-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CvHlyVox3ymMnJwdf1VKrxRAuOOaL3tCTtqNM2hhFEm1rbTCQbLqM4rT/HharPq9 CcaSuhUmiRw+AcTCc2Xp3w== 0000927550-96-000047.txt : 19960816 0000927550-96-000047.hdr.sgml : 19960816 ACCESSION NUMBER: 0000927550-96-000047 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JAM INC CENTRAL INDEX KEY: 0000765449 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 161092174 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15355 FILM NUMBER: 96614242 BUSINESS ADDRESS: STREET 1: 530 WILLOWBROOK OFFICE PARK CITY: FAIRPORT STATE: NY ZIP: 14450 BUSINESS PHONE: 7163856740 MAIL ADDRESS: STREET 1: 530 WILLOW BROOK OFFICE PARK CITY: FAIRPORT STATE: NY ZIP: 14450 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission file number 0-15355 J.A.M., INC. (exact name of registrant as specified in its charter) NEW YORK 16-1092174 (State of Incorporation) (IRS Employer Identification No.) 530 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code 716-385-6740 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common STOCK, $.01 par value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] -1- The aggregate market value of common stock held by non-affiliates of the Registrant at March 29, 1996 was not verifiable due to delisting. The number of shares of the Registrant's voting stock outstanding on March 29, 1996 was 15,274,447. Portions of the 1995 Annual Report to stockholders of Registrant are incorporated by reference in Parts I and II of this Report. The Index of Exhibits filed with this Report begins at page 16. The total number of pages in this Report is 39. PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL DEVELOPMENT OF BUSINESS. The information contained in the J.A.M., Inc. 1995 Annual Report to Stockholders for the year ended December 31, 1995 ("1995 Annual Report") on pages 1 through 7 inclusive is incorporated herein by reference. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. The business operations of J.A.M., Inc. are primarily development of interactive multimedia products and services. At the present time, J.A.M. can offer clients "Total Turnkey Solutions" that encompass both hardware and customized software and applications. Such solutions might range from stand alone CD-ROM based multimedia applications to video-on-demand computer-based multimedia applications such as kiosks or server-based applications utilizing local and wide area networking. Using our technology and expertise, J.A.M. can offer immensely effective solutions to our clients in the areas of training, education, public information, corporate communications, sales, and marketing. INFORMATION AS TO LINES OF BUSINESS. The Company's multimedia product and services include: SALES OF IT2000 PRODUCT AND RELATED HARDWARE AND SOFTWARE -- This includes IT2000 digital video file servers, kiosks, PCs, and support hardware and software including DCP (Digital Conversion Process) which consists of the conversion of existing paper and analog-based materials to digital platforms. DCP is ideal for the conversion of video and videodisc programs to multimedia PC platforms. DEVELOPMENT OF MULTIMEDIA APPLICATIONS AND CONTENT -- Sales of production services and custom development of projects to meet the various needs to our customers (training, informational, sales and marketing, database requirements). NETWORK CONSULTING AND INTEGRATION SERVICES -- Sales of consulting and integration services to enable customers to upgrade their computing environments and implement multimedia networking. IN-HOUSE SERVICES include: * Multimedia Design/Production * Video Production/Post Production/Computer Graphics * Instructional Design/Writing * CD-ROM & CD-i Production/Mastering * Conversion of Existing Material to Digital Platforms * Network Design/Integration NARRATIVE DESCRIPTION OF BUSINESS. The information contained in the J.A.M., Inc. 1995 Annual Report, page 4, is incorporated herein by reference, to sub-paragraphs (i) and (ii) of this sub item. PRINCIPAL PRODUCTS CUSTOM-DESIGNED TRAINING PROGRAMS. For the years ended December 31, 1995, 1994, and 1993, the Company derived approximately 95%, 95%, and 75%, respectively, of its revenues from the production and design of interactive multimedia training and communications programs. VIDEO PRODUCTION AND POST- PRODUCTION SERVICES. Video production and post- production services, which include production related to training programs, accounted for approximately 5%, 5%, and 10% of the Company's revenues for the years ended December 31, 1995, 1994, and 1993 respectively. DEPENDENCE UPON KEY CUSTOMERS. During 1995, the Company had three (3) major customer which had approximately $721,600 (46%) of total revenues for 1995, as compared to approximately $200,000 (38%) in 1994, and approximately $388,000 (47%) in 1993. BACKLOG. In 1995, the Company produced multimedia and communications services under contracts with its customers. The backlog at the end of 1995 was approximately $350,000. COMPETITION. In marketing its services, the Company competes for sales with many other businesses in training and multimedia communication services. Several companies also compete directly with the Company in providing video- based, computer-based, and interactive videodisc training programs. Many of the Company's competitors have available greater financial, technical, and marketing resources than the Company. EMPLOYEES. At December 31, 1995, the Company employed 20 full-time employees. Such employees included 3 officers, 4 administrative and sales personnel, 2 video production professionals, 7 software programmers and designers, and 4 instructional designers. The Company also employs a number of part-time employees and independent contractors depending on the volume and types of services required for various contracts. None of the Company's employees currently are represented by a labor union. Management believes that employee relations are good. In its production of recorded performances, the Company engages various artists and other production personnel who may be members of unions. The Company has not entered into any labor agreement with any such union, but complies with the terms of union agreements when dealing with union members. EXECUTIVE OFFICERS OF THE REGISTRANT. John A. Marszalek is the founder of the Company and has served as its President and as a Director since its incorporation in 1977. Prior to founding the Company, Mr. Marszalek served as general manager of two radio broadcast facilities in Rochester. He holds a Masters Degree from the University of Katowicace, Poland. ITEM 2. PROPERTIES. During August of 1992, the Company moved its headquarters to Fairport, which is a suburb of Rochester, New York, to reduce its expenses. The President of the Company personally guaranteed the five year lease agreement. The Company leases approximately 5,000 square feet of office space under a six-year net lease agreement expiring August 31, 1998, at an annual rental of approximately $70,000. This is a reduction of the Company's former annual rental by $36,000 per year. In December, 1995, the Company signed a second lease agreement for an additional 2,300 square feet on a one-year net lease at an annual rental of approximately $36,000 per year. ITEM 3. LEGAL PROCEEDINGS. Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The information concerning the principal market, sales, prices, number of holders, dividends and dividend policy for the common stock of the Company, contained in the J.A.M., Inc. 1995 Annual Report, Page 5, is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The information contained in the tabulation "Five Year Summary of Selected Financial Information" in the J.A.M., Inc. 1995 Annual Report, page 8, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information bearing the same title contained in the J.A.M., Inc. 1995 Annual Report, pages 6 through 7, is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements, prepared by the Company and contained in the J.A.M., Inc. 1995 Annual Report, pages 9 through 14 inclusive, are incorporated herein by reference. Other financial schedules are filed herewith as part of this Report, see Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. The information concerning this matter appears at page 7 of the Company's 1995 Annual Report, and is incorporated herein by reference. PART III ITEM 10. DIRECTORS OF THE REGISTRANT. The Company was not able to hold an Annual Meeting in 1995 due to lack of a quorum. JOHN A. MARSZALEK. Mr. Marszalek, 47 years of age, is the founder of the Company and has served as its President and as a Director since its incorporation in 1977. Prior to founding the Company, Mr. Marszalek served as general manager of two radio broadcast facilities in Rochester, New York. PETER A. SPINA. Dr. Spina, 57 years of age, has been a Director since June, 1989. He is President of Monroe Community College in Rochester, New York. He also serves as a director and officer of Blue Cross and Blue Shield of Rochester, New York, a director of Trinity Liquid Assets Trust, a director of Home Care Research of Rochester, New York, and is past president of the Association of Public Community Colleges. DAVID DELLA PENTA. Mr. DellaPenta, 47 years of age, was elected to the Board of Directors at the September 22, 1994 meeting. He is the President of Nalge Corporation, a Rochester, NY-based manufacturer of high-quality plastic products sold into the scientific research, industrial, and consumer markets worldwide. There are no family relationships between any Director, executive officer, or person nominated or chosen by the Board to become a Director or executive officer. The Board of Directors held four meetings during 1995, and all of the incumbent Directors attended more than 75% of the aggregate of the total number of Board meetings and total number of meetings held by all committees of the Board on which they serve. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. Officers, directors, and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that, during 1995, all filing requirements applicable to its officers, directors, and greater than ten percent beneficial owners were in compliance. ITEM 11. EXECUTIVE COMPENSATION. Under the SEC's executive compensation disclosure rules, information is required to be provided with respect to the compensation and benefits paid by the Company for all services rendered during 1995, 1994 and 1993 to five individuals: the person who was, at December 31, 1995, serving as the Company's Chief Executive Officer, and the four other individuals who were, as of December 31, 1995, the other four most highly compensated executive officers of the Company whose 1995 salary and bonus exceeded $50,000 in amount. Accordingly, the following table setting forth this information applies three (3) employees of J.A.M. in 1995: SALARY BONUS John A. Marszalek $61,836 Louis Camerlengo $55,000 $7,500 David Colaizzi $50,000 $3,000 Lee Maxey $50,000 $1,312.50 MANAGEMENT COMPENSATION. The Company's President, Mr. Marszalek, has an employment agreement with the Company, effective as of December 3, 1986. The agreement extends through December 31, 2000, and provides that Mr. Marszalek is to serve full-time Chief Executive Officer and Chairman of the Board of the Company. Pursuant to this agreement, Mr. Marszalek is entitled to participate in any benefit plans or programs for executive officers or employees that may be in effect from time to time and is entitled to reimbursement for the use of an automobile. It also provides for the payment of the greater of one year's salary or his then current salary for the remainder of the contract term in connection with his termination without cause prior to the expiration of the agreement. COMPENSATION OF DIRECTORS. Directors do not receive any compensation for services as a Director. Directors of the Company are reimbursed for out-of- pocket expenses incurred on the Company's behalf. COMPENSATION PURSUANT TO PLANS. STOCK OPTION PLAN. In May of 1986, the shareholders of the Company approved the Incentive Stock Option Plan (the "ISO Plan") for officers and key employees. The ISO Plan authorizes the issuance of options to purchase up to 200,000 shares of the Company's common stock. Options granted under the ISO Plan are intended to qualify as "incentive stock options" under the Internal Revenue Code of 1986, as amended. Under the ISO Plan, options may be granted at not less than 100% (110% in the case of 10% or greater shareholders) of the fair market value of the Company's common stock on the date of grant. Options granted under the ISO Plan must be exercised, if at all, within ten years from the date of grant (five years in the case of 10% or greater shareholders) and no option may be granted more than ten years from the date of adoption of the Plan. Options granted under the ISO Plan may not be transferred, except by will or by the laws of descent and distribution. Options granted under the plan must be exercised, if at all, within three months after termination of employment for any reason except death or disability and within 60 days after death or within one year after termination of employment due to disability. The Board of Directors of the Company, or the Compensation Committee of the Board, has the power to impose limitations, conditions, and restrictions in connection with the grant of any option. -8- COMPENSATION PURSUANT TO PLANS. (Cont'd) On September 22, 1994, the Board of Directors approved an Incentive Stock Option Plan (the "ISO Plan") for officers and key employees. On December 14, 1995, the Board appointed one (1) new officer to the Company: David Colaizzi as Vice President of MultiMedia. Robin Rutkowski has resigned from the Company as of July 11, 1995. The Board also granted David Colaizzi a stock option of 40,000 shares under the ISO Plan. Louis Camerlengo, Vice President of Sales and Marketing has 65,000 shares of stock options previously granted in 1994. The Board also granted Mr. Marszalek's right to exercise his option to acquire 3,000,000 additional shares by converting $150,000 of the Officer Loan. The Board recommended and authorized the President of the Company to develop a proposal for employees incentive program similar to a 401K plan. 1987 STOCK OPTION PLAN. In May of 1988, the shareholders of the Company approved the 1987 Stock Option Plan (the "1987 Plan") under which options to purchase stock may be granted to officers and other key employees of the Company. The 1987 Plan authorizes the issuance of options to purchase up to 500,000 shares of the common stock of the Company. The provisions of this plan are substantially the same as those of the Incentive Stock Option Plan, except that the 1987 Plan authorizes the issuance of both options intended to qualify as "incentive stock options" under the Internal Revenue Code of 1986, as well as options that do not so qualify. As of December 31, 1995, there were options outstanding to purchase up to 365,000 shares of Common Stock of the Company. No options were exercised under the 1987 Plan. Mr. Marszalek has no options under this plan. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth as of March 29, 1996, the number and percentage of outstanding shares of common stock beneficially owned by each Director of the Company, by all Directors and current officers of the Company as a group, and by each person known to the Company to be the beneficial owner of more than 5% of the Company's common stock. The Company believes that each individual in this group has sole investment and voting power with respect to his shares unless otherwise noted: Number of Percentage of Shares NAME OF NOMINEE SHARES OUTSTANDING John A. Marszalek* 5,042,716 33% Peter A. Spina** 100,000 1% David DellaPenta** 100,000 1% **Includes 100,000 shares issuable under stock options presently exercisable at $.04 per share. * Mr. Marszalek, with an address c/o 530 Willowbrook Office Park, Fairport, New York 14450, is the only person known to the Company to beneficially own more than 5% of its outstanding common stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Not Applicable -9- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. The following documents are filed as part of this Report. The following financial statements are contained in the J.A.M., Inc. 1995 Annual Report and are incorporated herein by reference in Item 8 of this Report: - Balance Sheets, December 31, 1995 and 1994 - Statements of Operations for the years ended December 31, 1995, 1994 and 1993. - Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993. - Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993. - Notes to Financial Statements SCHEDULES - The following schedules are filed as a part of this Report: - V Property, plant and equipment - VI Accumulated depreciation, depletion and amortization - VIII Valuation and qualifying accounts and reserves - X Supplemental Income Statement Information Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or the notes thereto. EXHIBITS - See Exhibit Index attached. REPORTS ON FORM 8-K. No report on Form 8-K was filed during the fourth quarter of 1995. