. Additionally, the cost
of sales decreased from $1,936,675 in 1997 to $806,417 in 1998. Other expenses
decreased from $583,6111 to $276,200, largely due to a decrease in bad debts.
The net loss of $4,033,116 for 1997 was reduced to $1,430,991 for 1998.
D. LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, our principal sources of liquidity included cash
and net accounts receivable of $118,470.
Current Assets decreased to $452,258 at June 30, 1999 from $491,577 at
the end of 1998. The decrease was due to in part to a reduction in inventory.
Total assets decreased to $520,446 at June 30, 1999 from $563,486 at December
31, 1999 due mainly to the reduction of current assets. There were no
significant additions to fixed assets in 1999. Current liabilities decreased
from $3,125,198 at December 31, 1998 to $1,910,786 at June 30, 1999.
To date, we have financed operations principally through net proceeds
from private placements of debt and equity. Cash on hand, along with cash
generated from the sale of products, signing of a new distribution agreement and
collections of accounts receivable, is expected to be sufficient to meet our
requirements through November 1, 1999. Our ability to fund continued operations
beyond October 1, 1999 depends on raising additional capital and converting the
majority of debt to equity. Should we be unable to raise additional capital and
convert most of debt to equity, we will be required to significantly reduce
operations, and reduce expenses. Such steps would likely have a material adverse
effect on our ability to establish profitable operations in the future. We will
continue to pursue other financing arrangements to increase its cash reserves.
There can be no assurance we will be capable of raising additional capital or
converting debt or that the terms upon which such capital or debt conversion
will be available to us will be acceptable.
Our initial financing was raised from individual investors. We raised
$4,724,562 in a Series A Preferred
-9-
<PAGE>
stock offering and $574,654 in a Series B Preferred stock offering. $200,000 in
Series B Preferred was sold in 1998.
We do not believe that inflation has had a significant impact on our
operations since inception of the Company.
E. PLAN OF OPERATION
Our financial forecast indicates that to grow according to plan, we
will need to raise $3,000,000 by the end of 1999, $12,000,000 in 2000, and
another $12,000,000 in 2001. 75% of these funds will be used in marketing to
acquire new customers. The remaining funds will be used in product development
to expand and enhance our web site and in operations and customer service. We
plan to grow to 29 employees by the end of 1999 and 69 employees by the end of
2000.
ITEM 3. DESCRIPTION OF PROPERTY
Our offices are located at 201 San Antonio Circle, Suite 105, Mountain
View, California 94040. We pay $4,891.50 per month for 2,174 square feet of
office space. We are currently renting on a month-to-month basis while we look
for a larger facility.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock, as of the date hereof, by (i) each stockholder
known by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each director of the Company, (iii) each officer
of the Company, and (iv) all directors and officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE
Name Number of Shares(1) BENEFICIALLY OWNED
- ---- ------------------- ------------------
<S> <C> <C>
Lee J. Lorenzen and Julie
Lorenzen as a married couple(2) 1,063,634 14.03
Richard W. Mathews and Jan M.
Mathews as a married couple(2) 1,322,163 16.78
Dan Mirich(2) 56,198 0.74
Valorie Cook Carpenter(2) 58,872 0.77
Jerome W. Carlson(2) 61,956 0.82
Jack F. Kemp(2) 17,361 0.23
All officers and directors
as a group (6 persons) 2,580,184 19.07
</TABLE>
- ---------------
(1) Except as otherwise indicated, we believe that the beneficial owners of
Common Stock listed above, based on information furnished by such
owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock subject to
options or warrants currently exercisable, or exercisable within 60
days, are deemed outstanding for purposes of computing the percentage
of the person or group holding such options or warrants, but are not
deemed outstanding for purposes of computing the percentage of any
other person or group.
(2) c/o Company's address: 201 San Antonio Circle, Suite 105, Mountain
View, CA 94040.
-10-
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and officers are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---- --- ------
<S> <C> <C>
Richard W. Mathews 56 Chief Executive Officer, Chairman of the Board of Directors
Valorie Cook Carpenter 45 Acting Senior Vice President Marketing, Director
Jerome W. Carlson 62 Acting Chief Financial Officer
Jan M. Mathews 50 Chief Operating Officer, Director, Secretary
Jack F. Kemp 63 Director
Dan Mirich 65 Director
</TABLE>
Richard W. Mathews, our Chief Executive Officer, and Jan M. Mathews,
our Chief Operating Officer, have been married for 13 years.
Richard W. Mathews, Chief Executive Officer, Chairman of the Board of
Directors. Prior to founding the Company, Mr. Mathews held senior engineering
management positions with Claris, Aldus, Columbia Data Products and Nomadic
Systems. As Vice President of Product Development and Strategic Alliances for
Claris Corporation, Mr. Mathews was responsible for the strategic planning and
implementation of the migration of Claris's product line to the Windows
platform. While at Claris, Mr. Mathews managed the development of ClarisWorks,
FileMaker Pro, MacWrite Pro, Claris CAD, Mac Project, and other software
products. As Vice President of Product Development for Aldus, Mr. Mathews
managed the development of PageMaker 3.0 and 4.0 for the Mac and Windows
platforms and Persuasion for Windows. As Chief Engineer for Xerox Office
Products Division, Mr. Mathews led the team that produced the 860 word processor
and the 820 personal computer. While with Xerox, in 1981 Mr. Mathews sponsored
the "skunkworks" project that prototyped an Intel-based personal computer using
the Xerox Star interface. As Vice President of Product Development and Strategic
Planning at Columbia Data Products, Mr. Mathews was responsible for the
development of some of the first IBM-compatible computers, including desktops,
portables, and the first hard drive-based PC. Mr. Mathews managed teams that
developed ROM BIOS, modified GW Basic for IBM compatibility. Mr. Mathews served
as Vice President of Engineering at Nomadic Systems where he was responsible for
SmartSync-TM-, a program that synchronized data between personal computers. He
also served as Manager of the Eastern Data Communications Center for Motorola
where he was responsible for the development, sales and installation of
computer-aided dispatching systems. Mr. Mathews has a BSE in Electrical
Engineering from the John Hopkins University night school and an MS in Computer
Science from John Hopkins University. Mr. Mathews has been employed by Jump!
Software since October 1, 1993.
Jerome W. Carlson, acting Chief Financial Officer. Mr. Carlson has been
President of Raljer, Inc., a management consulting firm, since January 1995,
specializing in assisting start-up companies and mid-size company re-
organizations. He is also our Chief Financial Officer on a part-time basis. We
expect to have a full-time CFO by the end of 1999. He has acted as an advisor to
several companies in the Software Business Cluster, a start-up incubator, in San
Jose, and is currently involved in the formation of a start-up incubator, in
Livermore, CA, along with representatives of Lawrence Livermore Labs, Sandia
Labs, Tri-Valley Business Council and other businesses. He recently was a
founder in aiding the start-up of the Valley Community Bank, in Pleasanton, CA,
and is now a director. The bank was formed to focus on serving the needs of
small businesses in an area where a number of new software, communications and
bio-tech companies are being formed.
Mr. Carlson also serves on the board of DBS Industries, in Mill Valley,
CA, a start-up company which will provide satellite communications for specific
industries using relatively low cost Leo satellite technology. From 1984 to
1990, Mr. Carlson served as the Chief Financial Officer for Triad Systems
Corporation, in Livermore, CA, responsible for all financial and legal
functions, and along with the leasing and business supplies operation which
served hundreds of the company's customers. From 1961 to 1984, Mr. Carlson
served in various positions with
-11-
<PAGE>
Hewlett Packard Company, in the Bay Area. where he managed the service support
operation for the Western United States, was general manager of one of the
company's first computer divisions and later became the company's first
corporate controller. As controller, he instituted a unique world-wide reporting
and control system that gave corporate management visibility and control over
nearly a hundred separate business operations that spanned across divisional
boundaries. Mr. Carlson holds an M.B.A. from the Stanford Graduate School of
Business and a B.S. degree in Economics from the University of California, at
Davis.
Valorie Cook Carpenter, acting Senior Vice President Marketing,
Director. Ms. Carpenter currently serves as a principal in the consulting
practice she founded, Market Savvy Consulting (founded in October 1994) which
focuses on strategically driving the creative process to deliver consistently
outstanding marketing programs that work and as Senior Vice President of
Marketing for Caere Corporation (April 1999 to present).
Over the past ten years, she has also held Vice President of Marketing
positions with Claris Corporation/FileMaker, Inc. (June 1997 to July 1998) as
well as Broderbund Software (November 1992 to October 1994), and was Vice
President of Marketing and Manufacturing with Ashlar.
While Vice President of Worldwide Marketing at Claris, Ms. Carpenter
introduced Mac OS 8, which is widely regarded as having revived retail interest
in the Mac platform; FileMaker Pro 4.0, named 1998's Best Business Software and
Best Numeric or Data Business Software by the Software Publishers Association;
and ClarisWorks for Kids, named 1998's Best Education Software Program and Best
Curriculum Software for Early Education by the Software Publishers Association.
At Broderbund, Ms. Carpenter also introduced numerous award-winning,
best-selling products, including Myst - the best-selling computer game of all
time - as well as The Print Shop Deluxe CD Ensemble, Kid Pix Studio, Math
Workshop, The Amazing Writing Machine, several Living Books, and 3D Home
Architect. She played a pivotal role in the successful re-launch of Broderbund's
original Carmen San Diego series.
As Vice President of Marketing and Manufacturing with Ashlar, Ms.
Carpenter was responsible for product management/product marketing, marketing
communications, product support, end user documentation, manufacturing, and
customer service. In this role she established product line, distribution and
manufacturing strategies; created and staffed departments, including recruiting
the Vice President of Sales and setting up a telesales operation; managed
aggressive alpha and beta site seeding programs; developed marketing materials,
including the corporate identity, packaging, advertising, data sheet,
testimonial video, and trial version; launched the product; and obtained
extraordinary press coverage, creating the image of a highly-successful, large
company while closely controlling expenses.
Ms. Carpenter has also held key positions at Software Publishing
Corporation, long ranked among the top 10 largest U.S. software companies. There
she served as Director of Marketing Services, as well as Product Marketing
Manager and Group Product Manager for the PFS: series of personal productivity
applications. Ms. Carpenter began her career in brand management with Procter &
Gamble and is a classically-trained musician. She holds an MBA from Stanford
University and a BS in Business from Indiana University.
Jan M. Mathews, Chief Operating Officer, Corporate Secretary and
Director. Ms. Mathews was Vice President of Marketing for Catalog City, an
internet startup focused on the catalog industry from December 1997 through
March 1998. From October 1993 through May 1999, Jan served as Vice President of
Marketing for Jump! Software Inc. where she directed the repositioning of
ConcertWare, a leading notation software program and developed the Piano
Discovery infomercial staring Herbie Hancock. In May 1999 she was promoted to
Chief Operating Officer. Ms. Mathews has over eighteen years experience in sales
and marketing management for high technology and industrial product companies.
As President and founder of Bumblebee Software, Inc., Ms. Mathews launched
dBFast/Windows and dBFast/Mac, the first Windows and Macintosh dBASE compatible
database and compiler. At Bumblebee, Ms. Mathews negotiated marketing
partnerships with Microsoft to promote Windows and with Novell to promote
dBFast/Windows as an SQL front end to NetWare.
-12-
<PAGE>
As Director of Marketing and Corporate Communications for Columbia Data
Products, Ms. Mathews managed Columbia's advertising and public relations. As
Executive VP and Director of Luhrs & Lange Advertising, Inc., Ms. Mathews
successfully marketed high tech products for Fortune 500 businesses. She created
a subsidiary company to develop and market consumer products for PCs. She also
worked with Nomadic Systems as Director of Product Marketing for SmartSync-TM-,
a Windows synchronization utility.
Jack F. Kemp, Director. Prior to founding Empower America in 1993, Mr.
Kemp served for four years as Secretary of Housing and Urban Development. Before
his appointment to the Cabinet, Mr. Kemp represented the Buffalo area and
Western New York for 18 years in the United States House of Representatives. Mr.
Kemp spent 13 years in professional football, playing quarterback for the San
Chargers and the Buffalo Bills. He led the Buffalo Bills to the American
Football League championship in 1964 and 1965 when he was named the League's
most valuable player. He also co-founded the AFL Players Association and was
elected president for five terms. He is on the Board of Habitat for Humanity and
Chairman of Habitat's National Campaign for Rebuilding our Communities.
Mr. Kemp has been self-employed for over five years.
In 1996, Jack Kemp gained even further prominence in the national
spotlight when Senator Bob Dole named him as the Republican Party's vice
presidential candidate.
Mr. Kemp is on the Boards of Oracle Corporation, Proxicom Inc.,
Speedway Motorsports, Inc., Everen Capital, Carson Inc., The Sports Authority,
Inc., and American Bankers Insurance Group, Inc.
Daniel Mirich, Director. Mr. Mirich is President of CJM Associates,
Inc., a management consulting firm that serves rapidly growing small to medium
sized high-technology corporations. Mr. Mirich has been with CJM for over ten
years. Prior to CJM, Mr. Mirich held several executive management positions at
Altus Corporation including Vice President, Senior Vice President and General
Manager. He has been a partner with Thomas Kelley & Associates as well as
Korn-Ferry International, managing executive searches exclusively for
high-technology clients. Earlier in his career, Mr. Mirich worked for
Hewlett-Packard in Colorado and California. He received his B.S. degree at
Colorado State University and his M.A. degree at the University of Northern
Colorado. Mr. Mirich serves on the board of Business Backers Management
Corporation. Mr. Mirich is an active volunteer in the community. He is a member
of the Board of Directors for the Enterprise Network, a high technology
incubator cluster. In addition, he served the Santa Clara County Chapter of
Junior Achievement for years as Director and Chairman.
ITEM 6. EXECUTIVE COMPENSATION
The following table and attached notes sets forth the compensation of
our executive officers during each of the last three fiscal years. The
remuneration described in the table does not include the cost to the Company of
benefits furnished to the named executive officers, including premiums for
health insurance, reimbursement of expense, and other benefits provided to such
individual that are extended in connection with the ordinary conduct of our
business. The value of such benefits cannot be precisely determined, but the
executive officers named below did not receive other compensation in excess of
the lesser of $25,000 or 10% of such officer's cash compensation. We have no
annuity, pension or retirement benefits proposed to be paid to officers,
directors or employees in the event of retirement at normal retirement date
pursuant to any presently existing plan provided or contributed by us.
-13-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Name and Principal Other Restricted All other
Position annual Stock Options LTIP Compen-
Year Salary Bonus Compen- Awards SARs Payouts sation
sation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard W. Mathews 1999 $ 165,000(3) -0- -0- -0- 250,000 -0- -0-
Chief Executive Officer 1998 $ 80,700 -0- -0- -0- -0- -0- -0-
1997 $ 170,000 -0- -0- -0- -0- -0- -0-
Jan M. Mathews 1999 $ 150,000 -0- -0- -0- 150,000 -0- -0-
Chief Operating Officer 1998 $ 26,912 -0- -0- -0- -0- -0- -0-
1997 $ 145,800 $10,500 $ 14,190(4) -0- 4,560 -0- -0-
Valorie Cook Carpenter 1999 -0- -0- -0- -0- 75,000 -0- -0-
VP Marketing 1998 -0- -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0- -0- -0-
Jerome W. Carlson 1999 -0- -0- -0- -0- 6,000 -0- -0-
Chief Financial Officer 1998 -0- -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- 2,090 -0- -0-
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(3.) Projected.
(4.) Accrued salary from 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
We did not grant any stock options during our 1998 fiscal year.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NAME NUMBER OF PERCENT OF TOTAL EXERCISE OR EXPIRATION
SECURITIES OPTIONS/SARS BASE PRICE DATE
UNDERLYING GRANTED TO ($/SH)
OPTIONS/SARS EMPLOYEES IN
GRANTED (#) FISCAL YEAR
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard W. Mathews -0- N/A N/A N/A
- -------------------------------------------------------------------------------------
Jan M. Mathews -0- N/A N/A N/A
- -------------------------------------------------------------------------------------
Valorie Cook Carpenter -0- N/A N/A N/A
- -------------------------------------------------------------------------------------
Jerome W. Carlson -0- N/A N/A N/A
- -------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 8. DESCRIPTION OF SECURITIES
A. COMMON STOCK
Our Articles of Incorporation authorize the issuance of 200,000,000
shares of common stock, $.001 par value per share, of which 7,579,000 shares
were outstanding as of the date hereof.
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common stock
have no cumulative voting rights. Accordingly, the holders of in excess of 50%
of the aggregate number of shares of Common Stock outstanding will be able to
elect all our directors and to approve or disapprove any other matter submitted
to a vote of all shareholders.
Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time, by the Board of
Directors in its discretion, from funds legally available therefor. We do not
currently anticipate paying any dividends on our Common Stock. In the event of a
liquidation, dissolution or winding up of the Company, the holders of shares of
common stock are entitled to share pro rata all assets remaining after payment
in full of all liabilities. Holders of Common Stock have no preemptive rights to
purchase our Common Stock. There are no conversion rights or redemption or
sinking fund provisions with respect to the Common Stock. All of the outstanding
shares of Common Stock are fully paid and non-assessable.
Shares of Common Stock are registered at our office and are
transferable at such office by the registered holder (or duly authorized
attorney) upon surrender of the Common Stock certificate, properly endorsed. No
transfer shall be registered unless we are satisfied that such transfer will not
result in a violation of any applicable federal or state securities laws. Our
transfer agent is Interwest Stock Transfer, 1981 E. Murray Holiday Road, Salt
Lake City, UT 84117
B. PREFERRED STOCK
We are authorized to issue 50,000,000 shares of preferred stock, $.001
par value, of which 2,500,000 shares are designated as Series C Redeemable and
Convertible Preferred Stock ("Series C Preferred Stock"). There are no shares of
Series C Preferred Stock issued and outstanding as of the date hereof. The
rights, privileges, and preferences of the Series C Preferred Stock are as
follows:
a. DIVIDEND PROVISIONS. The holders of shares of Series C
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor, dividends
accruing at the rate of ten percent (10.0%) per year of the face value (face
value is $3.00 per share) from the date of issuance through the date of
conversion (the "Coupon Dividend"), as well as dividends paid with respect to
each share of common stock for each share of Series C Preferred Stock at the
same time and on a parity with dividends paid on each share of common stock (the
"Common Dividend") less any Coupon Dividend paid for any such period. Each share
of Series C Preferred Stock shall rank on a parity with each other share of
Series C Preferred Stock with respect to dividends. Dividend payments to the
holders of shares of Series C Preferred Stock shall be payable annually, in cash
by delivery of a check to each entitled holder's address which is registered
with the Secretary of the Company. Any Coupon Dividend on the Series C Preferred
Stock which has accrued but which, for any reason whatsoever, (a) has not been
declared, or (b) has been declared but has not been timely paid, shall be deemed
in arrears and shall accumulate until paid.
b. CONVERSION PROVISIONS. Each share of Series C Preferred
Stock is convertible into shares of our Common Stock at any time after the date
of issuance based upon a conversion price of $3.00 per common
-15-
<PAGE>
share. Any holder of the Series C Preferred Stock may elect conversion (the
"Conversion Right") of any number of the shares so held by remitting the
Certificate evidencing ownership of the shares together with a signed
irrevocable stock transfer power, with signature guaranteed, to the Company
requesting and specifying the number of shares that the Holder seeks to convert
into our Common Stock (the "Conversion Request").
c. REDEMPTION.
i. MANDATORY REDEMPTION. If the shares of
Series C Preferred Stock are not converted earlier by the holder(s), at two
years following the date of issuance, we are obligated to redeem for cash each
and every outstanding shares of Series C Preferred Stock at face value plus
accrued and unpaid dividends owed.
ii. VOLUNTARY REDEMPTION. Notwithstanding the
Mandatory Redemption provision, in the event that our Common Stock trades at
$4.50 per share or greater for ten (10) consecutive trading days, as measured by
the closing bid price, we shall have the right to convert into Common Stock such
shares of Series C Preferred Stock at the greater of $4.50 or the closing bid
price on the date that we provide written notice of our intention to convert.
d. LIQUIDATION PREFERENCES. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
outstanding Series C Preferred Stock will be entitled to receive, before any
distribution is made with respect to the Corporation's common stock, a
preferential payment at a rate per each whole share of Series C Preferred Stock
equal to the face value of $3.00 per share plus accrued and unpaid dividends
thereon.
e. RECAPITALIZATION. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Amendment) provision shall be made so that the holders of the Series C
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series C Preferred Stock the number of shares of stock or other securities or
property of the Corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this section with respect to the rights of the holders of the
Series C Preferred Stock after the recapitalization to the end that the
provisions of this section (including adjustment of the applicable Conversion
Prices then in effect and the number of shares purchasable upon conversion of
the Series C Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
f. NO VOTING RIGHTS AND NO SINKING FUND. The Series C
Preferred Shares have no voting rights and no sinking fund has or will be
established to provide for dividends or the redemption of the Series C Preferred
Stock.
C. OPTIONS AND WARRANTS
a. OPTIONS
In 1995 Jump! Software, Inc., prior to its merger with America's Finest
Waters, Inc., enacted the Jump! Software, Inc. 1995 Stock Option Plan ("1995
Plan"). Adjusted for the merger, 309,261 options shares are still outstanding
under the 1995 Plan as of June 30, 1999, with an exercise price of $0.395 per
share.
On May 5, 1999 the Company enacted the 1999 Incentive and Nonstatutory
Stock Option Plan (the "1999 Plan") which has reserved for issuance 2,00,000
options to purchase shares of Common Stock for board members, key employees and
consultants. The 1999 Plan is subject to, and must receive the approval of the
shareholders. As of June 30, 1999, 677,757 options have been issued under the
1999 Plan with an exercise price of $3.59 per share.
-16-
<PAGE>
As of 1999, we have 987,018 options outstanding under both the 1995 and
199 Plan, of which 313,521 are currently exercisable.
b. WARRANTS
The following chart shows all of our current outstanding warrants:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
NUMBER OF WARRANTS PRICE CLASS OF SHARES
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David Anderson 3,800 $0.03 Common
-------------------------------------------------------------------------------------------
Silicon Valley Bank 6,196 $3.03 Common
-------------------------------------------------------------------------------------------
Charles Corfield 41,801 $0.03 Common
-------------------------------------------------------------------------------------------
L. George Klaus 9,500 $0.03 Common
-------------------------------------------------------------------------------------------
John Kohler 9,500 $0.39 Common
-------------------------------------------------------------------------------------------
J. Earl May 3,800 $0.03 Common
-------------------------------------------------------------------------------------------
Mark Walsen 3,800 $0.03 Common
-------------------------------------------------------------------------------------------
John Warnock 19,000 $0.39 Common
-------------------------------------------------------------------------------------------
Jack Kemp 25,000 $1.00 Common
-------------------------------------------------------------------------------------------
Dick Mathews 200,000 $5.125 Common
-------------------------------------------------------------------------------------------
Jan Mathews 100,000 $5.125 Common
-------------------------------------------------------------------------------------------
Houlihan, Smith & Co. 50,000 $1.00 Common
-------------------------------------------------------------------------------------------
Dick Mathews 500,000 $3.00 Preferred C
-------------------------------------------------------------------------------------------
Jan Mathews 100,000 $3.00 Preferred C
-------------------------------------------------------------------------------------------
</TABLE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY AND
OTHER STOCKHOLDERS MATTERS
A. MARKET INFORMATION
Our Common Stock has been quoted on the over-the-counter bulletin board
system ("OTC Bulletin Board") since January 13, 1992, formerly under the symbol
AFWA, and since the Merger, under the symbol JMUS.
The following table sets forth the high ask, low bid and closing bid
prices for the Company's common stock as reported on the OTC Bulletin Board.
The prices below also reflect inter-dealer quotations, without retail
mark-up, mark-down or commissions and may not represent actual transactions:
<TABLE>
<CAPTION>
---------------------------------------------------
QUARTER ENDED HIGH ASK LOW BID CLOSING BID
---------------------------------------------------
<S> <C> <C> <C>
03/31/92(1) 1 1/4 0 3/8 1 1/8
---------------------------------------------------
06/30/92 1 1/4 0 1/4 0 9/16
---------------------------------------------------
09/30/92(2) 0 3/4 0 1/8 0 5/16
---------------------------------------------------
12/31/92 0 1/2 0 1/16 0 1/4
---------------------------------------------------
03/31/93 0 7/16 0 1/16 0 3/32
---------------------------------------------------
06/30/93 0 0 3/32 0 3/32
-17-
<PAGE>
---------------------------------------------------
QUARTER ENDED HIGH ASK LOW BID CLOSING BID
---------------------------------------------------
09/30/93 0 0 3/32 0 3/32
---------------------------------------------------
12/31/93 0 0 3/32 0 3/32
---------------------------------------------------
03/31/94 0 3/4 0 1/16 0 1/2
---------------------------------------------------
06/30/94 0 3/4 0 1/16 0 11/32
---------------------------------------------------
09/30/94 0 9/16 0 1/16 0 1/4
---------------------------------------------------
12/30/94 0 7/16 0 1/32 0 5/32
---------------------------------------------------
03/31/95 0 9/32 0 1/32 0 5/32
---------------------------------------------------
06/30/95 0 9/32 0 1/32 0 5/32
---------------------------------------------------
09/29/95 0 9/32 0 1/32 0 9/64
---------------------------------------------------
12/29/95 0 1/4 0 1/32 0 3/32
---------------------------------------------------
03/29/96 0 9/32 0 1/32 0 5/32
---------------------------------------------------
06/28/96 0 9/32 0 1/32 0 5/32
---------------------------------------------------
09/30/96 0 5/16 0 1/64 0 11/64
---------------------------------------------------
12/31/96 0 5/16 0 1/64 0 1/64
---------------------------------------------------
03/31/97 0 5/16 0 1/64 0 11/64
---------------------------------------------------
06/30/97 0 5/16 0 1/64 0 11/64
---------------------------------------------------
09/30/97 0 5/16 0 1/64 0 11/64
---------------------------------------------------
12/31/97 0 5/16 0 1/64 0 11/64
---------------------------------------------------
03/31/98 0 5/16 0 1/64 0 1/32
---------------------------------------------------
06/30/98 0 3/64 0 1/64 0 1/32
---------------------------------------------------
09/30/98 0 3/64 0 1/64 0 1/32
---------------------------------------------------
12/31/98 3 1/8 0 1/64 1
---------------------------------------------------
03/31/99 1 1/4 0 1/4 0 3/4
---------------------------------------------------
06/30/99 4 1/2 4 1/2 4 1/2
---------------------------------------------------
</TABLE>
- -----------------
(1) Price and volume statistics are not available for the full period.
