<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 18, 2000
(February 4, 2000)
takeoutmusic.com Holdings Corp.
(Exact Name of Registrant as Specified in Charter)
Washington 33307727 980138706
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
381 Broadway, Suite 201, New York, NY 10013
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 8710714
Shampan, Lamport Holdings Limited
1260609 Granville Street, Vancouver, B.C. V7Y 1G5
Former Name and Former Address (Changed Since Last Report)
<PAGE>
Item 1. Change in Control of Registrant.
On February 4, 2000, TOMCI Acquisition Corp. ("MergerSub"), a
wholly owned subsidiary of takeoutmusic.com Holdings Corp. (f/k/a Shampan,
Lamport Holdings Limited), a Washington corporation, (the "Company"), merged
(the "Merger") with and into takeoutmusic.com, Inc., a Delaware corporation
("takeoutmusic.com"), pursuant to an Agreement and Plan of Merger dated January
26, 2000 (the "Merger Agreement"). takeoutmusic.com is a development stage
company engaged in the business of developing and marketing musical recordings,
and offering such recordings by direct file transfer, or "downloading" to
consumers over the Internet. Following the Merger, the business to be conducted
by the Company will be the business conducted by takeoutmusic.com prior to the
Merger.
Pursuant to the terms of the Merger Agreement, the Company issued
10,046,344 shares of its authorized but unissued common stock to the former
holders of takeoutmusic.com common stock based on a conversion ratio of 1.15
shares of the Company's common stock for each share of takeoutmusic.com common
stock issued and outstanding as of the effective time of the Merger. The shares
issued to the former takeoutmusic.com stockholders represent approximately 80.5%
of the outstanding common stock of the Company following the Merger, and the
shareholders of the Company prior to the Merger represent approximately 19.5% of
the outstanding common stock of the Company following the Merger. Immediately
prior to the Merger, Sofisco Nominees Limited, Mori S. Ninomiya, John Lavallo,
Jason Brunka and Richard Pangilinan beneficially owned approximately 17.2%,
16.2%, 13.4%, 11.7% and 11.0% of takeoutmusic.com, respectively, on a fully
diluted basis.
In addition, all outstanding options and warrants to purchase
takeoutmusic.com common stock were converted into options and warrants to
purchase common stock of the Company. The sole outstanding warrant to purchase
an aggregate of 273,598 shares of takeoutmusic.com Common Stock at an exercise
price of $0.666667 was converted into a warrant to purchase an aggregate of
314,638 shares of the Company's Common Stock at an exercise price of $0.579710.
takeoutmusic.com employee stock options to purchase an aggregate of 392,000
shares of takeoutmusic.com Common Stock at an exercise price of $0.67 per share
were converted into options to purchase 450,800 shares of the Company's Common
Stock at an exercise price of $0.58 per share.
Item 2. Acquisition or Disposition of Assets.
See Item 1 above for a description of the Merger.
Item 5. Other Events.
In connection with the Merger, the Company changed its name to
"takoutmusic.com Holdings Corp." pursuant to the Articles of Amendment to the
Articles of Incorporation of the Company declared effective at 5:00 p.m. on
February 9, 2000 by the Secretary of State of the State of Washington. Effective
February 4, 2000, the Company's principal executive offices are located
<PAGE>
at 381 Broadway, Suite 201, New York, New York 10013. The Company's new
telephone number, effective February 4, 2000, is (212) 871-0714.
Also in connection with the Merger, Mori S. Ninomiya, John Lavallo and
Edwin O'Loughlin, designees of the former stockholders of takeoutmusic.com, were
elected to the Board of Directors of the Company and thereafter the existing
Directors of the Company tendered their own resignations from the Board of
Directors of the Company.
Item 7. Financial Statements
(a) Financial Statements of Business Acquired.
See index to financial statements
(b) Pro Forma Financial Information.
See index to financial statements
(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger(1)
2.2 List of Exhibits and Schedules to Agreement and Plan
of Merger
3.1 Articles of Amendment to Registrant's Articles of
Incorporation
- --------------------------------------------------------------------------------
(1) The Company undertakes to file supplementally a copy of any schedule to
the Agreement and Plan of Merger to the SEC upon request.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
takeoutmusic.com Holdings Corp.
/s/ MORI S. NINOMIYA
----------------------------------------
Name: Mori S. Ninomiya
Title: Chairman of the Board, President
and Chief Executive Officer
Dated: May 17, 2000
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TAKEOUTMUSIC.COM, INC.
<S> <C>
Report of Independent Public Accountants F-1
Balance Sheet as of December 31, 1999 F-2
Statement of Operations for the period from April 12, 1999 (Inception) to
December 31, 1999 F-3
Statement of Stockholders' Equity for the period from April 12, 1999 (Inception)
to December 31, 1999 F-4
Cash Flow Statement for the period from April 12, 1999 (Inception) to
December 31, 1999 F-5
Notes to Financial Statements F-6
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introduction to Pro Forma Financial Statements (Unaudited) F-14
Pro Forma Balance Sheet as of December 31, 1999 F-15
Pro Forma Income Statement for the year ended December 31, 1999 F-16
Notes to the Pro Forma Financial Statements F-17
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of takeoutmusic.com
We have audited the accompanying balance sheet of takeoutmusic.com, Inc. (a
Delaware corporation in the development stage) as of December 31, 1999, and the
related statement of operations, stockholders' equity and cash flows for the
period from April 12, 1999 (inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of takeoutmusic.com, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
period from April 12, 1999 (inception) to December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
New York, New York
May 12, 2000
F-1
<PAGE>
takeoutmusic.com, Inc.
(a development stage company)
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,105,898
Certificate of deposit 300,000
Other current assets 4,932
----------------
Total current assets 1,410,830
PROPERTY AND EQUIPMENT, net 81,619
OTHER ASSETS 5,707
----------------
Total assets $ 1,498,156
================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 92,514
Obligations under capital leases - current portion 12,869
----------------
Total current liabilities 105,383
Obligations under capital leases, less current portion 9,033
----------------
STOCKHOLDERS' EQUITY
Common Stock; $0.01 par value; 50,000,000 shares authorized,
10,046,344 issued and outstanding at December 31, 1999 100,464
Additional paid-in capital 1,643,579
Deferred compensation (34,312)
Accumulated deficit during development stage (325,991)
----------------
Total stockholders' equity $ 1,383,740
----------------
Total liabilities and stockholders' equity $ 1,498,156
================
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-2
<PAGE>
takeoutmusic.com, Inc.
(a development stage company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM APRIL 12,1999 (INCEPTION) TO DECEMBER 31, 1999
REVENUE $ -
OPERATING EXPENSES:
General and administration 172,482
Selling and marketing 63,771
Business development 42,541
Non-cash compensation expense 3,188
-------------
Total operating expenses (281,982)
INTEREST INCOME: 7,692
Net loss before income taxes (274,290)
-------------
Provision for income taxes -
Net loss $ (274,290)
=============
Loss per share
Basic and diluted- diluted $ (0.04)
Weighted average shares outstanding:
Basic and diluted 6,324,756
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
takeoutmusic.com, Inc.
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 12,1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Stock
------------ Additional Deferred Accumulated
Shares Amount Paid in Capital Compensation Deficit Total
------ ------ --------------- ------------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock to founders 5,750 $ 58 $ - $ - $ (8) $ 50
Stock Split - 900 to 1 5,169,250 51,693 - - (51,693) -
Proceeds from issuance of
common stock in connection with
private placement, net of
issuance costs of $15,668 1,725,004 17,250 77,082 - - 94,332
Proceeds from issuance of common
stock in connection with
private placement net of
issuance costs of $263,508 3,146,340 31,463 1,528,997 - - 1,560,460
Issuance of options to
consultants for services - - 37,500 (37,500) - -
Amortization of deferred compensation - - - 3,188 - 3,188
Net loss for the year ended
December 31, 1999 - - - - (274,290) (274,290)
---------- --------- ----------- -------- --------- ---------
BALANCE AT DECEMBER 31, 1999 10,046,344 $ 100,464 $ 1,643,579 (34,312) (325,991) 1,383,740
========== ========= =========== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
takeoutmusic.com, Inc.
(a development stage company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM APRIL 12, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (274,290)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 6,044
Non-cash compensation expense 3,188
Increase in other asset (10,639)
Increase in accounts payable and accrued expenses 92,514
---------------
Net cash used in operating activities (183,183)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short term investments (300,000)
Capital expenditures (35,864)
Capitalization of web-site development costs (26,170)
Payment of capital lease liabilities (3,727)
---------------
Net cash used in investing activities (365,761)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions on initial capitalization 50
Proceeds from issuance of stock, net of issuance costs 1,654,792
---------------
Net cash provided by financing activities 1,654,842
---------------
Net increase in cash and cash equivalents 1,105,898
Cash and cash equivalents, beginning of period -
---------------
Cash and cash equivalents, end of period $ 1,105,898
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
1. THE COMPANY
takeoutmusic.com, Inc. (the "Company" or "takeoutmusic.com"), a Delaware
corporation, was incorporated on April 12, 1999. The Company is in the
development stage and is engaged in the business of developing and marketing
musical recordings, and offering such recordings by direct file transfer, or
"downloading" to consumers over the Internet on its websites. The sites employ a
record industry accepted technology licensed from Liquid Audio that allows
downloads of samples and full songs directly from its website to PC player
programs, CD recorder devices, and portable digital music players. The company
also undertakes internet and traditional marketing activities for third party
companies. The Company operates within one industry segment.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Risks and Uncertainties
The Company is in the development stage and is subject to various risks,
including the need for additional financing, dependence on key personnel and the
establishment of its operations as a viable business model. Furthermore, the
Company is subject to the risks and uncertainties associated with Internet
commerce.