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT For The Years Ended December 31, 1995, 1994, and 1993 Balance at Balance beginning at end CLASSIFICATION OF YEAR ADDITIONS RETIREMENTS OF YEAR December 31, 1995: Leasehold improvements $ 13,183 $ 14,766 $ 0 $ 27,949 Production equipment 258,732 242,640 0 501,372 Design and development equipment 137,416 0 511 136,905 Office furniture and equipment 151,239 0 88,025 63,214 $ 560,570 $257,406 $88,536 $729,440 December 31, 1994: Leasehold improvements $ 10,722 $ 17,227 $ 14,766 $ 13,183 Production equipment 327,955 23,277 92,500 258,732 Design and development equipment 190,268 2,644 55,496 137,416 Office furniture and equipment 112,514 65,758 27,033 151,239 $ 641,459 $108,906 $189,795 $ 560,570 December 31, 1993: Leasehold improvements $ 10,722 $ 0 $ 0 $ 10,722 Production equipment 327,955 0 0 327,955 Design and development equipment 147,943 42,325 0 190,268 Office furniture and equipment 87,508 25,292 286 112,514 $ 574,128 $ 67,617 $ 286 $641,459 -11- SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT For the Years Ended December 31, 1995, 1994 and 1993 Balance at Balance beginning at end CLASSIFICATION OF YEAR ADDITIONS RETIREMENTS OF YEAR December 31, 1995: Leasehold improvements $ 969 $ 1,843 $ 0 $ 2,812 Production equipment 243,598 138,772 0 382,370 Design and development equipment 132,153 11,789 0 143,942 Office furniture and equipment 65,651 0 34,144 31,507 $ 442,371 $152,404 $ 34,144 $ 560,631 December 31, 1994: Leasehold improvements 2,820 940 2,791 969 Production equipment 275,822 94,109 126,333 243,598 Design and development equipment 131,405 63,159 62,411 132,153 Office furniture and equipment 46,077 32,691 13,117 65,651 $ 456,124 $190,899 $ 204,652 $ 442,371 December 31, 1993: Leasehold improvements $ 120 $ 2,700 $ 0 $ 2,820 Production equipment 254,222 21,600 0 275,822 Design and development equipment 120,605 10,800 0 131,405 Office furniture and equipment 27,177 18,900 0 46,077 $ 402,124 $ 54,000 $ 0 $ 456,124 -12- SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31, 1995, 1994 and 1993 Additions Balance at Charged to Balance beginning Costs and Deduc- at end DESCRIPTION OF YEAR EXPENSES TIONS (1) OF YEAR Allowance for doubtful accounts - deducted from accounts and notes receivable in the balance sheet December 31, 1995 $ 3,600 $ 0 $ 1,803 $1,797 December 31, 1994 $ 3,600 $ 0 $ 0 $3,600 December 31, 1993 $ 3,600 $ 0 $ 0 $3,600 (1) uncollectable accounts written off. -13- SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION For The Years Ended December 31, 1995, 1994, and 1993 ITEM CHARGED TO COSTS AND EXPENSES 1995 1994 1993 Maintenance and repairs $ * $ 8,609 $ *____ Depreciation and amortization of intangible assets, pre- operating costs and similar deferrals $ 0 $46,082 $55,000 Taxes, other than payroll and income taxes $ * $ * $ *_____ Royalties $ 0 $ 0 $ *_____ Advertising costs $28,409 $ 8,072 $ *_____ * Less than 1% of total sales. -14- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. J.A.M., Inc. Dated: March 29, 1996 By:/s/John A. Marszalek President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons, on behalf of the Company and in the capacities and on the dates indicated: Dated: March 29, 1996 By:/s/ John A. Marszalek John A. Marszalek President and Chief Executive Officer, Director Dated: March 29, 1996 By: /s/ Peter A. Spina Peter A. Spina Director Dated: March 29,1996 By: /s/ David DellaPenta David DellaPenta Director -15- EXHIBIT INDEX Exhibit NUMBER DESCRIPTION LOCATION 3-1 Restated Certificate of Filed herewith Incorporation of J.A.M., Inc., as amended. 3-2 Bylaws of J.A.M., Inc. Filed herewith 4-1 Form of Common Stock Certificate of Incorporated by Reference to J.A.M., Inc. Exhibit 4 (a) to Registrant's S-18, registration no. 33-7486-NY, declared effective November 10, 1986 10-1 Employment Agreement between Registrant Filed herewith and John A. Marszalek dated July 17, 1986. 10-2 Registrant's Incentive Stock Option Plan Filed herewith 10-3 Registrant's 1987 Stock Option Plan Filed herewith 10-4 Employee Agreement Regarding Filed herewith Proprietary Information and Inventions between Registrant and John A. Marszalek 11 Statement re: Computation of Per Share * Earnings. 13 J.A.M., Inc. 1995 Annual Report Filed herewith to Shareholders 27 Financial Data Schedule Filed only with EDGAR filing, per Reg. S-K, Rule 601 (c)(1)(v) *See Note 2 to the Notes to Consolidated Financial Statements incorporated by reference in Item e of this Report. EX-3.1 2 EXHIBIT 3-1 RESTATED CERTIFICATE OF INCORPORATION OF J.A.M., INC. Under Section 807 of the Business Corporation Law We, John A. Marszalek and Anthony W. Busch, the President and Secretary respectively, of J.A.M., Inc., hereby certify: A. The name of the corporation is J.A.M., Inc. The corporation was formed under the name of JAM T.V. & Radio Productions, Inc. B. The certificate of its incorporation was filed by the Department of State on May 31, 1977. C. The Certificate of Incorporation, as amended heretofore, is hereby further amended as follows: (i) to change the number of shares which the corporation is authorized to issue from 2,000,000 shares of common stock, having a par value of $.01 per share, to 16,000,000 shares of common stock, having a par value of $.01 per share; (2) to change each of the issued and outstanding shares of the common stock of the corporation, par value $.01, into 3.144147 shares of common stock, $.01 par value; (3) to change the post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him. D. The text of the Certificate of Incorporation, as amended heretofore, is hereby restated as further amended to read as herein set forth in full: 1. The name of the corporation shall be: J.A.M., Inc. 2. The purpose or purposes for which this corporation is formed are as follows, to wit: To devise, prepare, publish, print, manufacture, produce, buy, hire, or otherwise acquire, use, sell, lease, license others to use, export, import or otherwise turn to account or dispose of, exhibit, distribute and deal in audio or visual productions, including, without limitation, still and motion pictures, films, microfilms, tapes, sound recordings, mechanical or otherwise, phonograph records and television productions, and any and all parts, apparatus, equipment, supplies, materials, chemicals, implements, devices and goods useful in manufacturing, producing, receiving, collecting, transcribing, reproducing, exhibiting, transmitting, publishing, broadcasting, telecasting or otherwise deal with the same. To acquire by lease, purchase, contract, concession, license or otherwise, to erect or otherwise construct and to own, use, manage, lease, operate and control motion picture studios, film branches or exchanges, distributing centers, warehouses, storerooms, laboratories, film developing and printing plants, television studios, radio broadcasting and telecasting systems or stations and other buildings and structures. To acquire such property, real and personal, as may be necessary to conduct such business. The powers, rights and privileges provided in this Certificate of Incorporation are not to be deemed to be in limitation of similar, other or additional powers, rights and privileges granted or permitted to a corporation by the Business Corporation Law, it being intended that this corporation shall have the right to engage in such similar activities as like corporations may lawfully engage in under the Business Corporation Law of the State of New York, as now in effect, or as hereafter promulgated. To do everything necessary, suitable or proper for the accomplishment, attainment or furtherance of, to do every other act or thing incidental to, appurtenant to, growing out of or connected with, the purposes, objects or powers set forth in this Certificate of Incorporation, whether alone or in association with others; to possess all the rights, powers and privileges now or hereafter conferred by the laws of the State of New York upon a corporation organized under the laws of the State of New York and, in general, to carry on any of the activities and to do any of the things set forth to the same extent and as fully as a natural person or partnership might or could do; provided, that nothing herein set forth shall be construed as authorizing the corporation to possess any purpose, object, or power, or to do any act or thing forbidden by law to a corporation organized under the laws of the State of New York. 3. The office of the corporation is to be located in the County of Monroe, State of New York. 4. The aggregate number of shares which the corporation shall have the authority to issue is 16,000,000 shares, all of which shall be common shares having a par value of $.01 per share. 5. The Secretary of State is designated as agent of the corporation upon whom process against it may be served. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: c/o J.A.M., Inc., 300 Main Street, East Rochester, New York 14445. 6. The corporation's initial accounting period for reporting the franchise tax on business corporations imposed by Article 9-A of the Tax Law shall end December 31, 1977. 7. Notwithstanding anything to the contrary herein contained, no holder of shares of the corporation of any class now or hereafter authorized shall have any preferential or preemptive rights to subscribe for, purchase or receive any shares of the corporation of any class, now or hereafter, or any options or warrants for such shares, or any right to subscribe for or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time be issued, sold or offered by sale by the corporation. E. The foregoing amendments to paragraph 4 provide for a change of issued shares of common stock. The number of issued shares of common stock is 1,258,205 shares. The terms of the change are that each issued share of common stock, will be changed into 3.144147 shares of common stock. In lieu of issuing any fractional shares as a result of the change, the corporation will pay, to shareholders who would be entitled to receive fractional shares, cash in the amount of the fair value of such fractional shares as of the date of this Restated Certificate of Incorporation as filed by the Department of State. As a result of the change of shares of common stock, the 1,258,205 issued shares will be changed into 3,955,967 shares. F. The foregoing amendments to paragraph 4 were duly authorized by vote of the Board of Directors of the corporation, followed by vote of the holders of the majority of all outstanding shares entitled to vote thereon at a meeting of the shareholders duly held. G. The foregoing amendment to paragraph 5 was duly authorized by vote of the Board of Directors at a meeting duly held. IN WITNESS WHEREOF, we have executed this Certificate and affirm the truth of the statements herein set forth under penalty of perjury this 1st day of May, 1986. /s/ John A. Marszalek ______________________________ John A. Marszalek, President /s/ Anthony W. Busch _____________________________ Anthony W. Busch, Secretary CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF J.A.M., INC. Under Section 803 of the Business Corporation Law The undersigned, being the President and Secretary, respectively, of J.A.M., Inc., certify that: 1. The name of the corporation is J.A.M., Inc. The Corporation was formed under the name of JAM T.V. & Radio Productions, Inc. 2. The certificate of its incorporation was filed by the Department of State on May 31, 1977. 3. The Certificate of Incorporation, as previously amended, is hereby amended as authorized by Section 801 of the Business Corporation Law to add a new paragraph 8 eliminating the personal liability of directors to the corporation or its shareholders for damages for certain breaches of duty in such capacity, as permitted by Section 402(b) of the Business Corporation Law. 4. So as to accomplish the foregoing amendment, there shall be added to the Certificate of Incorporation a new Paragraph 8, which shall read in its entirety as follows: "8. No director of the corporation shall be personally liable to the corporation or its shareholders for damages for any breach of duty in such capacity except where a judgment or other final adjudication adverse to said director establishes: (i) that the director's acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law; or (ii) that the director personally gained in fact a financial profit or other advantage to which the director was not legally entitled; or (iii) that the director's acts violated Section 719 of the New York Business Corporation Law. If the New York Business Corporation Law is hereafter amended to authorize corporation action further eliminating or limiting the personal liability of directors, then the liability of directors of the corporation shall be eliminated or limited to the fullest extent permitted by the New York Business Corporation Law, as so amended." 5. The foregoing amendment was duly authorized by a vote of the Board of Directors of the corporation, followed by a vote of the holders of a majority of all outstanding shares entitled to vote thereon at a meeting of shareholders duly held. IN WITNESS WHEREOF, we have executed this Certificate and affirm the truth of the statements herein set forth under penalty of perjury this 5th day of May, 1988. /s/ John A. Marszalek __________________________ John A. Marszalek, President /s/ Anthony W. Busch __________________________ Anthony W. Busch, Secretary EX-3.2 3 BY-LAWS OF J.A.M., INC. ARTICLE I OFFICES SECTION 1. PRINCIPAL OFFICE The principal office of the Corporation shall be located in the city, Town or Incorporated Village and County set forth in the Certificate of Incorporation. SECTION 2. ADDITIONAL OFFICES The Corporation may designate offices and place of business at such other places, within or without the State of New York, as the Board of Directors may, from time to time, designate or the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. TIME AND PLACE Meetings of the shareholders of the Corporation may be held at such time and place within or without the State of New York as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof. SECTION 2. ANNUAL MEETING The annual meeting of the shareholders shall be held on May 31 at the principal office of the Corporation or such other place as the Board of Directors shall authorize. The meeting shall be for the purpose of electing directors and for the transaction of such other business as may be brought before it. If such date should be a legal holiday, the meeting shall be held on the next business day following, at the same hour. SECTION 3. NOTICE OF ANNUAL MEETING Written notice of the place, date and hour of the annual meeting of shareholders shall be given by the Secretary as required by law; by serving personally or mailing, not less than ten days, nor more than fifty days previous to such meeting, postage prepaid, a copy of such notice, addressed to each shareholder entitled to vote at such meeting. Any and all notices of such meeting may be waived by any shareholder by written waiver or by attendance thereat, whether in person or by proxy. SECTION 4. SPECIAL MEETINGS Special meetings of the shareholders may be called by the President or the Board of Directors, at the written request of the holders of at least twenty percent of the shares of the Corporation issued and outstanding and entitled to vote thereat. Such requests shall state the purpose or purposes of the proposed meeting. SECTION 5. NOTICE OF SPECIAL MEETING Notice of special meetings of the shareholders shall be given