(2) No pricing activity for the last day of the period.
As of July 19,1999 the bid price of our Common Stock was $2 1/3 per
share. As of July 19,1999 there were approximately 396 registered and
unregistered holders of record of the Company's Common Stock, as reported by our
transfer agent.
-18-
<PAGE>
Management understands that the following firms currently make a market
for our securities on the OTC Bulletin Board:
Hill Thompson Magid & Company, Inc.
JP Trading, L.L.C.
Pennaluna & Company
Paragon Capital Corporation
Sharpe Capital, Inc.
B. HOLDERS
As of July 19, 1999 there were approximately 396 holders of Company
Common Stock, as reported by the our transfer agent.
C. DIVIDENDS
We have not paid any dividends on its Common Stock. We intend to retain
any earnings for use in its business, and therefore does not anticipate paying
cash dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
To the best knowledge of management, there are no legal proceedings
pending or threatened against the company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On March 7, 1999, we commenced an offering pursuant to Regulation D,
Rule 504, of the Securities Act of 1933, as amended (the "Act"). We sold a total
of 3,270,480 shares of its common stock ("Shares") at $0.04 per Share for which
we accepted subscriptions for a total of gross proceeds of $130,819.20. The
Offering was terminated on April 2, 1999.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Revised Statutes and the Company's Articles of Incorporation
and Bylaws authorize indemnification of a director, officer, employee or agent
of the Company against expenses incurred by him or her in connection with any
action, suit, or proceeding to which such person is named a party by reason of
having acted or served in such capacity, except for liabilities arising from
such person's own misconduct or negligence in performance of duty. In addition,
even a director, officer, employee or agent of the Company who was found liable
for misconduct or negligence in the performance of duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
-19-
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The following financial statements are included herein:
Audited Financial Statements for the Fiscal Years Ended December 31, 1998 and
December 31, 1997
Unaudited Financial Statements for the Six Months Ended June 30, 1999 and
June 30, 1998
PART III
ITEM 1 AND
ITEM 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Document Description
- ----------- --------------------
<S> <C>
2.1 Articles of Merger, filed May 5, 1999
3.1 Articles of Incorporation of JumpMusic.com, Inc. dated May 31, 1988
3.2 Amendment to Articles of Incorporation of JumpMusic.com, Inc.
3.3 Bylaws dated June 3, 1988
10.1 1995 Stock Option Plan
10.2 1999 Incentive and Non-statutory Stock Option Plan
10.3 Office Lease Agreement, dated July 25, 1994
10.4 First Amendment to Lease, dated July 25, 1994
10.5 Second Amendment to Lease, dated July 25, 1994
10.6 Employment Agreement with Richard Mathews
10.7 Employment Agreement with Jan Mathews
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, as
amended, the Registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
JUMPMUSIC.COM, INC.
/s/ Richard W. Mathews
------------------------------
By: Richard W. Mathews
Its: Chief Executive Officer and Chairman
Signature Title Date
- --------- ----- ----
/s/ Richard W. Mathews Chief Executive Officer July 21, 1999
- -------------------------
Richard W. Mathews and Chairman
/s/ Jan Mathews Chief Operating Officer and July 21, 1999
- -------------------------
Jan M. Mathews Director
-20-
<PAGE>
/s/ Valorie Cook Carpenter Director and Acting Senior July 21, 1999
- ---------------------------
Valorie Cook Carpenter Vice President Marketing
/s/ Jerome W. Carlson Acting Chief Financial Officer July 21, 1999
- ---------------------------
Jerome W. Carlson
/s/ Jack F. Kemp Director July 21, 1999
- ---------------------------
Jack F. Kemp
/s/ Daniel Mirich Director July 21, 1999
- ---------------------------
Daniel Mirich
-21-
<PAGE>
JUMP MUSIC.COM, INC.
Financial Statements
June 30, 1999 (unaudited)
and
December 31, 1998 and 1997
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Accountants' Report ..........................................................3
Balance Sheets................................................................4
Statements of Operations .....................................................6
Statements of Stockholders' Equity............................................7
Statements of Cash Flows .....................................................9
Notes to the Financial Statements ...........................................10
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Jump Music.Com, Inc.
We have audited the accompanying balance sheet of Jump Music.Com, Inc. as of
December 31, 1998 and the related statements of operations, stockholders' equity
and cash flows for the years ended December 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall 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 Jump Music.Com, Inc. as of
December 31, 1998 and the results of its operations and cash flows for the years
ended December 31, 1998 and 1997 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has had recurring operating losses for the
past several years. These factors raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in the Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Salt Lake City, Utah
June 15, 1999
-3-
<PAGE>
JUMP MUSIC.COM, INC.
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
------------------ ----------------
CURRENT ASSETS (unaudited)
<S> <C> <C>
Cash (Note 1) $ 13,653 $ 5,961
Accounts receivable (net of allowance for doubtful
accounts of $20,000 and $172,579, respectively) 118,470 126,487
Inventory 320,135 359,129
------------------ ----------------
Total Current Assets 452,258 491,577
------------------ ----------------
PROPERTY & EQUIPMENT (Note 1)
Computer and Music equipment 46,294 50,016
Trade show booth - 33,915
Furniture and equipment 36,902 36,902
Leasehold improvements 17,865 17,865
------------------ ----------------
101,061 138,698
Less:
Accumulated depreciation (36,869) (70,785)
------------------ ----------------
Total Property & Equipment 64,192 67,913
------------------ ----------------
OTHER ASSETS
Organization costs (Note 1) 522 522
Deposits 3,474 3,474
------------------ ----------------
Total Other Assets 3,996 3,996
------------------ ----------------
TOTAL ASSETS $ 520,446 $ 563,486
================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
<PAGE>
JUMP MUSIC.COM, INC.
Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
------------------ ----------------
<S> <C> <C>
CURRENT LIABILITIES (unaudited)
Accounts payable $ 593,412 $ 1,169,187
Accrued expenses 68,315 264,824
Deferred salaries 146,208 249,331
Deferred revenue - 70,000
Current portion of long-term liabilities (Note 4) 1,102,851 1,371,856
------------------ ----------------
Total Current Liabilities 1,910,786 3,125,198
------------------ ----------------
LONG TERM LIABILITIES (Note 4)
Notes payable 150,000 150,000
Notes payable-related party 947,833 4,381,000
Capital lease obligations 7,874 7,874
Less current portion (1,102,851) (1,371,856)
------------------ ----------------
Total long term Liabilities 2,856 3,167,018
------------------ ----------------
TOTAL LIABILITIES 1,913,642 6,292,216
------------------ ----------------
REDEEMABLE PREFERRED STOCK (Note 8)
Series C Redeemable convertible Preferred stock,
authorized 2,500,000 shares issued and outstanding
1,472,013 and 0 shares, respectively 4,416,039 -
------------------ ----------------
STOCKHOLDERS' EQUITY
Series A Convertible Preferred stock, authorized
14,000,000 shares issued and outstanding
0 and 4,151,793 shares, respectively
Liquidation value $4,774,562 - 4,152
Series B Convertible Preferred stock, authorized
287,327 shares issued and outstanding
0 and 287,327 shares, respectively
Liquidation value $330,426 - 287
Common stock, authorized 50,000,000 shares
issued and outstanding 7,579,005 and
5,843,858 shares, respectively 7,579 5,843
Additional paid in capital 6,750,574 6,383,208
Retained earnings (12,567,388) (12,122,220)
------------------ ----------------
Total Stockholders' Equity (5,809,235) (5,728,730)
------------------ ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 520,446 $ 563,486
================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements
-5-
<PAGE>
JUMP MUSIC.COM, INC.
Statements of Operations
<TABLE>
<CAPTION>
June 30 December 31
1999 1998 1998 1997
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 527,192 $ 775,545 $ 1,738,367 $ 3,530,154
COST OF SALES 219,073 383,613 806,417 1,936,675
----------- ----------- ----------- -----------
GROSS PROFIT 308,119 391,931 931,950 1,593,479
----------- ----------- ----------- -----------
SELLING EXPENSES 10,448 162,837 272,551 1,510,231
GENERAL & ADMINISTRATIVE
EXPENSES 543,930 1,115,430 1,813,390 3,531,953
----------- ----------- ----------- -----------
TOTAL
OPERATING EXPENSES 554,378 1,278,267 2,085,941 5,042,184
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (246,259) (886,336) (1,153,991) (3,448,705)
----------- ----------- ----------- -----------
OTHER INCOME AND (EXPENSES)
Interest income -- -- -- 3,273
Miscellaneous income 110,907 9,935 32,419 --
Interest expense (309,415) (101,326) (278,142) (130,691)
Bad debts -- (22,720) (30,477) (456,193)
----------- ----------- ----------- -----------
Total Other Income
and (Expenses) (198,508) (114,111) (276,200) (583,611)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES (444,767) (1,000,447) (1,430,191) (4,032,316)
PROVISION FOR INCOME
TAXES (Note 1) 400 400 800 800
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (445,167) $(1,000,847) $(1,430,991) $(4,033,116)
=========== =========== =========== ===========
NET INCOME (LOSS)
PER SHARE $ (.07) $ (.17) $ (.24) $ (.69)
=========== =========== =========== ===========
WEIGHTED AVERAGE
OUTSTANDING SHARES 6,711,432 5,831,493 5,843,858 5,837,675
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
-6-
<PAGE>
JUMP! SOFTWARE, INC.
Statements of Stockholders' Equity
From December 31, 1996 through December 31, 1998
and June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Series A Series B Additional
Retained
Preferred Stock Preferred Stock Common Stock
-------------------- ------------------- ------------------------
Paid-in Earnings
Shares Amount Shares Amount Shares Amount Capital (Deficit)
--------- --------- --------- -------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance on
December 31, 1996 3,386,578 $ 3,387 - $ - 5,806,762 $ 5,806 $4,924,131 $(6,658,113)
Stock issued for cash - - - - 37,096 37 5,527 -
Stock issued for cash 721,737 722 - - - - 829,276 -
Stock issued for cash - - 137,327 137 - - 274,467 -
Stock issued for services - - 50,000 50 - - 99,950 -
Net income (loss) for the year
ended December 31, 1997 - - - - - - - (4,033,116)
--------- --------- --------- -------- --------- -------- ---------- ------------
Balance on
December 31, 1997 3,386,578 3,387 - - 5,843,858 5,806 4,924,131 (10,691,229)
Stock issued for services 43,478 43 - - - - 49,957 -
Stock issued for cash - - 100,000 100 - - 199,900 -
Net income (loss)
for the year ended
December 31, 1998 - - - - - - - (1,430,991)
--------- --------- --------- -------- --------- -------- ---------- ------------
Balance on
December 31, 1998 4,151,793 4,152 287,327 287 5,843,858 5,843 6,383,208 (12,122,220)
</TABLE>
The accompanying notes are an integral part of these financial statements
-7-
<PAGE>
JUMP! SOFTWARE, INC.
Statements of Stockholders' Equity
From December 31, 1996 through December 31, 1998
and June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Additional
Series A Series B Retained
Common Stock
Preferred Stock Preferred Stock ------------------------
------------------- ------------------- Paid-in Earnings
Shares Amount Shares Amount Shares Amount Capital (Deficit)
---------- -------- --------- ------ ---------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance on
December 31, 1998 4,151,793 $ 4,152 287,327 $ 287 5,843,858 $ 5,843 $6,383,208 $12,122,220)
Reverse acquisition
and reorganization
adjustment (Note 13) (4,151,793) (4,152) (287,327) (287) 1,735,147 1,736 367,366 -
Net income (loss) for the
period ended June 30,1999 - - - - - - - (445,168)
---------- -------- --------- ------ ---------- ------- ---------- ------------
Balance on June 30,1999 - $ - - $ - $7,579,005 $ 7,579 $6,750,574 $(12,567,388)
========== ======== ========= ====== ========== ======= ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
-8-
<PAGE>
JUMP MUSIC.COM, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
June 30 December 31
1999 1998 1998 1997
------------- -------------- ----------------- -------------
Cash Flows From Operating Activities (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ (445,167) $ (1,000,847) $ (1,430,991) $ (4,033,116)
Non-cash items:
Depreciation & amortization 20,615 61,642 131,814
Bad debt - 22,720 16,977 456,193
Stock issued for services - - 35,854 100,000
Conversion of payables, accruals and
deferred expense to Preferred Stock 1,026,411 - - -
(Increase)/decrease in current assets:
Accounts receivable 8,033 600,552 362,075 526,276
Prepaid Expenses - (5,748) 25,500 (15,616)
Inventory 38,669 125,609 238,187 (127,228)
Increase/(decrease) in current liabilities:
Accounts payable (575,777) 47,896 231,987 (873,010)
Deferred salaries (103,124) 27,158 249,332 (46,000)
Accrued expenses (196,517) (67,953) (51,690) 132,617
Deferred revenue (70,000) - (80,000) 150,000
------------- -------------- ----------------- -------------
Net Cash Provided (Used) by
Operating Activities (317,472) (229,998) (341,127) (3,598,070)
------------- -------------- ----------------- -------------
Cash Flows from Investing Activities
Purchase of property and equipment - (7,315) (12,594) (27,556)
Cash paid for deposits - - (306) -
------------- -------------- ----------------- -------------
Net Cash Provided (Used)
by Investing Activities - (7,315) (12,900) (27,556)
------------- -------------- ----------------- -------------
Cash Flows from Financing Activities
Cash received from acquisition 115,164 - - -
Cash from line of credit - - - 1,000,000
Cash from sale of stock - 200,000 200,000 1,123,739
Cash received from debt financing 210,000 - 75,000 1,305,000
Principal payments on long-term debt - - (3,674) -
------------- -------------- ----------------- -------------
Net Cash Provided (Used) by
Financing Activities 325,164 200,000 271,326 3,428,739
------------- -------------- ----------------- -------------
Increase/(decrease) in Cash 7,692 (37,313) (82,701) (196,887)
Cash and Cash Equivalents at
Beginning of Period 5,961 88,662 88,662 285,549
------------- -------------- ----------------- -------------
Cash and Cash Equivalents at
End of Period $ 13,653 51,349 $ 5,961 $ 88,662
============= ============ ============== =============
Supplemental Cash Flow Information:
Cash paid for interest $ - $ 131,804 $ 25,667 $ -
Cash paid for income taxes $ - $ - $ - $ -
Non-cash financing transaction:
Purchase of equipment with
lease obligations $ - $ - $ - $ -
</TABLE>
-9-
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The financial statements presented are those of Jump
Music.Com, Inc. (The Company). The Company was incorporated under
the laws of the State of California on January 26, 1994 as Jump!
Software, Inc. On April 26, 199 the Company changed the name to
Jump Music.Com, Inc. pursuant to a merger agreement, (See Note
13). The Company develops, publishes and markets interactive
music software and hardware products for the consumer market.
b. Recognition of Revenue
The Company recognizes income and expense on the accrual
basis of accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is
based on the weighted average number of shares outstanding at the
date of the financial statements.
d. Provision for Income Taxes
No provision for income taxes have been recorded due to net
operating loss carryforwards totaling approximately $12,567,388
that will be offset against future taxable income. These NOL
carryforwards will begin to expire in the year 2012. No tax benefit
has been reported in the financial statements because the Company
believes there is a 50% or greater chance the carryforward will
expire unused.
Deferred tax asset and the valuation account is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- --------------
<S> <C> <C>
Deferred tax asset:
NOL carryforward $ 4,300,000 $ 4,100,000
Valuation allowance (4,300,000) (4,100,000)
--------------- --------------
$ - $ -
================ ==============
</TABLE>
e. Cash and Cash Equivalents
The company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
NOTE 1 - Summary of Significant Accounting Policies (Continued)
-10-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
f. Property and Equipment
Expenditures for property and equipment and for renewals
and betterments, which extend the originally estimated economic
life of assets or convert the assets to a new use, are capitalized
at cost. Expenditures for maintenance, repairs and other renewals
of items are charged to expense. When items are disposed of, the
cost and accumulated depreciation are eliminated from the accounts,
and any gain or loss is included in the results of operations.
The provision for depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.
Depreciation expense for the period ended June 30, 1999 and
December 31,1998 is $0 and $29,443, respectively.
g. Inventory
Inventory is recorded at the lower of cost or market.
h. Concentrations
At December 31, 1998, three customers accounted for 27%,
17% and 10% of accounts receivable.
i. Fair Value of Financial Instruments
Based on borrowing rates currently available to the Company
for loans with similar terms, the carrying value of notes payable
approximate fair value.
j. Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation", which is
effective for the Company's financial statements for fiscal years
beginning after December 15, 1995. SFAS No. 123 allows companies
to either account for stock-based compensation under the new
provisions of SFAS No. 123 or under the provisions of Accounting
Principles Board Opinion No. 25 (APB No. 25), "Accounting for
Stock Issued to Employees", but requires pro forma disclosure in
the footnotes to the financial statements as if the measurement
provisions of SFAS No. 123 had been adopted. The Company accounts
for its stock based compensation in accordance with the
provisions of APB No. 25 and presents disclosures required by
SFAS No. 123.
-11-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30. 1999 (unaudited) and December 31, 1998
NOTE 2 - Going Concern
The accompanying financial statements have been prepared
assuming that the company will continue as a going concern. The
company has had recurring operating losses for the past several
years and is dependent upon financing to continue operations. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Management plans to
raise additional funds through a public offering of its stock and
expand its internet business to generate necessary revenues.
NOTE 3 - Related Party Transactions
During the six months ended June 30, 1999 and the year
ended December 31, 1998, the Company received $209,833 and $75,000
in notes payable from shareholders of the Company (See Note 4).
The President loaned the Company $5,500 during 1998. It was
converted to capital in anticipation of the merger.
NOTE 4 - Long-Term Liabilities
Long Term Liabilities are detailed in the following
schedules as of June 30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
June 30, December 31,
Notes payable is detailed as follows: 1999 1998
------------------ ----------------
<S> <C> <C>
Note payable to a corporation, due
May 5, 1998, bears interest at 10%,
convertible to preferred stock 150,000 150,000
------------------ ----------------
Total Notes Payable 150,000 150,000
------------------ ----------------
Notes payable related party is detailed as follows:
Note payable to a shareholder, due
December 31, 1999, bears interest at 8%,
convertible to preferred stock - 25,000
Note payable to a shareholder, due
June 30, 1998, bears interest at 12%,
convertible to preferred stock - 358,000
Note payable to a shareholder, due
October 29, 1997, non-interest bearing
convertible to preferred stock - 135,000
Note payable to a shareholder, due
March 31, 1998, non-interest bearing
convertible to preferred stock 700,000 700,000
</TABLE>
-12-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
NOTE 4 - Long-Term Liabilities (continued)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------ ----------------
<S> <C> <C>
Note payable to a shareholder, due
March 31, 1998, bears interest at 8%,
convertible to preferred stock - 150,000
Note payable to a shareholder, due
December 1, 1998, bears interest at 8%,
convertible to preferred stock 38,000 38,000
Note payable to a corporation, due
within one year, bears interest at 8%,
convertible to preferred stock 9,833 -
Note payable to a shareholder, due
December 31, 1998, bears interest at 8%,
convertible to preferred stock - 50,000
Note payable to shareholder of the Company,
bears interest of 8%, unsecured note 200,000 -
Note payable to founders of the Company,
bear interest of 8%, unsecured note - 2,925,000
------------------ ----------------
Total notes payable - related party 947,833 4,381,000
------------------ ----------------
Capital lease obligations are detailed in the
following schedule as of June 30, 1999 and
December 31, 1998:
Capital lease obligation to a corporation
for computer equipment, lease payments due
monthly of $306 through June 2002, bears
interest at 12%, secured by computer
equipment. $ 7,874 $ 7,874
------------------ ----------------
Total Lease Obligations 7,874 7,874
------------------ ----------------
Total long term liabilities 1,105,707 4,538,874
</TABLE>
NOTE 4 - Long-Term Liabilities (continued)
-13-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------ ----------------
<S> <C> <C>
Less current portion of:
Notes payable 150,000 150,000
Notes payable - related party 947,833 1,218,000
Capital lease obligations 5,018 3,856
------------------ ----------------
Total current portion 1,102,851 1,371,856
------------------ ----------------
Net Long Term Liabilities $ 2,856 $ 3,167,018
================== ================
Future minimum principal payments on notes payable are as follows at June 30, 1999:
1999 1,097,833
2000 -
2001 -
2002 -
2003 -
----------------
Total notes payable $ 1,097,833
================
Future minimum lease payments are as follows:
1999 3,670
2000 3,670
2001 3,670
2002 1,830
----------------
12,840
Less portion representing interest (4,966)
---------------
Total $ 7,874
================
NOTE 5 - Inventories
Inventories consist of the following:
December 31,
1998
----------------
Electrical Parts $ 357,609
Finished Goods 1,520 359,129
---------------- ================
</TABLE>
NOTE 6 - Use of Estimates in the Preparation of Financial Statements
-14-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period.
NOTE 7 - Stockholders' Equity
CONVERTIBLE PREFERRED STOCK
The rights, preferences and privileges of the preferred
shareholders are as follows:
DIVIDENDS
Holders of Series A Preferred Stock (the Preferred Stock) are
entitled to receive dividends of $0.09 per share per annum, in
preference to any payment of cash dividends declared or paid on
shares of common stock. Dividends on Preferred Stock are
noncumulative and are payable as determined by the Board of
Directors. As of December 31, 1998, no dividends have been
declared.
LIQUIDATION
Holders of Preferred Stock are entitled to liquidation preferences
over common shareholders to the extent of $0.09 per share of
Preferred Stock, plus all declared but unpaid dividends. If funds
are insufficient to make a complete distribution to the preferred
shareholders, such shareholders will share in the distribution of
the Company assets on a pro rata basis in proportion to the
aggregate preferential amounts owed each shareholder. After payment
has been made to the preferred shareholders, any remaining assets
and funds are to be distributed equally among the holders of the
Common Stock based upon the number shares of the Common Stock held
by each.
CONVERSION
At the option of the holder, Preferred Stock is convertible into
such number of fully paid shares of common stock as is determined
by dividing the Preferred Stock issue price by the conversion price
in effect at the time. The initial conversion price of the
Preferred Stock is $1.15 per share, and is subject to adjustment in
accordance with the antidilution provisions contained in the
Company's Articles of Incorporation. Conversion is automatic (i)
upon the closing of a firm commitment underwritten public offering
under the Securities Act of 1933 or (ii) the approval by the
holders of a majority of the then outstanding shares of the
Preferred Stock. The Company has reserved 3,386,578 shares of
common stock in the event of conversion.
-15-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
NOTE 7 - Stockholders' Equity (continued)
REDEMPTION
At the election of the Board of Directors, the Company may redeem
all or part of the shares of the Preferred Stock (pro rata based
upon the total number of shares of the Preferred Stock held by each
holder) by paying in cash a sum per share equal to $1.15 plus $0.09
per annum from the date of issuance (as adjusted for any stock
dividends, combinations, splits or similar transactions).
VOTING RIGHTS
The holder of each share of Preferred Stock is entitled to one vote
for each share of common stock into which such share of the
Preferred Stock is convertible.
REDEEMABLE PREFERRED STOCK
The rights, preferences and privileges of the preferred
shareholders are as follows:
DIVIDENDS
Holders of Series C Preferred Stock (the Preferred Stock) are
entitled to receive dividends of $0.30 per share per annum, in
preference to any payment of cash dividends declared or paid on
shares of common stock. Dividends on Preferred Stock are
noncumulative and are payable as determined by the Board of
Directors. As of December 31, 1998, no dividends have been
declared.
LIQUIDATION
Holders of Preferred Stock are entitled to liquidation preferences
over common shareholders to the extent of $0.30 per share of
Preferred Stock, plus all declared but unpaid dividends. If funds
are insufficient to make a complete distribution to the preferred
shareholders, such shareholders will share in the distribution of
the Company assets on a pro rata basis in proportion to the
aggregate preferential amounts owed each shareholder. After payment
has been made to the preferred shareholders, any remaining assets
and funds are to be distributed equally among the holders of the
Common Stock based upon the number shares of the Common Stock held
by each.
CONVERSION
At the option of the holder, Preferred Stock is convertible into
such number of fully paid shares of common stock as is determined
by dividing the Preferred Stock issue price by the conversion price
in effect at the time. The initial conversion price of the
Preferred Stock is $3.00 per share, and is subject to adjustment in
accordance with the antidilution provisions contained in the
Company's Articles of Incorporation.
-16-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
NOTE 7 - Stockholders' Equity (continued)
REDEMPTION
(a) MANDATORY REDEMPTION. If the Series C Redeemable and
Convertible Preferred Shares are not converted earlier by the
holder(s), at two years following the date of issuance, the Company
is obligated to redeem for cash each and every outstanding shares
of Series C Redeemable and Convertible Preferred Stock at face
value plus accrued and unpaid dividends owed.
(b) VOLUNTARY REDEMPTION. Notwithstanding the Mandatory
Redemption provision stated above, in the event that the Company's
common stock trades at $4.50 per share or greater for ten (10)
consecutive days, as measured by the closing bid price, the Company
shall have the right to convert into its common shares such Class C
shares at the greater of $4.50 or the closing bid price on the date
that the Company provides written notice of its intention to
convert. The Company's stock has traded for more than $4.50 for 10
consecutive days as of June 30, 1999, and the Company intends to
voluntarily redeem the Preferred C Stock for common in the near
future.
