J-BIRD MUSIC GROUP, LTD.
EMPLOYEE STOCK PURCHASE AGREEMENT
This Agreement is made as of the 1st day of August, 2001, by and
between J-Bird Music, a Pennsylvania corporation (the "Corporation"), and the
employees listed on Schedule I attached hereto (collectively "Purchasers").
In consideration of the mutual covenants and representations set forth
herein, the Corporation and the Purchasers agree as follows:
1. Purchase and Sale of Stock.
(a) Subject to the terms and conditions of this Agreement, the
Corporation hereby agrees to sell to Purchasers and Purchasers agrees to
purchase from the Corporation on the Closing Date (as herein defined), the
number of shares of the Corporation's Common Stock (the "Stock") set opposite
their respective names on Schedule I attached hereto at a price of $0.80 per
share, for an aggregate purchase price of $48,000.00 or $16,000 for each
Purchaser. The purchase price for the Stock shall be paid in cash or, if
permitted by the Corporation, by the performance of employment services already
performed or to be performed.
(b) Upon the occurrence of a default by any Purchaser in the payment or
performance of the employment duties or the termination of his or her employment
for cause, the Corporation shall be entitled to immediate possession of the
Stock of the defaulting or terminated Purchaser and all rights and remedies of a
secured party under the Commercial Code of the State of Connecticut.
2. Closing. The purchase and sale of the Stock shall occur at a Closing to be
held at such time and place (the "Closing Date"), as designated by the
Corporation by written notice to each of the Purchasers of at least one (1)
business day prior to the Closing Date. The Closing will take place at the
principal office of the Corporation or at such other place as shall be
designated by the Corporation. At the Closing, each Purchaser shall deliver to
the Corporation a check in the amount of the purchase price payable to the order
of the Corporation and/or, if the consideration is to be paid in employment
services by any Purchaser, the Corporation and each such Purchaser shall agree
on the value of employment services already performed and the value of and term
length of services to performed, and the Corporation will issue, as promptly
thereafter as practicable, certificates representing the Stock registered in the
name of each such Purchaser.
3. Restriction on Transfer; Right of First Refusal.
(a) Each Purchaser agrees he or she shall not sell, transfer, pledge,
hypothecate or otherwise dispose of any shares of the Stock owned by him or her.
(b) Before any shares of Stock registered in the name of any Purchaser
may be sold or transferred (including transfer by operation of law), such shares
shall first be offered to the Corporation in accordance with the following terms
(i) Each Purchaser who intends to sell or transfer his or her
shares shall deliver a notice (the "Notice") to the Corporation
stating (A) his or her bona fide intention to sell or transfer such
shares, (B) the number of such shares to be sold or transferred, (C)
the price for which he or she proposes to sell or transfer such
shares, and (D) the name of the proposed purchaser or transferee.
(ii) Within thirty (30) days after receipt of the Notice from any
Purchaser, the Corporation or its assignee may elect to purchase any
or all shares to which the Notice refers, at the price per share
specified in the Notice.
(iii) If all of the shares to which the Notice refers are not
elected to be purchased as provided in subparagraph 3(b)(ii) hereof,
such Purchaser may sell the remaining shares to any person named in
the Notice at the price specified in the Notice or at a higher price,
provided that such sale or transfer is consummated within 60 days of
the date of said Notice to the Corporation, and, provided further,
that any such sale is in accordance with all the terms and conditions
The provisions of this Section 3 shall terminate on (i) the effective
date of a registration statement filed by the Corporation under the Securities
Act of 1933, as amended (the "Act"), with respect to any public offering of
Common Stock of the Corporation or (ii) the closing date of a sale of assets or
merger of the Corporation pursuant to which shareholders of this Corporation
receive securities of a buyer whose shares are publicly traded. The provisions
of this Section 3 shall not apply to a transfer of any shares of Stock by any
Purchaser, either during his or her lifetime or on death by will or intestacy to
his or her ancestors, descendants or spouse, or any custodian or trustee for the
account of such Purchaser or such Purchaser's ancestors, descendants or spouse,
provided, in each such case, a transferee shall receive and hold such shares
subject to the provisions of this Section 3 and there shall be no further
transfer of such shares in accordance herewith.