by the President or the Secretary, and shall be served personally or by mail addressed to each shareholder of record at his last known address not less than ten nor more than fifty days prior to the date of such meeting. The notice of such meeting shall contain a statement of the business to be transacted thereat. No business other than that specified in the notice of the meeting shall be transacted at any such special meeting. Notice of special meeting may be waived by any shareholder by written waiver or by attendance thereat, in person, or by proxy. SECTION 6. QUORUM Except as otherwise provided by law, or by the Certificate of Incorporation or these by-laws, the holders of a majority of the shares of the Corporation outstanding and entitled to vote thereat shall be necessary to and shall constitute a quorum for the transaction of business at all meetings of the shareholders; provided, however, that when a specified item of business is required to be voted on by a class or series, voting as a class, the holders of a majority of the shares of such class or series issued and outstanding and entitled to vote thereat shall constitute a quorum for the transaction of such specified items of business. A lesser number, when not constituting a quorum, may adjourn the meeting from time to time until a quorum shall be present or represented. At such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 7. VOTING At any meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person or by proxy. Each shareholder shall have one vote for each share of stock having voting power which is registered in his name on the books of the Corporation. Except where another date shall have been fixed as a record date for the determination of its shareholders entitled to vote, no share of stock shall be voted at any election of Directors which shall have been transferred on the books of the Corporation within twenty days next preceding such election of Directors. At any meeting of the shareholders, except as otherwise provided by statute, or by the Certificate of Incorporation or by these By-Laws, the vote of the holders of a majority of the shares present in person or by proxy shall decide any questions before such meeting. SECTION 8. PROXIES A proxy, to be valid, shall be executed in writing by the shareholder or by his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where an irrevocable proxy is permitted by law. SECTION 9. WRITTEN CONSENTS Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action taken, signed by the holders of all outstanding shares entitled to vote thereon. ARTICLE III DIRECTORS SECTION 1. BOARD OF DIRECTORS Subject to any provision in the Certificate of Incorporation, the business of the corporation shall be managed by the Board of Directors, each of which shall be at least eighteen years of age. SECTION 2. NUMBER AND TENURE The number of Directors constituting the entire Board of Directors shall be fixed from time to time by resolution of the shareholders, but shall in no event be less than three, except that where all the shares of the Corporation are owned beneficially and of record by less than three shareholders, the number of Directors may be less than three, but not less than the number of shareholders. The number of Directors on the initial Board of Directors shall be one (1). Directors shall be elected at the annual meeting of the shareholders, except as provided in Section 4 of this Article III. Except as otherwise provided by the Certificate of Incorporation, each Director shall be elected to serve until his successor has been elected and qualified. SECTION 3. RESIGNATION AND REMOVAL Any Director may resign at any time. Except as otherwise provided by law, the Board of Directors may, by majority vote of all Directors then in office, remove a Director for cause. Subject to applicable provisions of law, any and all of the Directors may be removed with or without cause, by vote of the shareholders. SECTION 4. VACANCIES Except as otherwise provided by the Certificate of Incorporation, if any vacancies occur in the Board of Directors by reason of the death, resignation, retirement, disqualification or removal from office of any Director with cause, or if any new Directorships are created, all of the Directors then in office, although less than a quorum, may, by majority vote, choose a successor or successors, or fill the newly created Directorships, and the Directors so chosen shall hold office until the next annual meeting of shareholders and until their successors shall be duly elected and qualified, unless sooner displaced; provided, however, that if in the event of any such vacancy, the Directors remaining in office shall be unable, by majority vote, to fill such vacancy within thirty days of the occurrence thereof, the President or Secretary may call a special meeting of the shareholders at which such vacancy shall be filled. In the event of any vacancy created by removal from office of any Director without cause, such special meeting of the shareholders shall be so called within thirty days of the occurrence thereof, at which meeting such vacancy may be filled. SECTION 5. DUTIES OF DIRECTORS The Board of Directors shall have the control of general management of the affairs and business of the Corporation unless otherwise provided in the Certificate of Incorporation. Such Directors shall in all cases act as a Board regularly convened by a majority at their meetings, and direct the management and business of the corporation as they may deem proper, not inconsistent with these By-Laws and the laws of the State of New York. ARTICLE IV MEETING OF THE BOARD SECTION 1. PLACE Except as otherwise provided in the Certificate of Incorporation, the Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of New York as may be determined by the Board of Directors. SECTION 2. REGULAR MEETINGS Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. SECTION 3. SPECIAL MEETINGS Special meetings of the Board of Directors may be called by the Chairman of the Board, if any, or by the President on two days' notice to each Director, either personally or by mail or by telegram; special meetings shall be called by the Chairman, President or Secretary in a like manner and on like notice on the written request of one Director. SECTION 4. QUORUM AND VOTING At all meetings of the Board of Directors, except as otherwise provided by the Certificate of Incorporation, or by these by-laws, a majority of the Board of Directors shall constitute a quorum. However, a lesser number when not constituting a quorum may adjourn the meeting from time to time until a quorum shall be present. Notice of any such adjournment shall be given to any Directors who were not present and, unless announced at the meeting, to the other Directors. SECTION 5. COMPENSATION Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board of Directors, a fixed fee and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 6. PARTICIPATION IN MEETINGS BY TELEPHONE Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time, such participation constituting presence in person at the meeting. ARTICLE V NOTICES SECTION 1. FORM AND DELIVERY Notices to Directors and shareholders shall be in writing and may be delivered personally or by mail or telegram. Notice by mail shall be deemed to be given at the time when deposited in the post office or a letter box, in a postpaid sealed wrapper, and addressed to Directors or shareholders at their addresses appearing on the records of the Corporation. SECTION 2. WAIVER Whenever a notice is required to be given by any statute, the Certificate of Incorporation or these by-laws, a waiver thereof, in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. In addition, any shareholder attending a meeting of the shareholders in person or by proxy without protesting prior to the conclusion of the meeting the lack of notice thereof to him, and any Director attending a meeting of the Board of Directors without protesting prior to the meeting or at its commencement, such lack of notice shall be conclusively deemed to have waived notice of such meeting. ARTICLE VI OFFICERS SECTION 1. OFFICES The officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers including a Chairman of the Board as may be determined by the Board of Directors. Any two or more of the offices may be held by the same person, except the office of President and Secretary; provided, however, that if all of the issued and outstanding stock of the Corporation is owned by one person, such person may hold all or any combination of offices. SECTION 2. AUTHORITY AND DUTIES All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these by-laws, or, to the extent not so provided, by the Board of Directors. SECTION 3. TERM OF OFFICE AND REMOVAL All officers shall be elected by the Board of Directors and shall hold office until the meeting of the Board of Directors following the next annual meeting of shareholders, and until his successor has been elected or appointed and qualified. SECTION 4. COMPENSATION The compensation of all officers of the Corporation shall be fixed by the Board of Directors, and the compensation of agents hall either be so fixed or shall be fixed by officers thereunto duly authorized. SECTION 5. VACANCIES If any office becomes vacant for any reason, the Board of Directors shall fill the vacancy. Any officer so appointed or elected by the Board of Directors shall serve only until the unexpired term of his predecessor shall have expired, unless re-elected by the Board of Directors. SECTION 6. THE PRESIDENT The President shall be the Chief Executive Officer of the Corporation; in the absence of the Chairman of the Board, or if there is no Chairman of the board, he shall preside at all meetings of the shareholders and Directors; he shall have general and active management and control of the business and affairs of the Corporation, subject to the control of the Board of Directors, and shall see that all orders and resolutions of the Board of Directors are carried into effect. SECTION 7. THE VICE-PRESIDENT The Vice-President, or if there be more than one, the Vice- Presidents, in order of their seniority or in any other order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall generally assist the President and perform such other duties as the Board of Directors or the President shall prescribe. SECTION 8. THE SECRETARY The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall act. He shall keep in safe custody the seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature or by the signature of the Treasurer or an Assistant Treasurer or Assistant Secretary. He shall keep in safe custody the books and records as the Board may direct and shall perform all other duties incident to the office of Secretary. SECTION 9. THE TREASURER The Treasurer shall have the care and custody of the corporate funds, and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Directors, at the regular meeting of the Board of Directors, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. SECTION 10. DELEGATION OF DUTIES In the case of the absence of any officer of the Corporation, or for any reason of the Board may deem sufficient, the Board may, except as otherwise provided in these by-laws, delegate the powers or duties of such officers to any other officer or any Director for the time being, provided that a majority of the entire Board concur therein. SECTION 11. BONDS In case the Board of Directors shall so require, any officer or agent of the Corporation shall give the Corporation a bond for such term, in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. ARTICLE VII SHARE CERTIFICATES SECTION 1. FORM OF CERTIFICATE The certificates for share of the Corporation shall be in such form as shall be determined by the Board of Directors and shall be numbered consecutively and entered in the books of the Corporation as they are issued. Each certificate shall exhibit the registered holder's name and the number and class of shares. SECTION 2. SIGNATURE The certificates for shares of the Corporation shall be signed by the President or a Vice-President and the Treasurer or the Secretary, and shall bear the seal of the Corporation or a facsimile thereof. SECTION 3. LOST CERTIFICATES The Board of Directors may direct a new share certificate or certificates to be issues in place of any certificate or certificates theretofore issues by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates or his legal representative, to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 4. REGISTRATION OF TRANSFER Upon surrender to the Corporation or any transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or such transfer agent to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 5. REGISTERED SHAREHOLDER Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of share to received dividends or other distributions, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or legal claim to or interest in such share or shares on the part of any person, whether or not it has actual or other notice thereof, except as otherwise provided by the laws of the State of New York. SECTION 6. RECORD DATE For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent or to dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action affecting interests of shareholders, the Board of Directors may fix, in advance, a record date. Such date shall be not more than fifty nor less than ten days before the date of any such meeting, nor more than fifty days prior to any other action. In each such case, except as otherwise provided by law, only such persons as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to express such consent or dissent, or to receive payment of such dividend, or such allotment of rights, or otherwise to be recognized as shareholders for the related purpose, notwithstanding any registration of transfer of shares on the books of the Corporation after any such record date so fixed. ARTICLE VIII GENERAL PROVISIONS SECTION 1. FISCAL YEAR The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 2. DIVIDENDS Dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting and may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and the law. SECTION 3. RESERVES Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the Board of Directors shall deem conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. SECTION 4. CHECKS All checks or demands for money or notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. SECTION 5. SEAL The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and with words "Corporate Seal New York". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. ARTICLE IX AMENDMENTS SECTION 1. ADOPTION, AMENDMENT AND REPEAL OF BY-LAWS By-Laws of the Corporation may be adopted, amended or repealed by vote of the holders of the shares at any time entitled to vote in the election of any Directors. By-Laws of the Corporation may also be adopted, amended or repealed by the Board of Directors, but any by-law adopted by the Board of Directors may be amended or repealed by the shareholders entitled to vote thereon as herein provided. SECTION 2. AMENDMENTS AFFECTING ELECTION OF DIRECTORS, NOTICE If any by-law regulating an impending election of Directors is adopted, amended or repealed by the Board, there shall be set forth in the notice of the next meeting of shareholders for the election of Directors the by- law so adopted, amended or repealed, together with a concise statement of the change made. 1 EX-10.1 4 EMPLOYMENT AGREEMENT Employment Agreement made this 1st day of January, 1995 by and between J.A.M., INC., a New York corporation ("JAM"), and JOHN A. MARSZALEK ("employee"). WHEREAS, Employee currently serves as the President and CEO of JAM and faithfully has discharged the duties and responsibilities of such position; and WHEREAS, the Board of Directors of JAM has approved and adopted an Employment Agreement between JAM and Employee, on January 1, 1995, upon the same terms and conditions as set forth herein; and WHEREAS, JAM and Employee desire to enter into an Employment Agreement upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing premises and of the covenants and agreements herein provided, the parties hereto agree as follows: 1.0 TERM OF EMPLOYMENT. 