VOTING RIGHTS
The holder of each share of Preferred Stock has no voting rights.
The Company converted notes payable, accounts payable,
deferred salaries and accrued interest into redeemable Series C
Preferred Stock in the amount of $4,416,039 during the six months
ended June 30, 1999.
NOTE 8 - Stock Option Plan
In 1995, the Company adopted the 1995 Stock Option Plan
(the Plan) under which 2,078,000 shares of the Company's common
stock have been reserved for issuance to employees, directors, or
consultants under terms and provisions established by the Board of
Directors. Under the terms of the Plan, incentive options may be
granted to employees, an nonstatutory options may be granted to
employees, directors and consultants, at prices no less than 100%
and 85%, respectively, of the fair market value of the Company's
common stock at the date of grant, as determined by the Board of
Directors. The options generally vest at a rate of at least 25% per
year and expire ten years from the date of grant.
-17-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
NOTE 8 - Stock Option Plan (continued)
The Company has also issued various options for
services performed. Following is a summary of the options issued at
June 30, 1999:
<TABLE>
<CAPTION>
Weighted
Number Average
Of Exercise
Shares Price
-------------- -----------
<S> <C> <C>
Outstanding at December 31, 1996 593,764 $ .395
Granted 46,507 -
Exercised 475 .395
Forfeited - -
-------------- -----------
Outstanding at December 31, 1997 639,796 .395
Granted - -
Exercised - -
Forfeited 330,535 -
-------------- -----------
Outstanding at December 31, 1998 309,261 .395
Granted 677,757 -
Exercised - -
Forfeited - -
-------------- -----------
Outstanding at June 30, 1999 987,018 .395
============== ===========
Options exercisable at June 30, 1999 313,521 .395
============== ===========
Weighted Average Fair Value of
Options granted during the year ended:
December 31, 1996 $ .395
==============
December 31, 1997 $ .395
==============
December 31, 1998 $ .395
==============
June 30, 1999 $ .395
==============
</TABLE>
The Company has adopted the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation (SFAS No. 123)." The Company, however, continues to apply APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for the Plan. Had compensation cost for the Plan been
determined based on the fair value at the grant date for awards in 1998 and 1997
consistent with the provisions of SFAS No. 123, the Company's net loss for the
year ended December 31, 1998 would not have been materially different from the
reported net loss.
-18-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
NOTE 8 - Stock Option Plan (continued)
As the provisions of SFAS No. 123 are only applied to stock
options granted after January 1, 1995, pro forma stock compensation
cast may be material in future years, as the Company may grant
additional options and as the vesting period for the Company's options
and the period over which stock compensation is charged to expense is
generally four years.
The fair value of each option grant is estimated on the date
of grant using the minimum value method with the following weighted
average assumptions used for grants in 1998 and 1997:
Risk-free interest rate 6.42%
Expected life 4 years
The weighted average expected life was calculated based on
the vesting period and the exercise behavior. The risk-free interest
rate was calculated in accordance with the grant date and expected
life.
The options outstanding and currently exercisable price at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Options Currently
Options Outstanding Exercisable
-------------------------- --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercisable Number Contractual Exercise Options Exercisable
Prices Outstanding Life (Years) Price Exercisable Price
----------- ----------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 0.395 309,261 8.93 $ 0.395 274,928 $ 0.395
</TABLE>
NOTE 9 - Warrants
The Company issued fully exercisable warrants to purchase
16,304 shares of Preferred Stock at a price of $1.15 per share. The
Company also issued fully exercisable warrants to purchase 75,000 and
165,000 shares of Common Stock at a price of $.15 and $.01,
respectively.
NOTE 10 - Profit Sharing Plan
The Company maintains a 401(k) profit sharing plan which
covers substantially all employees. Under the Plan, employees are
permitted to defer up to 15% of their earnings, not to exceed the
statutory amount per year on a pretax basis through contributions to
the Plan. The Plan provides for employer contributions at the
discretion of the Board of Directors; however, no such contributions
were made in 1998 and 1997.
-19-
<PAGE>
JUMP MUSIC.COM, INC.
Notes to the Financial Statements
June 30, 1999 (unaudited) and December 31, 1998
NOTE 11 - Commitments and Contingencies
The Company is committed to an operating lease for office
space. The lease requires the Company to pay monthly rent of $1,659.
The lease expires January 31, 1999 after which the lessor has agreed
to lease the space to the Company on a month to month basis.
NOTE 12 - Unaudited Information
The information furnished herein was taken from the books and
records of the Company without audit. However, such information
reflects all adjustments which are, in the opinion of management,
necessary to properly reflect the results of the six months ended June
30, 1999. The information presented is not necessarily indicative of
the results from operations expected for the full fiscal year.
NOTE 13 - Subsequent Events/Reverse Merger
On April 26, 1999, the Company entered an agreement to merge
with America's Finest Waters, Inc. (AFWI) a Nevada Corporation.
Pursuant to the agreement, AFWA issued 4,400,000 shares of common
stock to the shareholders of the Company for all issued and
outstanding stock of the Company. The merger has been treated as a
reverse merger, therefore Jump Music.Com, Inc. becomes the accounting
acquirer and all historical information in these financial statements
are those of Jump Music.Com, Inc. At the time of the merger, all
Preferred Series A and B were converted to common stock. An adjustment
was made on the books to reflect the legal entities (AFWA) equity and
Series C Redeemable Preferred Stock was organized. The June 30, 1999
financial statements are consolidated unaudited financial statements
including the books of Jump Music.Com, Inc. and America's Finest
Waters, Inc. At the time of the merger the Company changed its name to
Jump Music.Com, Inc.
-20-
<PAGE>
EXHIBIT 2.1
ARTICLES OF MERGER
<PAGE>
ARTICLES OF MERGER
W.L. Campbell hereby certifies that:
1. He is the President and Secretary of America's Finest Waters, Inc.,
a Nevada corporation (the "Surviving Corporation").
2. These Articles of Merger are being filed pursuant to Section 92A.200
of the Nevada Revised Statutes to effect a merger (the "Merger") between the
Surviving Corporation and Jump! Software, Inc., a California corporation (the
"Disappearing Corporation"). The Surviving Corporation and the Disappearing
Corporation shall be referred to collectively as the "Constituent Entities".
3. A Plan of Merger (the "Plan") has been adopted by each Constituent
Entity.
4. A special meeting of the board of directors and shareholders of the
Surviving Corporation was held on April 21, 1999. At that meeting, the Plan was
approved by a unanimous vote of the directors of the Surviving Corporation.
Also, at that meeting, the Secretary reported that there 3,594,859 shares of the
Surviving Corporation's capital stock issued and outstanding and proxies voting
"FOR" the Plan were received from the holders of 2,070,826 shares or 57.6% of
the total outstanding capital stock. Therefore, the Plan was approved by all of
the directors and a majority of the shareholders of the Surviving Corporation.
5. A special meeting of the board of directors and shareholders of the
Disappearing Corporation was held on March 31, 1999. At that meeting, the Plan
was approved by a unanimous vote of the directors of the Surviving Corporation.
Also, at that meeting, the Secretary reported that there were 10,239,500 shares
of the Disappearing Corporation's capital stock issued and outstanding and
proxies voting "FOR" the Plan were received from the holders of 5,984,425 shares
or 58.44% of the total outstanding capital stock. Therefore, the Plan was
approved by all of the directors and a majority of the shareholders of the
Disappearing Corporation.
6. The amendments to the Articles of Incorporation of the Surviving
Corporation are as follows:
a. The name of Surviving Corporation is hereby changed to
JumpMusic.Com, Inc., a Nevada corporation.
b. The total number of shares Surviving Corporation is authorized to
issue are 200,000,000 shares of common stock, $.001 par value; and 50,000,000
shares of preferred stock, $.001 par value, of which 2,500,000 shares are
designated as Series C. The rights, privileges, and preferences of the Series C
Preferred Stock are as follows:
i. DIVIDEND PROVISIONS. The holders of shares of Series C
Redeemable and Convertible Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors out of any funds at the time legally
available therefor, dividends accruing at the rate of ten percent (10.0%) per
year of the face value (face value is $3.00 per share) from the date of issuance
through the date of conversion (the "Coupon Dividend"), as well as dividends
paid with respect to each share of common stock for each share of Series C
Redeemable and Convertible Preferred Stock at the same time and on a parity with
dividends paid on each share of common stock (the "Common Dividend") less any
Coupon Dividend paid for any such period. Each share of Series C Redeemable and
Convertible Preferred Stock shall rank on a parity with each other share of
Series C Redeemable and Convertible Preferred Stock with respect to dividends.
Dividend payments to the holders of shares of Series C Redeemable and
Convertible Preferred Stock shall be payable annually, in cash by delivery of a
check to each entitled holder's address which is registered with the Secretary
of the Company. Any Coupon Dividend on the Series C Redeemable and Convertible
Preferred Stock which has accrued pursuant to this Section 2 but which, for any
reason whatsoever, (a) has not been declared, or (b) has been declared but has
not been timely paid, shall be deemed in arrears and shall accumulate until
paid.
1
<PAGE>
ii. CONVERSION PROVISIONS. Each Series C Redeemable and
Convertible Preferred Share is convertible into shares of the Company's Common
Stock at any time after the date of issuance based upon a conversion price of
$3.00 per common share. Any holder of the Series C Redeemable and Convertible
Preferred Shares may elect conversion (the "Conversion Right") of any number of
the Shares so held by remitting the Certificate evidencing ownership of the
Shares together with a signed irrevocable stock transfer power, with signature
guaranteed, to the Company requesting and specifying the number of Shares that
the Holder seeks to convert into the Company's Common Stock (the "Conversion
Request").
iii. REDEMPTION.
(a) MANDATORY REDEMPTION. If the Series C Redeemable and
Convertible Preferred Shares are not converted earlier by the holder(s), at two
years following the date of issuance, the Company is obligated to redeem for
cash each and every outstanding shares of Series C Redeemable and Convertible
Preferred Stock at face value plus accrued and unpaid dividends owed.
(b) VOLUNTARY REDEMPTION. Notwithstanding the Mandatory
Redemption provision contained at iii(a) above, in the event that the Company's
common stock trades at $4.50 per share or greater for ten (10) consecutive
trading days, as measured by the closing bid price, the Company shall have the
right to convert into its common shares such Class C shares at the greater of
$4.50 or the closing bid price on the date that the Company provides written
notice of its intention to convert.
iv. LIQUIDATION PREFERENCES. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
outstanding Series C Redeemable and Convertible Preferred Shares will be
entitled to receive, before any distribution is made with respect to the
Corporation's common stock, a preferential payment at a rate per each whole
Series C Redeemable and Convertible Preferred Share equal to the face value of
$3.00 per Share plus accrued and unpaid dividends thereon.
v. RECAPITALIZATION. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Amendment) provision shall be made so that the holders of the Series C
Redeemable and Convertible Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series C Redeemable and Convertible Preferred
Stock the number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this section with respect to the rights of the holders of the Series C
Redeemable and Convertible Preferred Stock after the recapitalization to the end
that the provisions of this section (including adjustment of the applicable
Conversion Prices then in effect and the number of shares purchasable upon
conversion of the Series C Redeemable and Convertible Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
vi. NO VOTING RIGHTS AND NO SINKING FUND. The Series C
Redeemable and Convertible Preferred Shares have no voting rights and no sinking
fund has or will be established to provide for dividends or the redemption of
the Series C Redeemable and Convertible Preferred Shares.
vii. NO IMPAIRMENT. This Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this section and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series C Redeemable and Convertible Preferred against impairment.
2
<PAGE>
viii. NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(a) No fractional shares shall be issued upon the
conversion of any share or shares of the Series C Redeemable and Convertible
Preferred Stock and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series C Redeemable and Convertible Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(b) Upon the occurrence of any adjustment or
readjustment of the Conversion Price of Series C Redeemable and Convertible
Preferred Stock, this Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series C Redeemable and Convertible Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This Corporation
shall, upon the written request at any time of any holder of Series C Redeemable
and Convertible Preferred Stock furnish or cause to be furnished to such holder
a like certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of a share of
Series C Redeemable and Convertible Preferred Stock.
ix. NOTICES OF RECORD DATE. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series C Redeemable and Convertible
Preferred Stock, at least twenty (20) days prior to the date specified therein,
a notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
x. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Redeemable and Convertible Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series C
Redeemable and Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series C Redeemable and
Convertible Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, this Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite shareholder approval on any necessary
amendment to these articles.
xi. NOTICES. Any notice required to be given to the holders of
shares of Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of this corporation.
7. The complete executed Plan of Merger is on file at the registered
office of the Surviving Corporation.
3
<PAGE>
I further declare under the penalty of perjury under the laws of the State
of Nevada that the matters set forth in these Articles of Merger are true and
correct of my own knowledge.
AMERICA'S FINEST WATER, INC.,
a Nevada corporation as Surviving Corporation
/s/ W.L. Campbell
-----------------
BY: W.L. Campbell
ITS: President and Secretary
Acknowledged:
JUMP! SOFTWARE, INC.,
a California corporation as Disappearing Corporation
/s/ Richard Mathews /s/ Jan Mathews
------------------- ---------------
BY: Richard Mathews BY: Jan Mathews
ITS: President ITS: Secretary
STATE OF WASHINGTON )
) SS.
COUNTY OF SPOKANE )
On April 29, 1999, before me, Lisa Y. Destreich, Notary Public, personally
appeared W.L. Campbell, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal. /s/ Lisa Y. Oestreich
---------------------
Signature
STATE OF CALIFORNIA )
) SS.
COUNTY OF SANTA CLARA )
On April 29, 1999, before me, Tammy D. Bast, Notary Public, personally appeared
Richard Mathews, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal. /s/ Tammy D. Bast
-----------------
Signature
4
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF SANTA CLARA )
On April 29, 1999, before me, Tammy D. Bast, Notary Public, personally appeared
Jan Mathews, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal. /s/ Tammy D. Bast
-----------------
Signature
5
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF
JUMPMUSIC.COM, INC., A NEVADA CORPORATION
DATED MAY 31, 1988
<PAGE>
ARTICLES OF INCORPORATION
OF
AMERICA'S FINEST WATERS, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a Corporation under and pursuant to the laws
of the State of Nevada, and we do hereby certify that:
ARTICLE I - NAME: The exact name of this Corporation is:
AMERICA'S FINEST WATERS, INC.
ARTICLE II - PRINCIPAL OFFICE AND REGISTERED AGENT:
The principal office and place of business in the State of Nevada of this
Corporation shall be located at 2950 East Flamingo Road, Suite G, Clark County,
Las Vegas, Nevada 89121. The resident agent of the Corporation is Max C. Tanner.
ARTICLE III - DURATION: The Corporation shall have perpetual existence.
ARTICLE IV - PURPOSES:
The purpose, object and nature of the business for which this Corporation is
organized are:
To engage in any lawful activity; (b) to carry on such business as may be
necessary, convenient, or desirable to accomplish the above purposes, and to do
all other things incidental thereto which are not forbidden by law or by these
Articles of Incorporation.
ARTICLE V - POWERS:
The powers of the Corporation shall be those powers granted y 78.060 and 78.070
of the Nevada Revised Statutes under which this corporation is formed. In
addition the corporation shall have the following specific powers:
To elect or appoint officers and agents of the Corporation and to fix their
compensation; (b) to Act as an agent for any individual, association,
partnership, corporation or other legal entity; (c) To receive, acquire, hold,
exercise rights arising out of the ownership or possession thereof, sell, or
otherwise dispose of, shares or other interests in, or obligations of,
individuals, associations, partnerships, corporation or governments; (d) to
receive, acquire, hold pledge, transfer, or otherwise dispose of shares of the
corporation, but such shares may only be purchased, directly or indirectly, out
of earned surplus; (e) To make gifts or contributions for the public welfare or
for charitable, scientific or educational purposes, and in time to war, to make
donations in aid of war activities.
ARTICLE VI - CAPITAL STOCK:
SECTION 1. AUTHORIZED SHARES. The total number of shares which this Corporation
is authorized to issue is 50,000,000 shares of Common Stock at $.001 par value
per share.
SECTION 2. VOTING RIGHTS OF SHAREHOLDERS. Each holder of the Common Stock shall
be entitled to one vote for each share of stock standing in his name on the
books of the Corporation.
1
<PAGE>
SECTION 3. CONSIDERATION FOR SHARES. The Common Stock shall be issued for such
consideration, as shall be fixed from time to time by the Board of Directors. In
the absence of fraud, the judgment of the Directors as to the value of any
property for shares shall be conclusive. When shares are issued upon payment of
the consideration fixed by the Board of Directors, such shares shall be taken to
be fully paid stock and shall be non assessable. The Articles shall not be
amended in this particular.
SECTION 4. PREEMPTIVE RIGHTS. Except as may otherwise be provided by the Board
of Directors, no holder of any shares of the stock of the Corporation, shall
have any preemptive right to purchase, subscribe for, or otherwise acquire any
shares of stock of the Corporation of any class now or hereafter authorized, or
any securities exchangeable for or convertible into such shares, or any warrants
or other instruments evidencing rights or options to subscribe for, purchase, or
otherwise acquire such shares.
SECTION 5. STOCK RIGHTS AND OPTIONS. The Corporation shall have the power to
create and issue rights, warrants, or options entitling the holders thereof to
purchase from the corporation any shares of its capital stock of any class or
classes, upon such terms and conditions and at such times and prices as the
Board of Directors may provide, which terms and conditions shall be incorporated
in an instrument or instruments evidencing such rights. In the absence of fraud,
the judgment of the Directors as to the adequacy of consideration for the
issuance of such rights or options and the sufficiency thereof shall be
conclusive.
ARTICLE VII - ASSESSMENT OF STOCK:
The capital stock of this Corporation, after the amount of the subscription
price has been fully paid in, shall not be assessable for any purpose, and no
stock issued as fully paid up shall ever be assessable or assessed. The holders
of such stock shall not be individually responsible for the debts, contracts, or
liabilities of the Corporation and shall not be liable for assessments to
restore impairments in the capital of the Corporation.
ARTICLE VIII - DIRECTORS:
For the management of the business, and for the conduct of the affairs of the
Corporation, and for the future definition, limitation, and regulation of the
powers of the Corporation and its directors and shareholders, it is further
provided :
SECTION 1. SIZE OF BOARD. The members of the governing board of the Corporation
shall be styled directors. The number f directors of the Corporation, their
qualifications, terms of office, manner of election, time and place of meeting,
and powers and duties shall be as are prescribed by statute and in the by - laws
of the Corporation. The initial number of shareholders will be one. The name and
post office address of the director constituting the first board of directors,
which shall be one (1) in number is :
Name Address
Max C. Tanner 2950 E. Flamingo Road, Suite G
Las Vegas, Nevada 89121
SECTION 2. POWERS OF BOARD. In furtherance and not in limitation of the powers
conferred by the laws of the State of Nevada, the Board of Directors is
expressly authorized and empowered :
To make, alter, amend, and repeal the By - Laws subject to the power of the
shareholders to alter or repeal the By - Laws made by the Board of Directors.
Subject to the applicable provisions of the By - Laws then in effect, to
determine, from time to time, whether and to what extent, and at what times and
places, and under what conditions and regulations, the accounts and books of
2
<PAGE>
the Corporation, or any of them, shall be open to shareholder inspection. No
shareholder shall have any right to inspect any of the accounts, books or
documents of the Corporation, except as permitted by law, unless and until
authorized to do so by resolution of the Board of Directors or of the
Shareholders of the Corporation.
To issue stock of the Corporation for money, property, services rendered, labor
performed, cash advanced, acquisitions for other corporations or for any other
assets of value in accordance with the action of the board of directors without
vote or consent of the shareholders and the judgment of the board of directors
as to value received and in return therefore shall be conclusive and said stock,
when issued, shall be fully- paid and non assessable.
To authorize and issue, without shareholder consent, obligations of the
Corporation, secured and unsecured, under such terms and conditions as the
Board, in its sole discretion, may determine, and to pledge of mortgage, as
security therefore, any real or personal property of the Corporation, including
after-acquired property;
To determine whether any and , if so, what part, of the earned surplus of the
Corporation shall be paid in dividends to the shareholders, and to direct and
determine other use and disposition of any such earned surplus;
To fix, from time to time, the amount of the profits of the Corporation to be
reserved as working capital or for any other lawful purpose;
To establish bonus, profit-sharing, stock option, or other types of incentive
compensation plans for the employees, including officers and directors, of the
Corporation, and to fix the amount of profits to be shared or distributed, and
to determine the persons to participate in any such plans and the amount of
their respective participation.
To designate, by resolution or resolutions passed by a majority of the whole
Board, one or more committees, each consisting of two or more directors, which,
to the extent permitted by law and authorized by the resolution or the By-laws
shall have and may exercise the powers of the Board;
a. To provide for the reasonable compensation of its own members by bylaw,
and to fix the terms and conditions upon which such compensation will be paid;
(a) In addition to the powers and authority herein-before,
or by statute, expressly conferred upon it, the Board of
Directors may exercise all such powers and do all such
acts and things as may be exercised or done by the
corporation, subject, nevertheless, to the provisions of
the laws of the Sate of Nevada, of these Articles of
Incorporation, and of the By-Laws of the Corporation.
SECTION 3. INTERESTED DIRECTORS. No contract or transaction between this
Corporation and any of its directors, or between this Corporation and any other
corporation, firm, association, or other legal entity shall be invalidated by
reason of the fact that the director of the Corporation has a direct or indirect
interest, pecuniary or otherwise, in such corporation, firm, association, or
legal entity, or because the interested director was present at the meeting of
the Board of Directors which acted upon or in reference to such contract or
transaction, or because he participated in such action, provided that: (1) the
interest of each such director shall have been disclosed to or known by the
Board and a disinterested majority of the Board shall have nonetheless ratified
and approved such contract or transaction (such interested director or directors
may be counted in determining whether a quorum is present for the meeting at
which such ratification or approval is given); or (2) the conditions of N.R.S.
78.140 are met.
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS:
The personal liability of a director or officer of the corporation to the
corporation or the Shareholders for damages for breach of fiduciary duty as a
director or officer shall be limited to acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law.
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ARTICLE X - INDEMNIFICATION.
Each director and each officer of the corporation may be indemnified by the
corporation as follows:
The corporation may indemnify any person who was or is a party, or is threatened
to made a part, to any threatened, pending or completed action, suit or
proceeding, whether civil , criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reasons of the fact
that his is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement, actually and reasonably incurred by him in
connection with the action, suit or proceeding, if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interest of the corporation and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding, by judgment, order, settlement,
conviction or upon a plea of nolo contendare or its equivalent, does not of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
The corporation may indemnify any person who was or is a party, or is threatened
to be made a party, to any threatened, pending or completed action or suit by or
in the right of the corporation, to procure a judgment in it's favor by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
To the extent that a director, officer, employee or agent of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this Article, or in defense
of any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorney's fees, actually and reasonably incurred by
him in connection with the defense.
Any indemnification under subsections (a) and (b) unless ordered by a court or
advanced pursuant to subsection (e), must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made :
By the stockholders :
By the board of directors by majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding :
If a majority vote of a quorum consisting of directors who were not parties to
the act, suit or proceeding so orders, by independent legal counsel in a written
opinion, or
If a quorum consisting of directors who were not parties to the act, suit or
proceeding cannot be obtained by independent legal counsel in a written opinion.
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Expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the corporation as the are incurred
and in advance of the final disposition of the action, suit or proceeding, upon
receipt of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent jurisdiction
that he is not entitled to be indemnified by the corporation. The provisions of
this subsection do not affect any rights to advancement of expenses to which
corporate personnel other than directors or officers may be entitled under any
contract or otherwise by law.
The indemnification and advancement of expenses authorized in or ordered by a
court pursuant to this section:
Does not exclude any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the certificate or articles of
incorporation or any by law, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection(b) or for the
advancement of expenses made pursuant to subsection (e) may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
Continues for a person who has ceased to be a director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS:
Subject to the laws of the State of Nevada, the shareholders and the Directors
shall have power to hold their meetings, and the Directors shall have power to
have an office or offices and to maintain the books of the Corporation outside
the State of Nevada, at such place or places as may from time to time be
designated in the By-Laws or by appropriate resolution.
ARTICLE XII - AMENDMENT OF ARTICLES
The provisions of these Articles of Incorporation may be amended, altered or
repealed from time to time to the extent and in the manner prescribed by the
laws of the State of Nevada, and additional provisions authorized by such laws
as are then in force may be added. All rights herein conferred on the directors,
officers and shareholders are granted subject to this reservation.
ARTICLE XIII - INCORPORATOR
The name and address of the sole incorporator signing these Articles of
Incorporation is as follows:
NAME POST OFFICE ADDRESS
1. Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
IN WITNESS WHEREOF, the undersigned incorporator has executed these Articles of
Incorporation this 31st day of May, 1988.
/s/ Max C. Tanner
-----------------
Max C. Tanner
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EXHIBIT 3.2
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
AMERICA'S FINEST WATERS, INC.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
AMERICA'S FINEST WATERS, INC.