Revenue Recognition
Advertising, marketing and promotion revenues will be derived principally from
short-term agreements. These revenues will be generally recognized ratably over
the term of the agreements, provided the Company has no significant obligations
and collection of receivable is probable. Revenue from music downloads and
merchandise sales will be recognized in the period in which the download or
shipment occurs.
Advertising Costs
Advertising costs are expensed as incurred. The Company expenses the production
costs of advertising the first time the advertising takes place. For the period
from inception (April 12, 1999) to December 31, 1999 advertising costs were
approximately $41,000.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts of the Company's accounts receivable, accounts payable,
accrued liabilities and debt approximate fair market value based upon the
relatively short-term nature of these financial instruments.
F-6
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and are
depreciated on the straight-line method over the estimated useful lives of the
assets, ranging from three to five years. Expenditures for maintenance and
repairs are charged to operations as incurred.
Software Costs
In accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", issued in March 1998
and adopted by the Company, external direct costs of materials and services
incurred in connection with developing or obtaining internal use software and
payroll costs of employees working solely on the application development stage
of the project have been capitalized. Such costs will be amortized using the
straight-line method over an estimated useful life of 3 years beginning when the
software is ready for its intended use or over its known useful life, whichever
is shorter.
The Company accounts for long-lived assets in accordance with the provisions of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed
of" ("SFAS 121"). This statement establishes financial accounting and reporting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of. SFAS
121 requires, among other things, that the entity review its long-lived assets
and certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable.
Organization Costs
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up
Activities." This SOP requires costs of start-up activities and organization
costs to be expensed as incurred. The Company has adopted SOP 98-5 and expensed
all costs as incurred.
Income Taxes
Income taxes are calculated using the liability method of accounting for income
taxes specified by SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Deferred income
taxes are recognized for the tax consequences of temporary differences between
the financial statements and income tax bases of assets, liabilities and
carryforwards using enacted tax rates. Valuation allowances are established when
necessary, to reduce deferred tax assets to the amount expected to be realized.
Realization is dependent upon future pre-tax earnings, the reversal of temporary
differences between book and tax income, and the expected tax rates in effect in
future periods.
Stock-based Compensation
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, encourages entities to
recognize compensation costs for stock-based employee compensation plans using
the fair value based method of accounting defined in SFAS No. 123, but allows
for the continued use of the intrinsic value based method of
F-7
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
accounting prescribed by Accounting Principles Board (APB) Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The Company continues to use the
accounting prescribed by APB Opinion No. 25 and as such is required to disclose
pro forma net income and earnings per share as if the fair value based method of
accounting had been applied.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No.133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 will be
effective for fiscal years beginning after June 15, 2000. The Company is
currently evaluating the impact of the adoption of SFAS 133 on its financial
position and results of operations.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and Equipment consists of the following:
<S> <C>
Computer equipment $ 52,836
Web site development costs 26,170
Office equipment and furniture 8,657
-----------
87,633
Less- accumulated depreciation and amortization (6,044)
===========
Net $ 81,619
===========
</TABLE>
4. ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses consist of the following:
<S> <C>
Professional fees $ 73,284
Accrued payroll taxes 1,909
Other 17,321
----------
$ 92,514
==========
</TABLE>
5. INCOME TAXES
As of December 31 1999, the Company has estimated tax net operating loss
carryforwards of approximately $274,000 which begin to expire in 2020. The
Company has recorded a deferred tax asset offset by a valuation allowance
of approximately $274,000 because of uncertainty regarding their future
realizability. A change in control, as defined in Internal Revenue Code Section
382 could limit the Company's ability to utilize its tax net operating loss
carryforwards.
F-8
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
6. COMMITMENTS AND CONTINGENCIES
Leases
takeoutmusic.com leases office space, certain computer equipment and office
equipment and furniture under noncancellable leases expiring through fiscal
2001. As of December 31, 1999, future net minimum lease payments were as
follows:
Capital Operating
Fiscal Year Lease Lease
----------- ----------- -------------
2000 $ 13,775 $ 15,433
2001 9,395 -
---------- -------------
Total minimum lease payments 23,170 15,433
Less: amounts representing interest (1,268)
Present value of minimum lease payments $ 21,902
----------
Current portion $ 12,869
----------
Long-term $ 9,033
==========
Operating lease expense for the period ended December 31, 1999 was $9,508 under
noncancellable operating leases.
In August 1999, the Company entered into an operating lease for its current
facility in New York. The lease expires on July 31, 2000 and the Company has not
yet identified an alternative location.
License Agreements
takeoutmusic.com had entered into license agreements with approximately 75
recording artists at December 31, 1999. The agreements allow takeoutmusic.com to
make recordings available for sale via internet download. If the Artist links
any Artist-controlled website to the takeoutmusic.com site, takeoutmusic.com is
entitled to a royalty on all sales of sound recordings or merchandise to
visitors who enter the Artist-controlled site through the takeoutmusic.com site.
The Company pays royalties to the Artists on digital downloads from the
takeoutmusic.com website, less a distribution fee to Liquid Audio. The Company
also receives royalties on sales of recordings through the Liquid Audio Network,
a portion of which remitted to the Artist.
Consulting Agreements
During 1999, the Company entered into consulting agreements with four of its
advisors to the Board of Directors, which will continue for one year subject to
renewal. The compensation under the agreement consists of initial grants of
25,000 stock options to each advisor at an exercise price of $0.67 per share and
annual grants of 5,000 stock options commencing two years after the initial
grant. The exercise price of the subsequent grants will be the then fair market
value. The initial options vest ratably over two years, provided that the
advisors are still providing consulting services to the Company and all stock
options including the additional annual grants will terminate six years after
the date of the initial option grant. During the period ended December 31, 1999,
the Company issued $33,000 of grants determined using the Black-Scholes option
pricing model, of which $2,063 was charged to expense.
F-9
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
During 1999, the Company entered into consulting agreements with two independent
contractors. The compensation under the agreement consists of nonqualified stock
options to purchase 5,000 shares each of common stock at an exercise price of
$0.67 per share. The options vest on October 1, 2000. The options will expire on
the earlier of 10 years from the date of grant or 3 months after grantee is no
longer employed or associated with the Company. During the period ended December
31, 1999, the Company issued $4,500 of grants determined using the Black-Scholes
option pricing model, of which $1,125 was charged to expense.
7. INCENTIVE COMPENSATION PLAN
On July 16, 1999, the Company adopted the 1999 Incentive Compensation Plan (the
"Plan"), under which incentive stock options, stock appreciation rights,
restricted stock units, stock awards or cash awards may be granted to
executives, employees, directors and other persons who provide services to the
Company, to the extent deemed appropriate by the Compensation Committee of the
Board of Directors. An aggregate of 1,200,000 shares of common stock of the
Company have been reserved for delivery in connection with Awards under the
Plan.
Pursuant to SFAS 123, the Company has elected to account for the 1999 Plan under
APB No. 25, under which no compensation expense is recognized for unit option
awards granted at or above fair market value. As the exercise price of all
options granted during 1999 equaled or was greater than the fair market value,
no deferred compensation expense was recorded. Under SFAS No. 123, compensation
cost is measured at the grant date based on the fair value of the award and is
recognized over the service (or vesting) period.
Had the Company recognized compensation expense in accordance with SFAS 123, the
Company's net loss would have been changed to the following pro forma amounts
for the period from inception (April 12, 1999) to December 31, 1999.
1999
----
Net loss, as reported $ (274,290)
Net loss, pro forma (389,171)
Under SFAS No. 123, the fair value of each option is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1999: (1) expected life of option of five
to ten years; (2) dividend yield of 0%; (3) expected volatility of 46%; and (4)
risk-free interest rate of 6%.
F-10
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
Following is a summary of the Company's stock option activity from the period of
inception (April 12, 1999) to December 31, 1999-
<TABLE>
<CAPTION>
December 31, 1999
------------------------------
Weighted
Average
Options Exercise Price
--------- --------------
<S> <C> <C>
Outstanding at beginning of period - $-
Granted 628,000 0.67
Canceled - -
Terminated - -
Exercised - -
Outstanding at end of period 628,000 $0.67
======== ========
Options exercisable at end of period - -
Weighted average fair value of
options granted $ 0.42
</TABLE>
8. STOCKHOLDER'S EQUITY
Change in Authorized Number of Shares
In June 1999, the Company amended its Certificate of Incorporation to increase
the number of authorized shares of common stock to 50,000,000 from 5,000 and to
change the par value from no par value to par value per share of $0.01.
Stock Split
Effective June 1999, the Company authorized a 900-for-1 stock split of common
shares.
Private Placement
In July 1999, the Company issued 1,725,004 shares of its common stock in a
private placement receiving net proceeds of $94,332 (after issuance costs of
approximately $16,000).