1.1 JAM hereby employs Employee, and Employee hereby accepts employment with JAM, all in accordance with the terms and conditions hereof, for a term commencing on the 1st day of January, 1995 and continuing for a period of five years, unless sooner terminated as hereinafter provided (the "Employment Period"). 2.0 DUTIES. 2.1 During the Employment Period, Employee shall be employed by JAM as the President and CEO of JAM and shall have such duties, responsibilities and powers as are customary and appropriate for such officers. Employee shall report directly to the Board of Directors of JAM. 2.2 During the Employment Period, Employee shall devote his entire business time, energies, best efforts, attention and ability to the business of JAM and its affiliates, shall faithfully and diligently perform the duties of his employment with JAM, and shall do all reasonably in his power to promote, develop and extend the business of JAM. 3.0 COMPENSATION. 3.1 During the Employment Period, JAM agrees to pay Employee as compensation for his services under this Agreement a base salary at an annual rate of not less than $100,000. In the event that JAM is profitable for the year ended December 31, 1995, as reflected in its Statement of Operations for such year as reviewed by its independent accountants, then such salary shall automatically be increased to an annual rate of $110,000, retroactive to the commencement date of the term of this Agreement. If JAM is not profitable for such fiscal year, such salary shall be increased to an annual rate of $110,000 on the first day of the month following that calendar quarter in which JAM is profitable. As, when and if the base salary is increased to $110,000 as aforesaid, such salary shall thereafter be increased by annually increments of $10,000 each during the term thereof. The Board of Directors of JAM may consider further increases in Employee's base salary under this Agreement, and will consider granting bonuses and other benefits to Employee at such times as the Board may deem appropriate. 3.2 Upon submission of appropriate invoices or vouchers, JAM shall pay or reimburse Employee for all reasonable expenses incurred by the Employee in the performance of his duties hereunder in furtherance of the business, and in keeping with the policies, of JAM. 3.3 Employee shall be entitled to participate in any fringe benefit plan available to JAM's employees as in effect from time to time, to the extent that he may be eligible to do so under the applicable provisions of the plan, with full credit for years of service to JAM as if such service had been rendered to JAM. Employee shall be entitled to receive such benefits as automobile use or allowance. 3.4 Employee shall be entitled to four (4) weeks vacation in each year of the Employment Period, such vacation to be taken at such time or times as he shall elect with the prior approval of the Board, and also shall be entitled to receive full compensation hereunder during any period of disability, subject to a limitation of eighteen (18) months of continued salary and benefits with respect to any single disability. 3.5 In addition to participation in any fringe benefit plan available to JAM's employees generally, Employee also shall be entitled to participate in JAM's stock option plan, profit-sharing plan, and in any fringe benefit plan for senior management of JAM which provides benefits for such senior management based upon the profitability or asset growth of JAM. 4.0 TERMINATION BY DEATH. 4.1 If Employee dies during the Employment Period, JAM's obligations under this Agreement shall terminate immediately and Employee's estate or legal representative shall be entitled to all arrearage of salary and expenses, and a pro rate share of other benefits accrued at such time. 5.0 SUSPENSION AND TERMINATION OTHER THAN BY DEATH. 5.1 JAM's Board of Directors may terminate Employee's employment at any time, but any termination by the Board of Directors other than termination for cause shall not prejudice Employee's right to compensation or other benefits under this Agreement. Termination for cause shall mean termination because of willful misconduct or gross negligence in the performance of his duties pursuant to the terms of this Agreement, or termination directed by any regulatory authority. In the event Employee is terminated without cause prior to the expiration of the term of this Agreement, he shall receive as termination pay the greater of one (I) one year's salary at the then current rate of compensation or (ii) his then current salary for the remainder of the Employment Period. 5.2 Employee shall have no right to receive compensation or other benefits for any period after termination for cause, except that vested rights of Employee, including, without limitation, rights accruing to Employee pursuant to any Retirement Plan and a pro rate amount equal to the salary which would have been payable during any vacation time not taken during the calendar year of such termination, shall not be affected. 5.3 In the event that JAM does not intend to offer employment to Employee at the expiration of the term of this Agreement or, in the event that JAM elects to terminate the employment of Employee after the expiration of the term, then JAM shall provide Employee with notice of such election not to renew or to terminate at least one hundred eighty (180) days prior to the effective date of termination. 6.0 BUSINESS MATERIALS, COVENANT TO REPORT. 6.1 All written materials, records, and documents made by Employee or coming into his possession concerning the business or affairs of JAM shall be the sole property of JAM and, upon the termination of his employment with JAM or upon the request of JA at any time, Employee shall deliver promptly the same to JA and shall retain no copies thereof. Prior to any termination of employment hereunder, Employee agrees to render to JAM such reports of the activities undertaken by Employee or conducted under Employee's direction pursuant hereto during the Employment Period as JAM reasonable may request. 7.0 BINDING EFFECT; BENEFITS. 7.1 This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives. Insofar as Employee is concerned, this Agreement, being personal, cannot be assigned. 8.0 NOTICES. 8.1 All notices and other communications which are required or permitted hereunder shall be in writing and shall be sufficient if delivered or mailed by registered or certified mail, postage prepaid, to the following addresses or such other address as any party hereto shall be specified by notice in writing to the other party hereto: If to Employee: John A. Marszalek 2940 East Avenue Rochester, New York l46l0 If to JAM: J.A.M., Inc. 530 Willowbrook Office Park Fairport, New York l4450 All such notices and communications shall be deemed to have been received on the date of delivery thereof or the fifth business day after the mailing thereof, whichever is earlier. 9.0 ENTIRE AGREEMENT. 9.1 This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. 10.0 AMENDMENTS AND WAIVERS. 10.1 This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. The waiver by any party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach. 11.0 SECTION AND OTHER HEADINGS. 11.1 The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of this Agreement or to control or affect the meaning or construction of any provision of this Agreement. 12.0 SEVERABILITY. 12.1 If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, this Agreement shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provision of this Agreement. 13.0 GOVERNING LAW. 13.1 This Agreement shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. J.A.M., INC. By: _______________________________ __________________________________ John A. Marszalek 1 EX-10.2 5 J.A.M., INC. INCENTIVE STOCK OPTION PLAN 1. PURPOSE. This Incentive Stock Option Plan (the "Plan" is intended as an incentive for, and to encourage stock ownership by certain officers and key employees of J.A.M., Inc. (the "Company") by the granting of options to purchase common stock in the Company, which options are qualified for treatment as "incentive stock options" under the provisions of Section 422A of the Internal Revenue Code of 1954, as amended, and/or the Internal Revenue Code of 1986, as amended, as the case may be (the "Code"). The purpose of making available incentive stock options to certain officers and key employees of the Company is to allow them to acquire or increase their proprietary interest in the success of the Company, as well as to encourage them to remain in the employ of the Company. 2. STOCK. The stock subject to options hereunder shall be shares of the Company's authorized but unissued or reacquired common stock, par value $.01 per share. The aggregate number of shares which may be issued under options pursuant to this Plan shall not exceed 200,000 shares of common stock. With respect to incentive stock options granted prior to January 1, 1987, the number of shares as to which options may be granted to any one individual during any calendar year shall be limited to a number of shares which shall not exceed $100,000 in fair market value on the grant date(s) of such option(s), plus any "unused limit carryover" to such calendar year within the meaning of Section 422A(c) (4) of the Code. With respect to incentive stock options granted on or after January 1, 1987, the aggregate fair market value (determined at the time of the grant of the option) of the shares as to which options are first exercisable by any optionee during any calendar year (under all stock option plans of the Company) shall not exceed $100,000. In the event that any outstanding option under the Plan for any reason expires or is terminated, the shares of stock allocable to the unexercised portion of such options may again be subjected to options under the Plan. 3. ADMINISTRATION. (a) The Plan shall be administered by the Board of Directors who may, from time to time, issue orders or adopt resolutions, not inconsistent with the provisions of this Plan, to interpret the provisions and supervise the administration of this Plan. (b) The Board of Directors may, from time to time, appoint a stock option plan committee, consisting of not less than three (3) directors, none of whom shall be eligible to participate in this Plan while members of the Committee (the "Committee"). The Board of Directors may delegate to such committee power to select the particular employees who are to receive options and to determine the number of shares to be optioned to each such employee. (c) MEDIUM AND TIME OF PAYMENT. The option price f or shares purchased upon the exercise of any option, shall be paid in full at the time of such purchase in cash (including cash, bank draft or money order). (d) TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan shall specifically include all provisions limiting the exercisability thereof which are required to be included in such option in order to qualify such option as an incentive stock option under Section 422A of the Code. Except as otherwise determined by the Board of Directors or the Committee, and specifically provided in the agreement, no option shall be exercisable, either in whole or in part prior to one (1) year f rom the date it is granted. Incentive stock options granted prior to January 1, 1987 may not be exercised while there is outstanding, within the meaning of Section 422A(c)(7) of the Code as then in effect, any incentive stock option previously granted to the optionee to purchase shares of the Company. Except as otherwise determined by the Board of Directors or the Committee, and subject to the right of cumulation provided in the last sentence of this paragraph, each option shall be exercisable as to not more than one-third (1/3) of the total number of shares covered thereby during each twelve (12) month period, commencing twelve (12) months from the date of the granting of the option, until all shares covered by the option shall have been purchased. No option shall be exercisable after the expiration of ten (10) years from the date it is granted, provided, however, that no option granted to a person then owning more than ten percent (10%) of the voting power of all classes of the Company's stock shall be exercisable after the expiration of five (5) years from the date it is granted. During the lifetime of the 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 shall accumulate and shall be exercisable in whole or in part, in any subsequent period, but, in no event, later than ten (10) years from the date the option is granted. (e) RECAPITALIZATION. In the event that the shares of common stock of the Company, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or another company, whether by reason of merger, consolidation, recapitalization, reclassification, split-ups, combination of shares or otherwise,, or if the number of shares of common stock shall be increased through the payment of a stock dividend, then such adjustment shall be made in the terms of outstanding options granted under the Plan, and the number and kind of shares for which options may thereafter be granted under the Plan, as may be necessary to reflect the foregoing events. (f) RIGHTS AS A STOCKHOLDER. An optionee or transferee of an option shall have no right as a stockholder with respect to any shares covered by an option until the date of issuance of a stock certificate for such shares. (g) OTHER PROVISIONS. The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option, as the Board of Directors or the Committee shall deem advisable, and which are not inconsistent with other provisions contained in the Plan, nor with the treatment of any options granted under the Plan as "incentive stock options" under the provisions of Section 422A of the Code. 6. TERM OF PLAN. Options may be granted pursuant to the Plan at any time, and f rom time to time, within a period of ten (10) years from the effective date of the Plan as set forth below, at which time the Plan will expire, except as to options then outstanding under the Plan. Such options shall remain in effect and subject to the terms of the Plan until they have been exercised or have expired. No options may be granted under the Plan after the expiration of ten (10) years from the effective date of the Plan. 7. AMENDMENT OF THE PLAN. The Board of Directors of the Company may, insofar as permitted by law, from time to time, with respect to any shares at the time not subject to options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever. No such action may prejudice the right of any employee who has prior thereto been granted an option or options under this Plan. Further, no amendment to this Plan which has the effect of: (a) increasing the number of shares of the Company's common stock subject to this Plan, or (b) changing the designation of the class of employees eligible to receive options under this Plan, may be effective unless and until approval of the stockholders of the Company is obtained in the same manner as approval of this Plan is required. 8. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of common stock pursuant to options will be used for general corporate purposes. 9. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall impose no obligation upon the optionee to exercise such option. 10. APPROVAL OF SHAREHOLDERS. The Plan shall be subject to the approval by the holders of a majority of all of the outstanding shares of stock of the company entitled to vote thereon, which approval must occur within twelve (12) months after the date of adoption of the Plan by the Board of Directors of the Company. 11. EFFECTIVE DATE. The Plan shall become effective upon its adoption by the Board of Directors of the Company, subject, however, to approval by the Company's shareholders within twelve (12) months after the date of such adoption as provided above. - 1 - G:\UKIJK\JAM\GENCORP\JAMISO.PLN [FORM OF OPTION GRANT CONTRACT] INCENTIVE STOCK OPTION AGREEMENT AGREEMENT made this ____ day of _______________, 198_, by and between J.A.M., INC., a New York corporation (the "corporation"), and _________________ (the "Employee"). WHEREAS, Employee is a key, full-time employee of the Corporation, and the Corporation considers it desirable and in its best interest that Employee be given an inducement to acquire a further proprietary interest in the Corporation, and an added incentive to advance the interests of the Corporation by possessing an option to purchase common voting shares of the Corporation in accordance with the Incentive Stock Option Plan adopted by the Directors of the Corporation on May 1, 1986, and approved by the shareholders on May 9, 1986. NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties as follows: 1. GRANT OF OPTION. The Corporation hereby grants to the Employee, the right, privilege and option to purchase _____ shares of its common stock at a purchase price of $_______ per share, in the manner and subject to the conditions hereinafter provided. 