The following certificate of amendment to the articles of incorporation of
AMERICA'S FINEST WATERS, INC., is adopted pursuant to the provisions of Sections
78.385, 78.390 and 78.395 of the Nevada Revised Statutes. We, the undersigned,
as president and secretary of said Corporation, do hereby certify that the
shareholders of the Corporation duly adopted on August 10, 1991, in accordance
with Section 78.315 of the Nevada Revised Statutes, resolutions to amend the
articles of incorporation as follows:
The articles of incorporation shall be amended by deleting Article VI in
its entirety and inserting the following in lieu thereof:
ARTICLE VI
AUTHORIZED SHARES
The corporation is authorized to issue a total of 55,000,000 shares,
consisting of 5,000,000 shares of preferred stock having a par value of $0.001
per share, and 50,000,000 shares of common stock having a par value of $0.001
per share. The powers preferences, rights, qualifications, limitations or
restrictions of the shares of stock of each class and series which the
Corporation is authorized to issue, is as follows:
Preferred Stock. Shares of Preferred Stock may be issued from time to time
in one or more series as may from time to time be determined by the Board of
Directors. Each series shall be distinctly designated. All shares of any one
series of the preferred Stock shall be alike in every particular, except there
may be different dates from which dividends thereon, if any, shall be
cumulative, if made cumulative. The powers, preferences, participating, optional
and other rights of each such series and the qualifications, limitations, or
restrictions thereof, if any, may differ from those of any and all other series
at any time outstanding. Except as hereinafter provided, the Board of Directors
of this Corporation is hereby expressly granted authority to fix by resolution
or resolutions adopted prior to the issuance of any shares of each particular
series of Preferred Stock, the designation, powers preferences and relative
participating, optional and other rights, and the qualifications, limitations
and restrictions thereof, if any, of such series, including without limiting the
generality of the foregoing, the following:
The distinctive designation of, and the number of shares of Preferred Stock
which shall constitute, each series, which number may be increased (except as
otherwise fixed by the Board of Directors) or decreased (but not below the
number of shares thereof outstanding) from time to time by action of the Board
of Directors;
The rate and times at which, and the terms and conditions upon which,
dividends, if any, on shares of the series shall be paid, the extent of
preferences or relations, if any of such dividends to the dividends payable on
any other class or classes of stock of the corporation or on any series of
Preferred Stock and whether such dividends shall be cumulative or
non-cumulative.
The right, if any, of the holders of shares of the same series to convert
the same into, or exchange the same for, any other class or classes of stock of
the corporation and the terms and conditions of such conversion or exchange the
same for, another class of classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
Whether shares of the series shall be subject to redemption, and the
redemption price or prices including, without limitation, a redemption price or
prices payable in shares of any class or classes of stock of the Corporation,
cash, or other property and the time or times at which, and the terms and
conditions on which, shares of the series may be redeemed;
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The rights, if any, of the holders of shares of the series upon voluntary
or involuntary liquidation, merger, consolidation, distribution or sale of
assets, dissolution, or winding up of the corporation;
The terms of any sinking fund or redemption or purchase account, if any, to
be provided for shares of the series; and
The voting powers, if any, of the holders of shares of the series which
may, without limiting the generality of the foregoing, include (A) the right to
more or less than one vote per share on any or all matters voted on by the
shareholders and (B) the right to vote as a series by itself or together with
other series of Preferred Stock or together with all series of Preferred Stock
as a class, on such matters, under such circumstances, and on such conditions as
the Board of Directors may fix, including, without limitation the right, voting
as a series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, to elect one or more
directors of the Corporation in the event there shall have been a default in the
payment of dividends on any one or more series of Preferred Stock or under such
other circumstances and on such conditions as the Board of Directors may
determine.
Common Stock. The Common Stock shall have the following powers, rights,
qualifications, limitations and restrictions:
After the requirements with respect to preferential dividends of Preferred
Stock, if any, shall have been met and after the Corporation shall comply with
all the requirements if any, with respect to the setting aside of funds as
sinking funds or redemption or purchase accounts and subject further to any
other conditions which may be required by the laws of the State of Nevada, then,
but not otherwise, the holders of Common Stock shall be entitled to receive such
dividends, if any as may be declared from time to time by the Board of
Directors;
After distribution in full of the preferential amount to be distributed to
the holders of Preferred Stock, if any, in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or winding up of the
Corporation, the holders of the Common Stock shall be entitled to receive all
the remaining assets of the Corporation, tangible and intangible, of whatever
kind available for distribution to stockholders, ratably in proportion to the
number of shares of the Common Stock held by each; and
Except as may otherwise be required by law or these articles of
incorporation , in all matters as to which the vote or consent of stockholders
of the Corporation shall be required or be taken, including, any vote to amend
the articles of incorporation, to increase or decrease the par value of any
class of stock, effect a stock split or combination of shares, or later or
change the powers, preferences, or special rights of any class or series of
stock, the holders of the Common Stock shall have one vote per share of Common
Stock on all such matters and shall not have the right to cumulate their votes
for any purpose.
OTHER PROVISIONS.
The board of Directors of the Corporation shall have authority to authorize
the issuance, from time t time without any vote or other action by the
stockholders, of any or all shares of the Corporation of any class at any time
authorized, and any securities convertible into or exchangeable for such shares,
in each case to such persons and for such consideration and on such terms as the
Board of Directors from time to time in its discretion lawfully may determine;
provided, however, that the consideration for the issuance of shares of stock of
the Corporation having par value shall not be less than such par value. Shares
so issued, for which the full consideration determined by the Board of Directors
has been paid to the Corporation, shall be fully paid stock, and the holders of
such stock shall not be liable for any further call or assessment thereon.
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Unless otherwise provided in the resolution of the Board of Directors
providing for the issue of any series of preferred stock no holder of shares of
any class of the Corporation or of any security of obligation convertible into,
or of any warrant, option, or right to purchase, subscribe for, or otherwise
acquire, shares of any class of the Corporation, whether now or hereafter
authorized, shall, as such holder, have any preemptive right whatsoever to
purchase, subscribe for, or otherwise acquire shares of any class of the
corporation, whether now or hereafter authorized.
1. Anything herein contained to the contrary notwithstanding, any and all
right, title, interest and claim in and to any dividends declared or other
distributions made by the Corporation, whether in cash, stock, or otherwise,
which are unclaimed by the stockholder entitled thereto for a period of six
years after the close of business on the payment date, shall be and be deemed to
be extinguished and abandoned; and such unclaimed dividend or other
distributions in the possession of the Corporation, its transfer agents, or
other agents or depositories, shall at such time become the absolute property of
the corporation, free and clear of any and all claims of any person whatsoever.
2. Except as specifically provided herein, the provisions of the Corporation's
articles of incorporation shall remain unamended and shall continue in full
force and effect.
That the foregoing amendment to the articles of incorporation was duly
adopted at a duly called meeting of the stockholders of the Corporation held
August 10, 1991; on the date of such meeting, the number of shares of the
Corporation issued and outstanding and entitled to vote on the foregoing
amendment to the articles of incorporation was 23,997,228 shares of common stock
and no shares of preferred stock; and, stockholders of the Corporation holding
15,935,270 shares of common stock, which is greater than a majority of the
issued and outstanding shares, voted in favor of the adoption of the foregoing
amendment, and 483,583 shares voted against such amendment.
DATED this 10th day of December, 1991.
ATTEST: AMERICA'S FINEST WATERS, INC.
/s/ Paul B. Baker /s/ Richard M. Adams
- ------------------------ --------------------------------
Paul B. Baker, Secretary By: Richard M. Adams, President.
Notary Stamp
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EXHIBIT 3.3
BYLAWS OF JUMPMUSIC.COM, INC.
DATED JUNE 3, 1988
<PAGE>
BYLAWS OF
AMERICAN'S FINEST WATERS, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1.01 ANNUAL MEETING. The annual meeting of the shareholders shall
be held at such date and time as shall be designated by the board of directors
and stated in the notice of the meeting or in a duly-executed waiver of notice
thereof. If the corporation shall fail to provide notice of the annual meeting
of the shareholders as set forth above, the annual meeting of the shareholders
of the corporation shall be held during the month of November or December of
each year as determined by the Board of Directors, for the purpose of electing
directors of the corporation to serve during the ensuing year and for the
transaction of such other business as many properly come before the meeting. If
the election of the directors is not held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the president
shall cause the election to be held at a special meeting of the shareholders as
soon thereafter as is convenient.
SECTION 1.02 SPECIAL MEETINGS. Special meetings of the shareholders may
be called by the president or the Board of Directors and shall be called by the
president at the written request of the shareholders of not less than 51% of the
issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be
transacted at any special meeting at any adjournment thereof. However, no
business shall be acted upon at a special meeting, except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock of
the corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
SECTION 1.03 PLACE OF MEETINGS. Any meeting of the shareholders of the
corporation may be held at its principal office in the State of Nevada or such
other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote may
designate any place for the holding of such meeting.
SECTION 1.04 NOTICE OF MEETINGS.
(a) The secretary shall sign and deliver to all shareholders of record
written or printed notice of any meeting at least ten (10) days, but not more
than sixty (60) days, before the date of such meeting; which notice shall state
the place, date and time of the meeting, the general nature of the business to
be transacted, and, in the case of any meeting at which directors are to be
elected, the names of nominees, if any, to be presented for election.
(b) In the case of any meeting, any proper business may be presented for
action, except the following items shall be valid only if the general nature of
the proposal is stated in the notice or written waiver of notice:
(1) Action with respect to any contract or transaction between the
corporation and one or more of its directors or another firm, association, or
corporation in which one or more of its directors has a material financial
interest;
Adoption of amendments to the Articles of Incorporation; or
Action with respect to the merger, consolidation, reorganization,
partial or complete liquidation or dissolution of the corporation.
(c) The notice shall be personally delivered or mailed by first class mail
to each shareholder of record at the
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last known address thereof, as the same appears on the books of the corporation,
and the giving of such notice shall be deemed delivered the date the same is
deposited in the United States mail, postage prepaid. If the address of any
shareholder does not appear upon the books of the corporation, it will be
sufficient to address any notice to such shareholder at the principal office of
the corporation.
The written certificate of the personal calling any meeting, duly sworn,
setting forth the substance of the notice, the time and place the notice was
mailed or personally delivered to the several shareholders, and the addresses to
which the notice was mailed shall be prima facie evidence of the manner and fact
of giving such notice.
SECTION 1.05. WAIVER OF NOTICE. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the shareholders shall meet in person or by proxy, such meeting
shall be valid for all purposes without call or notice, and at such meeting any
corporate action may be taken.
SECTION 1.06. DETERMINATION OF SHAREHOLDERS OF RECORD. The Board of
Directors may at any time fix a future date as a record date for the
determination of the shareholders entitled to notice of any meeting or to vote
or entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect of any
other lawful action. The record date so fixed shall not be more than sixty (60)
days prior to the date of such meeting nor more than sixty (60) days prior to
any other action. When a record date is so fixed, only shareholders of record on
that date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution or allotment of rights, or to exercise their rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
If no record date is fixed by the Board of Directors, then (1) the record
date for determining shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held; (2)
the record date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is necessary, shall be the day on which written consent is given;
and (3) the record date for determining shareholders for any other purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto, or the sixtieth (60th ) day prior to the date
of such other action, whichever is later.
SECTION 107. QUORUM: ADJOURNED MEETINGS. At any meeting of the
shareholders, a majority of the issued and outstanding shares of the corporation
represented in person or by proxy, shall constitute a quorum. If less than a
majority of the issued and outstanding shares are represented a majority of
shares so represented may adjourn from time to time at the meeting, until
holders of the amount of stock required to constitute a quorum shall be in
attendance. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted as originally
called. When a shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken, unless the
adjournment is for more than ten (10) days in which event notice thereof shall
be given.
SECTION 1.08 VOTING. Each shareholder of record, such shareholder's duly
authorized proxy or attorney-in-fact shall be entitled to one (1) vote for each
share of stock standing registered in such shareholder's name on the books of
the corporation on the record date.
Except as otherwise provided herein, all votes with respect to shares
outstanding in the name of an individual on the record date (included pledged
shares) shall be cast only by that individual or such individual's duly
authorized proxy or attorney-in-fact. With respect to shares held by the
representative of the estate of a deceased shareholder, guardian, conservator,
custodian or trustee, votes may be cast by such holder upon proof of capacity,
even though the shares do not stand in the name of such holder. In the case of
shares under the control of a receiver, the receiver may cast votes carried by
such shares even though the shares do not stand in the name of the receiver
provided that the order of the court of competent jurisdiction which appoints
the receiver contains the authority to cast votes carried by such shares. If
shares stand in the name of a minor, votes may be cast only by the duly
appointed guardian of the estate of such minor if such guardian has provided the
corporation with written notice and proof of such appointment.
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With respect to shares standing in the name of a corporation on the record
date, votes may be cast by such officer or agents as the by-laws of such
corporation prescribe or, in the absence of an applicable by-law provision, by
such person as may be appointed by resolution of the Board of Directors of such
corporation. In the event no person is so appointed, such votes of the
corporation may be cast by any person (including the officer making the
authorization) authorized to do so by the Chairman of the Board of Directors,
President or any Vice President of such corporation.
Notwithstanding anything to the contrary herein contained, no votes may be
cast by shares owned by this corporation or its subsidiaries, if any. If shares
are held by this corporation or its subsidiaries, if any, in a fiduciary
capacity, no votes shall be cast with respect thereto on any matter except to
the extent that the beneficial owner thereof possesses and exercises either a
right to vote or to give the corporation holding the same binding instructions
on how to vote.
With respect to shares standing in the name of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, husband
and wife as community property, tenants by the entirety, voting trustees,
persons entitled to vote under a shareholder voting agreement or otherwise and
shares held by two or more persons (including proxy holders) having the same
fiduciary relationship respect in the same shares, votes may be cast in the
following manner:
If only one such person votes, the votes of such person binds all.
If more than one person casts votes, the act of the majority so voting
binds all.
If more than one person casts votes, but the vote is evenly split on a
particular matter, the votes shall be deemed cast proportionately as split.
Any holder of shares entitled to vote on any matter may cast a portion of
the votes in favor of such matter and refrain from casting the remaining votes
or cast the same against the proposal, except in the case of elections of
directors. If such holder entitled to vote fails to specify the number of
affirmative votes, it will be conclusively presumed that the holder is casting
affirmative votes with respect to all shares held.
If a quorum is present, the affirmative vote of the holders of a majority
of the shares represented at the meeting and entitled to vote on any mater shall
be the act of the shareholders, unless a vote of greater number or voting by
classes is required by the laws of the State of Nevada, the Articles of
Incorporation and these By-Laws.
SECTION 1.09 PROXIES. At any meeting of shareholders, any holder of
shares entitled to vote may authorize another person or persons to vote by
proxy with respect to the shares held by an instrument in writing and
subscribed to by the holder of such shares entitled to vote. No proxy shall
be valid after the expiration of six (6) months from the date of execution
thereof, unless coupled with an interest or unless otherwise specified in the
proxy. In no event shall the term of a proxy exceed seven (7) years from the
date of its execution. Every proxy shall continue in full force and effect
until its expiration or revocation. Revocation may be effected by filing an
instrument revoking the same or a duly-executed proxy bearing a later date
with the secretary of the corporation.
SECTION 1.10 ORDER OF BUSINESS. At the annual shareholders meeting, the
regular order of business shall be as follows;
Determination of shareholders present and existence of quorum;
Reading and approval of the minutes of the previous meeting or meetings;
Reports of the Board of Directors, the president, treasurer and secretary
of the corporation, in the order named;
Reports of committee;
Election of directors;
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Unfinished business;
New business;
Adjournment.
SECTION 1.11 ABSENTEES CONSENT TO MEETINGS. Transactions of any
meeting of the shareholders are as valid as though had at a meeting duly-held
after regular call and notice if a quorum is present, either in person or by
proxy, and if, either before or after the meeting, each of the persons
entitled to vote, not present in person or by proxy (and those who, although
present, either object at the beginning of the meeting to the transaction of
any business because the meeting has not been lawfully called or convened or
expressly object at the meting to the consideration of matters not included
in the notice which are legally required to be include therein), signs a
written waiver of notice and/or consent to the holding of the meeting or an
approval of the minutes thereof. All such waivers, consents, and approvals
shall be filed with the corporate records and made a part of the minutes of
the meeting. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person objects at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of maters not included in
the notice if such objection is expressly made at the beginning. Neither the
business to be transacted at nor the purpose of any regular or special
meeting of shareholders need to specified in any written waiver of notice,
except as otherwise provided in Section 1.04(b) of these By-Laws.
SECTION 1.12 ACTION WITHOUT MEETING. Any action, except the election
of directors, which may be taken by the vote of the shareholders at a meeting
may be taken without a meeting if consented to by the holders of a majority
of the shares entitled to vote or such greater proportion as may be required
by the laws of the State of Nevada, the Articles of Incorporation, or these
By-Laws. Whenever action is taken by written consent, a meeting of
shareholders needs not be called or noticed.
ARTICLE II
DIRECTORS
SECTION 2.01. NUMBER, TENURE AND QUALIFICATIONS. Except as otherwise
provided herein, the Board of Directors of the corporation shall consist of
at least one (1) but no more than seven (7) persons who, shall be elected at
the annual meeting of the shareholders of the corporation and who shall hold
office for one (1) year or until their successors are elected and qualify.
If, at any time, the number of shareholders of the corporation is less than
three (3) the Board of Directors may consist of fewer persons, but shall not
be less than the number of shareholders. A director need not be a shareholder
of the corporation.
SECTION 2.02 RESIGNATION. Any director may resign effective upon
giving written notice to the chairman of the Board of Directors, the
president, or the secretary of the corporation, unless the notice specifies a
later time for effectiveness of such resignation. If the Board of Directors
accepts the resignation of a director tendered to take effect at a future
date, the Board or the shareholders may elect a successor to take office when
the resignation becomes effective.
SECTION 2.03. REDUCTION IN NUMBER. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his
term of office.
SECTION 2.04 REMOVAL. The Board of Directors of the shareholders of the
corporation, by a majority vote, may declare vacant the office of a director who
has been declared incompetent by an order of a court of competent jurisdiction
or convicted of a felony.
SECTION 2.05 VACANCIES. A vacancy in the Board of Directors because of
death, resignation, removal, change in number of directors, or otherwise may be
filled by the shareholders at any regular or special meeting or
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any adjourned meeting thereof (but not by written consent) or the remaining
director(s) by the affirmative vote of a majority thereof. A Board of Directors
consisting of less than the maximum number authorized in Section 2.01 of ARTICLE
II constitutes vacancies on the Board of Directors for purposes of this
paragraph and may be filled as set forth above including by the election of a
majority of the remaining directors. Each successor so elected shall hold office
until the next annual meeting of shareholders or until a successor shall have
been duly-elected and qualified.
If, after the filling of any vacancy by the directors, the directors then
in office who have been elected by the shareholders shall constitute less than a
majority of the directors then in office, any holder or holders of an aggregate
of five percent (5%) or more of the total number of shares entitled to vote may
call a special meeting of shareholders to be held to elect the entire Board of
Directors. The term of office of any director shall terminate upon such election
of a successor.
SECTION 2.06 REGULAR MEETINGS. Immediately following the adjournment of,
and at the same place as, the annual meeting of the shareholders, the Board of
Directors, including directors newly elected, shall hold its annual meeting
without notice, other than, this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
SECTION 2.07 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the chairman and shall be called by the chairman upon the
request of any two (2) directors or the president of the corporation.
SECTION 2.08 PLACE OF MEETINGS. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any place
for the holding of such meeting.
SECTION 2.09 NOTICE OF MEETINGS. Except as otherwise provided in Section
2.06, the chairman shall deliver to all directors written or printed notice of
any special meeting, at least three (3) days before the date of any special
meeting, by delivery of such notice personally or mailing such notice first
class mail, or by telegram. If mailed, the notice shall be deemed delivered two
(2) business days following the date the same is deposited in the United States
mail, postage prepaid. Any director may waive notice of any meeting, and the
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, unless such attendance is for the express purpose of objecting to
the transaction of business threat because the meeting is not properly called or
convened.
SECTION 2.10 QUORUM / ADJOURNED MEETINGS. A majority of the Board of
Directors in office shall constitute a quorum.
At any meeting of the Board of Directors where a quorum is not present, a
majority of those present may adjourn, from time to time, until a quorum is
present, and no notice of such adjournment shall be required. At any adjourned
meeting where a quorum is present, any business may be transacted which could
have been transacted at the meeting originally called.
SECTION 2.11 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if a written consent thereto is signed by a
majority of the members of the Board of Directors or of such committee. Such
action by written consent shall have the same force and effect as the
unanimous vote of the Board of Directors or committee.
SECTION 2.12 TELEPHONIC MEETINGS. Meetings of the Board of Directors
may be held through the use of a conference telephone or similar
communications equipment so long as all members participating in such meeting
can hear one another at the time of such meeting. Participation in such a
meeting constitutes presence in person at such meeting.
SECTION 2.13 BOARD DECISIONS. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
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SECTION 2.14 POWERS AND DUTIES. Except as otherwise provided in the
Articles of Incorporation or the laws of the State of Nevada, the Board of
Directors is invested with the complete and unrestrained authority to manage the
affairs of the corporation, and is authorized to exercise for such purpose as
the general agent of the corporation, its entire corporate authority in such
manner as it sees fit. The Board of Directors may delegate any of its authority
to manage, control or conduct the current business of the corporation to any
standing or special committee or to any officer or agent and to appoint any
persons to be agents of the corporation with such powers, including the power to
sub-delegate, and upon such terms as may be deemed fit.
The Board of Directors shall present to the shareholders at annual meetings
of the shareholders, and when called for by a majority vote for the shareholders
at a special meeting of the shareholders, a full and clear statement of the
condition of the corporation, and shall, at request, furnish each of the
shareholders with a true copy thereof.
The Board of Directors, in its discretion, may submit any contract or act
for approval or ratification at any annual meeting of the shareholders or any
special meeting properly called for the purpose of considering any such contract
or act, provided a quorum is present. The contract or act shall be valid and
binding upon the corporation and upon all the shareholders thereof, if approved
and ratified by the affirmative vote of a majority of the shareholders at such
meeting.
In furtherance and not in limitation of the powers conferred by the laws of
the State of Nevada, the Board of Directors is expressly authorized and
empowered to issue stock of the Corporation for money, properly, services
rendered, labor performed, cash advanced, acquisitions for other corporations or
for any other assets of value in accordance with the action of the Board of
Directors without vote or consent of the shareholders and the judgement of the
Board of Directors as to the value received and in return therefore shall be
conclusive and said stock, when issued, shall be fully-paid and non-assessable.
SECTION 2.15 COMPENSATION. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board, but shall
not receive any compensation for their services as directors until such time as
the corporation is able to declare and pay dividends on its capital stock.
SECTION 2.16 BOARD OFFICERS
(a) At its annual meeting, the Board of Directors shall elect, from among
its members, a chairman to preside at the meetings of the Board of Directors.
The Board of Directors may also elect such other board officers and for such
term as it may, from time to time, determine advisable.
(b) Any vacancy in any board office because of death, resignation, removal
or otherwise may be filled by the Board of Directors for the unexpired portion
of the term of such office.
SECTION 2.17 ORDER OF BUSINESS. The order of business at any meeting
of the Board of Directors shall be as follows:
(1) Determination of members present and existence of quorums;
(2) Reading and approval of the minutes of any previous meeting or
meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
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(7) Adjournment.
ARTICLE III
OFFICERS
SECTION 3.01 ELECTION. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and until
their successors are elected and qualify. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more vice presidents, assistant secretaries assistant treasurers and
transfer agents of the corporation as it may deem advisable; prescribed their
duties; and fix their compensation.
SECTION 3.02 REMOVAL; RESIGNATION Any officer or agent or elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgement, the best interest of the corporation would be served thereby. Any
officer may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to which
the resigning officer is a party.
SECTION 3.03 VACANCIES Any vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
SECTION 3.04 PRESIDENT. The President shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The president shall preside
at all meetings of the shareholders and shall sign the certificates of stock
issued by the corporation, and shall perform such other duties as shall be
prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to act
and to vote at any meetings of the shareholders of any corporation in which the
corporation may hold stock and, at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock.
The Board of Directors, by resolution from time to time, may confer like powers
on any person or persons in place of the place of the president to represent the
corporation for these purposes.
SECTION 3.05 VICE PRESIDENT. The Board of Directors may elect one or more
vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the vice president shall perform such other duties as shall be prescribed by
the Board of Directors.
SECTION 3.06 SECRETARY. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall attend to the giving and service of all
notices of the corporation, may sign with the president in the name of the
corporation all contracts authorized by the Board of Directors or appropriate
committee, shall have the custody of the corporate seal, shall affix the
corporate seal to all certificates of stock duly issued by the corporation,
shall have charge of stock certificate books, transfer books and stock ledgers,
and such other books and papers as the Board of Directors or appropriate
committee may direct, and shall, in general perform all duties incident to the
office of the secretary. All corporate books kept by the secretary shall be open
for examination by any director at any reasonable time.
SECTION 3.07 ASSISTANT SECRETARY. The Board of Directors may appoint an
assistant secretary who shall have such powers and perform such duties as may be
prescribed for him by the secretary of the corporation or by the Board of
Directors.
SECTION 3.08 TREASURER. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the
Board of Directors, and shall have custody of all the funds and securities of
the
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corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer shall sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these By-laws or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter regularly in the books of the corporation, to be kept for
that purpose, full and accurate accounts of all monies received and paid on
account of the corporation and whenever required by the Board of Directors, the
treasurer shall render a statement of any or all accounts. The treasurer shall
at all reasonable times exhibit the books of account to any directors of the
corporation and shall perform all acts incident to the position of treasurer
subject to the control of the Board of Directors.
The treasurer shall, if required by the Board of Directors, give a bond to
the corporation in such sum and with such security as shall be approved by the
Board of Directors for the faithful performance of all the duties of the
treasurer and for the restoration to the corporation in the event of the
treasurer's death, resignation, retirement, or removal from office, of all
books, records, papers, vouchers, money and other property belonging to the
corporation. The expense of such bond shall be borne by the corporation.
SECTION 3.09 ASSISTANT TREASURER. The Board of Directors may appoint an
assistant treasurer who shall have such powers and perform such duties as may be
prescribed by the treasurer of the corporation or by the Board of Directors, and
the Board of Directors may require the assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for the
restoration to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property belonging to the corporation. The expense of
such bond shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
SECTION 4.01 ISSUANCE. Shares of capital stock of the corporation
shall be issued in such manner and at such times and upon such conditions as
shall be prescribed by the Board of Directors.