In December 1999, the Company issued 3,146,340 shares of its common stock in a
private placement receiving net proceeds of $1,560,460 (after issuance costs of
approximately $264,000).
Warrant
In connection with the December private placement, takeoutmusic.com issued a
warrant to purchase an aggregate of 314,638 shares of takeoutmusic.com Common
Stock to their placement agent at an exercise price of $0.67. The warrants are
exercisable from the closing of the private placement (December 28, 1999). The
expiration date of the warrant is December 28, 2004.
F-11
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
The fair value of the warrant granted, using the Black-Scholes option pricing
model with the following assumptions: dividend yield of 0%, volatility of 46%,
risk-free interest rate of 6.49% and expected life of five years, was $89,778.
takeoutmusic.com has recorded this as a transaction cost associated with the
private placement.
9. SUBSEQUENT EVENTS
Merger with Shampan Lamport Holdings Limited
On February 4, 2000, TOMCI Acquisition Corp., ("MergerSub"), a Delaware
corporation and a wholly owned subsidiary of Shampan Lamport Holdings Limited
("Shampan"), a Washington corporation, merged with and into takeoutmusic.com,
Inc., a Delaware corporation ("takeoutmusic.com"), pursuant to an Agreement and
Plan of Merger dated January 26, 2000 (the "Merger Agreement"). takeoutmusic.com
was the surviving corporation in the merger. In connection with the Merger,
Shampan changed its name to takeoutmusic.com Holdings Corp.
Pursuant to the terms of the Merger Agreement, Shampan issued 10,046,344 shares
of its authorized but previously unissued common stock to the former holders of
takeoutmusic.com common stock based on a conversion ratio of 1.15 shares of
Shampan's common stock for each share of takeoutmusic.com common stock issued
and outstanding as of the effective time of the Merger. The shares issued to the
former takeoutmusic.com stockholders represent approximately 80.5% of the
outstanding common stock of Shampan following the Merger, and the shareholders
of Shampan prior to the Merger represent approximately 19.5% of the outstanding
Common Stock of Shampan following the Merger. The merger was accounted for as a
capital transaction which is equivalent to the issuance of stock by
takeoutmusic.com for Shampan's net liabilities of approximately $275,000,
accompanied by a recapitalization of takeoutmusic.com. All share and per share
information included in these financial statements has been adjusted
retroactively to reflect the recapitalization.
In addition, all outstanding options and warrants to purchase takeoutmusic.com
common stock were converted into options and warrants to purchase common stock
of Shampan. The sole outstanding warrant to purchase an aggregate of 273,598
shares of takeoutmusic.com common stock at an exercise price of $0.67 was
converted into a warrant to purchase an aggregate of 314,638 shares of Shampan'
common stock at an exercise price of $0.58. takeoutmusic.com employee stock
options to purchase an aggregate of 733,000 shares of takeoutmusic.com common
stock at an exercise price of $0.67 per share were converted into options to
purchase 842,950 shares of Shampan' common stock at an exercise price of $0.58
per share.
In addition, the 1999 Incentive Compensation Plan (the "Plan") to grant options
to purchase takeoutmusic.com common stock were converted into the 1999 Incentive
Plan to purchase common stock of Shampan.
Fulfillment Center Agreement
In April, 2000, takeoutmusic.com entered into an agreement with Baker & Taylor,
Inc. ("B&T"), a third party service organization whereby B&T provides
takeoutmusic.com with drop ship distribution services in support of
takeoutmusic.com's retail operations, for an initial period of one year,
renewable annually for a total of five years. All aspects relating to
fulfillment of customer orders are handled by B&T following receipt of customers
orders from takeoutmusic.com, including processing of customer orders and
shipment of merchandise.
F-12
<PAGE>
takeoutmusic.com inc.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 12, 1999
(INCEPTION) TO DECEMBER 31, 1999
In consideration for performance of the services provided by B&T during the
contract term, takeoutmusic.com paid an initial start- up fee and will be
charged on a fee-for-service basis.
F-13
<PAGE>
takeoutmusic.com, Inc. and Shampan Lamport Holdings Limited
Introduction to Pro Forma Financial Statements (unaudited)
On February 4, 2000, Shampan Lamport Holdings Limited, ("Shampan"), a Washington
corporation, merged with and into takeoutmusic.com, Inc., a Delaware corporation
("takeoutmusic.com"), pursuant to an Agreement and Plan of Merger dated January
26, 2000 (the "Merger Agreement"). Takeoutmusic.com was the surviving
corporation in the merger. In connection with the Merger, Shampan changed its
name to takeoutmusic.com Holdings Corp.
Pursuant to the terms of the Merger Agreement, each share of takeoutmusic.com
common stock issued and outstanding was exchanged for Shampan common stock based
on a conversion ratio of 1.15 shares of Shampan's common stock for each share of
takeoutmusic.com common stock. As a result of the merger, the takeoutmusic.com
Stockholders collectively acquired approximately 10,046,344 shares of Shampan
Common Stock or approximately 80.5% of the outstanding common stock of Shampan.
In addition, all outstanding options and warrants to purchase takeoutmusic.com
common stock were converted into options and warrants to purchase common stock
of the Company. The merger will be accounted for as a capital transaction, which
is equivalent to the issuance of stock by takeoutmusic.com for Shampan's net
liabilities of approximately $275,000, accompanied by a recapitalization of
takeoutmusic.com.
The accompanying unaudited pro forma balance sheet presents the financial
position of takeoutmusic.com and Shampan as of December 31, 1999, assuming the
merger has been completed as of the balance sheet date. The unaudited pro forma
statement of operations for the year ended December 31, 1999 for
takeoutmusic.com and Shampan reflect the merger as if the merger had been
completed on the first day of the fiscal year presented. The historical
statements of operations for the year ended December 31, 1999 have been derived
from the audited financial statements of Shampan included in its Annual Report
on Form 10-KSB, Registration Number 333-07727 which is incorporated herein by
reference, and takeoutmusic.com's audited statement of operations for the period
ended December 31, 1999.
The unaudited pro forma financial statements are not indicative of the results
that actually would have occurred had the acquisition taken place at the
beginning of the period or of results that may be obtained in the future.
New York, New York
- --------------
F-14
<PAGE>
takeoutmusic.com, Inc. and Shampan Lamport Holdings Limited
BALANCE SHEET
DECEMBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
Takeout Shampan Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,105,898 $ 8,497 $ - $ 1,114,395
Certificate of Deposits 300,000 - - 300,000
Other current assets 4,932 - - 4,932
---------------- --------------- ---------------- ---------------
Total current assets 1,410,830 8,497 - 1,419,327
PROPERTY AND EQUIPMENT, net 81,619 - - 81,619
OTHER ASSETS 5,707 - - 5,707
---------------- --------------- ---------------- ---------------
Total assets $ 1,498,156 $ 8,497 $ - $ 1,506,653
================ =============== ================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 92,514 $ 32,686 $ - $ 125,200
Current portion of capital lease obligation 12,869 - - 12,869
Notes Payable - 67,500 - 67,500
---------------- --------------- ---------------- ---------------
Total current liabilities 105,383 100,186 - 205,569
CAPITAL LEASE OBLIGATION, less current portion 9,033 - - 9,033
NOTES PAYABLE TO SHAREHOLDER - 183,000 - 183,000
---------------- --------------- ---------------- ---------------
Total liabilities 114,416 283,186 - 397,602
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 100,464 24,389 (87,360) (b) 137,956
100,463 (a)
Additional paid-in capital 1,643,579 4,949,776 (5,248,854) (c) 1,331,398
87,360 (b)
(100,463) (a)
Accumulated deficit (325,991) (5,248,854) 5,248,854 (c) (325,991)
Deferred compensation (34,312) - - (34,312)
---------------- --------------- ---------------- ---------------
Total stockholders' equity 1,383,740 (274,689) - 1,109,051
---------------- --------------- ---------------- ---------------
Total liabilities and
stockholders' equity
(deficit) $ 1,498,156 $ 8,497 $ - $ 1,506,653
================ =============== ================ ===============
DECEMBER 31, 1999
</TABLE>
F-15
<PAGE>
takeoutmusic.com, Inc. and Shampan Lamport Holdings Limited
INCOME STATEMENT
DECEMBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Takeout Shampan Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATING EXPENSES $ 281,982 $ 78,170 $ - $ 360,152
-------------- -------------- ---------------- --------------
LOSS FROM OPERATIONS (281,982) (78,170) - (360,152)
INTEREST INCOME (EXPENSE) 7,692 (12,937) - (5,245)
-------------- -------------- ---------------- --------------
Net loss $ (274,290) $ (91,107) $ - $ (365,397)
============== ============== ================ =============
NET LOSS PER COMMON SHARE:
(BASIC AND DILUTED) $ (0.04) $ (0.04) $ (0.04)
============== ============== =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(BASIC AND DILUTED) 6,324,756 2,328,363 8,653,119
</TABLE>
F-16
<PAGE>
takeoutmusic.com, Inc. and Shampan Lamport Holdings Limited
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,1999
(unaudited)
1. BASIS OF PRESENTATION
The pro forma balance sheet combines the balance sheets of takeoutmusic.com,
Inc. ("takeoutmusic.com") and Shampan Lamport Holdings Limited ("Shampan") as of
December 31, 1999, assuming the merger has been completed as of the balance
sheet date. The pro forma statement of operations for the year ended December
31, 1999 combines the statement of operations of takeoutmusic.com for the period
from inception (April 12, 1999) until December 31, 1999 with the statement of
operations of Shampan for the year ended December 31, 1999. The results of
operations of Shampan for the period from January 1, 2000 to February 4, 2000
were not material. The pro forma statement of operations reflects the merger, as
if the merger had occurred on the first day of the fiscal year presented.