2. TIME OF EXERCISE OF OPTION. This option may not be exercised in whole or in part for one (1) year from the date hereof. The option shall be exercisable as to not more than _____ shares during each twelve (12) month period commencing twelve (12) months from the date hereof until all shares covered by the option shall have been purchased. No option shall be exercisable after the expiration of ten (10) years from the date hereof. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, in any subsequent period, but, in no event, later than ten (10) years from the date hereof. 3. METHOD OF EXERCISE. The option shall be exercised by written notice directed to the Corporation, at the Corporation's principal place of business, accompanied by cash or check payment of the option price for the number of shares specified and paid for. The Corporation shall make immediate delivery of such shares, provided that if any law or regulation requires the Corporation to take any action with respect to the shares specified in such notice before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to take such action. 4. TERMINATION OF OPTION. Except as herein otherwise stated, the option to the extent not theretofore exercised shall terminate upon the first to occur of the following dates: (a) The expiration of three (3) months after the date on which the Employee's employment by the Corporation is terminated (except if such termination be by reason of death or permanent and total disability). (b) The expiration of twelve (12) months after the date on which the Employee's employment by the Corporation is terminated, if such termination be by reason of the Employee's permanent and total disability. (c) In the event of the Employee's death while in the employ of the Corporation, his executors or administrators may exercise, within sixty (60) days following the date of death, the option as to any of the shares not theretofore exercised during the Employee's lifetime. (d) The expiration of ten (10) years from the date of grant. 5. RIGHTS PRIOR TO EXERCISE OF OPTION. This option is not transferable by the Employee, except in the event of death as provided above, and during the Employee's lifetime is exercisable only by the Employee. The Employee shall have no rights as a stockholder with respect to the optioned shares until payment of the option price and delivery to the Employee of such shares as herein provided. 6. RESTRICTION ON TRANSFER. By the act of accepting an option, the Employee shall agree that, in the event the Employee or the Employee's successors exercise such option, the Employee or said successors will purchase the shares which are subject thereof for investment and not with any present intention to resell the same, and shall further agree that the Employee or said successors will confirm such intention by an appropriate certificate at the time of exercising the option and an appropriate legend relating to restrictions on resale shall be included on any certificates representing shares purchased hereunder. 7. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. J.A.M., INC. By:_________________________ President ___________________________ EMPLOYEE - 1 - G:\UKIJK\JAM\GENCORP\JAMISO.PLN EX-10.3 6 J.A.M., INC. 1987 STOCK OPTION PLAN 1. INTRODUCTION AND STATEMENT OF PURPOSE This Stock Option Plan (the "Plan") is intended to encourage stock ownership by selected officers and employees of J.A.M., Inc. (the "Company") , a New York State Corporation, in order to increase their proprietary interest in the success of the Company and to encourage them to remain in the employ of the Company. Options granted under this Plan may be either Incentive Stock Options (as defined and provided for in Section 5(a) of this Plan) or Nonstatutory Stock Options (as defined and provided for in Section 5(b) of this Plan), as shall be determined in each specific case by a duly appointed committee of the Board of Directors of the Company (the "Committee") as hereinafter provided. As used in this Plan, the term motion" shall refer to either Incentive Stock Options or Nonstatutory Stock Options, or both. 2. ADMINISTRATION (a) Subject to the express provisions of this Plan, the Committee shall have plenary authority, in its sole discretion: (i) To determine the time or times at which, and the officers and employees of the Company to whom, options shall be granted under this Plan; (ii) To determine, as the case may be, the Incentive Stock option Price or Nonstatutory Stock Option Price (both as defined herein) of, and the number of shares of Stock (as defined herein) to be covered by, options granted under this Plan; (iii) To determine the time or times at which each option granted under this Plan may be exercised, including whether an option may be exercised in whole or in installments; (iv) To interpret this Plan and to prescribe, amend and rescind rules and regulations relating to it; and (v) To make all other determinations which the Committee shall deem necessary or advisable for the administration of this Plan. (b) The membership of the Committee shall at all times consist of not less than 3 members of the Board of Directors of the Bank (the "Board of Directors"), each of whom shall be a "Disinterested Person" as defined in Section 2(d) hereinafter. The Committee shall have all of the powers and duties set forth herein, as well as such additional powers and duties as the Board of Directors may delegate to it; provided, however, that the Board of Directors expressly retains the right (i) to appoint the members of the Committee, and (ii) to terminate or amend this Plan consistent with provisions of applicable law. The Board of Directors may from time to time appoint members of the Committee in substitution for or in addition to members previously appointed, may fill vacancies in the Committee, however caused, and may discharge the Committee. Duly authorized actions of the Committee shall constitute actions of the Board of Directors for the purposes of this Plan and the administration thereof. (c) Notwithstanding anything herein to the contrary, no employee, officer or director of the Company shall, as a member of the Committee or otherwise , have any vote with regard to the grant of any option to himself, including, but not limited to: (i) The time at which any such option shall be granted; (ii) The number of shares of Stock covered by any such option; (iii) The time or times at which, or the period during which, any such option may be exercised or whether it may be exercised in whole or in installments; (iv) The provisions of the agreement relating to any such option; and (v) The Incentive Stock Option Price of Stock subject to an Incentive Stock Option granted to him, or the Nonstatutory Stock Option Price of Stock subject to a Nonstatutory Stock Option granted to him. (d) The term "Disinterested Person" as used in Section 2 (b) of this Plan shall mean a person who, at the time he exercises discretion with respect to the administration of this Plan, is not then and has not at any time during the preceding year been eligible for selection as a person to whom options may be granted under this Plan or to whom stock may be allocated or options granted under the provisions of any other plan of the Company which entitles the participants therein to acquire stock or stock options of the Company. 3. STOCK Except as provided in Section 10 of this Plan, the number of shares which may be made subject to options, or which may be issued upon the exercise of options granted under this Plan, shall be limited to an aggregate of 500,000 shares of the common stock of the Company (the "Stock") The shares reserved for issuance pursuant to this Plan shall consist of authorized but previously unissued shares of Stock. Except as otherwise provided in Section 10 of this Plan, if an option granted under this Plan expires, terminates or is cancelled for any reason without having been exercised in full, the shares of Stock allocable to the unexercised portion of such option may again be made subject to an option or options granted under this Plan. 4. ELIGIBILITY Options may be granted under this Plan to such officers and regular full-time employees of the Company as may be selected in the manner provided in Section 2 of this Plan. A director of the Company who is not also a regular full-time employee of the Company shall not be eligible to receive any options under this Plan. A person granted an option under this Plan shall nevertheless remain eligible to receive one or more additional options thereafter, notwithstanding that options previously granted to such person remain unexercised in whole or in part. 5. TERMS OF OPTIONS This Plan is intended to authorize the Committee to grant, in its discretion, options that qualify as incentive stock options pursuant to Section 422A(b) of the Internal Revenue Code of 1954, as amended AND/OR THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS THE CASE MAY BE, (the "Code") (such qualifying options being referred to herein as "Incentive Stock Options") or options that do not so qualify (such nonqualifying options being referred to herein as "Nonstatutory Stock Options"). Each option granted under this Plan shall be evidenced by a written option agreement which shall be executed and delivered as provided in Section 12 of this Plan and which shall specify whether the option granted therein is an Incentive Stock Option or a Nonstatutory Stock Option. (a) TERMS OF INCENTIVE STOCK OPTIONS. Each stock option agreement covering an Incentive Stock Option granted under this Plan and any amendment thereof shall conform to the provisions of Section 5(a)(i)(iii) below, and may contain such other terms and provisions consistent with the requirements of this Plan as the Committee shall deem appropriate: (i) INCENTIVE STOCK OPTION PRICE. Except as otherwise specifically provided in Section 8, the purchase price of each share of Stock subject to an Incentive Stock Option (the "Incentive Stock Option Price") shall be a stated price which is not less than the fair market value of such share of Stock, determined in accordance with Section 8 of this Plan, as of the date such Incentive Stock Option is granted; provided, however, that if an employee, at the time an Incentive Stock Option is granted to him, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company (or, under Section 425(d) of the Code, is deemed to own stock representing more than 10% of the total combined voting power of all such classes of stock, directly or indirectly, by or for any brother, sister, spouse, ancestor, or lineal descendant of such employee, or by or for any corporation, partnership, estate or trust of which such employee is a shareholder, partner or beneficiary) , then the Incentive Stock Option Price of each share of Stock subject to such Incentive Stock Option shall be at least equal to 110% of the fair market value of such share of Stock, as determined in the manner stated above. (ii) TERM OF INCENTIVE STOCK OPTIONS. Incentive Stock Options granted under this Plan shall be exercisable for such periods as shall be determined by the Committee at the time of grant of each such Incentive Stock Option, but in no event shall an Incentive Stock option be exercisable after the expiration of 10 years from the date of grant; provided, however, that an Incentive Stock Option granted to any employee as to whom the Incentive Stock Option Price of each share of Stock subject thereto is required to be at least equal to the greater of the book value or 110% of the f air market value of such share of Stock pursuant to Section 5(a)(i) above, shall not be exercisable after the expiration of 5 years from the date of grant. Each Incentive Stock Option granted under this Plan shall also be subject to earlier termination as provided in this Plan. (iii) EXERCISE OF INCENTIVE STOCK OPTIONS. (A) Subject to the provisions of sections 5(a)(iii)(F) and 10 of this Plan, Incentive Stock Options granted under this Plan may be exercised in whole or in installments, to such extent, and at such time or times during the terms thereof, as shall be determined by the Committee at the time of grant of each such option. (B) Incentive Stock Options granted under this Plan shall be exercisable only by delivery to the Company of written notice of exercise, which notice shall state the number of shares with respect to which such Incentive Stock Option is exercised, the date of grant of the Incentive Stock Option, the aggregate purchase price for the shares with respect to which the Incentive Stock Option is exercised and the effective date of such exercise, which date shall not be earlier than the date the notice is received by the Company nor later than the date upon which such Incentive Stock Option expires. The written notice of exercise shall be sent together with the full Incentive Stock Option Price of the shares purchased, which must be paid in full in United States dollars by cash, certified check, bank draft or money order payable to the order of the Company. (C) Except as expressly provided to the contrary in section 9 of this Plan, an Incentive Stock Option granted hereunder shall remain outstanding and shall be exercisable only so long as the person to whom such Incentive Stock Option was granted remains an officer or employee of the Company. (D) All Incentive Stock Options granted under this Plan shall be nontransferable, except by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom granted only by such person (or such person's duly appointed, qualified, and acting personal representative). (E) No Incentive Stock Option may be exercised as to fewer than 100 shares of Stock at any one time without the consent of the Committee, unless the number of shares to be purchased upon such exercise is the total number of shares at the time available for purchase under such Incentive Stock Option. (b) TERMS OF NONSTATUTORY STOCK OPTIONS. Each Stock option agreement covering a Nonstatutory Stock Option granted under this Plan and any amendment thereof shall conform to the provisions of section 5 (b) (i) - - (iii) , below, and may contain such other terms and provisions consistent with the requirements of this Plan as the Committee shall deem appropriate: (i) NONSTATUTORY STOCK OPTION PRICE. Except as otherwise specifically provided in Section 8, the purchase price of each share of Stock subject to a Nonstatutory Stock Option (the "Nonstatutory Stock Option Price") shall be a stated price which is not less than the par value of such share of Stock. (ii) TERM OF NONSTATUTORY STOCK OPTIONS. Nonstatutory Stock Options granted under this Plan shall be exercisable for such periods as shall be determined by the Committee at the time of grant of each such Nonstatutory Stock Option, but in no event shall a Nonstatutory Stock Option be exercisable after the expiration of 10 years from the date of grant. Each Nonstatutory Stock Option granted under this Plan shall also be subject to earlier termination as provided in this Plan. (iii) EXERCISE OF NONSTATUTORY STOCK OPTIONS. (A) Subject to the provisions of Sections 5(b)(iii)(E) and 10 of this Plan, Nonstatutory Stock options granted under this Plan may be exercised in whole or in installments, to such extent, and at such time or times during the terms thereof, as shall be determined by the Committee at the time of grant of each such option. (B) Nonstatutory Stock Options granted under this Plan shall be exercisable only by delivery to the Company of written notice of exercise, which notice shall state the number of shares with respect to which such Nonstatutory Stock Option is exercised, the date of grant of the Nonstatutory Stock option, the aggregate purchase price for the shares with respect to which the Nonstatutory Stock Option is exercised and the effective date of such exercise, which date shall not be earlier than the date the notice is received by the Company nor later than the date upon which such Nonstatutory Stock Option expires. The written notice of exercise shall be sent together with the full Nonstatutory Stock Option Price of the shares purchased, which must be paid in full in United States dollars by cash, certified check, bank draft or money order payable to the order of the Company.. (C) Except as expressly provided to the contrary in section 9 of this Plan, a Nonstatutory Stock Option granted hereunder shall remain outstanding and shall be exercisable only so long as the person to whom such Nonstatutory Stock Option. was granted remains an officer or employee of the Company. (D) All Nonstatutory Stock Options granted under this Plan shall be nontransferable, except by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom granted only by such person (or such person's duly appointed, qualified, and acting personal representative). (E) No Nonstatutory Stock Option may be exercised as to fewer than 100 shares at any one time without the consent of the Committee, unless the number of shares to be purchased upon such exercise is the total number of shares at the time available for purchase under such Nonstatutory Stock Option. 