SECTION 4.02 CERTIFICATES. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the
corporation and shall be signed by the president or the vice president and
also by the secretary or an assistant secretary. Each certificate shall
contain the name of the record holder, the number, designation, if any, class
or series of shares represented, a statement of summary of any applicable
rights, preferences, privileges, or restrictions thereon, and a statement
that the shares are assessable, if applicable. All certificates shall be
consecutively numbered.
The name and address of the shareholder, the number of shares, and the date
of issue shall be entered on the stock transfer books of the corporation.
SECTION 4.03 SURRENDER: LOST OR DESTROYED CERTIFICATES. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be cancelled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been cancelled, except
that in case of a lost, stolen, destroyed or mutilated certificate, a new one
may be issued therefor. However, any shareholder applying for the issuance of a
stock certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and an indemnity bond in an amount and upon such terms
as the treasurer, or the Board of Directors, shall require. In no case shall the
bond be in amount less than twice the current market value of the stock and it
shall indemnify the corporation against any loss, damage, cost or inconvenience
arising as a consequence of the issuance of a replacement certificate.
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SECTION 4.04 REPLACEMENT CERTIFICATE. When the Articles of Incorporation
are amended in way affecting the statement contained in the certificates for
outstanding shares of Capital stock of the corporation or if it becomes
desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue a
new certificate therefor conforming to the rights of the holder, the Board of
Directors may order any holders of outstanding certificates for shares to
surrender and exchange the same for new certificates within a reasonable time to
be fixed by the Board of Directors. The order may provide that a holder of any
certificate(s) ordered to be surrendered shall not be entitled to vote, receive
dividends or exercise any other rights of shareholders until the holder has
complied with the order provided that such order operates to suspend such rights
only after notice and until compliance.
SECTION 4.05 TRANSFER OF SHARES. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation by the certificate
therefor, accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer on the books of the
corporation.
SECTION 4.06 TRANSFER AGENT. The Board of Directors may appoint one or
more transfer agents and registrars of transfer and may require all
certificates for shares of stock to bear the signature of such transfer agent
and such registrar of transfer.
SECTION 4.07 STOCK TRANSFER BOOKS. The stock transfer books shall be
closed for a period of ten (10) days prior to all meetings of the
shareholders and shall be closed for the payment of dividends as provided in
Article V hereof and during such periods as, from time to time, may be fixed
by the Board of Directors, and, during such periods, no stock shall be
transferable.
SECTION 4.08 MISCELLANEOUS. The Board of Directors shall have the
power and authority to make such rules and regulations not inconsistent
herewith as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of the capital stock of the
corporation.
ARTICLE V
DIVIDENDS
SECTION 5.01 DIVIDENDS. Dividends may be declared, subject to the
provision of the laws of the State of Nevada and the Articles of
Incorporation, by the Board of Directors at any regular or special meeting
and may be paid in cash, property shares of corporate stock, or any other
medium. The Board of Directors may fix in advance a record date, as provided
in Section 1.06 of these By-Laws, prior to the dividend payment for the
purpose of determining shareholders entitled to receive payment of any
divided. The Board of Directors may close the stock transfer books for such
purpose for a period of not more than ten (10) days prior to the payment date
of such dividend.
ARTICLE VI
OFFICES, RECORDS, REPORTS, SEAL AND FINANCIAL MATTERS
SECTION 6.01 PRINCIPAL OFFICE. The principal office of the corporation
in the State of Nevada shall be 2950 East Flamingo Road, Las Vegas, Nevada
89100 and the corporation may have an office in any other state or territory
as the Board of Directors may designate.
SECTION 6.02 RECORDS. The stock transfer books and a certified copy of
the By-Laws, Articles of Incorporation, any amendments thereto, and, the
minutes of the proceedings of the shareholders, the Board of Directors, and
committees of the Board of Directors shall be kept at the principal office of
the corporation for the
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inspection of all who have the right to see the same and for the transfer of
stock. All other books of the corporation shall be kept at such places as me be
prescribed by the Board of Directors.
SECTION 6.03 FINANCIAL REPORT ON REQUEST. Any shareholder or
shareholders holding at least five percent (5%) of the outstanding shares of
any class of stock may make a written request for an income statement of the
corporation for the three (3) month, six (6) month, or nine (9) month period
of the current fiscal year ended more than thirty (30) days prior to the date
of the request and a balance sheet of the corporation as of the end of such
period. In addition, if no annual report for the last fiscal year has been
sent to shareholders, such shareholder or shareholders may make a request for
a balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year. The
statement shall be delivered or mailed to the person making the request
within thirty (30) days thereafter. A copy of the statements shall be kept on
file in the principal office of the corporation for twelve (12) months, and
such copies shall be exhibited at all reasonable times to any shareholder
demanding an examination of them or a copy shall be mailed to each
shareholder. Upon request by any shareholder, there shall be mailed to the
shareholder a copy of the last annual, semiannual or quarterly income
statement which it has prepared and a balance sheet as of the end of the
period The financial statements referred to in this Section 6.03 shall be
accompanied by the report thereon, if any, of any independent accountants
engaged by the corporation or the certificate of an authorized officer of the
corporation that such financial statements were prepared without audit from
the books and records of the corporation.
SECTION 6.04 RIGHT OF INSPECTION. The accounting books and records and
minutes of proceedings of the shareholders and the Board of Directors and
committees of the Board of Directors shall be open to inspection upon the
written demand of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours for a purpose reasonably related to
such holder's interest as a shareholder or as the holder of such voting trust
certificate. This rights of inspection shall extend to the records of the
subsidiaries, if any, of the corporation. Such inspection may be made in person
or by agent or attorney, and the right of inspection includes the right to copy
and make extracts.
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of the corporation and/or its subsidiary corporation.
Such inspection may be made in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.
SECTION 6.05 CORPORATE SEAL. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
SECTION 6.06 FISCAL YEAR. The fiscal year-end of the corporation shall be
the calendar year or such other term as may be fixed by resolution of the Board
of Directors.
SECTION 6.07 RESERVES. The Board of Directors may create, by resolution,
out of the earned surplus of the corporation such reserves as the directors may,
from time to time, in their discretion, think proper to provide for
contingencies, or to equalize dividends or to repair or maintain any property of
the corporation, or for such other purpose as the Board of Directors may deem
beneficial to the corporation, and the directors may modify or abolish any such
reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 INDEMNIFICATION. The corporation shall, unless prohibited by
Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in any
manner (including, without limitation, as a party or a witness) or is threatened
to be so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit or
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proceeding brought by or in the right of the corporation to procure a judgment
in its favor (collectively, a "Proceeding") by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise, against all Expenses and Liabilities
actually and reasonably incurred by him in connection with such Proceeding. The
right to indemnification conferred in this Article shall be presumed to have
been relied upon by the directors, officers, employees and agents of the
corporation and shall be enforceable as a contract right and inure to the
benefit of heirs, executors and administrators of such individuals.
SECTION 7.02 INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnity with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada Law. Such agreements or arrangements may provide (i)
that the Expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding, must be paid by the corporation as they are
incurred and in advance of the final disposition of any such action, suit or
proceeding provided that, if required by Nevada Law at the time of such advance,
the officer or director provides an undertaking to repay such amounts if it is
ultimately determined by a court of competent jurisdiction that such individual
is not entitled to be indemnified against such expenses, (ii) that the
Indemnitee shall be presumes to be entitled to indemnification under this
Article or such agreement or arrangement and the corporation shall have the
burden of proof to overcome that presumption, (iii) for procedures to be
followed by the corporation and the Indemnitee in making any determination of
entitlement to indemnification or for appeals therefrom and (iv) for insurance
or such other Financial Arrangements described in Paragraph 7.02 of this
Article, all as may be deemed appropriate by the Board of Directors at the time
of execution of such agreement or arrangement.
SECTION 7.03 INSURANCE AND FINANCIAL ARRANGEMENTS. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out of
his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv) the establishment of a
letter of credit, guaranty or surety.
SECTION 7.03 DEFINITIONS. For purposes of this Article:
EXPENSES. The word "Expenses" shall be broadly construed and, without
limitation, means (i) all direct and indirect costs incurred, paid or accrued,
(ii) all attorneys' fees, retainers, court costs, transcripts, fees of experts,
witness fees, travel expenses, food and lodging expenses while traveling,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service, freight or other transportation fees and expenses, (iii) all
other disbursements and out-of-pocket expenses, (iv) amounts paid in settlement,
to the extent permitted by Nevada Law, and (v) reasonable compensation for time
spent by the Indemnitee for which he is otherwise not compensated by the
corporation or any third party, actually and reasonably incurred in connection
with either the appearance at or investigation, defense, settlement or appeal of
the Proceeding or establishing or enforcing a right to indemnification under any
agreement or arrangement, this Article, the Nevada Law or otherwise; provided,
however, that "Expenses" shall not include any judgments or fines or excise
taxes or penalties imposed under the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or other excise taxes or penalties.
LIABILITIES. "Liabilities" means liabilities of any type whatsoever,
including, but not limited to, judgments of fines, ERISA or other excise taxes
and penalties, and amounts paid in settlement.
NEVADA LAW. "Nevada Law" means Chapter 78 of the Nevada Revised Statutes as
amended and in effect from time to time or any successor or other statutes of
Nevada having similar import and effect.
THIS ARTICLE. "This Article" means Paragraphs 7.01 through 7.04 of these
bylaws or any portion of them.
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POWER OF STOCKHOLDERS. Paragraphs 7.01 through 7.04, including this
Paragraph, of these By-laws may be amended by the stockholders only by vote of
the holders of sixty-six and two-thirds percent (66 2/3%) of the entire number
of shared of each class, voting separately, of the outstanding capital stock of
the corporation (even though the right of any class to vote is otherwise
restricted or denied) ; provided, however, no amendment or repeal of this
Article shall adversely affect any right of any Indemnitee existing at the time
such amendment or repeal becomes effective.
POWER OF DIRECTORS. Paragraphs 7.01 through 7.04 and this Paragraph of
these Bylaws may be amended or repealed by the Board of Directors only by vote
of eighty percent (80%) of the total number of Directors and the holders of
sixty-six and two-thirds percent (66 2/3) of the entire number of shares of each
class, voting separately, of the outstanding capital stock of the corporation
(even thought the right of any class to vote is otherwise restricted or denied)
; provided, however, no amendment or repeal of this Article shall adversely
affect any right of any Indemnitee existing at the time such amendment or repeal
becomes effective.
ARTICLE VIII
BYLAWS
SECTION 8.01 AMENDMENT. Amendments and changes of these By-Laws may be
made at any regular of special meeting of the Board of Directors by a vote of
not less than all of the entire Board, or may be made by a vote of, or a
consent in writing signed by the holders of a majority of the issued and
outstanding capital stock.
SECTION 8.02 ADDITIONAL BY-LAWS. Additional by-laws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board of
Directors at which a quorum is present by an affirmative vote of a majority of
the directors present or by the unanimous consent of the Board of Directors in
accordance with Section 2.11 of these By -laws.
CERTIFICATION
I, the undersigned, being the duly elected secretary of the corporation, do
hereby certify that the forgoing Bylaws were adopted by the Board of Directors
on the 3rd day of June, 1998.
/s/ Max C. Tanner
------------------------
Max C. Tanner, Secretary
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EXHIBIT 10.1
1995 STOCK OPTION PLAN
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JUMP! SOFTWARE, INC.
1995 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1995 Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Jump! Software, Inc., a California
corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a consultant or
from a consultant to an Employee will not constitute a termination of
employment.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company,
with the status of employment determined based upon such minimum number of hours
or periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means, as of any date, the fair market
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
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(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
(r) "Plan" means this 1995 Stock Option Plan.
(s) "Reporting Person" means an officer, director, or greater
than ten percent shareholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(t) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, as the same may be amended from time to time, or any successor
provision.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(v) "Stock Exchange" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted at
any given time.
(w) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 2,078,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS.
With respect to grants of Options to Employees who are Reporting Persons, the
Plan shall be administered by (A) the Board if the Board may administer the Plan
in compliance with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan, or (B) a committee designated by the Board
to administer the Plan, which committee shall be constituted in such a
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manner as to permit the Plan to comply with Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan. Once appointed, such
committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the committee and thereafter directly
administer the Plan, all to the extent permitted by Rule 16b-3 with respect to a
plan intended to qualify thereunder as a discretionary plan. No person serving
as a member of an Administrator that has authority with respect to grants to
Reporting Persons shall be eligible to receive any grant under the Plan which
would cause such member to cease to be "disinterested" within the meaning of
Rule 16b-3.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options to Employees or Consultants who are
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of the Code and of any applicable Stock Exchange (the "Applicable Laws").
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any Stock Exchange, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or
any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock; and
(viii) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to participants who are
foreign nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.
5. ELIGIBILITY.
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(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares subject to an Incentive Stock Option shall be
determined as of the date of the grant of such Option.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the
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exercise price and any applicable income or employment taxes, (7) delivery of an
irrevocable subscription agreement for the Shares that irrevocably obligates the
option holder to take and pay for the Shares not more than twelve months after
the date of delivery of the subscription agreement, (8) any combination of the
foregoing methods of payment, or (9) such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan; provided that such Option shall become exercisable at the rate of
at least twenty percent (20%) per year over five (5) years from the date the
Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and the
Company has received full payment for the Shares with respect to which the
Option is exercised. Full payment may, as authorized by the Board, consist of
any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the Optioned Stock, not withstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares that thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
Subject to Section 9(c), in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee with the Company, such Optionee
may, but only within three (3) months (or such other period of time not less
than thirty (30) days as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding three (3) months) after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate. No termination shall be deemed to occur and this Section 9(b) shall
not apply if (i) the Optionee is a Consultant who becomes an Employee within the
time specified herein; or (ii) the Optionee is an Employee who becomes a
Consultant within the time specified herein.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding the provisions of Section 9(b)
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her total and permanent
disability (within the meaning of Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's
consulting relationship or Continuous Status as an Employee as a result of a
disability which does not fall within the meaning of total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. However,
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to the extent that such Optionee fails to exercise an Option which is an
Incentive Stock Option ("ISO") (within the meaning of Section 422 of the Code)
within three (3) months of the date of such termination, the Option will not
qualify for ISO treatment under the Code. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within six months (6) from
the date of termination, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee during the period of Continuous Status as an Employee or any consulting
relationship, or within thirty (30) days following the termination of the
Optionee's Continuous Status as an Employee or consulting relationship, the
Option may be exercised, at any time within six (6) months following the date of
death (but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee was entitled to exercise the Option at the date
of death or, if earlier, the date of termination of the consulting relationship
or Continuous Status as an Employee. To the extent that Optionee was not
entitled to exercise the Option at the date of death or termination, as the case
may be, or if Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate.
(e) RULE 16b-3. Options granted to Reporting Persons shall
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
for Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
Any surrender by a Reporting Person of previously owned
Shares to satisfy tax withholding obligations arising upon exercise of this
Option must comply with the applicable provisions of Rule 16b-3 and shall be
subject to such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a form
acceptable to the Administrator and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is a Reporting Person, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made
by an Optionee and the Tax Date is deferred under Section 83 of the Code because
no election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN
OTHER TRANSACTIONS.
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(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock that have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or that have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock, or any other increase
or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale
of all or substantially all of the Company's assets or a merger of the Company
with or into another corporation where the successor corporation issues its
securities to the Company's shareholders, each outstanding Option shall be
assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, in which case such Option shall terminate upon the
consummation of the merger or sale of assets.
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's shareholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee, only by the Optionee.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of any Stock Exchange), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange.
As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by law.
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16. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. AGREEMENTS. Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange. All Options issued under the Plan shall become void
in the event such approval is not obtained.
19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide
financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding, and in the case of an individual
who acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.
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EXHIBIT 10.2
1999 INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
DATED MAY 5, 1999
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JUMPMUSIC.COM, INC.
1999 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
1. PURPOSE
This Incentive and Nonstatutory Stock Option Plan (the "Plan") is intended
to further the growth and financial success of JUMPMUSIC.COM, INC., a Nevada
corporation (the "Corporation") by providing additional incentives to selected
employees, directors, and consultants of the Corporation or parent corporation
or subsidiary corporation of the Corporation as those terms are defined in
Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the
"Code") (such parent corporations and subsidiary corporations hereinafter
collectively referred to as "Affiliates") so that such employees, directors, and
consultants may acquire or increase their proprietary interest in the
Corporation. Stock options granted under the Plan (hereinafter "Options") may be
either "Incentive Stock Options," as defined in Section 422A of the Code and any
regulations promulgated under said Section, or "Nonstatutory Options" at the
discretion of the Board of Directors of the Corporation (the "Board") and as
reflected in the respective written stock option agreements granted pursuant
hereto.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Corporation; provided however, that the Board may delegate such administration
to a committee of not fewer than three (3) members (the "Committee"), at least
two (2) of whom are members of the Board and all of whom are disinterested
administrators, as contemplated by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"); and provided further, that the
foregoing requirement for disinterested administrators shall not apply prior to
the date of the first registration of any of the securities of the Corporation
under the Securities Act of 1933, as amended (the "Act").
Subject to the provisions of the Plan, the Board and/or the Committee shall
have authority to (a) grant, in its discretion, Incentive Stock Options in
accordance with Section 422A of the Code or Nonstatutory Options; (b) determine
in good faith the fair market value of the stock covered by an Option; (c)
determine which eligible persons shall be granted Options and the number of
shares to be covered thereby and the term thereof; (d) construe and interpret
the Plan; (e) promulgate, amend and rescind rules and regulations relating to
its administration, and correct defects, omissions, and inconsistencies in the
Plan or any Option; (f) consistent with the Plan and with the consent of the
optionee, as appropriate, amend any outstanding Option or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to optionholders without constituting termination
of their employment for the purpose of the Plan; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or of
any Option shall be conclusive and final. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
3. ELIGIBILITY
The persons who shall be eligible to receive Options shall be key
employees, directors, and consultants of the Corporation or any of its
Affiliates ("Optionees"). The term consultant shall mean any person who is
engaged by the Corporation to render services and is compensated for such
services, and any director of the Corporation whether or not compensated for
such services; provided that, if the Corporation registers any of its securities
pursuant to the Act, the term consultant shall thereafter not include directors
who are not compensated for their services or are paid only a director fee by
the Corporation.
(a) INCENTIVE STOCK OPTIONS. Incentive Stock Options may only be
issued to employees of the Corporation or its Affiliates. Incentive Stock
Options may be granted to officers, whether or not they are directors, but a
director shall not be granted an Incentive Stock Option unless such director is
also an employee of the Corporation. Payment of a director fee shall not be
sufficient to constitute employment by the Corporation. Any grant of option to
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an officer or director of the Corporation subsequent to the first registration
of any of the securities of the Corporation under the Act shall comply with the
requirements of Rule 16b-3. An optionee may hold more than one Option.
The Corporation shall not grant an Incentive Stock Option under the
Plan to any employee if such grant would result in such employee holding the
right to exercise for the first time in any one calendar year, under all options
granted to such employee under the Plan or any other stock option plan
maintained by the Corporation or any Affiliate, with respect to shares of stock
having an aggregate fair market value, determined as of the date of the Option
is granted, in excess of $100,000. Should it be determined that an Incentive
Stock Option granted under the Plan exceeds such maximum for any reason other
than a failure in good faith to value the stock subject to such option, the
excess portion of such option shall be considered a Nonstatutory Option. If, for
any reason, an entire option does not qualify as an Incentive Stock Option by
reason of exceeding such maximum, such option shall be considered a Nonstatutory
Option.
(b) NONSTATUTORY OPTION. The provisions of the foregoing Section 3(a)
shall not apply to any option designated as a "Nonstatutory Stock Option
Agreement" or which sets forth the intention of the Parties that the option be a
Nonstatutory Option.
4. STOCK
The stock subject to Options shall be the shares of the Corporation's
authorized but unissued or reacquired Common Stock (the "Stock").
(a) NUMBER OF SHARES. Subject to adjustment as provided in Paragraph
5(i) of this Plan, the total number of shares of Stock which may be purchased
through exercise of Options granted under this Plan shall not exceed one million
eight hundred thousand (1,800,000) shares. If any Option shall for any reason
terminate or expire, any shares allocated thereto but remaining unpurchased upon
such expiration or termination shall again be available for the grant of Options
with respect thereto under this Plan as though no Option had been granted with
respect to such shares.
(b) RESERVATION OF SHARES. The Corporation shall reserve and keep
available at all times during the term of the Plan such number of shares as
shall be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration of the Plan
or Options under the Act, the Corporation is unable to obtain authority from any
applicable regulatory body, which authorization is deemed necessary by legal
counsel for the Corporation for the lawful issuance of shares hereunder, the
Corporation shall be relieved of any liability with respect to its failure to
issue and sell the shares for which such requisite authority was so deemed
necessary unless and until such authority is obtained.
5. TERMS AND CONDITIONS OF OPTIONS
Options granted hereunder shall be evidenced by agreements between the
Corporation and the respective Optionees, in such form and substance as the
Board or Committee shall from time to time approve. Such agreements need not be
identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:
(a) NUMBER OF SHARES: Each Option shall state the number of shares to
which it pertains.
(b) OPTION PRICE: Each Option shall state the Option Price, which
shall be determined as follows:
(i) Any Option granted to a person who at the time the Option is
granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
value of all classes of stock of the Corporation, or of any Affiliate, ("Ten
Percent Holder") shall have an Option Price of no less than one hundred ten
percent (110%) of the fair market value of the common stock as of the date of
grant; and
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(ii) Incentive Stock Options granted to a person who at the time
the Option is granted is not a Ten Percent Holder shall have an Option price of
no less than one hundred percent (100%) of the fair market value of the common
stock as of the date of grant.
(iii) Nonstatutory Options granted to a person who at the time
the Option is granted is not a Ten Percent Holder shall have an Option Price
determined by the Board as of the date of grant.
For the purposes of this paragraph 5(b), the fair market value shall
be as determined by the Board, in good faith, which determination shall be
conclusive and binding; provided however, that if there is a public market for
such stock, the fair market value per share shall be the average of the bid and
asked prices (or the closing price if such stock is listed on the NASDAQ
National Market System) on the date of grant of the Option, or if listed on a
stock exchange, the closing price on such exchange on such date of grant.
(c) MEDIUM AND TIME OF PAYMENT: To the extent permissible by
applicable law, the Option price shall be paid, at the discretion of the Board,
at either the time of grant or the time of exercise of the Option (i) in cash or
by check, (ii) by delivery of other common stock of the Corporation, provided
such tendered stock was not acquired directly or indirectly from the
Corporation, or, if acquired from the Corporation, has been held by the Optionee
for more than six (6) months, (iii) by the Optionee's promissory note in a form
satisfactory to the Corporation and bearing interest at a rate determined by the
Board, in its sole discretion, but in no event less than 6% per annum, or (iv)
such other form of legal consideration permitted by the Nevada Revised Statutes
and case law related thereto as may be acceptable to the Board.
(d) TERM AND EXERCISE OF OPTIONS: Any Option granted to an Employee of
the Corporation shall become exercisable over a period of no longer than ten
(10) years and no less than twenty percent (20%) of the shares covered thereby
shall become exercisable annually. No Incentive Stock Option shall be
exercisable, in whole or in part, prior to one (1) year from the date it is
granted unless the Board shall specifically determine otherwise, as provided
herein. In no event shall any Option be exercisable after the expiration of ten
(10) years from the date it is granted, and no Incentive Stock Option granted to
a Ten Percent Holder shall, by its terms, be exercisable after the expiration of
ten (10) years from the date of the Option. Unless otherwise specified by the
Board or the Committee in the resolution authorizing such option, the date of
grant of an Option shall be deemed to be the date upon which the Board or the
Committee authorizes the granting of such Option.
Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the option
agreement, whether or not other installments are then exercisable.
(e) TERMINATION OF STATUS AS EMPLOYEE, DIRECTOR, OR CONSULTANT: If
Optionee's status as an employee, director, or consultant shall terminate for
any reason other than Optionee's death, then the Optionee (or if the Optionee
shall die after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise the portions of any such termination, in whole or in part, at
any time within thirty (30) days after such termination (or in the event
Optionee's termination was caused permanent disability [within the meaning of
Section 22(e)(3) of the Code) this 30 day period shall be extended to six (6)
months] of "termination for good cause" as that term is defined under the Nevada
Revised Statutes and case law related thereto, such shorter period as the option
agreement may specify, but not less than three (3) days) or the remaining term
of the Option, whichever is the lesser; provided, however, that with respect to
Nonstatutory Options, the Board may specify such longer period, not to exceed
one hundred eighty (180) days, for exercise following termination as the Board
deems reasonable and appropriate. The Option may be exercised only with respect
to installments that the Optionee could have exercised at the date of
termination of employment. Nothing contained herein or in any Option granted
pursuant hereto shall be construed to affect or restrict in any way the right of
the Corporation to terminate the Optionee with or without cause.
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(f) DEATH OF OPTIONEE: If an Optionee dies while employed or engaged
as a director or consultant by the Corporation or an Affiliate, the portion of
such Optionee's Option or Options which were exercisable at the date of death
may be exercised, in whole or in part, by the estate of the decedent or by a
person succeeding to the right to exercise such Option or Options, at any time
within the remaining term of this Option, but only to the extent, that Optionee
could have exercised this Option as of the date of Optionee's death; provided,
in any case, that this Option may be so exercised only to the extent that this
Option has not previously been exercised by Optionee.
(g) NONTRANSFERABILITY OF OPTION: No Option shall be transferable by
the Optionee, except by will or by the laws of descent and distribution.