The historical balance sheets used in the presentation of the pro forma
financial statements have been derived from takeoutmusic.com's and Shampan's
audited financial statements as of December 31, 1999. The historical statements
of operations for the year ended December 31, 1999 have been derived from
takeoutmusic.com's and Shampan's audited statements of operations.
2. UNAUDITED PRO FORMA ADJUSTMENTS
A description of the adjustments included in the unaudited pro forma financial
statements are as follows:
(a) Reflects the issuance of 10,046,344 shares of $0.01 par value common
stock of Shampan in exchange for the outstanding common shares of
takeoutmusic.com
(b) Reflects the elimination of takeoutmusic.com's common stock.
(c) Reflects the elimination of Shampan's accumulated deficit.
F-17
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
by and among
SHAMPAN, LAMPORT HOLDINGS LIMITED,
TOMCI ACQUISITION CORP.,
and
TAKEOUTMUSIC.COM, INC.
January 26, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
I. THE MERGER.............................................................2
Section 1.01 The Merger..................................................2
Section 1.02 Effective Time..............................................2
Section 1.03 Closing.....................................................3
Section 1.04 Certificate of Incorporation and By-Laws of the
Surviving Corporation............................................3
II. STATUS AND CONVERSION OF SECURITIES; OTHER AGREEMENTS..................3
Section 2.01 Common Stock of Takeoutmusic.com and the Merger-Sub.........3
Section 2.02 Takeoutmusic.com Options and Warrants.......................4
Section 2.03 Exchange of Takeoutmusic.com Capital Stock..................6
Section 2.04 Registration................................................7
Section 2.05 Board of Directors of the Parent............................7
III. REPRESENTATIONS AND WARRANTIES.........................................8
Section 3.01 Representations and Warranties of Takeoutmusic.com..........8
Section 3.02 Representations and Warranties of the Parent and the
Merger-Sub......................................................17
IV. COVENANTS.............................................................29
Section 4.01 Covenants of the Parent and the Merger-Sub.................29
Section 4.02 Covenants of Takeoutmusic.com..............................34
Section 4.03 British Columbia Reporting.................................38
Section 4.04 Amendment to Form 10-SB....................................38
V. CONDITIONS............................................................39
Section 5.01 Conditions to Each Party's Obligation to Effect the Merger.39
Section 5.02 Conditions to Obligations of the Parent and the Merger-Sub.40
Section 5.03 Conditions to Obligation of Takeoutmusic.com to Effect the
Merger..........................................................42
VI. TERMINATION...........................................................44
Section 6.01 Termination................................................44
Section 6.02 Effect of Termination......................................46
VII. MISCELLANEOUS.........................................................46
Section 7.01 Fees and Expenses..........................................46
Section 7.02 Further Actions............................................46
Section 7.03 Availability of Equitable Remedies.........................47
Section 7.04 Survival...................................................47
Section 7.05 Modification...............................................47
i
<PAGE>
Page
----
Section 7.06 Notices....................................................47
Section 7.07 Waiver.....................................................48
Section 7.08 Binding Effect.............................................49
Section 7.09 No Third-Party Beneficiaries...............................49
Section 7.10 Severability...............................................49
Section 7.11 Merger; Assignability......................................49
Section 7.12 Headings...................................................50
Section 7.13 Counterparts; Governing Law; Jurisdiction..................50
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
SHAMPAN, LAMPORT HOLDINGS LIMITED,
TOMCI ACQUISITION CORP.,
and
TAKEOUTMUSIC.COM, INC.
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is dated
as of January 26, 2000, by and among SHAMPAN, LAMPORT HOLDINGS LIMITED, a
Washington corporation, whose address is 1260 609 Granville Street, P.O. Box
10372 Pacific Center, Vancouver, British Columbia V7Y 1G5 (the "Parent"), TOMCI
ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of Parent,
whose address is 1260 609 Granville Street, P.O. Box 10372 Pacific Center,
Vancouver, British Columbia V7Y 1G5 (the "Merger-Sub") and TAKEOUTMUSIC.COM,
INC., a Delaware corporation, whose address is 381 Broadway, Suite 201, New
York, New York 10013 ("Takeoutmusic.com"). Takeoutmusic.com shall be the
surviving corporation of the proposed merger between the Merger-Sub and
Takeoutmusic.com and, in such capacity, Takeoutmusic.com shall sometimes be
referred to herein as the "Surviving Corporation."
W I T N E S S E T H:
-------------------
WHEREAS, the respective Board of Directors of the Parent, the
Merger-Sub and Takeoutmusic.com have determined that it is advisable and in the
best interests of their respective equity owners to consummate the business
combination transaction provided for herein in which the Merger-Sub would merge
(the "Merger") with and into Takeoutmusic.com; and
WHEREAS, Parent, the Merger-Sub and Takeoutmusic.com desire to
make certain agreements in connection with the Merger.
<PAGE>
NOW, THEREFORE, in consideration of the mutual premises,
covenants, and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
I. THE MERGER.
Section 1.01 The Merger.
At the Effective Time (as defined in Section 1.02), upon the
terms and subject to the conditions of this Agreement, the Merger-Sub shall be
merged with and into Takeoutmusic.com in accordance with the Delaware General
Corporation Law (the "DGCL"). Takeoutmusic.com shall be the surviving
corporation in the Merger, and the name of the Surviving Corporation shall be
"TAKEOUTMUSIC.COM, INC." As a result of the Merger, all outstanding shares of
capital stock of Takeoutmusic.com (the "Takeoutmusic.com Capital Stock"), and
any options, warrants or other securities convertible into Takeoutmusic.com
Capital Stock shall be converted in the manner provided in Article II.
Section 1.02 Effective Time.
At the Closing (as defined in Section 1.03), a certificate of
merger (the "Certificate of Merger") shall be duly prepared by the Surviving
Corporation and delivered to the Secretary of State of Delaware for filing as
provided in the DGCL, on, or as soon as practicable after, the Closing Date (as
defined in Section 1.03). The Merger shall become effective as soon as the
Certificate of Merger has been filed with the Secretary of State of Delaware
(the date and time when such condition has been satisfied being referred to
herein as the "Effective Time").
2
<PAGE>
Section 1.03 Closing.
The closing of the Merger (the "Closing") will take place at
the offices of Camhy Karlinsky & Stein LLP, 1740 Broadway, New York, New York
10019-4315 on or before February ___, 2000 (the "Closing Date"). At the Closing,
there shall be delivered to Takeoutmusic.com and the Parent the certificates and
other documents and instruments required to be delivered under Article V. The
Closing will be effective as of the Effective Time.
Section 1.04 Certificate of Incorporation and By-Laws of the Surviving
Corporation.
At the Effective Time, (i) the Certificate of Incorporation of
Takeoutmusic.com in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation and (ii) the By-Laws
of Takeoutmusic.com as in effect immediately prior to the Effective Time shall
be the By-Laws of the Surviving Corporation. The Certificate of Incorporation
and By-Laws of Takeoutmusic.com as in effect as of the date hereof and to be in
effect as of the Effective Time are attached hereto as Exhibits 1.04-1 and
1.04-2, respectively.
Section 1.05 Certificate of Incorporation and By-Laws of
the Parent The Certificate of Incorporation and the By-Laws of the Parent as in
effect on the date hereof and to be in effect as of the Effective Time are
attached hereto as Exhibits 1.05-1 and 1.05-2, respectively.
II. STATUS AND CONVERSION OF SECURITIES; OTHER AGREEMENTS.
Section 2.01 Common Stock of Takeoutmusic.com and the Merger-Sub.
(a) Each share of common stock, par value $.01 per share, of
the Merger-Sub outstanding immediately prior to the Closing shall remain
outstanding and shall, by virtue of the Merger and without any further action on
the part of the holders thereof, be converted into one (1)
3
<PAGE>
share of common stock, par value $.01 per share, of the Surviving Corporation
(the "Surviving Corporation Common Stock"), so that at the Effective Time, the
Parent shall be the holder of all of the issued and outstanding shares of the
Surviving Corporation Common Stock.
(b) Each share of common stock, par value $.01 per share, of
Takeoutmusic.com (the "Takeoutmusic.com Common Stock") issued and outstanding
prior to the Closing shall be converted into 1.15 shares of the Parent Common
Stock.
Section 2.02 Takeoutmusic.com Options and Warrants.
(a) Schedule 2.02(a) sets forth a true, correct and complete
list of all outstanding options (the "Takeoutmusic.com Options") to acquire
shares of Takeoutmusic.com Common Stock granted pursuant to the Takeoutmusic.com
1999 Incentive Compensation Plan (the "Stock Option Plan") or otherwise, the
dates on which such Takeoutmusic.com Options were granted, the number of
outstanding Takeoutmusic.com Options granted on each such date and the exercise
price thereof. A copy of the Stock Option Plan is attached hereto as Exhibit
2.02(a)-1.