The Corporation shall not be required (i) to transfer on its books any
shares of Stock which shall have been sold or transferred by any Purchaser in
violation of any of the provisions set forth in this Agreement, or (ii) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
4. Legends. All certificates representing any of the shares of Stock subject
to the provisions of this Agreement shall have endorsed thereon the following
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATION ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER, RIGHT OF REPURCHASE AND RIGHT OF FIRST
REFUSAL AS SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
(b) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) Any legend required to be placed thereon by applicable
securities laws of any state.
5. Purchasers' Representations. In connection with his purchase of the Stock,
each of the Purchasers hereby represents and warrants to the Corporation as
(a) Investment Intent; Capacity to Protect Interests. He or she is
purchasing the Stock solely for his or her own account for investment and not
with a view to or for sale in connection with any distribution of the Stock or
any portion thereof and not with any present intention of selling, offering to
sell or otherwise disposing of or distributing the Stock or any portion thereof
in any transaction other than a transaction exempt from registration under the
Act. The Purchaser also represents that the entire legal and beneficial
interests of the Stock is being purchased, and will be held, for the Purchaser's
account only, and neither in whole nor in part for any other person. Purchaser
either has a preexisting business or personal relationship with the Corporation
or any of its officers, directors or controlling persons or by reason of his or
her business or financial experience or the business or financial experience of
his or her professional advisors who are unaffiliated with and who are not
compensated by the Corporation or any affiliate or selling agent of the
Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Corporation
and to protect his or her own interests in connection with this transaction.
(b) Residence. Each of the Purchaser's principal residence is located
at the address indicated beneath the Purchaser's signature below.
(c) Information Concerning Corporation. Each of the Purchasers has
heretofore discussed the Corporation and its plans, operations and financial
condition with the Corporation's officers and has heretofore received all such
information as each of the Purchasers has deemed necessary and appropriate to
enable him or her to evaluate the financial risk inherent in making an
investment in the Stock, and he or she has received satisfactory and complete
information concerning the business and financial condition of the Corporation
in response to all inquiries in respect thereof.
(d) Economic Risk. Each Purchaser realizes that the purchase of the
Stock will be a highly speculative investment and involves a high degree of
risk, and he or she is able, without impairing his or her financial condition,
to hold the Stock for an indefinite period of time and suffer a complete loss on
his or her investment.
(e) Restricted Securities. Each Purchaser understands and
(i) the sale of the Stock has not been registered under the
Act, the Stock must be held indefinitely unless subsequently
registered under the Act or an exemption from such registration
is available and the Corporation is under no obligation to
register the Stock;
(ii) the share certificate representing his or her Stock
will be stamped with the legends specified in Section 4 hereof;
(iii) the Corporation will make a notation in its records of
the aforementioned restrictions on transfer and legends.
(f) Disposition of the Stock. Each Purchaser represents that he or she
is familiar with the provisions of Rule 144, promulgated under the Act, which,
in substance, permit limited public sale of "restricted securities" acquired,
directly or indirectly from the issuer thereof, in a nonpublic offering, subject
to the satisfaction of certain conditions. In the event the Corporation is
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), each Purchaser is subject
to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as that term is defined under the Exchange Act); and (2), the
availability of certain public information about the Corporation, and the amount
of the Corporation's securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e).