(h) RECAPITALIZATION: Subject to any required action by the
stockholders, the number of shares of common stock covered by each outstanding
Option, and the price per share thereof set forth in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Corporation.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving entity in any merger or consolidation, each outstanding
Option thereafter shall pertain to and apply to the securities to which a holder
of shares of common stock equal to the shares subject to the Option would have
been entitled by reason of such merger or consolidation. A dissolution or
liquidation of the Corporation or a merger or consolidation in which the
Corporation is not the surviving entity shall cause each outstanding Option to
terminate on the effective date of such dissolution, liquidation, merger or
consolidation. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving entity, as applicable, which on an equitable basis shall provide the
Optionee with substantially the same economic benefit as such unexercised
Option, then the Board may grant to such Optionee, but shall not be obligated to
do so, the right for a period commencing thirty (30) days prior to and ending
immediately prior to such dissolution, liquidation, merger or consolidation or
during the remaining term of the Option, whichever is the lesser, to exercise
any unexpired Option or Options, without regard to the installment provisions of
Paragraph 5(d) of this Plan; provided, that any such right granted shall be
granted to all Optionees not receiving an offer to substitute on a consistent
basis, and provided further, that any such exercise shall be subject to the
consummation of such dissolution, liquidation, merger or consolidation.
In the event of a change in the common stock of the Corporation as
presently constituted, which is limited to a change of all of its authorized
shares without par value into the same number of shares with a par value, the
shares resulting from any such change shall be deemed to be the common stock
within the meaning of this Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided in this Paragraph 5(h), the Optionee shall have no
rights by reason of any subdivision or consolidation of shares of stock or any
class or the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class, and the number or price of shares of
common stock subject to any Option shall not be affected by, and no adjustment
shall be made by reason of, any dissolution, liquidation, merger or
consolidation, or any issue by the Corporation of shares of stock of any class
or securities convertible into shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make any adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge, consolidate, dissolve, or liquidate or to sell or
transfer all or any part of its business or assets.
(i) RIGHTS AS A STOCKHOLDER: An Optionee shall have no rights as a
stockholder with respect to any shares covered by an Option until the date of
the issuance of a stock certificate to Optionee for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Paragraph 5(h) hereof.
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(j) MODIFICATION, ACCELERATION, EXTENSION, AND RENEWAL OF OPTIONS:
Subject to the terms and conditions and within the limitations of the Plan, the
Board may modify an Option, or once an Option is exercisable, accelerate the
rate at which it may be exercised, and may extend or renew outstanding Options
granted under the Plan or accept the surrender of outstanding Options (to the
extent not theretofore exercised) and authorize the granting of new Options in
substitution for such Options, provided such action is permissible under Section
422A of the Code and the Nevada Revised Statutes and case law related thereto.
Notwithstanding the foregoing provisions of this Paragraph 5(j),
however, no modification of an Option shall, without the consent of the
Optionee, alter to the Optionee's detriment or impair any rights or obligations
under any Option theretofore granted under the Plan.
(k) INVESTMENT INTENT: Unless and until the issuance and sale of the
shares subject to the Plan are registered under the Act, each Option under the
Plan shall provide that the purchases of stock thereunder shall be for
investment purposes and not with a view to, or for resale in connection with,
any distribution thereof. Further, unless the issuance and sale of the stock
have been registered under the Act, each Option shall provide that no shares
shall be purchased upon the exercise of such Option unless and until (i) any
then applicable requirements of state and federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Corporation and
its counsel, and (ii) if requested to do so by the Corporation, the person
exercising the Option shall (i) give written assurances as to knowledge and
experience of such person (or a representative employed by such person) in
financial and business matters and the ability of such person (or
representative) to evaluate the merits and risks of exercising the Option, and
(ii) execute and deliver to the Corporation a letter of investment intent, all
in such form and substance as the Corporation may require. If shares are issued
upon exercise of an Option without registration under the Act, subsequent
registration of such shares shall relieve the purchaser thereof of any
investment restrictions or representations made upon the exercise of such
Options.
(l) EXERCISE BEFORE EXERCISE DATE: At the discretion of the Board, the
Option may, but need not, include a provision whereby the Optionee may elect to
exercise all or any portion of the Option prior to the stated exercise date of
the Option or any installment thereof. Any shares so purchased prior to the
stated exercise date shall be subject to repurchase by the Corporation upon
termination of Optionee's employment as contemplated by Paragraphs 5(e) and 5(f)
hereof prior to the exercise date stated in the Option and such other
restrictions and conditions as the Board or Committee may deem advisable.
(m) OTHER PROVISIONS: The Option agreements authorized under this Plan
shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the Options, as the Board or the Committee shall deem
advisable. Shares shall not be issued pursuant to the exercise of an Option, if
the exercise of such Option or the issuance of shares thereunder would violate,
in the opinion of legal counsel for the Corporation, the provisions of any
applicable law or the rules or regulations of any applicable governmental or
administrative agency or body, such as the Act, the Securities Exchange Act of
1934, as amended, the rules promulgated under the foregoing or the rules and
regulations of any exchange upon which the shares of the Corporation are listed.
6. AVAILABILITY OF INFORMATION
During the term of the Plan and any additional period during which an
Option granted pursuant to the Plan shall be exercisable, the Corporation shall
make available, not later than one hundred and twenty (120) days following the
close of each of its fiscal years, such financial and other information
regarding the Corporation as is required by the bylaws of the Corporation and
applicable law to be furnished in an annual report to the stockholders of the
Corporation.
7. EFFECTIVENESS OF PLAN; EXPIRATION
Subject to approval by the stockholders of the Corporation, this Plan shall
be deemed effective as of the date it is adopted by the Board. The Plan shall
expire on May 5, 2009, but such expiration shall not affect the validity of
outstanding Options.
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8. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to Options, suspend or terminate the Plan
or revise or amend it in any respect whatsoever, except that without the
approval of the stockholders of the Corporation, no such revision or amendment
shall (i) increase the number of shares subject to the Plan, (ii) decrease the
price at which Options may be granted, (iii) materially increase the benefits to
Optionees, or (iv) change the class of persons eligible to receive Options under
this Plan; provided, however, no such action shall alter or impair the rights
and obligations under any Option outstanding as of the date thereof without the
written consent of the Optionee thereunder. No Option may be granted while the
Plan is suspended or after it is terminated, but the rights and obligations
under any Option granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan.
9. INDEMNIFICATION OF BOARD
In addition to such other rights or indemnifications as they may have as
directors or otherwise, and to the extent allowed by applicable law, the members
of the Board and the Committee shall be indemnified by the Corporation against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any claim, action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Corporation, in writing, the
opportunity, at its own expense, to handle and defend the same.
10. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of common stock
pursuant to the exercise of Options will be used for general corporate purposes.
11. NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
12. NOTICES
All notice, requests, demand, and other communications pursuant this Plan
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or on
the third day following the mailing thereof to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid.
13. FINANCIAL STATEMENTS
Optionees under this Plan shall receive financial statements annually
regarding the Corporation during the period the options are outstanding. The
financial statements provided need not comply with Title 10, Section 260.613 of
the California Code of Regulations.
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The foregoing Incentive and Nonstatutory Stock Option Plan was duly adopted
and approved by the Board of Directors on May 5, 1999.
/s/ Jan Mathews
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Jan Mathews, Secretary
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EXHIBIT 10.3
OFFICE LEASE AGREEMENT
DATED JULY 25, 1994
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OFFICE LEASE AGREEMENT
THIS LEASE dated July 25, 1994, is entered into by and between JACK DYMOND
ASSOCIATES California Partnership, hereinafter referred to as "Lessor" and JUMP
SOFTWARE, a California corporation, hereinafter referred to as "Lessee" who
agree as follows:
ARTICLE I
DEMISED PREMISES
Lessor does hereby lease to Lessee, and Lessee does hereby rent from
Lessor, for the term and subject to the agreements, conditions and provisions
contained herein, that certain real property (hereinafter referred to as the
("Demised Premises") constituting a part of the office building located at 201
San Antonio Circle, Mountain View, California and more particularly described
as: approximately 1,980 square feet of lease space, known as Suite 172, First
Floor, Bldg. E together with the right to use the common areas and service
facilities, subject to the reasonable rules and regulations as may be
promulgated from time to time by Lessor governing the use of such common areas.
ARTICLE II
TERM
2.01 The term of this Lease shall be a period of TWO (2) years commencing on
September 1, 1994 and ending on August 31, 1996 unless sooner terminated as
provided herein.
2.02 If Lessor, for any reason whatsoever, is unable to deliver possession of
the Demised Premises to Lessee on the commencement date specified in Section
2.01 above, Lessor shall not be liable to Lessee for any loss or damage
resulting therefrom, nor shall this Lease be void or voidable, but in such event
Lessee shall not be liable for rent or other sums due Lessor until possession of
the Demised Premises is offered to Lessee. No delay in delivery of possession
shall operate to extend the term hereof.
ARTICLE III
RENT
3.01 Lessee covenants and agrees to pay to Lessor as rent for the Demised
Premises the following sums per month, in lawful money of the United States,
payable in advance on or before the first day of each and every successive
calendar month during the term hereof, without deduction, setoff or demand, at
such place as may be designated in writing by Lessor.
<TABLE>
<CAPTION>
- -------------------------- ---------------- -------------------- ----------------------- ----------------
Time Period Leased Sq. Ft. Annual Increase Rental Amount Sq. Ft. Rate
- -------------------------- ---------------- -------------------- ----------------------- ----------------
<S> <C> <C> <C> <C>
9/01/94-10/31/94 1,980 Free
- -------------------------- ---------------- -------------------- ----------------------- ----------------
- -------------------------- ---------------- -------------------- ----------------------- ----------------
11/01/94-08/31/95 1,980 $3,168.00/mo. $1.60
- -------------------------- ---------------- -------------------- ----------------------- ----------------
- -------------------------- ---------------- -------------------- ----------------------- ----------------
09/01//95-08/31/96 1,980 6% $3,366.00/mo $1.79
- -------------------------- ---------------- -------------------- ----------------------- ----------------
</TABLE>
3.02 In the event the commencement date is not the first day of a calendar
month, or if the termination date is not the last day of a calendar month, the
monthly rental for the fractional month shall be prorated on the basis of a
thirty (30) day month.
3.03 Lessee acknowledges that late payment of rent and any other charges
provided herein will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of such costs being extremely difficult and impracticable to
determine. Such costs include, without limitation, processing and accounting
charges, late charges that may be imposed on Lessor by the terms of any
encumbrances against the Demised Premises and penalties on delinquent tax
payments. Lessee therefore agrees that if any installment of rent or other
charge payable by Lessee hereunder is not received by
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Lessor within ten (10) days after the same becomes due, Lessor shall be entitled
to collect an additional sum equal to one and one-half percent (1.5%) of the
delinquent payment for each month or fraction thereof that the rent or other
charge remains unpaid. Acceptance of any late charge shall not constitute a
waiver of Lessee's default with respect to the overdue amount, nor prevent
Lessor from exercising any other rights and remedies available to Lessor
hereunder or provided by law.
ARTICLE IV
SECURITY DEPOSIT
Lessee has deposited with Lessor the sum of THREE THOUSAND ONE HUNDRED
SIXTY-EIGHT AND NO/100 DOLLARS ($3,168.00)as and for a security deposit. If
Lessee defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any part of the security deposit to cure such default or
to compensate Lessor for all damages sustained by Lessor resulting from Lessee's
default. If any portion of said deposit is so used or applied, Lessee shall
within ten (10) days after written demand therefor, deposit cash with Lessor in
an amount sufficient to restore the security deposit to its original amount, and
Lessee's failure to do so shall constitute a material breach of this Lease.
Lessor's obligations with respect to the security deposit are those of a debtor
and not a trustee. Lessor shall not be required to segregate the security
deposit as a separate fund and Lessee shall not be entitled to any interest
thereon. If Lessee shall fully and faithfully perform every provision of the
Lease to be performed by Lessee, the security deposit or any balance thereof
shall be returned to Lessee within thirty (30) days after termination of the
Lease.
ARTICLE V
CONDITION OF DEMISED PREMISES
Lessor shall have no obligation to make any alterations or improvement to the
Demised Premises for the benefit of Lessee except as may be specifically
described in an Addendum to this Lease executed by Lessor and Lessee. By taking
possession of the Demised Premises, Lessee accepts and acknowledges the Demised
Premises as being in good order, condition and repair. Acceptance of the Demised
Premises shall also constitute acceptance of any alteration or improvements
therein performed by Lessor. Lessee acknowledges that neither Lessor nor anyone
acting on Lessor's behalf has made any representation or warranty as to the
suitability or fitness of the Demised Premises for the conduct of Lessee's
business or for any other purpose.
ARTICLE VI
USE
6.01 The Demised Premises shall be used and occupied by Lessee solely for
general office purposes and for no other or additional purpose without the prior
written consent of Lessor.
6.02 Lessee shall not use the Demised Premises or permit anything to be one in
or about the Demised Premises which is prohibited by or will in any way conflict
with any law, statute, ordinance or governmental rule or regulation now in force
or which may hereafter be in force, or which is prohibited by the standard form
of fire insurance policy, or will in any way increase the existing rate of any
fire or other insurance covering the office building or any of its contents, or
cause any change or cancellation of such insurance. The judgment of any court of
competent jurisdiction or the admission of Lessee in any action against Lessee,
whether Lessor be a party thereto or not, that Lessee has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between Lessor and Lessee.
Lessee shall not do or permit anything to be done in or about the Demised
Premises which will in any way obstruct or interfere with the rights of other
tenants in the office building, or injure or annoy them, or use or allow the
Demised Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Lessee cause, maintain or permit any nuisance in, on or about
the Demised Premises or commit or suffer to be committed any waste in, on or
about the Demised Premises.
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ARTICLE VII
UTILITIES AND SERVICES
7.0 Lessor shall maintain the public and common areas of the office building,
including lobbies, stairs, elevators, corridors and restrooms, the windows, the
mechanical, plumbing and electrical equipment serving the building, the
structure itself and the exterior sidewalks, parking areas and grounds in
reasonably good order and condition, except for damage occasioned by the act of
Lessee, which damage shall be repaired by Lessor at Lessee's expense.
7.02 Lessor shall furnish the Demised Premises with: (a) electricity for
lighting and the operation of the office machines; (b) heat and air conditioning
during reasonable and usual business hours, as determined by Lessor, required in
Lessor's judgment for the comfortable use and occupation of the Demised
Premises; (c) lighting replacement for building standard lights; and (d)
elevator service. Lessor shall not be in default hereunder or be liable for
damages directly or indirectly resulting from, nor shall the rent provided
herein be abated by reason of Lessor's failure to furnish or delay in furnishing
any of the foregoing services when such failure or delay is caused by accident,
breakage, repairs, strikes, lockouts or other labor dispute, or by limitation,
curtailment, rationing or restrictions on use of electricity, gas, water or
other utility, or any other cause, similar or dissimilar, beyond the reasonable
control of Lessor.
7.03 Whenever heat generating machines or equipment or lighting other than
building standard lights are used in the Demised Premises which affect the
temperature otherwise maintained by the air conditioning system, Lessor shall
have the right to install supplementary air conditioning units in the Demised
Premises, and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Lessee to Lessor as
additional rent upon billing by Lessor. Lessee shall not, without the prior
written consent of Lessor, install or use any fixture, equipment, apparatus or
device requiring electricity, water, gas or compressed air (if compressed air is
furnished by Lessor) in excess of that usually furnished or supplied by Lessor
to the office building, nor shall Lessee connect with electric current, water
pipes, gas lines or air pipes except through existing outlets to the Demised
Premises provided by Lessor. In the event Lessor consents to the excessive use
by Lessee of electricity, water, gas or compressed air, Lessor may install
separate meters to measure such use and the cost of any such meters, together
with the cost of installation, maintenance and repair thereof, and the cost of
any other equipment or facilities that may be necessary to furnish the excess
utility service, shall be paid by Lessee to Lessor upon billing by Lessor.
Lessee shall also pay to Lessor, as additional rent, the cost of the excess
utility service, as shown by said meters or as calculated by Lessor in the
absence thereof, based upon the rates charged for the service by the public
utility, plus any additional expenses incurred by Lessor in keeping account and
billing Lessee for the excess utility charges.
ARTICLE VIII
INDEMNITY AND INSURANCE
8.01 Lessee hereby waives any and all claims against Lessor for damage to any
property or injury to or death of any person in, upon or about the Demised
Premises, arising at any time and from any cause other than solely by reason of
the negligence or willful misconduct of Lessor. Lessee further expressly
indemnifies and holds Lessor harmless from and against any and all claims,
demands, causes of action, liabilities, costs or expenses, including attorney's
fees, occasioned by or in any way connected with the condition, use or misuse of
the Demised Premises, or occasioned by any act or omission of Lessee and
Lessee's agents, servants, employees, invitees or other persons who may come
upon the Demised Premises, except for damage to any property or injury to or
death of any person caused solely by the negligence or willful misconduct of
Lessor.
8.02 Lessee hereby agrees to maintain in full force and effect at all times
during the term of this Lease, at Lessee's expense, a policy or policies of
comprehensive public liability and property damage insurance with a single
combined liability limit of not less than $2,000,000.00, insuring against all
liability of Lessee and Lessee's authorized representatives arising out of or in
connection with Lessee's use and occupancy of the Demised Premises. All such
public liability and property damage insurance shall insure performance by
Lessee of the indemnity provisions set forth in paragraph 8.01. Both Lessor and
Lessee shall be named as co-insureds under such policies, as their respective
interests may appear, and such policies shall specifically provide that no
cancellation or change in coverage will be made without ten (10) days prior
written notice to Lessor. A copy of each policy or a certificate of insurance
shall be furnished to Lessor.
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8.03 Lessor and Lessee each hereby waive any and all rights or recovery against
the other, or against the agents, employees or representatives of the other, on
account of loss or damage to the property of the waiving party to the extent
that such loss or damage is insured against under any insurance policies which
either Lessor or Lessee may have in force at the time of such loss or damage.
Lessee shall, upon obtaining the insurance required hereunder, give notice to
the insurance carrier that the foregoing mutual waiver of subrogation is
contained in the Lease and Lessee shall cause each insurance policy obtained by
Lessee to provide that the insurance company waives all right of recovery by way
of subrogation against either Lessor or Lessee in connection with any damage
covered by such policy.
ARTICLE IX
REPAIRS AND MAINTENANCE
Lessor shall, at all times during the term hereof and at Lessor's own expense,
keep and maintain the Demised Premises and every part thereof in good condition
and repair. Lessee hereby waives all rights to make repairs at the expense of
Lessor or in lieu thereof to vacate the Demised Premises as provided by
California Civil Code Section 1942 or any other law, statute or ordinance now or
hereafter in effect. Lessor shall maintain the building, and all parts thereof
in good repair.
ARTICLE X
ALTERATIONS AND IMPROVEMENTS
Lessee shall not, without the prior written consent of Lessor (which consent
shall not be unreasonably withheld), make any alterations, additions or
improvements in, on or about the Demised Premises. As a condition to giving such
consent, Lessor may require Lessee to provide Lessor a surety bond or other
security satisfactory to Lessor to insure Lessor against mechanics' and
materialmen's liens and to insure completion of the work. All alterations,
additions and improvements, whether temporary or permanent in character, made by
Lessee in, on or about the Demised Premises, except movable trade fixtures
installed at the expense of Lessee, shall, in the absence of a written request
by Lessor for their removal, become the property of Lessor and shall remain upon
and be surrendered with the Demised Premises at termination of this Lease by
lapse of time or otherwise without compensation to Lessee.
ARTICLE XI
DAMAGE OR DESTRUCTION
11.01 If the Demised Premises, or other portion of the office building of which
the Demised Premises constitute a part, are damaged, by fire or other casualty,
Lessor shall forthwith repair the same, provided such repairs can, in Lessor's
opinion, be completed within ninety (90) days. In such event, this Lease shall
remain in full force and effect except that if there is damage to the Demised
Premises and such damage was not the result of negligence or willful misconduct
of Lessee or Lessee's employees or invitees, the rent payable by Lessee shall be
abated while the repairs are being made by the extent to which the Demised
Premises are unusable by Lessee in the normal conduct of Lessee's business. In
the event Lessor cannot make the repairs within ninety (90) days, and provided
the damage affect the Demised Premises or common areas necessary to Lessee's
occupancy, Lessor shall give written notice of such fact to Lessee within thirty
(30) days after the date on which the damage occurred and either Lessor or
Lessee may, within thirty (30) days after the giving of such notice, terminate
this Lease.
11.02 Notwithstanding the provisions of Section 11.01 above, Lessor shall have
the option of terminating this Lease in any of the following circumstances:
(a) Where the damage or destruction arises from a casualty or cause not
covered by Lessor's insurance then in force.
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(b) Where the office building in which the Demised Premises are located is
damaged or destroyed to the extnet of 33 1/3 percentn or more of the replacement
cost thereof, whether the Demised Premises be injured or not.
(c) Where the repairs cannot be made by reason of any statute, ordinance,
rule or regulation of any governmental authority.
11.03 If Lessor is obligated or elects to repair any damage pursuant to this
Article, Lessor shall not be required to repair or replace any improvements
installed in the Demised Premises by or for Lessee, other than building standard
tenant improvements made by Lessor, and Lessee shall, at Lessee's own expense,
repair and restore Lessee's portion of such improvements.
11.04 A total destruction of the entire office building in which the Demised
Premises are located shall automatically terminate this Lease.
11.05 Except as otherwise expressly provided in this Article, Lessee hereby
waives the provision of California Civil Code Sections 1932(2) and 1933(4).
ARTICLE XII
CONDEMNATION
12.01 If all of the Demised Premises or so much thereof is taken by right of
eminent domain, or purchase in lieu thereof, such that the Demised Premises are
no longer reasonably suitable for Lessee's use, this Lease shall terminate as of
the date that possession of the Demised Premises or part thereof is taken.
12.02 If any part of the Demised Premises is taken and the remaining part
thereof (after reconstruction of the then existing building) is reasonably
suitable for Lessee's use, this Lease shall, as to the part so taken, terminate
as of the date that possession of such part is taken and the rent payable
hereunder shall be reduced in the same proportion that the floor area of the
portion of the Demised Premises so taken (less any addition thereto by reason of
any reconstruction) bear to the original floor area of the Demised Premises
immediately prior to the taking. Lessor shall, at Lessor's expense, make all
necessary repairs or alterations to restore the remaining Demised Premises to a
complete architectural unit.
12.03 No award for any partial or entire taking shall be apportioned and Lessee
hereby assigns to Lessor all of Lessee's interest therein, except that Lessee
shall be entitled to any portion of the award specifically designated as
compensation for the taking of personal property belonging to Lessee, for the
interruption of Lessee's business, for Lessee's moving costs or loss of goodwill
suffered by Lessee. No temporary taking of the Demised Premises shall terminate
this Lease or give Lessee any right to abatement of rent hereunder; any award
recovered by Lessee for such temporary taking shall belong entirely to Lessee
and Lessor shall have no interest therein. Each party agrees to execute and
deliver to the other all instruments and documents that may be required to
implement the provisions of this section.
ARTICLE XIII
ASSIGNMENT AND SUBLETTING
13.01 Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet, pledge, hypothecate or encumber all or any part of Lessee's
interest in this Lease or in the Demised Premises or any part thereof, without
Lessor's prior written consent and any attempt to do so without such consent
being first had and obtained shall be wholly void and shall constitute a breach
of this Lease. If Lessee is a corporation, any transfer of a controlling
interest in the stock of Lessee shall constitute an assignment hereunder.
13.02 If Lessee complies with the following conditions, Lessor shall not
unreasonably withhold Lessor's consent to the assignment of this Lease or the
subletting of the Demised Premises or any portion thereof. Lessee shall submit
in writing to Lessor:
(a) The name and legal composition of the proposed Assignee or Sublessee;
(b) The terms and provisions of the proposed Assignment or Sublease; and
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(c) Such financial information as Lessor may reasonably request concerning
the proposed Assignee or Sublessee.
13.03 No consent by Lessor to any assignment or subletting by Lessee shall
relieve Lessee of any obligation to be performed by Lessee under this Lease,
whether occurring before or after such consent, assignment or subletting. The
consent by Lessor to any assignment or subletting shall not relieve Lessee from
the obligation to obtain Lessor's express written consent to any other
assignment or subletting. The acceptance of rent by Lessor from any other person
shall not be deemed to be a waiver by Lessor of any provisions of this Lease or
to be a consent to any assignment, subletting or other transfer. Consent to one
assignment, subletting or other transfer shall not be deemed to constitute
consent to any subsequent assignment, subletting or other transfer.
ARTICLE XIV
TRANSFER 0F LESSOR'S INTEREST
Lessor shall have the right at any time to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of Lessor's interest in the Demised Premises
and in this Lease. In the event of any such sale, transfer, assignment, pledge,
hypothecation or other disposition, all obligations of Lessor hereunder shall
devolve upon the transferee and Lessor shall be released and discharged from all
further obligation or liability hereunder; provided, that Lessor shall be
responsible for any funds in the hands of Lessor in which Lessee has an interest
until such funds have been delivered to the transferee. Lessee agrees to attorn
to the transferee provided all of Lessor's obligations hereunder are assumed by
the transferee in writing for the benefit of Lessee.
ARTICLE XV
MECHANICS' LIENS
Lessee shall keep the Demised Premises free and clear of all mechanics' liens
resulting from any construction work done by or for Lessee. Lessee shall have
the right to contest the correctness or validity of any such lien if,
immediately on demand by Lessor, Lessee procures and records a lien release bond
issued by a corporation authorized to issue surety bonds in California in an
amount equal to one and one-half (1-1/2) times the amount of the claim of lien
or other security satisfactory to Lessor. If used, the bond shall met the
requirement of Section 3143 of the California Civil Code and shall provide for
the payment of any sum that the claimant may recover on the claim, together with
costs of suit. Should Lessee fail to discharge any such lien or cause the same
to be released within sixty (60) days from the date the lien is filed, Lessor
may, without inquiring into the validity thereof, cause the same to be
discharged and all amounts so expended by Lessor, together with reasonable
attorney's fees and expenses, shall be paid by Lessee to Lessor as additional
rent hereunder, together with interest thereon at the rate of fifteen percent
(15%) per annum. Lessee shall give ten (10) days prior written notice to Lessor
of the date on which any construction work will be commenced so as to afford
Lessor the opportunity to post a notice of nonresponsibility.