6. LIMITATION ON GRANT OF INCENTIVE STOCK OPTIONS. The aggregate fair market value of the Company's Stock (determined under Section 8 hereof at the time of the grant of any option) with respect to which Incentive Stock Options are first exercisable by any Optionee during any calendar year (under all stock option plans of the Company) shall not exceed $100,000,00. 7. RIGHTS OF OPTIONEES No holder of an option shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to such option unless and until his option shall have been exercised pursuant to the terms thereof, the Company shall have issued and delivered to the holder of the option certificates representing the shares of Stock as to which he has exercised his option, and his name shall have been entered as a stockholder of record on the books of the Company, or its trans f er agent. Thereupon, such person shall have full voting and other ownership rights with respect to such shares of Stock. 8. DETERMINATION OF FAIR MARKET VALUE For the purposes of this Plan, the Committee shall determine the fair market value of a share of stock of the Company. The determination of fair market value shall be made on the basis of such factors as it shall deem appropriate but specifically including the difference between the market value and the book value of comparable companies and the trend of the Company's earnings and of its book capital account, provided that (i) if on the date as of which such determination is made quotations for the class of stock being valued are regularly quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or another comparable system, the fair market value of a share of such stock shall be deemed to be equal to the mean of the average of the closing sales prices, if available, or the closing bid and asked prices for such stock quoted on such system on each of the 5 trading days immediately preceding the date as of which such determination is made, and (ii) if on the date as of which such determination is made the class of stock being valued is admitted to trading on a national securities exchange or exchanges for which actual sale prices are regularly reported, or actual sales prices are otherwise regularly published f or such stock, the f air market value of a share of such stock shall be deemed to be equal to the mean of the closing sale prices reported for such stock on each of the 5 trading days immediately preceding the date as of which such determination is made. 9. RETIREMENT, TERMINATION OF EMPLOYMENT OR DEATH OF HOLDERS OF OPTIONS (a) RETIREMENT. If a person to whom an option has been granted under this Plan retires from employment with the Company as a result of "Normal Retirement" or as a result of "Disability" (both as defined for purposes of any retirement plan in effect for the Company from time to time) such option shall continue to be exercisable in whole or in part to the extent exercisable on the date of retirement, and, to the extent not theretofore exercised, by the person to whom granted (or such person's duly appointed, qualified, and acting personal representative) in the manner set forth in Section 5 of this Plan, at any time within the remaining term of such option unless otherwise determined by the Committee at the time of grant, provided, however, that any Incentive Stock Option must be exercised within 3 months of the Normal Retirement Date, or within one year from the Termination date of employment caused by Disability. (b) TERMINATION OF EMPLOYMENT. Except as otherwise provided in this Section 9, if the employment of a person to whom an option has been granted under this Plan is terminated for any reason, such option shall, to the extent not theretofore exercised, continue to be exercisable to the same extent that it was exercisable for a period of 30 days from the date of such termination of employment, or for such other period as may be determined by the Committee at the time of grant, whereupon it shall terminate and shall not thereafter be exercisable; provided, however, that in the event of termination of employment for cause involving dishonesty, malfeasance, misfeasance or the commission of a criminal offense (with respect to which determination of the Committee shall be final and conclusive), any such option shall terminate immediately upon such termination of employment. No option granted under this Plan shall be affected by any change of duties or position of the person to whom such option was granted or by any temporary leave of absence granted to such person by the Company. (c) DEATH. Unless otherwise determined by the Committee at the time of grant, if a person to whom an Option has been granted under this Plan (the "Grantee") dies prior to the expiration of the term of such option, such option shall be exercisable by the estate of the Grantee, or by a person who acquired the right to exercise such option by bequest or inheritance from the Grantee, at any time within two years after the death of such person and prior to the date upon which the term of such option expires, to the extent and in the manner exercisable by the Grantee as of the date of his death. 10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION; CHANGES IN CONTROL. (a) If the outstanding shares of Stock of the Company as a whole are increased, decreased, changed into, or exchanged for, a different number or kind of shares or securities of the Company, whether through merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split, combination of shares, exchange of shares, change in corporate structure, or amendment to the certificate of incorporation of the Company or otherwise, an appropriate and proportionate adjustment, as determined by the Committee, shall be made to the number and kind of shares subject to this Plan, and to the number, kind, and per share Incentive Stock Option Price or Nonstatutory Stock Option Price (as the case may be) of shares subject to unexercised options granted prior to any such change. Any such adjustment shall be made without a change in the aggregate purchase price of the shares of Stock subject to the unexercised portion of any option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more other corporations in which the Company is not the surviving corporation, or of the transfer of substantially all of the assets or the transfer of all of the shares of the Company to another corporation (any such transaction being referred to herein as a Terminating Event"), this Plan and any option theretofore granted hereunder shall terminate unless provision is made in writing in connection with such Terminating Event for the continuance of this Plan and for the assumption of options theretofore granted hereunder, or the substitution for such options of new options covering the shares of the successor corporation, or a parent or subsidiary thereof, with such appropriate adjustments as may be determined or approved by the Committee (or the successor to the Company) to the number and kind of shares subject to such substituted options and to the Incentive Stock option Price or Nonstatutory Stock option Price (as the case may be), in which event this Plan and the options theretofore granted or the new options substituted therefor, shall continue in the manner and under the terms so provided. Upon the occurrence of a Terminating Event in which provision is not made for the continuance of this Plan and for the assumption of options theretofore granted or the substitution for such options of new options covering the shares of a successor corporation or a parent or subsidiary thereof, each officer or employee to whom an option has been granted under this Plan (or such person's personal representative, estate or any person who acquired the right to exercise the option from such person by bequest or inheritance) shall be entitled, prior to the effective date of any such Terminating Event, (i) to exercise, in whole or in part, such person's rights under any option granted to him or her without regard to any restrictions on exercise that would otherwise apply, or (ii) to surrender any such option to the company in exchange for receipt of cash equal to the difference between the aggregate fair market value of the shares of Stock such person would have received had he exercised his option in full immediately prior to consummation of such Terminating Event (determined as of the date of the Terminating Event as provided in Section 8 hereof) and the applicable aggregate Incentive Stock Option Price or Nonstatutory Stock Option Price, as the case may be. To the extent that a person, pursuant to this Section 10(b), has a right to exercise or surrender any option on account of a Terminating Event which such person otherwise would not have had at that time, such person's exercise or surrender of such option shall be contingent upon the consummation of such Terminating Event. (c) In connection with the grant of any option hereunder the Committee may, in its sole discretion, provide the holder thereof with the right, following a "change in control-' of the Company (as such term is defined in section 10(d) hereinafter), and without regard to any restrictions on exercise that would otherwise apply, to exercise such option or to surrender such option for a cash payment equal to the difference between the aggregate fair market value of the number of shares of Stock then subject to the option, as determined in accordance with Section 8 of this Plan as of the date of such surrender, and the aggregate Incentive Stock Option Price or Nonstatutory Stock Option Price therefor, as the case may be. Any right granted hereunder shall expire one year after receipt by the option holder of written notice from the Company that a change in control has occurred. (d) For the purposes of this Plan, a "change in control" of the Company shall mean a change in control of a nature that would be required to be reported in a proxy statement with respect to the Company (even if the Company is not actually subject to said reporting requirements) in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), except that any merger, consolidation or corporate reorganization in which the owners of the Company's capital stock entitled to vote in the election of directors ("Voting Stock") prior to said combination receive 75% or more of the resulting entity's Voting Stock shall not be considered a change in control for the purposes of this Plan; and provided that, without limitation of the foregoing, such change in control shall be deemed to have occurred if (i) any "person" (as that term is used in Sections 13 (d) and 14 (d) (2) of the Exchange Act) is or becomes the "beneficial owner" (as that term is defined by the Securities and Exchange Commission for purposes of Section 13 (d) of the Exchange Act), directly or indirectly, of more than 20% of the outstanding Voting Stock of the Company or its successors; or (ii) during any period of two consecutive years a majority of the Board of Directors no longer consists of individuals who were members of the Board of Directors at the beginning of such period, unless the election of each director who was not a director at the beginning of the period was approved by a vote of at least 75% of the directors still in office who were directors at the beginning of the period. 11. EFFECTIVENESS OF THE PLAN This Plan shall become effective upon its adoption by the Board of Directors; provided, however, that (i) the effectiveness of this Plan shall be subject to approval by the affirmative votes of a majority of the outstanding shares of capital stock of the Company at a stockholder's meeting duly called and held under the provisions of New York Law within 12 months after the adoption of this Plan by the Board of Directors; and (ii) the effectiveness of options granted under this Plan prior to the date that such approval by the stockholders is obtained shall also be subject to such approvals. 12. MANNER OF GRANT OF OPTIONS Nothing contained in this Plan or in any resolution heretofore or hereafter adopted by the Board of Directors or any committee thereof or by the stockholders of the Company with respect to this Plan shall constitute the granting of an option under this Plan. The granting of an option under this Plan shall be deemed to occur only upon the date on which the Committee shall approve the grant of such option. All options granted under this Plan shall be evidenced by a written agreement, in such form shall be determined by the Committee, signed by a representative of the Committee and the recipient thereof. 13. COMPLIANCE WITH LAW AND REGULATIONS The obligation of the Company to sell and deliver any shares of Stock under this Plan shall be subject to all applicable laws, rules and regulations, and the obtaining of all approvals by governmental agencies deemed necessary or appropriate by the Committee, and should the grant or exercise of any particular option or options hereunder be found to be in contravention of any such laws, rules or regulations, said options shall be void or voidable without affecting any other options granted (or to be granted) hereunder. Except as otherwise provided in Section 2 and Section 16 herein, the Committee may make such changes in this Plan and include such terms in any option agreement as may be necessary or appropriate, in the opinion of counsel to the Company, to comply with the rules and regulations of any governmental authority or to obtain, for officers and employees granted Incentive Stock options, the tax benefits under the applicable provisions of the Code and the regulations thereunder. 14. TAX WITHHOLDING The employer of an officer or employee granted an option under this Plan shall have the right to deduct or otherwise effect a withholding of any amount required by federal or state laws to be withheld with respect to the grant, exercise or surrender of any option or the sale of stock acquired upon the exercise of an Incentive Stock Option in order for the employer to obtain a tax deduction otherwise available as a consequence of such grant, exercise, surrender or sale, as the case may be. 15. NONEXCLUSIVITY OF THE PLAN Neither the adoption of this Plan by the Board of Directors nor the submission of this Plan to the stockholders of the Company for approval shall be construed as having any impact on existing qualified or nonqualified retirement, bonus or similar plans of the Company, or as creating any limitations on the power of the Board of Directors to adopt such - other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options or stock appreciation rights otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases. 16. AMENDMENT The Board of Directors at any time, and f rom time to time, may amend this Plan, subject to any required regulatory approval and subject to the limitation that, except as provided in Sections 10 or 11 hereof, no amendment shall be effective unless approved by the affirmative votes of the holders of a majority of the outstanding shares of the Company's Voting Stock within 12 months after the date of the adoption of such amendment, if such amendment would: (a) Increase the number of shares of Stock which may be made subject to options, or which may be issued upon the exercise of options granted under this Plan; (b) Change in substance the provisions of Section 2 hereof relating to administration of this Plan, or of Section 4 hereof relating to eligibility to participate in this Plan; (c) Change the method of computing the Incentive Stock option Price for shares of Stock subject to Incentive Stock Options or the Nonstatutory Stock Option Price for shares of Stock subject to Nonstatutory Stock Options or decrease any option price, or (d) Increase the maximum term of any options provided for herein, or the term of the Plan, or (e) Materially increase the benefits accruing to participants under the Plan. Except as provided in Sections 11 and 13 hereof, rights and obligations under any option granted before amendment of this Plan shall not be altered or impaired by amendment of this Plan, except with the consent of the person to whom the option was granted. 