(b) At the Effective Time, the Parent shall assume the Stock
Option Plan as its own plan (the "Parent Stock Option Plan") and one million
three hundred eighty thousand (1,380,000) shares of Parent Common Stock shall be
reserved for issuance of nonqualified and incentive stock options thereunder.
Parent shall issue options (the "Parent Stock Options") to the former holders of
the Takeoutmusic.com Options and the director nominees of the Parent as set
forth on Schedule 2.02(b).
(c) At the Effective Time, each outstanding Takeoutmusic.com
Option, whether vested or unvested, shall be cancelled and replaced with an
option (the "Substituted Option") to acquire, on the same terms and conditions
as were applicable under such Takeoutmusic.com Option,
4
<PAGE>
a number of shares of Parent Common Stock equal to the product (rounded down to
the nearest whole share) of (i) the number of shares of Takeoutmusic.com Common
Stock issuable upon exercise of the Takeoutmusic.com Option immediately prior to
the Effective Time and (ii) 1.15; and the option exercise price per share of
Parent Common Stock at which such option is exercisable shall be the amount
(rounded up to the nearest whole cent) obtained by dividing (x) the option
exercise price per share of Takeoutmusic.com Common Stock at which such option
is exercisable immediately prior to the Effective Time by (y) 1.15, pursuant to
the terms and conditions of the Parent Stock Option Plan; provided, however,
that, with respect to Substituted Options granted in respect of any
Takeoutmusic.com Option to which Section 421 of the Internal Revenue Code of
1986, as amended (the "Code") applies by reason of its qualification under any
of Sections 422-424 of the Code ("qualified stock options"), the option price,
the number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 425(a) of the Code.
(d) Schedule 2.02(d) sets forth a copy of the sole outstanding
warrant (the "Takeoutmusic.com Warrant") to acquire shares of Takeoutmusic.com
Common Stock. Takeoutmusic.com obtain and deliver to the Parent, prior to the
Effective Time, an executed consent (the "Warrant Consent") relating to the
cancellation of the Takeoutmusic.com Warrant. As soon as practicable after the
Effective Time, the Takeoutmusic.com Warrant shall be cancelled and replaced
with a warrant (the "Substituted Warrant") to acquire, on the same terms and
conditions as were applicable under such Takeoutmusic.com Warrant, a number of
shares of Parent Common Stock equal to the product (rounded down to the nearest
whole share) of (i) the number of shares of Takeoutmusic.com Common Stock
issuable upon exercise of the Takeoutmusic.com Warrant
5
<PAGE>
immediately prior to the Effective Time and (ii) 1.15; and the warrant exercise
price per share of Parent Common Stock at which such Warrant is exercisable
shall be the amount (rounded up to the nearest whole cent) obtained by dividing
(x) the warrant exercise price per share of Takeoutmusic.com Common Stock at
which such warrant is exercisable immediately prior to the Effective Time by (y)
1.15. The Parent shall reserve the aggregate number of shares of Parent Common
Stock underlying such warrant for fulfillment thereof in the event such warrant
is exercised.
Section 2.03 Exchange of Takeoutmusic.com Capital Stock.
(a) The Parent shall authorize one or more persons to act as a
transfer and exchange agent hereunder (the "Exchange Agent") pursuant to an
agreement (the "Exchange Agent Agreement") in a form to be agreed upon by the
parties hereto. Promptly after the Closing, the Parent shall deposit or cause to
be deposited with the Exchange Agent the certificates representing the shares of
Parent Common Stock issuable to the holders of Takeoutmusic.com Capital Stock.
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Takeoutmusic.com Capital Stock (the "Takeoutmusic.com
Certificates"), a form letter of transmittal (which shall specify that delivery
shall be effective, and risk of loss and title to the Takeoutmusic.com
Certificates shall pass, only upon delivery of the Takeoutmusic.com Certificates
to the Exchange Agent) and instructions for such holder's use in effecting
surrender of the Takeoutmusic.com Certificates in exchange for certificates
representing shares of Parent Common Stock.
6
<PAGE>
(c) As of the Effective Time, each holder of a
Takeoutmusic.com Certificate shall surrender the same at the principal offices
of the Exchange Agent, and shall be entitled to receive in exchange therefor a
certificates of the Parent reflecting the amount of Parent Common Stock to be
received by such holder.
Section 2.04 Registration.
The Parent hereby expressly assumes the obligations of
Takeoutmusic.com under the Investors' Rights Agreement (the "IRA") dated
November 16, 1999 and December 30, 1999 among Takeoutmusic.com and purchasers of
the Takeoutmusic.com Common Stock listed on Exhibit A thereto (the "Investors"),
pursuant to Section 2.2 thereof. In the event the Investors exercise their right
to a demand registration, the Parent shall also (i) cause to be registered any
Parent Common Stock underlying the Parent Options and Substituted Warrant and
(ii) shall permit the holders of Parent Common Stock issued to the investors in
the July 16, 1999, private placement of 1,500,003 shares of Takeoutmusic.com
Common Stock to include such securities in such registration upon the terms and
conditions set forth in the IRA.
Section 2.05 Board of Directors of the Parent.
At the Effective Time, the existing directors of Parent shall
elect to the Board of Directors of the Parent between five (5) and seven (7)
nominees of the Former Takeoutmusic.com Stockholders, as designated by such
Former Takeoutmusic.com Stockholders, and immediately thereafter tender their
own resignations from the Board of Directors of Parent.
7
<PAGE>
III. REPRESENTATIONS AND WARRANTIES.
Section 3.01 Representations and Warranties of Takeoutmusic.com.
Takeoutmusic.com represents and warrants to the Parent and the
Merger-Sub as follows:
(a) Organization and Qualification. Takeoutmusic.com is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full power and authority to conduct its
business as and to the extent now conducted, and currently proposed to be
conducted, and to own, use and lease its assets and properties, except for such
failures to have such power and authority which, individually or in the
aggregate, do not and are not reasonably expected to have a Material Adverse
Effect (as defined in this Section 3.01(a)) on Takeoutmusic.com.
Takeoutmusic.com is duly qualified, licensed or admitted to do business and is
in good standing in New York. As used in this Agreement, a "Material Adverse
Effect" shall mean a material adverse effect on the businesses, properties,
assets, liabilities, condition (financial or otherwise) or results of operations
of an entity (or group of entities taken as a whole). Notwithstanding the
foregoing, a Material Adverse Effect shall not include any change in political
or economic matters of general applicability. Takeoutmusic.com does not directly
or indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
(b) Organizational Documents; Capital Stock; Capitalization.
(i) A true and complete copy of the Certificate of
Incorporation of Takeoutmusic.com as in effect on the date hereof has
been delivered to Parent.
8
<PAGE>
(ii) The authorized capital stock of Takeoutmusic.com
consists of 50,000,000 shares of Takeoutmusic.com Common Stock. As of
the date hereof, 8,754,733 shares of Takeoutmusic.com Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable. Takeoutmusic.com has heretofore delivered a true and
complete table of all of its stockholders.
(iii) Schedule 3.01(b)(iii) attached hereto sets
forth the number of shares of Takeoutmusic.com Common Stock reserved
for future issuance upon exercise of Takeoutmusic.com Options granted
and outstanding as of the date hereof and under the Stock Option Plan.
Except as disclosed in Schedule 2.02(a), since January 15, 2000,
through the date of this Agreement, Takeoutmusic.com has not made any
grants under the Stock Option Plan. Except as set forth on Schedule
2.02(a) and Schedule 2.02(d), there are no outstanding options,
warrants, calls, subscriptions, rights, agreements or other commitments
of any character (contingent or otherwise) of Takeoutmusic.com to
issue, sell, repurchase, redeem, or otherwise acquire any shares of
Takeoutmusic.com Capital Stock.
(iv) There are no debt obligations of
Takeoutmusic.com of any nature whatsoever except as set forth on
Schedule 3.01(b)(iv), and as of the Closing Date, Takeoutmusic.com will
not have any debt, liabilities, obligations, or contingent obligations
of any nature whatsoever, except as set forth on Schedule 3.01(b)(iv).
(c) Authority Relative to this Agreement. Takeoutmusic.com has
full power and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery, and performance of this Agreement by Takeoutmusic.com
and the consummation by Takeoutmusic.com of the Merger and the
9
<PAGE>
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Takeoutmusic.com, and upon the approval of the
stockholders of Takeoutmusic.com, no other proceedings on the part of
Takeoutmusic.com will be necessary to authorize the execution, delivery, and
performance of this Agreement by Takeoutmusic.com and the consummation by
Takeoutmusic.com of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Takeoutmusic.com, and
constitutes the legal, valid, and binding obligation of Takeoutmusic.com
enforceable against Takeoutmusic.com in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity (whether considered
in a proceeding at law or in equity).
(d) Non-Contravention; Approvals and Consents.