ARTICLE XVI
ENTRY BY LESSOR
16.01 Lessor and Lessor's authorized representatives shall have the right to
enter the Demised Premises at reasonable hours for any of the following
purposes:
(a) To examine and inspect the Demised Premises;
(b) To supply janitor service and any other service to be provided by
Lessor to Lessee hereunder;
(c) To perform any necessary maintenance or repairs that Lessor is required
or permitted to perform hereunder;
(d) To serve, post or keep posted any notices required or allowed under the
provisions of this Lease;
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(e) To post "for sale" signs at any time during the term, to post "for
rent" or "for lease" signs during the last ninety (90) days of the Lease term,
or during any period while Lessee is in default;
(f) To show the Demised Premises to prospective tenants, buyers, lenders or
other persons at any time during the Lease term;
(g) To do any other act or thing necessary for the safety or preservation
of the Demised Premises or the office building.
16.02 Lessee hereby waives any claim for damages for any injury or inconvenience
to or interference with Lessee's business, any loss of occupancy or quiet
enjoyment of the Demised Premises or any other loss occasioned by Lessor's entry
pursuant to Section 16.01. Lessor shall at all times have and retain a key with
which to unlock all of the doors in, on or about the Demised Premises (excluding
Lessee's vaults, safes and other secured areas designated in writing by Lessee
in advance); and Lessor shall have the right to use any and all means which
Lessor may deem proper to open said doors in an emergency in order to obtain
entry to the Demised Premises, and any entry to the Demised Premises obtained by
Lessor by any of said means, or otherwise, shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into or a detainer of the
Demised Premises, or an eviction, actual or constructive, of Lessee from the
Demised Premises, or any portion thereof.
ARTICLE XVII
DEFAULT BY LESSEE
The occurrence of any one or more of the following events ("Events of Default")
shall constitute a material default and breach of this Lease by Lessee:
(a) Any failure by Lessee to pay any rental as and when the same becomes
due and payable, and such failure continues for more than ten (10) days after
written notice from Lessor.
(b) Any failure by Lessee to pay any other sum required to be paid by
Lessee hereunder, as and when the same becomes due and payable, and such failure
continues for more than ten (10) days after written notice from Lessor.
(c) Any failure by Lessee to observe and perform any other provision of
this Lease to be observed or performed by Lessee, where such failure continues
for ten (10) days after written notice thereof by Lessor to Lessee; provided,
however, that if the nature of such default is such that it cannot reasonably be
cured within such ten (10) day period, Lessee shall not be deemed to be in
default if Lessee shall within such period commence such cure and thereafter
diligently prosecute the same to completion.
(d) The making by Lessee of any general assignment or general arrangement
for the benefit of creditors; the filing by or against Lessee of a petition to
have Lessee adjudged a bankrupt or a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against Lessee, the same is dismissed within ninety (90) days); the appointment
of a trustee or receiver to take possession of substantially all of Lessee's
interest in this Lease, where possession is not restored to Lessee within sixty
(60) days; or the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Demised Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
forty-five (45) days.
Any notice given under this Article shall specify the Event of Default and the
applicable lease provisions, and shall demand that Lessee perform the provisions
of this Lease or pay the rent that is in arrears, as the case may be, within the
applicable period of time. No such notice shall be deemed a forfeiture or
termination of this Lease provided Lessee cures the default with the applicable
period of time.
ARTICLE XVIII
LESSOR'S REMEDIES UPON DEFAULT
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Lessor shall have the following remedies upon the occurrence of an Event of
Default, such remedies being cumulative and not exclusive and in addition to any
other remedies available to Lessor as now or hereafter provided by law:
(a) Lessor can continue this Lease in full force and effect, and the Lease
will continue in effect as long as Lessor does not terminate Lessee's right to
possession, and Lessor shall have the right to collect rent when due,
irrespective of whether Lessee shall have abandoned the Demised Premises. During
the period Lessee is in default, Lessor can enter the Demised Premises and relet
them, or any part of them, to third parties for Lessee's account. Lessee shall
be liable immediately to Lessor for all costs Lessor incurs in such reletting,
including, without limitation, broker's commissions, expenses of remodeling the
Demised Premises required by reletting, and the costs. Reletting can be for a
period shorter or longer than the remaining term of this Lease. Lessee shall pay
to Lessor the rent specified in this Lease on the dates when the same becomes
due, less the rent Lessor receives from any reletting. No act by Lessor allowed
by this paragraph shall terminate this Lease unless Lessor notifies Lessee that
Lessor elects to terminate this Lease. After Lessee's default and for as long as
Lessor does not terminate Lessee's right to possession of the Demised Premises,
Lessee shall have the right to assign or sublet Lessee's interest in this Lease
pursuant to Article XIII, but Lessor's consent may be conditioned upon all
defaults by Lessee being fully cured at the time of assignment or subletting.
(b) Lessor can terminate Lessee's right to possession of the Demised
Premises at any time during Lessee's default. No act by Lessor other than giving
written notice to Lessee shall terminate this Lease. Acts of maintenance,
efforts to relet the Demised Premises, or the appointment of a receiver on
Lessor's initiative to protect Lessor's interest under this Lease shall not
constitute a termination of Lessee's right to possession. On termination, Lessor
has the right to recover from Lessee:
(1) The worth, at the time of the award, of the unpaid rent that has
been earned at the time of termination of this Lease; plus
(2) The worth, at the time of the award, of the amount by which the
unpaid rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that Lessee
proves could have been reasonably avoided; plus
(3) The worth, at the time of the award, of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of the loss of rent that Lessee proves could have been reasonably
avoided; and
(4) Any other amount, the court costs, necessary to compensate Lessor
for all detriment approximately caused by Lessee's default.
"The worth, at the time of the award," as used in (1) and (2) above, is to be
computed by allowing interest at the rate of ten percent (10%) per annum from
the date of default. "The worth, at the time of the award" as used in (3) above
is to be computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award, plus one percent (1%).
The term "rent," as used in this Article shall be deemed to include all monetary
sums required to be paid by Lessee pursuant to the terms of this Lease.
ARTICLE XIX
LESSOR'S RIGHT TO CURE DEFAULTS
If Lessee shall fail to pay any sum of money, other than rental, required to be
paid by Lessee hereunder, or shall fail to perform any other act on Lessee's
part to be performed hereunder, and such failure shall continue for ten (10)
days after notice thereof by Lessor, Lessor may, but shall not be obligated to
do so, and without waiving or releasing Lessee from any obligations of Lessee,
make such payment or perform any such other act on Lessee's part to be made or
performed hereunder. All sums expensed by Lessor, including necessary incidental
costs, shall be deemed additional rent hereunder and shall be payable to Lessor
immediately upon demand, together with interest thereon at the rate of fifteen
percent (15%) per annum from the date of expenditure to the date of
reimbursement.
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ARTICLE XX
COSTS OF SUIT
20.01 In the event legal action between Lessor and Lessee shall become necessary
in order to enforce or interpret this lease, or any provision contained herein,
the prevailing party shall be entitled to recover all costs and expenses as may
be incurred in connection therewith, including reasonable attorney's fees.
20.02 Should Lessor, without fault on Lessor's part, be made a party to any
litigation instituted by Lessee or by any third party against Lessee, or by or
against any person holding under or using the Demised Premises by license of
Lessee, or for the foreclosure of any lien for labor or materials furnished to
or for Lessee or any such other person or otherwise arising out of or resulting
from any act or transaction of Lessee or of any such other person, Lessee
covenants to save and hold Lessor harmless from any judgment rendered against
Lessor or the Demised Premises or any part thereof, and all costs and expenses,
including reasonable attorney's fees, incurred by Lessor in connection with such
litigation.
ARTICLE XXI
SUBORDINATION
In the event the holder of any deed of trust hereafter to be placed against the
demised premises requires that this Lease be subordinate to any such
encumbrance, this Lease shall be subordinate to that encumbrance if Lessor first
obtains from the holder of the deed of trust a written agreement providing that
for so long as Lessee shall perform all of Lessee's duties and obligations
hereunder, no foreclosure, deed given in lieu of foreclosure or sale under such
deed of trust shall affect Lessee's rights under this Lease. Lessee shall attorn
to any purchaser at any foreclosure sale, or to any grantee or transferee
designated in any deed given in lieu of foreclosure. Lessee shall execute the
written agreement and any other documents required by the holder of the deed of
trust to accomplish the purposes of this Article, and upon Lessee's failure or
refusal to do so within five (5) days after demand, Lessee hereby appoints
Lessor as Lessee's attorney-in-fact to execute such agreement or other documents
for and on behalf of Lessee. The power of attorney granted herein shall be
deemed to be coupled with an interest and to be irrevocable.
ARTICLE XXII
ESTOPPEL CERTIFICATE
Each party, within ten (10) days after notice from the other, shall execute and
deliver to the other, in recordable form, a certificate stating that this Lease
is unmodified and in full force and effect, or in full force and effect as
modified stating the modifications. The certificate also shall state the amount
of monthly rent, the dates to which the rent has been paid in advance, the
amount of any security deposit or prepaid rent, and shall further certify that
there is no uncured default by the other party under the Lease, or specify such
default, if any is claimed. Failure to deliver the certificate within the ten
(10) days, shall be conclusive upon the party failing to deliver the certificate
for the benefit of the party requesting the certificate, and any successor to
the party requesting the certificate, that this Lease is in full force and
effect and has not been modified except as may be represented by the party
requesting the certificate, that there are no uncured defaults by the party
requesting the certificate and that not more than one (1) month's rent has been
paid in advance.
ARTICLE XXIII
HOLDING OVER
If Lessee remains in possession of all or any part of the Demised Premises after
the expiration of the term hereof, with the express or implied consent of
Lessor, such tenancy shall be from month to month only, and not a renewal hereof
or an extension for any further term and in such case rent and other monetary
sums due hereunder shall be the amount payable at the expiration of the term of
this Lease and such month to month tenancy shall be subject to every other term,
covenant and agreement contained herein.
ARTICLE XXIV
SURRENDER
Upon the expiration or earlier termination of this Lease, Lessee shall surrender
the Demised Premises in the same condition as received, ordinary wear and tear
and damage by fire, earthquake, act of God or the elements alone excepted.
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Lessee shall remove all of Lessee's personal property and trade fixtures and
shall repair, at Lessee's expense, any damage to the Demised Premises or the
office building caused by such removal, including, without limitation, repair of
floors and patching and repainting of walls where required, all to Lessor's
reasonable satisfaction. Any personal property or trade fixtures not removed at
the expiration or earlier termination of this Lease shall be deemed abandoned by
Lessee. If Lessor so elects, Lessee shall also remove any alterations or
improvements installed by or for Lessee which would otherwise remain as part of
the Demised Premises and Lessee shall restore the Demised Premises to their
condition prior to such installation. Should Lessee fail to remove any personal
property or trade fixtures, or fail to remove any alterations or improvements as
requested by Lessor, Lessee shall be liable to Lessor for any and all removal
costs, transportation and storage expenses, and the cost of restoring the
Demised Premises as required herein. Lessee shall indemnify Lessor against any
loss, damage or liability resulting from delay by Lessee in so surrendering the
Demised Premises, including, without limitation, any claims made by any
succeeding tenants founded on such delay.
ARTICLE XXV
WAIVER
No covenant, term or condition or the breach thereof shall be deemed waived,
except by written consent of the party against whom the waiver is claimed, and
any waiver of any covenant, term or condition shall not be a waiver of any
preceding or succeeding breach of the same or any other covenant, term or
condition. Acceptance by Lessor of any performance by Lessee after the time the
same shall have become due shall not constitute a waiver by Lessor of the breach
or default of any covenant, term or condition unless otherwise expressly agreed
to by Lessor in writing. The receipt and acceptance by Lessor of delinquent rent
shall constitute only a waiver of timely payment for the particular rent payment
involved.
ARTICLE XXVI
QUIET ENJOYMENT
Lessor hereby covenants with Lessee that upon payment by Lessee of the rent as
aforesaid and upon observance and performance of the terms of this Lease by
Lessee, Lessee shall peaceably hold and enjoy the Demised Premises for the term
hereby demised without hindrance or interruption by Lessor or any person or
persons lawfully or equitably claiming by, through or under Lessor.
ARTICLE XXVII
NOTICES
All notices or demands required or permitted to be given hereunder shall be in
writing and shall be either personally served or mailed by certified mail,
return receipt requested, to the other party at the following addresses:
To Lessor: Jack Dymond Associates
450 First Street
Los Altos, CA 94022
To Lessee: Jump Software, Inc.
201 San Antonio Circle, Suite172
Mountain View, CA 94040
Either party may change the foregoing address by giving notice to the other in
the manner provided herein. Any notice sent by mail shall be deemed received on
the second business day following deposit of the notice in the United States
Mail, with proper postage prepaid thereon.
ARTICLE XXVIII
RULES AND REGULATIONS
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Lessee agrees to observe the Rules and Regulations promulgated by Lessor
concerning use of the Demised Premises and the common areas of the office
building, a copy of which is attached hereto as Exhibit "A" and made a part
hereof, together with any amendments or additions thereto hereafter made by
Lessor.
ARTICLE XXIX
MISCELLANEOUS PROVISIONS
29.01 CAPTIONS. The captions used in the Lease are for convenience only and
shall not be deemed to be relevant in resolving any question of interpretation
or construction of any provision contained herein.
29.02 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes and cancels any prior agreements or understandings,
whether written or oral. This Agreement can only be modified by a written
amendment hereto executed by both parties.
29.03 SEVERABILITY. If any term or provision of this Lease shall, to any extent,
be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
29.04 TIME. Time is hereby declared to be of the essence of this Lease and each
and every provision hereof.
29.05 CORPORATE AUTHORITY. If Lessee signs as a corporation, each of the persons
executing this Lease on behalf of Lessee does hereby represent and warrant that
Lessee is a duly authorized and existing corporation, that Lessee is qualified
to do business in California, that the corporation has full right and authority
to enter into this Lease, and that each person executing this Lease on behalf of
the corporation is duly authorized and empowered to do so.
29.06 CALENDAR DAYS. All references herein to any acts or obligations to be
performed within a certain number of days shall mean calendar days.
29.07 JOINT AND SEVERAL LIABILITY. If there be more than one Lessee, the
obligations hereunder imposed upon Lessee shall be joint and several.
29.08 EFFECTIVE DATE. Submission of this instrument for examination or signature
by Lessee does not constitute a reservation of or option for lease, and this
instrument is not effective as a lease or otherwise until execution and delivery
by both Lessor and Lessee, in which event this Lease shall become effective on
the date of execution or such other date as may be specified in writing signed
by Lessor and Lessee.
29.09 CHOICE OF LAW. This Lease shall be governed by and interpreted in
accordance with the laws of the State of California.
29.10 MEMORANDUM OF LEASE. This Lease Agreement shall not be recorded but the
parties may agree to execute and record a Memorandum of Lease, in form
satisfactory to Lessor and Lessee.
29.11 SUCCESSORS AND ASSIGNS. Subject to the restrictions against assignment and
subletting by Lessee, this Lease shall be binding upon and inure to the benefit
of the respective heirs, executors, administrators, personal representatives,
successors and assigns of the parties hereto
IN WITNESS THEREOF, LESSOR AND LESSEE HAVE EXECUTE THIS LEASE THE DAY AND YEAR
FIRST ABOVE WRITTEN.
OFFICE LEASE AGREEMENT DATED June 17, 1999 between JACK DYMOND ASSOCIATES
(LESSOR) AND JUMP SOFTWARE, INC. (LESSEE)
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LESSOR: LESSEE:
JACK DYMOND ASSOCIATES JUMPMUSIC.COM, INC.
A CALIFORNIA PARTNERSHIP
By: /s/ Ronald E. Meredith By: /s/ Jan Mathews
---------------------- ---------------------
Ronald E. Meredith
/s/ Richard W. Mathews
Dated: August 4, 1994 Dated: August 4, 1994
12
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EXHIBIT 10.4
FIRST AMENDMENT TO LEASE
DATED JULY 25, 1994
<PAGE>
FIRST AMENDMENT TO LEASE
Dated July 25, 1994
This FIRST AMENDMENT to lease is entered into this eleventh day of September
1995 by and between JACK DYMOND ASSOCIATES (LESSOR) , AND Jump Software Inc.
(LESSEE).
WHEREAS, the lessee currently leases from the lessor that certain real property
constituting a part of the office building located at 201 San Antonio Circle,
suite 172, Building "E", Mountain View, CA.
Now therefore, the parties agree to hold an additional 2430 square feet of
adjacent space of building "E", 201 San Antonio Circle, Suite 190 Mountain View,
California for a total of 4410 square footage. (See Exhibit "A").
The parties also agree to make certain improvements to suite 190. Lessor agrees
to demolish walls, install new building standard carpet and some minor wall
adjustments, and paint all interior walls at lessor's expense. Any other tenant
improvement shall be at lessee's expense which must receive approval by lessor.
Rent shall be $7497.00 per month. Commencement date shall be February 1, 1996,
and terminate on January 31, 1999. Lessor grants Lessee two months free rent,
for Suite #190, therefore, Lessee shall commence rent payments beginning April
1, 1996.
All other terms and conditions of the lease are hereby ratified and confirmed.
IN WITNESS, WHEREOF, the parties hereto have executed these presents as of the
day and year first above mentioned.
JACK DYMOND ASSOCIATES JUMP SOFTWARE, INC.
BY: /s/ Ronald E. Meredith BY: /s/ Dick Mathews
--------------------------- ---------------------------
DATED: 10/31/93 DATED: 10/31/95
1
<PAGE>
EXHIBIT 10.5
SECOND AMENDMENT TO LEASE
DATED JULY 25, 1994
<PAGE>
SECOND AMENDMENT TO LEASE
Dated July 25, 1994
This SECOND AMENDMENT to lease is entered into this twenty-seventh day of
September 1995 by and between JACK DYMOND ASSOCIATES (LESSOR) , AND JUMP
SOFTWARE INC. (LESSEE).
WHEREAS, the lessee currently leases from the lessor that certain real property
constituting the first floor of Building "E", 201 San Antonio Circle, Suites 172
and 190, Mountain View, California for a total of 4410 square feet.
Now therefore, the lessor agrees to lease to the lessee and lessee agrees to
lease from lessor premises located at 201 San Antonio Circle, Suite 105,
Mountain View, California 94040, being approximately 2174 square feet.
Rent shall be $1.60 per square foot; $3,478.40 per month for a total rent as
follows:
<TABLE>
<S> <C>
Suite 172 and 190 $ 7,497.00
Suite 105 $ 3,478.40
----------
Total: $10,975.40
==========
</TABLE>
Commencement dates shall be December 8, 1995 for Suite 105, and April 1, 1996
for Suite 190, and terminate on January 31, 1999.
All other terms and conditions of the lease are hereby ratified and confirmed.
IN WITNESS, WHEREOF, the parties hereto have executed these presents as of the
day and year first above mentioned.
JACK DYMOND ASSOCIATES JUMP SOFTWARE, INC.
BY: /s/ Ronald E. Meredith BY: /s/ Dick Mathews
----------------------- -----------------------
DATED: 10/31/93 DATED: 10/31/95
1
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT WITH
RICHARD MATHEWS
<PAGE>
EMPLOYMENT AGREEMENT
This agreement is effective on the 5th day of May, 1999, by and between
JUMPMUSIC.COM, INC. a Nevada Corporation, hereinafter referred to as "Employer",
and RICHARD MATHEWS, hereinafter referred to as "Employee", who, in
consideration of the mutual promises made herein, agree as follows:
EMPLOYMENT AND TITLE
1. Employer hereby employs Employee and Employee accepts employment as
Chairman of the Board, President and CEO, of JUMPMUSIC.COM, INC., located at 201
San Antonio Circle, Suite 105, Mountain View, California as more specifically
set forth below.
TERM
2. The term of employment hereunder shall be three (3) years commencing upon
May 5, 1999, and subject to earlier termination as provided in this Agreement,
terminating on the May 4, 2002. The term shall be extended on a year by year
basis starting May 5, 2002 unless Employer gives Employee three (3) months
notice in writing before the start of the next extension period that Employer is
not extending the term.
COMPENSATION
3.1 For the period from May 5, 1999 through December 31, 1999, Employer shall
pay Employee a gross monthly salary of Thirteen Thousand Seven Hundred and Fifty
Dollars ($13,750.00), payable twice each month on the 15th and last day thereof
in the gross amount of Six Thousand Eight Hundred and Seventy-Five Dollars
($6,875.00).
3.2 For each following year starting January 1, 2000, Employer shall increase
Employee's salary by a minimum of six percent (6%).
3.3 Employer shall pay Employee a bonus of four tenths of one percent (0.4%)
of all gross sales over the first Two Million Dollars ($2,000,000.00) that
Employer makes during each fiscal year. This payment shall be made as soon as
possible after Employer's yearly financials are prepared and shall be made no
later than ninety (90) days after the end of the Employer's fiscal year. The
maximum yearly bonus paid under this Paragraph shall be Two Hundred Thousand
Dollars ($200,000.00).
3.4 Employer shall have the right to deduct or withhold from any amounts paid
Employee under this agreement, any and all sums required by law for federal
income, social security, or other taxes or withholdings and all state and local
taxes or withholdings now applicable or that may be enacted and become
applicable in the future.
ADDITIONAL BONUS/SALARY INCREASE
4. Employer may increase Employee's Salary or pay Employee an additional
bonus at any time. However, the amount of salary increase or additional bonus,
in any, shall not be guaranteed but shall be determined in the sole subjective
and absolute discretion of the Employer. Employer makes no representations or
warranty as to any future additional salary increases or bonus payments except
as set forth in this Agreement.
HEALTH CARE BENEFITS/BUSINESS EXPENSES
5.1 Employer shall use its best efforts to obtain, and include Employee with
coverage under, a medical benefit insurance plan. Employer's obligation to
include Employee in its medical benefit insurance plan is subject to the prior
approval of health insurance coverage for Employee by Employer's medical benefit
insurance plan insurer. Employee may decline or waive coverage under Employer's
medical benefit insurance plan. If, while employed by Employer, Employee is not
covered under Employer's medical insurance plan for any reason, Employer shall
reimburse Employee One Thousand Dollars ($1,000.00) per month for costs incurred
by Employee to purchase his own health insurance.
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<PAGE>
5.2 Employer shall promptly reimburse Employee for all reasonable business
expenses incurred by Employee in connection with the business of Employer
including, without limitation, continuing education expenses, travel expenses
and entertainment and promotion expenses. Each such expenditure shall be
reimbursed only if it is of the nature qualifying it as a proper deduction on
the federal and state income tax returns of Employer. Each such expenditure
shall be reimbursed only if Employee furnishes Employer with adequate records
and other documentary evidence required by federal and state statues and
regulations issued by the appropriate taxing authority for the substantiation of
each expenditure as an income tax deduction.
VACATIONS/SABBATICAL
6.1 Each year during the term hereof (January 1 through December 31)
(hereinafter referred to as a "Term Year"), Employee shall be entitled to a
vacation equal to the number of days provided by Employer's standard vacation
policy or twenty (20) days, whichever is greater, without loss of compensation;
provided, however, Employee may be absent from his employment for vacation only
at such times as is reasonable, taking into the then current need for Employee's
presence or availability. In the event that Employee is unable for any reason to
take the total amount of vacation time authorized herein during any Term Year,
he may accrue such unused vacation time and add it to vacation time for any
following Term Year; providing however, such accrued vacation time shall never
exceed forty (40) days. Any accrued vacation time in excess of such forty (40)
days shall be deemed to be waived by Employee.
6.2 In the third (3rd) Term Year of this agreement, starting January 1, 2002,
Employee shall be entitled to a six (6) week sabbatical at full pay and
benefits. Employee must take his sabbatical by December 31, 2002 or lose it.
SUMS DUE DECEASED EMPLOYEE
7. If Employee dies prior to the expiration of the term of his employment,
Employer agrees to fully vest Employee's unvested stock options; additionally,
Employer agrees to promptly pay six (6) months salary at Employee's then current
rate and any other sums to be due Employee from Employer under this Agreement as
of the date of death or thereafter to Employee's executors, administrators,
heirs, personal representatives, successors, and assigns.
DUTIES
8.1 Employee shall report to Employer's Board of Directors regarding
performance of his duties hereunder. Employee shall do and perform all services,
acts, or other things necessary or advisable to manage the function of
Employer's business, subject at all times to policies set by Employer's Board of
Directors, and to the consent of the Boards when required by the terms of this
Agreement.
8.2 Employee shall, at all times, during the term hereof, comply with any and
all constraints or other limitations upon Employees discretion or authority to
enter into any agreement in the name of Employer or otherwise to obligate
Employer in any respect.
8.3 Notwithstanding anything to the contrary contained herein, Employee,
shall not, without the prior specific approval of Employer's Board of Directors,
terminate the services of any other officer of Employer who is employed full
time or hire any full time replacement of any officer whose services have been
terminated.
ADDITIONAL DUTIES ASSIGNED LATER
9. In addition to the foregoing duties, Employee shall perform any other
duties that may be assigned to him, subject to the instructions, directions, and
control of Employer's Board of Directors; provided, however, that Employee shall
be assigned only to duties consistent with his professional skills and
abilities.
DUTIES WHEN DISABLED
10. If Employee at any time during the term of this Agreement should be found
by a physician chosen by Employer and agreed to by Employee to be unable to
perform the duties required by this Agreement for a period of ninety (90)
2
<PAGE>
days because of personal injury, physical or mental illness, or any other cause,
Employer may, in its sole and absolute discretion, either terminate this
Agreement or assign Employee to other duties, and the compensation to be paid
thereafter shall be adjusted to be commensurate with such duties. In the event
Employee does not accept the adjusted compensation offered by Employer
commensurate with such duties, Employee may terminate this Agreement. If
Employer or Employee terminates this Agreement under this Paragraph, all of
Employee's compensation as set forth herein shall terminate per section 19.