17. TERMINATION OR SUSPENSION The Board of Directors at any time may suspend or terminate this Plan. This Plan, unless sooner terminated, shall terminate on the loth anniversary of its adoption by the Board of Directors or its approval by the stockholders of the Company, Q(T whichever is earlier, but such termination shall not affect any option theretofore granted. No option may be granted under this Plan while this Plan is suspended or after it is terminated. No rights or obligations under any option granted while this Plan is in effect shall be altered or impaired by suspension or termination of this Plan, except with the consent of the person to whom the option was granted. Any option granted under this Plan may be terminated by agreement between the holder thereof and the Company and, in lieu of the terminated option, a new option may be granted with an Incentive Stock Option Price or a Nonstatutory Stock Option Price, as the case may be, which may be higher or lower than the Incentive Stock Option Price or Nonstatutory Stock Option Price, as the case may be, of the terminated option. 18. CONTINUATION OF EMPLOYMENT Nothing contained in this Plan (or in any written option agreement) shall obligate the Company to continue for any period to employ an officer or employee to whom an option has been granted, or interfere with the right of the Company to vary the terms of such person's employment or reduce such person's compensation. 19. EXCULPATION AND INDEMNIFICATION The Company shall indemnify and hold harmless the members of the Board of Directors and the members of the Committee from and against any and all liabilities, costs, and expense incurred by such persons as a result of any act, or omission to act, in connection with the performance of such persons' duties, responsibilities, and obligations under this Plan, other than such liabilities, costs and expenses as may result from the negligence, gross negligence, bad faith, willful misconduct, or criminal acts of such persons. 20. TITLES Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan. - 1 - G:\UKIJK\JAM\GENCORP\1987OPT.PLN [FORM OPTION GRANT CONTRACT] STOCK OPTION AGREEMENT AGREEMENT made this ___ day of ______________,198_, by and between J.A.M., INC., a New York corporation (the "Corporation"), and (the 'Employee"). WHEREAS, Employee is a key, full-time employee of the Corporation, and the Corporation considers it desirable and in its best interest that Employee be given an inducement to acquire a further proprietary interest in the Corporation, and an added incentive to advance the interests of the Corporation by possessing an option to purchase common voting shares of the Corporation in accordance with the 1987 Stock Option Plan adopted by the Directors of the Corporation on July 17, 1987, and approved by the shareholders on May 5, 1988. NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties as follows: 1. GRANT OF OPTION. The Corporation hereby grants to the Employee, the right, privilege and option to purchase ______ shares of its common stock at a purchase price of $__________ per share, in the manner and subject to the conditions hereinafter provided. This option [IS] [IS NOT] an Incentive Stock Option (as defined in Section 5(a) of the Plan). 2. TIME OF EXERCISE OF OPTION. This option may not be exercised in whole or in part for one (1) year from the date hereof. The option shall be exercisable as to not more than shares during each twelve (12) month period commencing twelve (12) months from the date hereof until all shares covered by the option shall have been purchased. No option shall be exercisable after the expiration of ten (10) years from the date hereof. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, in any subsequent period, but, in no event, later than ten (10) years from the date hereof. 3. METHOD OF EXERCISE. The option shall be exercised by written notice described to the Corporation, at the Corporation's principal place of business, accompanied by cash or check payment of the option price for the number of shares specified and paid for. The Corporation shall make immediate delivery of such shares, provided that if any law or regulation requires the Corporation to take any action with respect to the shares specified in such notice before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to take such notice. 4. TERMINATION OF OPTION. Except as herein otherwise stated, the option to the extent not theretofore exercised shall terminate upon the first to occur of the following dates: (a) The expiration of thirty (30) days after the date on which the Employee's employment by the Corporation is terminated (except if such termination be for cause or by reason of death, retirement or disability). (b) In the case of Incentive Stock Options, the expiration of one (1) year after the date on which the Employee's employment by the Corporation is terminated, if such termination be by reason of the Employee's permanent and total disability. In the case of Nonstatutory Stock Options, such options may be exercised at any time during the remaining term in the event of termination by reason of the Employee's permanent and total disability. (c) In the event of the Employee's death while in the employ of the Corporation, his executors or administrators may exercise, within two (2) years following the date of death, the option as to any of the shares not theretofore exercised during the Employee's lifetime. (d) In the event of termination of employment for cause (as defined in the Plan), immediately upon such termination of employment. (e) The expiration of three (3) months after the date which the Employee's employment with the Corporation is terminated, if such termination be by reason of the Employee's Normal Retirement, in the case of Incentive Stock options. In the case of Nonstatutory Stock Options, such options, may be exercised during the remaining term in the event of termination of employment by Normal Retirement. (f) The expiration of ten (10) years from the date of grant. 5. RIGHTS PRIOR TO EXERCISE OF OPTION. This option is not transferable by the Employee, except in the event of death as provided above, and during the Employee's lifetime is exercisable only by the Employee. The Employee shall have no rights as a stockholder with respect to the optioned shares until payment of the option price and delivery to the Employee of such shares as herein provided. 6. THE PLAN. This option is subject to and the Corporation and the Employee agree to be bound by all of the provisions and terms and conditions of the Plan. 7. BINDING EFFECT. This Agreement shall insure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. J.A.M., INC. By:________________________ President ___________________________ EMPLOYEE - 1 - G:\UKIJK\JAM\GENCORP\1987OPT.PLN EX-10.4 7 Exhibit 10-4 EMPLOYEES' AGREEMENT REGARDING PROPRIETARY INFORMATION AND INVENTIONS In consideration of the employment and continued employment of the undersigned ("Employee") by JAM Productions, Inc. ("Corporation"), Employee agrees: 1. While Employee is an employee of Corporation, and after his employment has been terminated for any reason, Employee will not use for his own benefit or the benefit of any other person or entity, nor will Employee disclose to any other person or entity, any Confidential Information, except to the extent required in the course of his employment by Corporation. 2. Employee will not remove from Corporation's premises nor make copies of any Confidential Information, in any form, except as required by his duties of employment by Corporation. Upon termination of his employment, or at any such time as Corporation may request, Employee will deliver to Corporation all copies in his possession of any Confidential Information, in any form. Employee will not assert any rights in or with respect to any Confidential Information. 3. "Confidential Information" means any secret or confidential information, knowledge or data of Corporation or of any vendor or supplier to or distributor or customer of Corporation, regardless of how acquired or developed by Corporation or by any such vendor, supplier, distributor or customer, concerning any of their businesses, policies, research, processes, inventions, products and trade secrets, including specifically all computer software developed, owned or licensed by them. Confidential Information does not include information, knowledge, or data in Employee's possession prior to the commencement of his employment with Corporation or information, knowledge or data in the public domain other than by reason of the wrongful acts of Employee. 4. Employee agrees that all products, processes, inventions or devices, including computer software, or any improvements to any of the foregoing ("Inventions"), discovered or developed during the course of his employment by Corporation which are (a) related to Corporation's business, or (b) in the course of development by Corporation, or (c) made with the use of Corporation's time, materials or facilities shall belong to Corporation. Employee hereby assigns and transfers to Corporation all right, title and interest in and to any and all such Inventories. Employee agrees promptly to disclose to Corporation all such Inventions, whether patentable or unpatentable. Employee agrees to execute such instruments (including patent and copyright applications and assignments) and take all such, action at Corporation's expense, as may be necessary or desirable to vest title in such Inventions to Corporation or to obtain letters patent and copyrights for the benefit of Corporation. 5. There is ( ) is not ( X ) attached a list (including a brief description) of inventions, patented or unpatented, and of computer software in which Employee has an interest, which were made, conceived or developed by Employee prior to his employment by Corporation and which are not inventions for purposes of Paragraph 4 of this Agreement. 6. During the continuance of Employee's employment with Corporation, Employee will devote his whole time and attention to the business and affairs of Corporation, and will not, either individually or together with any person or firm, directly or indirectly, be engaged in any activity similar to those engaged in by Corporation without its prior written consent. 7. Employee represents and warrants that he is not prevented or restricted from entering into an employment relationship with Corporation, or from performing any duties for Corporation, by any agreement with or obligation to any person or entity or by any other disability or restraint. 8. This Agreement shall be binding upon and inure to the benefit of Corporation and its successors and assigns, and shall be construed in accordance with the laws of the State of New York. Employee's obligations contained in this Agreement shall survive the termination of his employment, regardless of the reason for such termination. If any provision of this Agreement shall be declared void, such provision shall be deemed severed from this Agreement, and the remainder of this Agreement shall otherwise remain in full force and effect. Date this 30th day of October, 1985. EMPLOYEE: /s/ John A. Marszalek ____________________ ____________________ (Print Name) Signed in the present of: /s/ Kathryn A. Jernan ______________________ EX-13 8 Exhibit 13 1995 ANNUAL REPORT FINANCIAL HIGHLIGHTS ______________________________________________________________________________ For the Year 1995 1994 ______________________________________________________________________________ Net sales $1,567,748 $537,696 Earnings (loss) before income taxes and extraordinary credit 45,532 (185,747) Net earnings (loss) 45,183 Net earnings (loss) per share $.003 $(0.02) ______________________________________________________________________________ At Year End Total assets $482,227 $293,749 Total liabilities 663,034 699,189 ______________________________________________________________________________ Total stockholders' equity (180,807) (405,440) _______________________________________________________________________________ Working Capital (360,835) (523,639) _______________________________________________________________________________ Current ratio 0 0 _______________________________________________________________________________ MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED MATTERS ______________________________________________________________________________ The number of stockholders on January 31, 1996 was approximately 5,000. The Company was delisted by NASDAQ in 1992. To the best knowledge of the Company, management does not have any market makers. In 1995, it was impossible to establish any quotes for the JAM Company stock. The Company still believes that its JAMY common stock is traded in the over-the-counter market. The following table summarizes by quarter the high and low bid prices for the Company's common stock during 1995 and 1994. 1995 1994 HIGH LOW HIGH LOW First Quarter No quotables No quotables Second Quarter No quotables No quotables Third Quarter No quotables No quotables Fourth Quarter No quotables No quotables -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ______________________________________________________________________________ 1995 COMPARED TO 1994 Net sales for 1995 totaled $1,568,748, an increase of $1,031,052, or 150% from sales of $537,696 in 1994. This increase was due to receiving several contracts from new and previous client base. Cost of sales in 1995 totaled $924,011, an increase of $578,559, or 297% from 1994. This increase was due to payroll and outside vendor activity for multi- media projects. Gross profits increased $401,811 in 1995 from $242,926 to $644,737, due to managing cost controls and project management systems. 1994 COMPARED TO 1993 Net sales for 1994 totaled $537,696, a decrease of $288,641, or 35% from sales of $826,337 in 1993. This decrease was due to the Company spending much of its time on research and development. Cost of sales in 1994 totaled $294,770, a decrease of $124,752, or 30% from 1993. This decrease in cost of sales was due to the decrease in sales and the need for outside services. Gross profits decreased $163,889 in 1994 from $406,815 to $242,926, due largely to the concentration on research and develop which caused the drop in gross sales. Liquidity and Capital Resources At December 31, 1995, the Company had negative working capital of $360,835 and total stockholders' equity (deficit) of $(180,807). This compares to the negative working capital of $523,639 and total stockholders' equity (deficit) of $(405,440) in 1994. Liquidity and capital resources increased in 1995 as a result of the operating profit. The Company acknowledges that additional resources may be needed to continue growth in 1996 as well as additional sources of capital may be necessary. Inflation During 1995, 1994 and 1993, inflation had no material effect on the costs incurred by the Company or the demand for the Company's services. Status of Certified Public Accountants In December, 1995, the Company retained the accounting firm of Bonn & Shortsleeve, CPA's to audit the 1995 and 1994 Financial Statements. FIVE YEAR SUMMARY OF SELECTED FINANCIAL INFORMATION ______________________________________________________________________________ The table below represents a summary of selected components of the Company's balance sheets and statements of operations of the five years ended December 31, 1995. All information concerning the Company should be read in conjunction with the other financial statements and related notes included elsewhere herein. AS OF AND FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991 BALANCE SHEET DATA: Current assets $ 302,199 $ 175,550 $ 61,998 $ 60,388 $ 43,939 Current liabilities 663034 699189 414,023 415,984 368,689 Working capital $ (360,835) $ (523,639) $ (352,025) $ (355,596) $ (324,750) Total assets $ 482,227 $ 293,749 $ 247,333 $ 232,392 $ 821,690 Long-term obligations $ - $ - $ - $ 10,671 $ 269,842 - - - Stockholders' equity $ (180,807) $ (405,440) $ (166,890) $ (187,212) $ 362,859 OPERATING DATA: Net sales $ 1,568,748 $ 537,696 $ 826,337 $ 651,876 $ 1,021,451 Cost of sales 924,011 294,770 419,522 415,351 832,379 Gross profit $ 644,737 $ 242,926 $ 406,815 $ 236,525 $ 189,072 Selling, general and administrative expenses 556,481 394,109 374,593 785,039 781,605 Operating profit (loss) $ 88,256 $ (151,183) $ 32,222 $ (548,514) $ (592,533) Other income (deductions), net $ (43,073) $ (34,563) $ (13,101) $ (1,557) $ 7,958 Net earnings (loss) $ 45,183 $ (185,746) $ 19,121 $ (550,071) $ (584,575) Net earnings (loss) per share $0.00 ($0.01) $0.00 ($0.04) $0.05