(i) The execution and delivery of this Agreement by
Takeoutmusic.com does not, and the performance by Takeoutmusic.com of
its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or
breach of, constitute (with or without notice or lapse of time or both)
a default under, result in or give to any person any right of payment
or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any lien,
claim, mortgage, encumbrance, pledge, security interest, equity, or
charge of any kind (any of the foregoing, a "Lien") upon any of the
assets or properties of Takeoutmusic.com under any of the terms,
conditions, or provisions of (x) the Certificate of Incorporation of
Takeoutmusic.com, (y) any statute, law, rule, regulation, or ordinance
(collectively, "Laws"), or any judgment, decree, order, writ, permit,
or license (collectively, "Orders"), of any court,
10
<PAGE>
tribunal, arbitrator, authority, agency, commission, official, or other
instrumentality of the United States, any foreign country, or any
domestic or foreign state, county, city, or other political subdivision
(a "Governmental or Regulatory Authority"), applicable to
Takeoutmusic.com or any of its assets or properties, or (z) any note,
bond, mortgage, security agreement, indenture, license, franchise,
permit, concession, contract, lease (capital or operating) or other
instrument, obligation, or agreement of any kind (collectively,
"Contracts") to which Takeoutmusic.com is a party or by which
Takeoutmusic.com or any of its assets or properties is bound, excluding
from the foregoing clauses (y) and (z) conflicts, violations, breaches,
defaults, terminations, modifications, accelerations and creations, and
impositions of Liens which, individually or in the aggregate, could not
be reasonably expected to have a Material Adverse Effect on
Takeoutmusic.com or on its ability to consummate the transactions
contemplated by this Agreement.
(ii) Except (x) for the filing of the Certificate of
Merger and other appropriate merger documents required by the DGCL with
the Secretary of State of Delaware, (y) as otherwise disclosed in
Schedule 3.01(d)(ii) hereto, and (z) for the approval of stockholders
of Takeoutmusic.com, no consent, approval, or action of, filing with,
or notice to any Governmental or Regulatory Authority or other public
or private third party is necessary or required under any of the terms,
conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any Contract to which Takeoutmusic.com is a
party or by which Takeoutmusic.com or any of its assets or properties
is bound for the execution and delivery of this Agreement by
Takeoutmusic.com, the performance by Takeoutmusic.com of its
obligations hereunder or the consummation of the transactions
11
<PAGE>
contemplated hereby, except for such consents, approvals, or actions
of, filings with or notices to any Governmental or Regulatory Authority
or other public or private third party the failure of which to make or
obtain could not reasonably be expected to have a Material Adverse
Effect on Takeoutmusic.com, the Surviving Corporation, or on
Takeoutmusic.com's ability to consummate the transactions contemplated
by this Agreement.
(e) Legal Proceedings. There are no actions, suits,
arbitrations, or proceedings pending, nor to the knowledge of Takeoutmusic.com,
threatened against, relating to or affecting, Takeoutmusic.com or any of its
assets and properties which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on Takeoutmusic.com or on the
ability of Takeoutmusic.com to consummate the transactions contemplated by this
Agreement. Takeoutmusic.com is not subject to any judgment, decree, court order,
or writ of any Governmental or Regulatory Authority.
(f) Patents, Trademarks, Intangibles. To the best of
Takeoutmusic.com's knowledge and belief, it has all right, title and interest
in, or a valid and binding license to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, franchises, trade secrets, computer programs (in object
or source code form), or other intangible property or asset (collectively,
"Intangibles") which individually or in the aggregate are material to the
conduct of its business. Attached as Schedule 3.01(f) is a true and complete
list of all material Intangibles of Takeoutmusic.com. Takeoutmusic.com is not in
default (or with the giving of notice or lapse of time or both, would be in
default) in any material respect under any license to use such Intangibles. To
Takeoutmusic.com's knowledge, no such Intangibles are being infringed by any
third party and, to Takeoutmusic.com's knowledge,
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Takeoutmusic.com is not infringing any Intangible of any third party, except for
such defaults and infringements which, individually or in the aggregate, do not
and are not reasonably expected to have a Material Adverse Effect on
Takeoutmusic.com or the Surviving Corporation.
(g) Financial Statements. Takeoutmusic.com has delivered to
the Parent and the Merger-Sub a true, correct and complete copy of the unaudited
financial statements of Takeoutmusic.com as of December 31, 1999 (the
"Takeoutmusic.com Balance Sheet"). The Takeoutmusic.com Balance Sheet fairly
presents the financial condition, assets, liabilities, and stockholders' equity
of Takeoutmusic.com as of such date.
(h) Absence of Certain Changes or Events. Except as set forth
in Schedule 3.01(h) hereto or as contemplated hereby, since December 31, 1999,
no change, event, or development or combination of changes or developments
(including any worsening of any condition currently existing) has occurred or is
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Takeoutmusic.com (without regard, however, to changes in
conditions generally applicable to the industry in which Takeoutmusic.com is
involved or general economic conditions).
(i) Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the Takeoutmusic.com Balance Sheet,
Takeoutmusic.com did not have at such date and has not incurred since that date,
any liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except liabilities or
obligations which were incurred in connection with this Agreement and the
transactions contemplated hereby, which were incurred in the ordinary course of
business consistent with past practice.
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(j) Information Supplied. Nothing in this Agreement or any
schedule, exhibit, certificate, document, or statement in writing which has been
supplied by or on behalf of Takeoutmusic.com, in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits any statement of a material fact required to be stated or
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to Takeoutmusic.com which materially and
adversely affects Takeoutmusic.com or the Surviving Corporation, which has not
been set forth in this Agreement or in the schedules, exhibits, certificates,
documents, or statements in writing furnished by Takeoutmusic.com in connection
with the transactions contemplated by this Agreement.
(k) Compliance with Laws and Orders. Takeoutmusic.com holds
all permits, licenses, variances, exemptions, orders, and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of its
business (the "Takeoutmusic.com Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders, and approvals which,
individually or in the aggregate, do not and are not reasonably expected to have
a Material Adverse Effect on Takeoutmusic.com. Takeoutmusic.com is in compliance
with the terms of the Takeoutmusic.com Permits, except failures so to comply
which, individually or in the aggregate, do not have and are not reasonably
expected to have a Material Adverse Effect on Takeoutmusic.com. Takeoutmusic.com
is not in violation of, or in default under, any Law or Order of any
Governmental or Regulatory Authority, except for violations which, individually
or in the aggregate, do not and are not reasonably expected to have a Material
Adverse Effect on Takeoutmusic.com.
(l) Compliance with Agreements; Certain Agreements. Neither
Takeoutmusic.com, nor to the knowledge of Takeoutmusic.com, any other party
thereto, is in breach
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or violation of, or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or lapse of time or
both, is reasonably expected to result in a default under, (x) the Certificate
of Incorporation of Takeoutmusic.com or (y) any material Contract to which
Takeoutmusic.com is a party or by which Takeoutmusic.com or any of its assets or
properties is bound, except in the case of clause (y) for breaches, violations,
and defaults which, individually or in the aggregate, do not and are not
reasonably expected to have a Material Adverse Effect on Takeoutmusic.com.
(m) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Takeoutmusic.com
and its affiliates directly with the Parent and the Merger-Sub without the
intervention of any person on behalf of Takeoutmusic.com and its affiliates in
such manner as to give rise to any valid claim by any person against
Takeoutmusic.com, the Parent, or the Surviving Corporation for a finder's fee,
brokerage commission, or similar payment.
(n) Consents Without Any Condition. Takeoutmusic.com has not
made any agreement or reached any understanding not approved by the Parent and
the Merger-Sub as a condition for obtaining any consent, authorization,
approval, order, license, certificate, or permit required for the consummation
of the transactions contemplated by this Agreement.
(o) Tax Matters.
(i) Takeoutmusic.com has filed all tax returns
required to be filed by applicable law prior to the Closing. All tax
returns were (and, as to tax returns not filed as of the date hereof,
will be) true, complete, and correct and filed on a timely basis.
Takeoutmusic.com (x) has paid all taxes due, or claimed or asserted in
writing by any taxing
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authority to be due, for the periods covered by such tax returns or (y)
has duly and fully provided reserves (in accordance with GAAP) adequate
to reflect all such taxes.
(ii) Takeoutmusic.com has established (and until the
Closing will maintain) on its books and records reserves adequate to
reflect all material taxes not yet due and payable. Takeoutmusic.com
has made available to the Parent and the Merger-Sub complete, and
accurate copies of all work papers associated with the calculation of
Takeoutmusic.com's tax reserves.
(iii) There are no tax liens upon the assets of
Takeoutmusic.com.
(iv) Takeoutmusic.com has not requested (and no
request has been made on its behalf) any extension of time within which
to file any material tax return.
(v) (A) No income tax returns have been examined by
any taxing authorities for any periods; and (B) no deficiency for any
material taxes has been suggested, proposed, asserted, or assessed
against Takeoutmusic.com that has not been resolved and paid in full.
(vi) No audits or other administrative proceedings or
court proceedings are presently pending with regard to any taxes or tax
returns of Takeoutmusic.com. No written claim has been made by a taxing
authority in a jurisdiction where Takeoutmusic.com does not file tax
returns such that it is or may be subject to taxation by that
jurisdiction.
(vii) To the extent requested by the Parent and the
Merger-Sub, Takeoutmusic.com has made available to the Parent and the
Merger-Sub (or, in the case of tax returns to be filed on or before the
Closing, will make available) complete and accurate
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copies of all tax returns and associated work papers filed by or on
behalf of Takeoutmusic.com for all taxable years ending on or prior to
the Closing.