BEST EFFORTS
11. Employee agrees that to the best of his ability and experience he will at
all times loyally and conscientiously perform all of the duties and obligations
either expressly or implicitly required of him by the terms of this Agreement
and exert his best efforts and exercise the highest degree of professional
competence in discharging his duties of employment.
ADHERENCE TO EMPLOYER'S RULES
12. At all times during the performance of this Agreement, Employee shall
strictly adhere to and fulfill all of Employer's rules and regulations governing
the conduct of its employees now in effect or as subsequently modified.
COMPETITIVE ACTIVITIES
13. During the term of Employee's employment with Employer, Employee shall
not, directly or indirectly, own, manage, operate, join, perform any services of
a business, commercial, or professional natures for, control, be employed by, or
participate in the ownership, management operation, or control of, or be
connected in any manner with, any business that is directly competitive to the
business of Employer. However, the expenditure of reasonable amounts of time for
educational, charitable, religious, or professional activities shall not be
deemed a breach of this Agreement if those activities do not materially
interfere with the services required under this Agreement. This Agreement shall
not be interpreted to prohibit Employee from making passive personal investments
in organizations or entities whose equity interests are publicly traded. The
provisions of this Paragraph will not apply to those business relationships of
Employee specifically set forth in Exhibit 13, attached hereto and incorporated
by reference herein; provided, however, Employee represents, warrants, and
covenants to Employer that Employee's fulfillment of Employee's obligations
under those relationships set forth in Exhibit 13 will not interfere, in any
manner, with Employee's performance and fulfillment of Employee's obligations
and duties hereunder.
TRADE SECRETS
14.1 The parties acknowledge and agree that during the term of this Agreement
and in the course of this discharge of his duties hereunder, Employee shall have
access to and become acquainted with information concerning the assets,
processes and operations of Employer, including without limitation, intellectual
property, discoveries, ideas, concepts, customer lists, formulas, designs,
trademarks, copyrights, patents, logos, improvements, specifications, scientific
information, computer programs, source codes, inventions, techniques, trade
secrets, and other technical information that is owned by Employer, is regularly
used in the operation of Employer's business, has commercial value to Employer,
and is treated as confidential by Employer, and that all of this information
constitutes Employer's "Trade Secrets." Except as required in the course of his
employment with Employer, Employee will not, without prior written consent of
Employer's Board of Directors, either during his employment by Employer or at
any time after termination of that employment, directly or indirectly, disclose
to any third person/party any Trade Secret of Employer.
14.2 All files, drawings, records, documents, equipment, Trade Secrets and
similar items relating to the business of Employer, whether they are prepared by
Employer of come into Employee possession in any other way and whether or not
they contain or constitute Trade Secrets owned by Employer, are and shall remain
the exclusive property of Employer.
14.3 During the term of this Agreement and at all times after the termination
hereof, Employee shall keep in the strictest confidence and trust all Trade
Secrets and shall not use, utilize, circulate, copy, publish, disseminate,
3
<PAGE>
appropriate, or disclose any such Trade Secrets, directly or indirectly, in any
way except as is required in the course of his employment for Employer.
14.4 Upon expiration or termination of this Agreement, Employee shall deliver
to Employer all copies of all files, records, documents, drawings, equipment,
Trade Secrets and similar items belonging to Employer, obtained during the
course of Employee's employment or pertaining to his employment, and Employee
shall not retain any of the foregoing or any reproduction of any of the
foregoing or any Trade Secret that is embodied in a tangible medium of
expression.
14.5 Paragraphs 14.1 and 14.3 shall not apply to information that: (i) is in
or enters the public domain through no fault of Employee or (ii) is released for
publication by Employer in writing.
OWNERSHIP OF TRADE SECRETS
15.1 All files, drawings, records, documents, equipment, Trade Secrets, and
other tangible or intangible rights that are conceived or developed by Employee,
either alone or with others, during the term of Employee's employment, whether
or not conceived during Employee's working hours, and that relate at the time of
conception or reduction to practice of the file, drawing, record, document,
equipment, Trade Secret, or other tangible or intangible to the business of the
Employer or to Employer's actual or reasonably anticipated research and
development, shall constitute "works made for hire" and shall be the sole
property of Employer. Employee shall execute all documents, including patent
applications and assignments, required by Employer to establish Employer's
rights under this Paragraph.
15.2 Paragraph 15.1 shall not apply to assign to Employer any of Employee's
rights in any file, drawing, record, document, equipment, process, intellectual
property, discovery, idea, concept, formula, design, improvement, specification,
scientific information, invention, technique, patent, copyright, trademark, or
other intangible right that Employee developed entirely on his own time, except
for that which relates, at the time it is conceived or reduced to practice, to
Employer's business or to actual or reasonable anticipated research or
development of Employer.
GROUNDS FOR TERMINATION
16.1 This Agreement shall terminate immediately on the occurrence of any
one (1) of the following events:
a. The death of Employee.
b. The willful breach of habitual neglect by Employee of his
obligations under this Agreement, unless waived by Employer in writing.
c. The incapacity for a period of ninety (90) days, whether due to
illness, physical or mental disability, or any other cause, on the part of
Employee which prevents Employee from performing his duties, unless waived by
Employer in writing.
d. The involuntary dissolution of Employer.
e. The merger of Employer, or the sale or other transfer of all or
substantially all of Employer's assets. In this event, Employee shall be deemed
to have earned a minimum of all monies due him through May 4, 2002 under Section
3 of this contract and have all his stock options fully vested.
16.2 Termination pursuant to Paragraph 16.1 shall be without prejudice to any
right remedy to which either party may be entitled either at law, in equity, or
under this Agreement.
16.3 Notwithstanding anything to the contrary contained herein, Employee may
terminate this Agreement for any reason whatsoever upon thirty (30) days' prior
written notice to Employer without any liability, obligation, or duty to, or
recourse by, Employer. Such termination by Employee shall not constitute a
breach of this Agreement.
4
<PAGE>
COMPENSATION PRORATED TO DATE OF TERMINATION
17. In the event that this Agreement is terminated prior to the completion of
the term of employment specified herein, Employee shall be entitled to receive
any compensation earned, but unpaid, prior to the date of termination as
provided for in this Agreement, computed pro rata up to and including that date.
Such compensation earned and unpaid at the time of termination shall be paid
without abatement or reduction immediately upon termination of this Agreement.
Any yearly bonus due shall be prorated as a percentage of the year the Employee
was employed by Employer time the total bonus due and shall be paid to Employee
within ninety (90) days after the end of the fiscal year directly following
Employee's termination.
NOTICES
18. Any notices to be given hereunder by either party to the other shall be
in writing and may be transmitted by personal delivery or by mail, registered
and certified, postage prepaid with return receipt requested. Mailed notices
shall be addressed to Employer at 201 San Antonio Circle, Suite 105, Mountain
View California 94040, and to Employee at 163 Bridgton Court, Los Altos,
California 04022, but each party may change that address by written notice in
accordance with this Section. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of five (5) days after the mailing date.
ARBITRATION OF DISPUTES
19. Any dispute or claim in law or equity arising out of this Agreement or
any resulting transaction shall be decided by neutral binding arbitration in
accordance with the rules of the American Arbitration Association, and not by
court action except as provided by California law for judicial review of
arbitration proceedings. Judgement upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. The parties all have
the right to discovery in accordance with Code of Civil Procedure 1283.05. The
filing of a judicial action to enable the recording of a notice of pending
action, for order of attachment, receivership, injunction, or other provisional
remedies, shall not constitute a waiver of the right to arbitrate under this
provision.
"NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION
DECIDED BY NEUTRAL ARBITRATORS AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL. UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE
'ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
"WE HAVE READ AND UNDERSTOOD THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION TO
NEUTRAL ARBITRATION."
MODIFICATIONS
20. Any modification of this Agreement will be effective only if it is in
writing and signed by both parties.
ATTORNEY'S FEES AND COSTS
21. If any action, at law or in equity, or any arbitration or other
proceeding is necessary to enforce or interpret the terms of this Agreement, the
prevailing party in such action, arbitration or other proceeding shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which that party may be entitled. This provision
shall be construed as applicable to the entire contract.
5
<PAGE>
ENTIRE AGREEMENT
22. This Agreement (including any Exhibit attached hereto) supersedes any and
all other agreements, either oral or in writing between parties hereto with
respect to the employment of Employee by Employer and contains all of the
covenants and agreements between the parties with respect to that employment in
any manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, oral or otherwise, have
been made by any party or anyone acting on behalf of any party, which are not
embodied herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding on either party.
EFFECT OF WAIVER
23. The failure of either party to insist on strict compliance with any of
the terms, conditions, or covenants of this Agreement by the other party shall
not be deemed a waiver of that term, condition, or covenant, nor shall any
waiver or relinquishment of any right or power at any one time or times be
deemed a waiver or relinquishment of that right or power for all or any other
times.
PARTIAL INVALIDITY
24. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
LAW GOVERNING AGREEMENT
25. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
COVENANT OF NONINTERFERENCE
26. Employee represents, warrants, and covenants to Employer that Employee's
performance of all of the terms of this Agreement and as an employee of Employer
does not and will not breach any agreement to keep in confidence any proprietary
or confidential information acquired by Employee in confidence or in trust prior
to Employee's employment with Employer. Employee also covenants to Employer that
Employee has not brought and will not bring with Employee to Employer or use in
the performance of Employee's responsibilities hereunder any materials or
documents of a former employer that are not generally available to the public,
unless Employee shall have obtained the prior written consent from the former
employer for their possession and use.
Executed effective the 5th day of May, 1999.
EMPLOYER:
JUMPMUSIC.COM, a Nevada Corporation
By: /s/ Jan Mathews
---------------------------------
Jan Mathews, Secretary and C.O.O.
EMPLOYEE:
/s/ Richard Mathews
---------------------------------
Richard Mathews
6
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
WITH JAN MATHEWS
<PAGE>
EMPLOYMENT AGREEMENT
This agreement is effective on the 5th day of May, 1999, by and between
JUMPMUSIC.COM, INC. a Nevada Corporation, hereinafter referred to as "Employer",
and JAN MATHEWS, hereinafter referred to as "Employee", who, in consideration of
the mutual promises made herein, agree as follows:
EMPLOYMENT AND TITLE
1. Employer hereby employs Employee and Employee accepts employment as
Secretary, and COO, of JUMPMUSIC.COM, INC., located at 201 San Antonio Circle,
Suite 105, Mountain View, California as more specifically set forth below.
TERM
2. The term of employment hereunder shall be three (3) years commencing upon
May 5, 1999, and subject to earlier termination as provided in this Agreement,
terminating on the May 4, 2002. The term shall be extended on a year by year
basis starting May 5, 2002 unless Employer gives Employee three (3) months
notice in writing before the start of the next extension period that Employer is
not extending the term.
COMPENSATION
3.1 For the period from May 5, 1999 through December 31, 1999, Employer shall
pay Employee a gross monthly salary of Twelve Thousand Five Hundred Dollars
($12,500.00), payable twice each month on the 15th and last days thereof in the
gross amount of Six Thousand Two Hundred Fifty Dollars ($6,250.00).
3.1 For each following year starting January 1, 2000, Employer shall increase
Employee's salary by a minimum of six percent (6%).
3.2 Employer shall pay Employee a bonus of two tenths of one percent (0.2%)
of all gross sales over the first Two Million Dollars ($2,000,000.00) that
Employer makes during each fiscal year. This payment shall be made as soon as
possible after Employer's yearly financials are prepared and shall be made no
later than ninety (90) days after the end of the Employer's fiscal year. The
maximum yearly bonus paid under this Paragraph shall be One Hundred and Fifty
Thousand Dollars ($150,000.00).
3.3 Employer shall have the right to deduct or withhold from any amounts paid
Employee under this agreement, any and all sums required by law for federal
income, social security, or other taxes or withholdings and all state and local
taxes or withholdings now applicable or that may be enacted and become
applicable in the future.
ADDITIONAL BONUS/SALARY INCREASE
4. Employer may increase Employee's Salary or pay Employee an additional
bonus at any time. However, the amount of salary increase or additional bonus,
in any, shall not be guaranteed but shall be determined in the sole subjective
and absolute discretion of the Employer. Employer makes no representations or
warranty as to any future additional salary increases or bonus payments except
as set forth in this Agreement.
HEALTH CARE BENEFITS/BUSINESS EXPENSES
5.1 Employer shall use its best efforts to obtain, and include Employee with
coverage under, a medical benefit insurance plan. Employer's obligation to
include Employee in its medical benefit insurance plan is subject to the prior
approval of health insurance coverage for Employee by Employer's medical benefit
insurance plan insurer. Employee may decline or waive coverage under Employer's
medical benefit insurance plan. If, while employed by Employer, Employee is not
covered under Employer's medical insurance plan for any reason, Employer shall
reimburse Employee One Thousand Dollars ($1,000.00) per month for costs incurred
by Employee to purchase his own health insurance.
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<PAGE>
5.2 Employer shall promptly reimburse Employee for all reasonable business
expenses incurred by Employee in connection with the business of Employer
including, without limitation, continuing education expenses, travel expenses
and entertainment and promotion expenses. Each such expenditure shall be
reimbursed only if it is of the nature qualifying it as a proper deduction on
the federal and state income tax returns of Employer. Each such expenditure
shall be reimbursed only if Employee furnishes Employer with adequate records
and other documentary evidence required by federal and state statues and
regulations issued by the appropriate taxing authority for the substantiation of
each expenditure as an income tax deduction.
VACATIONS/SABBATICAL
6.1 Each year during the term hereof (January 1 through December 31)
(hereinafter referred to as a "Term Year"), Employee shall be entitled to a
vacation equal to the number of days provided by Employer's standard vacation
policy or twenty (20) days, whichever is greater, without loss of compensation;
provided, however, Employee may be absent from his employment for vacation only
at such times as is reasonable, taking into the then current need for Employee's
presence or availability. In the event that Employee is unable for any reason to
take the total amount of vacation time authorized herein during any Term Year,
he may accrue such unused vacation time and add it to vacation time for any
following Term Year; providing however, such accrued vacation time shall never
exceed forty (40) days. Any accrued vacation time in excess of such forty (40)
days shall be deemed to be waived by Employee.
6.2 In the third (3rd) Term Year of this agreement, starting January 1, 2002,
Employee shall be entitled to a six (6) week sabbatical at full pay and
benefits. Employee must take his sabbatical by December 31, 2002 or lose it.
SUMS DUE DECEASED EMPLOYEE
7. If Employee dies prior to the expiration of the term of his employment,
Employer agrees to fully vest Employee's unvested stock options; additionally,
Employer agrees to promptly pay six (6) months salary at Employee's then current
rate and any other sums to be due Employee from Employer under this Agreement as
of the date of death or thereafter to Employee's executors, administrators,
heirs, personal representatives, successors, and assigns.
DUTIES
8.1 Employee shall report to Employer's Board of Directors regarding
performance of his duties hereunder. Employee shall do and perform all services,
acts, or other things necessary or advisable to manage the function of
Employer's business, subject at all times to policies set by Employer's Board of
Directors, and to the consent of the Boards when required by the terms of this
Agreement.
8.2 Employee shall, at all times, during the term hereof, comply with any and
all constraints or other limitations upon Employees discretion or authority to
enter into any agreement in the name of Employer or otherwise to obligate
Employer in any respect.
8.3 Notwithstanding anything to the contrary contained herein, Employee,
shall not, without the prior specific approval of Employer's Board of Directors,
terminate the services of any other officer of Employer who is employed full
time or hire any full time replacement of any officer whose services have been
terminated.
ADDITIONAL DUTIES ASSIGNED LATER
9. In addition to the foregoing duties, Employee shall perform any other
duties that may be assigned to him, subject to the instructions, directions, and
control of Employer's Board of Directors; provided, however, that Employee shall
be assigned only to duties consistent with his professional skills and
abilities.
DUTIES WHEN DISABLED
10. If Employee at any time during the term of this Agreement should be found
by a physician chosen by Employer and agreed to by Employee to be unable to
perform the duties required by this Agreement for a period of ninety (90)
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days because of personal injury, physical or mental illness, or any other cause,
Employer may, in its sole and absolute discretion, either terminate this
Agreement or assign Employee to other duties, and the compensation to be paid
thereafter shall be adjusted to be commensurate with such duties. In the event
Employee does not accept the adjusted compensation offered by Employer
commensurate with such duties, Employee may terminate this Agreement. If
Employer or Employee terminates this Agreement under this Paragraph, all of
Employee's compensation as set forth herein shall terminate per section 19.
BEST EFFORTS
11. Employee agrees that to the best of her ability and experience she will
at all times loyally and conscientiously perform all of the duties and
obligations either expressly or implicitly required of him by the terms of this
Agreement and exert his best efforts and exercise the highest degree of
professional competence in discharging his duties of employment.
ADHERENCE TO EMPLOYER'S RULES
12. At all times during the performance of this Agreement, Employee shall
strictly adhere to and fulfill all of Employer's rules and regulations governing
the conduct of its employees now in effect or as subsequently modified.
COMPETITIVE ACTIVITIES
13. During the term of Employee's employment with Employer, Employee shall
not, directly or indirectly, own, manage, operate, join, perform any services of
a business, commercial, or professional natures for, control, be employed by, or
participate in the ownership, management operation, or control of, or be
connected in any manner with, any business that is directly competitive to the
business of Employer. However, the expenditure of reasonable amounts of time for
educational, charitable, religious, or professional activities shall not be
deemed a breach of this Agreement if those activities do not materially
interfere with the services required under this Agreement. This Agreement shall
not be interpreted to prohibit Employee from making passive personal investments
in organizations or entities whose equity interests are publicly traded. The
provisions of this Paragraph will not apply to those business relationships of
Employee specifically set forth in Exhibit 13, attached hereto and incorporated
by reference herein; provided, however, Employee represents, warrants, and
covenants to Employer that Employee's fulfillment of Employee's obligations
under those relationships set forth in Exhibit 13 will not interfere, in any
manner, with Employee's performance and fulfillment of Employee's obligations
and duties hereunder.
TRADE SECRETS
14.1 The parties acknowledge and agree that during the term of this Agreement
and in the course of this discharge of his duties hereunder, Employee shall have
access to and become acquainted with information concerning the assets,
processes and operations of Employer, including without limitation, intellectual
property, discoveries, ideas, concepts, customer lists, formulas, designs,
trademarks, copyrights, patents, logos, improvements, specifications, scientific
information, computer programs, source codes, inventions, techniques, trade
secrets, and other technical information that is owned by Employer, is regularly
used in the operation of Employer's business, has commercial value to Employer,
and is treated as confidential by Employer, and that all of this information
constitutes Employer's "Trade Secrets." Except as required in the course of his
employment with Employer, Employee will not, without prior written consent of
Employer's Board of Directors, either during his employment by Employer or at
any time after termination of that employment, directly or indirectly, disclose
to any third person/party any Trade Secret of Employer.
14.2 All files, drawings, records, documents, equipment, Trade Secrets and
similar items relating to the business of Employer, whether they are prepared by
Employer of come into Employee possession in any other way and whether or not
they contain or constitute Trade Secrets owned by Employer, are and shall remain
the exclusive property of Employer.
14.3 During the term of this Agreement and at all times after the termination
hereof, Employee shall keep in the strictest confidence and trust all Trade
Secrets and shall not use, utilize, circulate, copy, publish, disseminate,
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appropriate, or disclose any such Trade Secrets, directly or indirectly, in any
way except as is required in the course of his employment for Employer.
14.4 Upon expiration or termination of this Agreement, Employee shall deliver
to Employer all copies of all files, records, documents, drawings, equipment,
Trade Secrets and similar items belonging to Employer, obtained during the
course of Employee's employment or pertaining to his employment, and Employee
shall not retain any of the foregoing or any reproduction of any of the
foregoing or any Trade Secret that is embodied in a tangible medium of
expression.
14.5 Paragraphs 14.1 and 14.3 shall not apply to information that: (i) is in
or enters the public domain through no fault of Employee or (ii) is released for
publication by Employer in writing.
OWNERSHIP OF TRADE SECRETS
15.1 All files, drawings, records, documents, equipment, Trade Secrets, and
other tangible or intangible rights that are conceived or developed by Employee,
either alone or with others, during the term of Employee's employment, whether
or not conceived during Employee's working hours, and that relate at the time of
conception or reduction to practice of the file, drawing, record, document,
equipment, Trade Secret, or other tangible or intangible to the business of the
Employer or to Employer's actual or reasonably anticipated research and
development, shall constitute "works made for hire" and shall be the sole
property of Employer. Employee shall execute all documents, including patent
applications and assignments, required by Employer to establish Employer's
rights under this Paragraph.
15.2 Paragraph 15.1 shall not apply to assign to Employer any of Employee's
rights in any file, drawing, record, document, equipment, process, intellectual
property, discovery, idea, concept, formula, design, improvement, specification,
scientific information, invention, technique, patent, copyright, trademark, or
other intangible right that Employee developed entirely on his own time, except
for that which relates, at the time it is conceived or reduced to practice, to
Employer's business or to actual or reasonable anticipated research or
development of Employer.
GROUNDS FOR TERMINATION
16.1 This Agreement shall terminate immediately on the occurrence of any
one (1) of the following events:
a. The death of Employee.
b. The willful breach of habitual neglect by Employee of his
obligations under this Agreement, unless waived by Employer in writing.
c. The incapacity for a period of ninety (90) days, whether due to
illness, physical or mental disability, or any other cause, on the part of
Employee which prevents Employee from performing his duties, unless waived by
Employer in writing.
d. The involuntary dissolution of Employer.
e. The merger of Employer, or the sale or other transfer of all or
substantially all of Employer's assets. In this event, Employee shall be deemed
to have earned a minimum of all monies due him through May 4, 2002 under Section
3 of this contract and have all his stock options fully vested.
16.2 Termination pursuant to Paragraph 16.1 shall be without prejudice to any
right remedy to which either party may be entitled either at law, in equity, or
under this Agreement.
16.3 Notwithstanding anything to the contrary contained herein, Employee may
terminate this Agreement for any reason whatsoever upon thirty (30) days' prior
written notice to Employer without any liability, obligation, or duty to, or
recourse by, Employer. Such termination by Employee shall not constitute a
breach of this Agreement.
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COMPENSATION PRORATED TO DATE OF TERMINATION
17. In the event that this Agreement is terminated prior to the completion of
the term of employment specified herein, Employee shall be entitled to receive
any compensation earned, but unpaid, prior to the date of termination as
provided for in this Agreement, computed pro rata up to and including that date.
Such compensation earned and unpaid at the time of termination shall be paid
without abatement or reduction immediately upon termination of this Agreement.
Any yearly bonus due shall be prorated as a percentage of the year the Employee
was employed by Employer time the total bonus due and shall be paid to Employee
within ninety (90) days after the end of the fiscal year directly following
Employee's termination.
NOTICES
18. Any notices to be given hereunder by either party to the other shall be
in writing and may be transmitted by personal delivery or by mail, registered
and certified, postage prepaid with return receipt requested. Mailed notices
shall be addressed to Employer at 201 San Antonio Circle, Suite 105, Mountain
View California 94040, and to Employee at 163 Bridgton Court, Los Altos,
California 04022, but each party may change that address by written notice in
accordance with this Section. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of five (5) days after the mailing date.
ARBITRATION OF DISPUTES
19. Any dispute or claim in law or equity arising out of this Agreement or
any resulting transaction shall be decided by neutral binding arbitration in
accordance with the rules of the American Arbitration Association, and not by
court action except as provided by California law for judicial review of
arbitration proceedings. Judgement upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. The parties all have
the right to discovery in accordance with Code of Civil Procedure 1283.05. The
filing of a judicial action to enable the recording of a notice of pending
action, for order of attachment, receivership, injunction, or other provisional
remedies, shall not constitute a waiver of the right to arbitrate under this
provision.
"NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION
DECIDED BY NEUTRAL ARBITRATORS AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL. UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE
'ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
"WE HAVE READ AND UNDERSTOOD THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION TO
NEUTRAL ARBITRATION."
MODIFICATIONS
20. Any modification of this Agreement will be effective only if it is in
writing and signed by both parties.
ATTORNEY'S FEES AND COSTS
21. If any action, at law or in equity, or any arbitration or other
proceeding is necessary to enforce or interpret the terms of this Agreement, the
prevailing party in such action, arbitration or other proceeding shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which that party may be entitled. This provision
shall be construed as applicable to the entire contract.
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ENTIRE AGREEMENT
22. This Agreement (including any Exhibit attached hereto) supersedes any and
all other agreements, either oral or in writing between parties hereto with
respect to the employment of Employee by Employer and contains all of the
covenants and agreements between the parties with respect to that employment in
any manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, oral or otherwise, have
been made by any party or anyone acting on behalf of any party, which are not
embodied herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding on either party.
EFFECT OF WAIVER
23. The failure of either party to insist on strict compliance with any of
the terms, conditions, or covenants of this Agreement by the other party shall
not be deemed a waiver of that term, condition, or covenant, nor shall any
waiver or relinquishment of any right or power at any one time or times be
deemed a waiver or relinquishment of that right or power for all or any other
times.
PARTIAL INVALIDITY
24. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
LAW GOVERNING AGREEMENT
25. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
COVENANT OF NONINTERFERENCE
26. Employee represents, warrants, and covenants to Employer that Employee's
performance of all of the terms of this Agreement and as an employee of Employer
does not and will not breach any agreement to keep in confidence any proprietary
or confidential information acquired by Employee in confidence or in trust prior
to Employee's employment with Employer. Employee also covenants to Employer that
Employee has not brought and will not bring with Employee to Employer or use in
the performance of Employee's responsibilities hereunder any materials or
documents of a former employer that are not generally available to the public,
unless Employee shall have obtained the prior written consent from the former
employer for their possession and use.
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Executed effective the 5th day of May, 1999.
EMPLOYER:
JUMPMUSIC.COM, a Nevada Corporation
By: /s/ Richard Mathews
-------------------------------------
Richard Mathews, President and C.E.O.
EMPLOYEE:
By: /s/ Jan Mathews
-------------------------------------
Jan Mathews
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