Each Purchaser acknowledges and understands that the shares of stock
purchased hereby may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires among other things: (1) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a nonaffiliate who has held the securities less
than two years, (2) the availability of certain public information about the
Company, (3) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as that term is
defined under the Exchange Act), and (4) the amount of the Corporation's
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(g) Further Limitations on Disposition. Without in any way limiting
Purchasers' representations set forth above, each Purchaser further agrees that
he or she shall in no event make any disposition of all or any portion of the
Stock unless and until:
(i)(A) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or (B)(1) each Purchaser shall
have notified the Corporation of his or proposed disposition and shall have
furnished the Corporation with a detailed statement of the circumstances
surrounding the proposed disposition, (2) each Purchaser shall have
furnished the Corporation with an opinion of the Corporation's counsel to
the effect that such disposition will not require registration of such
shares under the Act.
(ii) The Purchaser shall have complied with the right of first refusal
set forth in Section 3 hereof if it is still in effect at the time of any
(h) Valuation of Common Stock. Each Purchaser understands that the
Stock has been valued by the board of directors of the Corporation and that the
Corporation believes this valuation represents a fair attempt at reaching an
accurate appraisal of its worth; each Purchaser understands, however, that the
Corporation can give no assurances that such price is in fact the fair market
value of the Stock and that it is possible that, with the benefit of hindsight,
the Internal Revenue Service would successfully assert that the value of the
Common Stock on the date of purchase is greater than so determined.
If the Internal Revenue Service were to succeed in a tax determination
that the Stock received had value greater than that upon which the transaction
was based, the additional value would constitute ordinary income as of the date
of its receipt. The additional taxes (and interest) due would be payable by each
Purchaser, and there is no provision for the Corporation to reimburse each
Purchaser for that tax liability, and each Purchaser assumes all responsibility
for such potential tax liability. In the event such additional value would
represent more than 25 percent of each Purchaser's gross income for the year in
which the value of the shares were taxable, the Internal Revenue Service (the
"I.R.S.") would have six years from the due date for filing the return (or the
actual filing date of the return if filed thereafter) within which to assess
such Purchaser the additional tax and interest which would then be due.
The Corporation would have the benefit, in any such transaction, if a
determination was made prior to the three-year statute of limitations period
affecting the Corporation, of an increase in its deduction for compensation
paid, which would offset its operating profits, or, if not profitable, would
create a net operating loss carry forward arising from operations in that year.
(a) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
(b) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to the appropriate Purchaser at his or her
address shown on the Corporation's employment records and to the Corporation at
the address of its principal corporate offices (attention: President) or at such
other address as such party may designate by ten days' advance written notice to
the other party hereto.
(c) The Corporation may assign its rights and delegate its duties and
obligations under this Agreement. If any such assignment or delegation requires
consent of any state securities authorities, the parties agree to cooperate in
requesting such consent. This Agreement shall inure to the benefit of the
successors and assigns of the Corporation and, subject to the terms and
conditions herein set forth, be binding upon each Purchaser, his or her heirs,
executors, administrators, successors and assigns.
(e) Each Purchaser hereby authorizes and directs the Secretary or
Transfer Agent of the Corporation to transfer the Stock as to which the right of
first refusal has been exercised from Purchaser to the Corporation.
(f) Nothing in this Agreement shall affect in any manner whatsoever the
right or power of the Corporation, or a parent or subsidiary of the Corporation,
to terminate any of the Purchasers' employment, for any reason, with or without
(g) This Agreement may be signed and delivered in several counterparts
and each counterpart shall be a separate agreement between the Purchaser signing
it and the Corporation.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
J-Bird Music Group, Ltd.
/S/ HOPE X. XXXXXXXXXX
Hope X. Xxxxxxxxxx, President
/S/ XXXXXX XXXXXXXX
/S/ ASA FISH
/S/ XXXXXX XXXXXXX
/S/ HOPE X. XXXXXXXXXX
Hope X. Xxxxxxxxxx
Employee Value of Services No. Shares
-------- ----------------- ----------
Xxxxxx Xxxxxxxx $16,000 20,000
00 Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
Xxx Fish $16,000 20,000
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Hope X. Xxxxxxxxxx $16,000 20,000
Address: 0 Xxxxxxxxxx Xxxxxx #00
Xxxxxxx, XX 00000