(viii)No agreements relating to allocating or sharing
of any taxes have been entered into by Takeoutmusic.com.
(ix) Takeoutmusic.com has not entered into any
transactions that could give rise to an understatement of Federal
Income Tax.
(x) None of Takeoutmusic.com or any other person on
behalf of Takeoutmusic.com has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar
provisions of state, local or foreign law by reason of a change in
accounting method initiated by Takeoutmusic.com or has any application
pending with any taxing authority requesting permission for any change
in accounting methods that relate to the business or operations of
Takeoutmusic.com, and Takeoutmusic.com has no knowledge that the IRS
has proposed any such adjustment or change in accounting method.
(xi) Takeoutmusic.com has not been, and is not now, a
member of any consolidated, combined, unitary or affiliated group of
corporations for any tax purposes.
Section 3.02 Representations and Warranties of the Parent and the
Merger-Sub.
The Parent and the Merger-Sub represent and warrant to
Takeoutmusic.com as follows:
(a) Organization and Qualification. The Parent and the
Merger-Sub are corporations duly organized, validly existing, and in good
standing under the laws of Washington and Delaware, respectively, and have full
corporate power and authority to conduct their business as and to the extent now
conducted, and currently proposed to be conducted, and to own, use and
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lease their assets and properties. Except for the Parent's ownership of the
Merger-Sub, neither the Parent nor the Merger-Sub directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture, or other business association or entity.
(b) Organizational Documents; Capital Stock; Capitalization.
(i) Attached hereto as Exhibits 3.02(b)-1 and
3.02(b)-2, respectively, are true and complete copies of the
Certificate of Incorporation and By-Laws of the Merger-Sub as in effect
on the date hereof. Attached hereto as Exhibits 1.05-1 and 1.05-2,
respectively, are true and complete copies of the Certificate of
Incorporation and By-Laws of the Parent as in effect on the date
hereof.
(ii) As of the Closing Date, the authorized capital
stock of the Parent will consist solely of one hundred million
(100,000,000) shares of the Parent Common Stock and fifty million
(50,000,000) shares of the Parent Preferred Stock. As of the Closing
Date, the authorized capital stock of the Merger-Sub will consist
solely of one thousand (1,000) shares of the common stock, par value
$.01 per share, of the Merger-Sub (the "Merger-Sub Common Stock"). The
shares of the Parent Common Stock issuable to the Former
Takeoutmusic.com Stockholders pursuant to Article II hereof, will be,
when issued in accordance with this Agreement, duly authorized, validly
issued, fully paid, and nonassessable.
(iii) As of the date hereof, (i) approximately
2,438,889 shares of Parent Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable. Schedule
3.02(b)(iii) attached hereto sets forth the number of shares of
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Parent Common Stock reserved for future issuance upon exercise of
Parent options granted and outstanding as of the date hereof and under
the existing Parent stock option plan. No options have been granted
under the existing Parent stock option plan, and Parent shall undertake
to have such option plan terminated on or before the Effective Date.
Except as set forth on Schedule 3.02(b)(iii), there are no outstanding
options, warrants, calls, subscriptions, rights, agreements or other
commitments of any character (contingent or otherwise) of the Parent or
the Merger-Sub to issue, sell, repurchase, redeem, or otherwise acquire
any shares of the Parent Common Stock or the Merger-Sub Common Stock,
respectively. True and complete copies of all such options, warrants,
calls, subscriptions, rights, agreements and other commitments as in
effect on the date hereof have been delivered to Takeoutmusic.com.
(iv) There are no debt obligations of the Parent or
the Merger-Sub of any nature whatsoever except as set forth on Schedule
3.02(b)(iv), and as of the Closing Date, neither the Parent nor the
Merger-Sub will have any debt, liabilities, obligations, or contingent
obligations of any nature whatsoever, except as set forth on Schedule
3.02(b)(iv).
(c) Authority Relative to this Agreement. The Parent and the
Merger-Sub have full corporate power and authority to enter into this Agreement
and to perform their respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement by the Parent and the Merger-Sub and the consummation by the
Parent and the Merger-Sub of the Merger and the transactions contemplated hereby
have been duly and validly approved by the respective Boards of Directors of the
Parent and the Merger-Sub and Parent as the sole stockholder of the Merger-Sub,
and no other corporate
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<PAGE>
proceedings on the part of the Parent or the Merger-Sub are necessary to
authorize the execution, delivery, and performance of this Agreement by the
Parent and the Merger-Sub and the consummation by the Parent and the Merger-Sub
of the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by the Parent and the Merger-Sub, and constitutes
a legal, valid, and binding obligation of the Parent and the Merger-Sub
enforceable against the Parent and the Merger-Sub in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer or similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(whether considered in a proceeding at law or in equity).
(d) Non-Contravention; Approvals and Consents.
(i) Except as set forth in Schedule 3.02(d)(i)
hereto, the execution and delivery of this Agreement by the Parent and
the Merger-Sub does not, and the performance by the Parent and the
Merger-Sub of their obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of
time or both) a default under, result in, or give to any person any
right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or
imposition of any Lien on any of the respective assets or properties of
the Parent or the Merger-Sub under any of the terms, conditions or
provisions of (x) the Certificate of Incorporation or By-Laws of the
Parent or the Merger-Sub, (y) any Laws or Orders of any Governmental or
Regulatory Authority applicable to the Parent or the Merger-Sub or any
of their respective assets or properties, or (z) any Contracts to which
either the Parent or the Merger-Sub is a party or by which either
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the Parent or the Merger-Sub or any of their respective assets or
properties are bound, excluding from the foregoing clauses (y) and (z)
conflicts, violations, breaches, defaults, terminations, modifications,
accelerations, and creations and impositions of Liens, which
individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect on the Parent or the Merger-Sub or on
their ability to consummate the transactions contemplated by this
Agreement.
(ii) Except (x) for the filing of the Certificate of
Merger and other appropriate merger documents required by the DGCL with
the Secretary of State of Delaware and appropriate documents with the
relevant authorities of other states in which the Constituent Entities
are qualified to do business, and (y) as disclosed in Schedule
3.02(d)(ii) hereto, no consent, approval, or action of, filing with or
notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms,
conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any Contract to which the Parent or the Merger-
Sub is a party or by which the Parent or the Merger-Sub or any of their
respective assets or properties is bound for the execution and delivery
of this Agreement by the Parent and the Merger-Sub, the performance by
the Parent and the Merger-Sub of their respective obligations hereunder
or the consummation of the transactions contemplated hereby, except for
such consents, approvals or actions of, filing with or notices to any
Governmental or Regulatory Authority or other public or private third
party the failure of which to make or obtain could not reasonably be
expected to have a Material Adverse Effect on the Parent, the
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Merger-Sub or the Surviving Corporation or on the Parent's and the
Merger-Sub's ability to consummate the transactions contemplated by
this Agreement.
(e) Financial Statements. The Parent has delivered to
Takeoutmusic.com true, correct, and complete copies of the following: the
audited balance sheets of the Parent (the "Parent Balance Sheets") as of
December 31, 1997 and December 31, 1998; the audited statement of operations of
the Parent (the "Parent Operations Statement") for the years ending December 31,
1997 and December 31, 1998; the audited statement of changes in stockholders'
deficit of the Parent (the "Parent Stockholders' Equity Statement") for the
years ending December 31, 1997 and December 31, 1998; and the audited statement
of cash flows of the Parent (the "Parent Cash Flow Statement") for the years
ending December 31, 1997 and December 31, 1998, and interim unaudited financial
statements of Parent for the quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999 and for the year ended December 31, 1999 (the "Parent Interim
Financial Statements") (together, the "Parent Financial Statements"). The Parent
Financial Statements fairly present the financial condition, assets,
liabilities, stockholders equity and results of operations of the Parent for the
periods indicated. The Merger-Sub is a newly-formed subsidiary of the Parent
which, as of the date hereof, has no assets or liabilities, other than a stated
capital account, has been formed solely for the purposes of the Merger, and has
not conducted and shall not conduct any business except in connection with the
Merger.
(f) Absence of Certain Changes or Events. Except as set forth
in Schedule 3.02(f) hereto, in the Parent Interim Financial Statements or as
contemplated hereby, since December 31, 1999, no change, event, or development
or combination of changes or developments (including any worsening of any
condition currently existing) has occurred or is reasonably expected to have,
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<PAGE>
individually or in the aggregate, a Material Adverse Effect on the Parent or the
Merger-Sub (without regard, however, to changes in conditions generally
applicable to the industries in which the Parent and the Merger-Sub are involved
or general economic conditions).
(g) Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.02(g) hereto, and for matters reflected or reserved against in the
Parent Balance Sheets included in the Parent Financial Statements, neither
Parent nor the Merger-Sub had at such date and has not incurred since that date,
any liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except liabilities or
obligations which were incurred in connection with this Agreement and the
transactions contemplated hereby or in the ordinary course of business
consistent with past practice.