See accompanying notes to financial statements. -8- BALANCE SHEETS December 31, 1995 and 1994 ASSETS
1995 1994 AUDITED Unaudited CURRENT ASSETS: Cash $ 4,705 $ - Accounts receivable, less allowance for doubtful accounts of $1,747 in 1995 and $3,600 in 1994 (Note 5) 288,126 200,557 Inventories (Note 2) 2,988 2,814 Prepaid expenses 6,380 6,549 302,199 209,920 PROPERTY AND EQUIPMENT (NOTES 2 AND 3): Leasehold improvements 27,949 13,183 Production equipment 501,372 258,732 Office furniture and equipment 200,119 288,655 729,440 560,570 Less: Accumulated depreciation 560,631 442,371 168,809 118,199 Other Assets: Deposits 11,219 - $ 482,227 $ 328,119
See accompanying notes to financial statements. -9- BALANCE SHEETS (CONT'D) LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994 AUDITED Unaudited CURRENT LIABILITIES: Checks drawn in excess of deposits $ - $ 34,370 Payroll taxes payable - 53,075 Accrued Income Tax 349 - Accounts payable 87,535 155,564 Accrued expenses 138,975 12,784 Billings in excess of costs and estimated earnings (Notes 2 and 4) - 19,262 Loan - Officer 146,175 323,504 Loans - Miscellaneous 290,000 135,000 $ 663,034 $ 733,559 STOCKHOLDERS' EQUITY (NOTE 7): Common stock - $.01 par value, authorized 16,000,000 shares; issued and outstanding 15,274,447 and 12,274,447 at December 31, 1995 and 1994 respectively 152,745 122,744 Additional paid-in capital 3,147,227 3,027,227 Accumulated deficit (3,480,779) (3,555,411) (180,807) (405,440) $ 482,227 $ 328,119
See accompanying notes to financial statements. STATEMENTS OF OPERATIONS For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993 AUDITED Unaudited Unaudited Net sales (Notes 2 and 5) $ 1,568,748 $ 537,696 $ 826,337 Cost of sales 924,011 294,770 419,522 Gross profit 644,737 242,926 406,815 Selling, general and administrative expenses 556,481 394,109 374,593 Operating income (loss) 88,256 (151,183) 32,222 Other income (expense): Interest income - - 15 Interest expense (47,724) (25,163) (22,216) Gain on sale of asset 5,000 10,500 (9,400) (42,724) (34,563) (11,701) Income (loss) before income taxes and extraordinary items 45,532 (185,746) 20,521 Provision for income taxes (Notes 2 and 7) 1,400 349 366 Income (loss) for the year $ 45,183 $ (186,112) $ 19,121 Earnings per share of common stock (Note 2) Net income (loss) per share $0.00 ($0.01) $0.00
See accompanying notes to financial statements. STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 1995, 1994, and 1993 COMMON STOCK
Paid In Number Capital In Total Of Excess of Stockholder's Accumulated SHARES Amount Par Value Equity Deficit Balance December 31, 1992 12,274,447 122,744 3,027,227 $ (187,212) $ (3,337,183) Net income for the year 19,121 19,121 - - - Balance December 31, 1993 12,274,447 122,744 3,027,227 $ (168,091) $ (3,318,062) Net loss for the year - - - (160,028) (195,513) Balance December 31, 1994 12,274,447 122,744 3,027,227 $ (328,119) $ (3,513,575) Net income for the year 3,000,000 30,000 120,000 $ 45,183 $ 195,183 Balance December 31, 1995 15,274,447 152,744 3,147,227 $ (282,936) $ (3,318,392)
See accompanying notes to financial statements. STATEMENTS OF CASH FLOWS For The Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993 AUDITED Unaudited Unaudited Cash flows from operation activities: Income (loss) before extraordinary item $ 45,183 $ (154,362) $ 19,121 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Write off of capitalized software - 6,212 - Depreciation and amortization 42,057 (14,666) 55,000 Provision for doubtful accounts - - - (Increase) decrease in: Accounts receivable (103,532) (148,503) (3,393) Inventories (174) 358 274 Prepaid expenses (6,380) - 1,275 Costs and estimated earning in excess - - - Other assets (4,755) - - Increase (decrease) in: Checks drawn in excess of deposits 34,148 (18,059) Accounts payable (69,975) (4,484) (63,561) Accrued expenses 55,658 33,678 (9,416) Billings in excess of costs and estimated earnings - (19,262) (65,861) (87,101) (112,519) (103,741) Cash flows from investing activities: Capital expenditures (65,739) (62,819) (67,291) (65,739) (62,819) (67,291)
See accompanying notes to financial statements. STATEMENTS OF CASH FLOWS, (CONT'D)
1995 1994 1993 AUDITED Unaudited Unaudited Cash flows from financing activities: Loans from shareholders $ (8,268) $ 295,107 $ 163,398 Proceeds from demand loan 55,000 - - Proceeds from line of credit 100,000 - - Payments of long-term debt - - (10,671) Payments of capital lease obligations - - (1,050) 146,732 295,107 151,677 Net increase (decrease) in cash and cash equivalents $ 39,075 $ (34,593) $ 189 Cash and cash equivalents at beginning of year (34,370) 223 34 Cash and cash equivalents at end of year $ 4,705 $ (34,370) $ 223 Supplemental disclosure of cash flow information: Cash paid during the year for $ 34,730 $ 25,163 $ 22,216 interest Cash paid during the year for income taxes $ 366 $ 748 $ 1,400
See accompanying notes to financial statements. NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS The Company provides training and information communication services, including instructional design and training program development; video production and post production; graphics and animation; and software design and programming for computer based training and interactive simulations. As shown in the financial statements as of December 31, 1995, the Company's accumulated deficit was $3,480,779 including total net losses for the three-year period ended December 31, 1995 of $121,818. During 1995, there was an increase in working capital of $162,804 and as of the date of this financial statement, the Company had borrowed $146,175 from a shareholder at prime plus 2%. The financial statements have been prepared in accordance with generally accepted accounting principles. Management of the Company has a plan to improve liquidity and attain future profitable operations. The plan includes aggressive marketing of company capabilities and services to interactive multi-media markets. Management believes that the operations of the Company will provide sufficient cash flow to fund its on-going operations, if the objectives of their plan are attained. The continued support and forbearance of the Company's creditors will also be required. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) INVENTORY Inventories are stated at the lower of cost, using the first- in, first-out (FIFO) method, or market. b) PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are stated at cost. Property and equipment under capital leases are stated at the lower of the present value of minimum lease payments at the beginning of the lease term or fair market value at the inception of the lease. Normal repairs and maintenance are charged to operations as incurred. Depreciation is calculated using straight-line and declining- balance methods over the estimated useful lives of the assets. Equipment held under capital leases is amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. The estimated useful lives are as follows: Leasehold improvements 5-10 years Production equipment 5-7 years Office furniture and equipment 5-8 years c) REVENUE RECOGNITION Revenue is recognized upon the completion and delivery to the customer of products and services except for long-term contracts (usually three to sixteen months in duration), for which revenue is recognized on the percentage-of-completion method as the contracts progress. d) INCOME TAXES Certain income and expense items are accounted for in different periods for financial and tax reporting purposes. These timing differences consist primarily of different methods of accounting for depreciation and any unrealized gain or loss on the U.S. Government Mutual Fund. e) EARNINGS PER COMMON SHARE Net income per share is based on the weighted average number of common shares and common share equivalents (stock operation and warrants with a dilutive effect) outstanding during each period. The weighted average number of common and common equivalent shares outstanding during 1995 was 15,274,447 and during 1994 and 1993 was 12,274,447 each year. f) Reclassifications Certain items in the 1995 and 1994 financial statements were reclassified for comparative purposes and do not affect the 1995 and 1994 net income (loss) as originally reported. 3. LEASES AND LEASE COMMITMENTS At December 31, 1995, there was no equipment under capital lease agreements. At December 31, 1994, there was no equipment under capital lease agreements. At December 31, 1993, there was no equipment under capital lease agreements The company leases office space under a non-cancelable lease which required minimum monthly payments of approximately $6,288 through July, 1997. In December, 1995, the Company signed for additional office space of approximately 2300 square feet at $3,000/mo. with a one (1) year commitment beginning January 1, 1996. Total rental expense under noncancellable operating leases for office facilities and equipment amounted to $78,736 in 1995, $74,485 in 1994, and $76,348 in 1993. 4. CONTRACTS IN PROGRESS As of December 31, 1995, the company had a signed backlog of $350,000. Accumulated costs and estimated earnings and billings on contracts in progress at December 31, 1994 and 1993 are as follows: 1995 1994 Accumulated costs and estimated earnings $N/A $ 0 Less: Billings N/A 19,262 $N/A $19,262 Contracts in progress are included in the accompanying balance sheets under the following captions: 1995 1994 Costs and estimated earnings in excess of billings $0 $0 Billings in excess of costs and estimated earnings 0 19,262 $0 $19,262 5. SIGNIFICANT CUSTOMERS AND ACCOUNTS RECEIVABLE The Company has received approximately 30% of its revenue from a Fortune 50 company. The Company by the end of 1995 was in the process of negotiating a contract with some of the same customers for 1996. There were four (4) significant customers in accounts receivable as of December 31, 1995. 6. STOCK OPTIONS AND WARRANTS A summary of stock option and warrant transactions during 1995 and 1994 is as follows: WARRANTS OPTIONS $.72 $.375 $.25 $.04 $1.00 $.01 Outstanding December 31, 1994 Outstanding December 31, 1995 470,000 Options to purchase a total of 105,000 shares were issued under the Company's 1986 Incentive Stock Option Plan for officers and key employees. These options are exercisable at $.04 per share. This plan authorized the issuance of options to purchase up to 200,000 shares of the Company's common stock. Options under the 1986 Incentive Stock Option Plan are granted at the discretion of the Board of Directors. The exercise price of the options is the fair market value of the Company's common stock at the date of grant, or 110 percent of fair market value for grants to employees with stockholdings greater than 10 percent. Options can be exercised in installments over a three-year period beginning one year from the date of grant. The options expire 10 years from the date of grant with the exception of options issued to more than 10 percent stockholders, which expire five years from the date of grant. Options to purchase a total of 365,000 shares were issued under the 1987 Stock Option Plan to two members of the Board of Directors, two individuals who loaned the Company money in the past three years, and one other individual, who is a partner of the Corporation's general counsel. Those options are exercisable at $.04 per share. In December, 1995, $150,000 of the Officer Loan was converted to 3,000,000 shares of stock. Total shares of common stock reserved for issuance under warrants and options plans at December 31, 1991 amounted to 725,000 shares. 7. INCOME TAXES For the year ended December 31, 1990, the Company recognized a federal income tax benefit of $4,700, from the utilization of net operating loss carryforwards. No federal income tax benefit was derived from the net operating losses in current in 1991 and 1989 as taxable income within the carryback period had previously been offset by net operating loss carryforwards. The actual federal income tax expense (benefit), before consideration of the effect of the loss carryforwards, differs from the expense (benefit) computed by applying the federal corporate tax rate of 34 percent to earnings (loss) before income taxes and extraordinary credit in 1995, 1994 and 1993 as follows:
1995 1994 1993 Expected federal income tax expense (benefit) at statutory rate $ 20,321 $ $ 0 0 Current year operating loss 0 0 0 Effect of graduated tax rates 366 1,400 0 $ $ 366 $ 1,400 0
The components of current income tax expense are as follows: 1995 1994 1993 Federal $ 0 $ 0 $ 0 State 349 366 1,400 $ 34 $366 $1,400 At December 31, 1995, the Company had net operating loss carryforwards for tax purposes of $3,436,120, which expire in 1999 through 2009 and investment credit carryforwards of $46,660 which expire in 1997 through 2009. Net operating loss carryforwards for financial statement purposes do not differ significantly from those for tax purposes. BONN, SHORTSLEEVE & CO. CERTIFIED PUBLIC ACCOUNTANTS 80 LINDEN OAKS OFFICE PARK ROCHESTER, NEW YORK 14625 _______________ (716) 381-9660 FAX: (716) 248-0603 To the Board of Directors J.A.M., Inc. Fairport, New York We have audited the accompanying balance sheets of J.A.M., Inc. (a C- corporation) as of December 31, 1995 and 1994, and the related statements of income (loss) and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsbility is to express an opinion on these financial statements based on our audits. Except as explained in the following paragraph, we conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. We did not substantiate the December 31, 1993 accounts receivable and accounts payable balances since that date was prior to our appointment as auditors for the Company. The accounts receivable and accounts payable balances as of December 31, 1993, enter into the determination of net income and cash flows for the year ended December 31, 1994. Because of the matter discussed in the preceding paragraph, the scope of our audit was not sufficient to enable us to express, and we do not express, an opinion on the results of operations and cash flows for the year ended December 31, 1994. In our opinion, the balance sheets of J.A.M., Inc. as of December 31, 1995 and 1994, and the related statements of income, deficit, and cash flows for the year ended December 31, 1995, present fairly, in all materials respects, the financial position of J.A.M., Inc. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the year ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Bonn, Shortsleeve & Co. March 5, 1996 -21- EX-27 9
5 THE DATA IN THIS SCHEDULE ARE EXTRACTED FROM THE COMPANY'S AUDITED 1995 FINANCIAL STATEMENTS AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000765449 J.A.M., INC. U.S. DOLLARS 12-MOS DEC-31-1995 JAN-1-1995 DEC-31-1995 1 4,705 0 289,873 1,747 2,988 302,199 729,440 560,631 482,227 663,034 0 0 0 (180,807) 0 482,227 1,568,748 1,568,748 924,011 1,480,492 42,724 0 47,724 45,532 349 45,183 0 0 0 45,183 0.00 0.00
-----END PRIVACY-ENHANCED MESSAGE-----