(h) Legal Proceedings. Except as set forth in Schedule
3.02(h), there are no actions, suits, arbitrations, or proceedings pending or to
the knowledge of the Parent or the Merger- Sub, threatened against, relating to
or affecting, nor to the knowledge of the Parent or the Merger- Sub, are there
any Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, the Parent or the Merger-Sub or
any of their assets and properties which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on the Parent or
the Merger-Sub or on the ability of the Parent or the Merger-Sub to consummate
the transactions contemplated by this Agreement. Neither the Parent nor the
Merger- Sub is subject to any judgment, decree, court order, or writ of any
Governmental or Regulatory Authority.
(i) Information Supplied. Nothing in this Agreement or any
schedule, exhibit, certificate, document, or statement in writing which has been
supplied by or on behalf of the Parent
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or the Merger-Sub, in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact, or omits any statement of a
material fact required to be stated or necessary in order to make the statements
contained herein or therein not misleading. There is no fact known to the Parent
or the Merger-Sub which materially and adversely affects the Parent or the
Merger-Sub, which has not been set forth in this Agreement or in the schedules,
exhibits, certificates, documents, or statements in writing furnished by the
Parent or the Merger-Sub in connection with the transactions contemplated by
this Agreement.
(j) Compliance with Laws and Orders. Except as set forth in
Schedule 3.02(j) hereto, the Parent and the Merger-Sub hold all permits,
licenses, variances, exemptions, orders, and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of its business (the
"Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders, and approvals which, individually or in the aggregate, do
not and are not reasonably expected to have a Material Adverse Effect on the
Parent or the Merger-Sub. The Parent and the Merger-Sub are in compliance with
the terms of the Permits, except failures so to comply which, individually or in
the aggregate, do not have and are not reasonably expected to have a Material
Adverse Effect on the Parent or the Merger-Sub. The Parent and the Merger-Sub
are not in violation of, or in default under, any Law or Order of any
Governmental or Regulatory Authority except for violations which, individually
or in the aggregate, do not and are not reasonably expected to have a Material
Adverse Effect on the Parent or the Merger-Sub.
(k) Compliance with Agreements; Certain Agreements. Neither
the Parent nor the Merger-Sub, nor to the knowledge of the Parent or the
Merger-Sub, any other party thereto, is in breach or violation of, or in default
in the performance or observance of any term or provision of
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and no event has occurred which, with notice or lapse of time or both, is
reasonably expected to result in a default under, (x) the respective
Certificates of Incorporation and By-Laws of the Parent and the Merger-Sub or
(y) any material Contract to which the Parent or the Merger-Sub is a party or by
which the Parent or the Merger-Sub or any of their assets or properties is
bound, except in the case of clause (y) for breaches, violations, and defaults
which, individually or in the aggregate, do not and are not reasonably expected
to have a Material Adverse Effect on the Parent or the Merger- Sub.
(l) Employee Benefit Plans. Neither the Parent nor the
Merger-Sub has or contributes to any pension, profit-sharing, option, other
incentive plan, or any other type of employee benefit plan, or has any
obligation to or customary arrangement with employees for bonuses, incentive
compensation, vacations, severance pay, sick pay, sick leave, insurance, service
award, relocation, disability, tuition refund, or other benefits, whether oral
or written, other than the existing Parent stock option plan, which plan shall
be cancelled on or prior to the Effective Date.
(m) Patents, Trademarks, Et Cetera. Neither the Parent nor the
Merger-Sub has any material Intangibles.
(n) Insurance. Neither the Parent nor the Merger-Sub has an
insurance policy.
(o) Labor Matters. Steven A. Rothstein and Robert H. Daskal
are the sole officers of the Parent and the Merger-Sub as of the date hereof,
and neither the Parent nor the Merger-Sub has any other employees.
(p) Facilities, Tangible Property and Assets. Except as set
forth on Schedule 3.02(p), the Parent and the Merger-Sub have no facilities,
tangible property or assets.
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(q) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the Parent and the
Merger-Sub and their affiliates directly with Takeoutmusic.com, without the
intervention of any person on behalf of the Parent or the Merger-Sub and their
affiliates in such manner as to give rise to any valid claim by any person
against the Parent, the Merger-Sub, Takeoutmusic.com or the Surviving
Corporation for a finder's fee, brokerage commission or similar payment.
(r) Transactions with AffiliatExcept as set forth on Schedule
3.02(r), neither the Parent nor the Merger-Sub is a party to any material
Contract with any of their affiliates or any director or officer for the
purchase, sale, lease or other disposition of property or services.
(s) Tax Matters.
(i) Except as set forth in Schedule 3.02(s), the
Parent and the Merger-Sub have filed all tax returns required to be
filed by applicable law prior to the Closing. All tax returns were
(and, as to tax returns not filed as of the date hereof, will be) true,
complete, and correct and filed on a timely basis. The Parent and the
Merger-Sub (x) have paid all taxes due, or claimed or asserted in
writing by any taxing authority to be due, for the periods covered by
such tax returns or (y) have duly and fully provided reserves (in
accordance with GAAP) adequate to reflect all such taxes.
(ii) The Parent and the Merger-Sub have established
(and until the Closing will maintain) on their respective books and
records reserves adequate to reflect all material taxes not yet due and
payable. The Parent and the Merger-Sub have made available to
Takeoutmusic.com complete and accurate copies of all work papers
associated with the calculation of the Parent's and the Merger-Sub's
respective tax reserves.
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(iii) There are no tax liens upon the assets of the
Parent or the Merger-Sub.
(iv) The Parent and the Merger-Sub have not requested
(and no request has been made on their behalf) any extension of time
within which to file any material tax return.
(v) No income tax returns have been examined by any
taxing authorities for any periods; and no deficiency for any material
taxes has been suggested, proposed, asserted, or assessed against the
Parent or the Merger-Sub that has not been resolved and paid in full.
(vi) No audits or other administrative proceedings or
court proceedings are presently pending with regard to any taxes or tax
returns of the Parent or the Merger-Sub. No written claim has been made
by a taxing authority in a jurisdiction where the Parent or the
Merger-Sub does not file tax returns such that it is or may be subject
to taxation by that jurisdiction.
(vii) To the extent requested by Takeoutmusic.com,
the Parent and the Merger-Sub have made available to Takeoutmusic.com
(or, in the case of tax returns to be filed on or before the Closing,
will make available) complete and accurate copies of all tax returns
and associated work papers filed by or on behalf of the Parent or the
Merger-Sub for all taxable years ending on or prior to the Closing.
(viii)No agreements relating to allocating or sharing
of any taxes have been entered into by the Parent or the Merger-Sub.
(ix) Neither the Parent nor the Merger-Sub has
entered into any transactions that could give rise to an understatement
of Federal Income Tax.
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(x) Neither the Parent, the Merger-Sub nor any other
person on behalf of the Parent or the Merger-Sub has agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code
or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Parent or the Merger-Sub
or has any application pending with any taxing authority requesting
permission for any change in accounting methods that relate to the
business or operations of the Parent or the Merger-Sub, and neither the
Parent nor the Merger-Sub has knowledge that the IRS has proposed any
such adjustment or change in accounting method.
(xi) Except as set forth on Schedule 3.02(s), neither
the Parent nor the Merger-Sub has been, or is now, a member of any
consolidated, combined, unitary or affiliated group of corporations for
any tax purposes.
(t) Accuracy of Information. The Parent has made with the
Securities and Exchange Commission ("SEC") all filings required by the
Securities Exchange Act of 1934, as amended (all such filings and any future
filings made thereunder are collectively, the "Exchange Act Filings"). None of
the Exchange Act Filings contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Neither the SEC nor any state regulatory authority has
issued any order preventing or suspending the use of any preliminary prospectus
or registration statement or any part thereof, and no proceedings for a stop
order suspending the effectiveness of any of the Company's securities have been
instituted or are pending or threatened.
(u) NASD Report.
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(i) To the knowledge of the Parent, the Parent has
made all requisite filings with the National Association of Securities
Dealers (the "NASD") and the Over-the- Counter Bulletin Board (the
"OTCBB") pursuant to Rule 6740 (the "Rule"). As of the date of filing
thereof, such filings (i) complied as to form in all material respects
with the requirements of the Securities Exchange Act of 1934, as
amended, and the rules promulgated by the NASD, and (ii) did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(ii) As of the date hereof, the Parent's Common Stock
is quoted on the OTCBB and, upon the declaration or ordering of
effectiveness of the registration statement on Form 10-SB of the
Parent, filed with the SEC on January 7, 2000, as amended or
supplemented from time to time (as so amended and supplemented, the
"Form 10-SB"), the Parent shall be in compliance with the NASD
Eligibility Rule, as effective January 4, 1999. Parent makes no
representation as to the timing or ultimate effectiveness of such
registration statement.
(iii) No quotation is being submitted or published,
directly or indirectly, on behalf of the Parent or any director or
officer, or any person, directly or indirectly, who is the beneficial
owner of more than ten percent (10%) of the outstanding shares of any
equity security of the Parent.
IV. COVENANTS.
Section 4.01 Covenants of the Parent and the Merger-Sub.
The Parent and the Merger-Sub covenant and agree as follows:
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(a) Certificate of Incorporation and By-Laws. As of the
Closing Date, the Certificate of Incorporation and By-Laws of the Merger-Sub
shall be substantially in the form of Exhibits 3.02(b)-1 and 3.02(b)-2,
respectively, and the Certificate of Incorporation and By-Laws of the Parent
shall be substantially in the form of Exhibits 1.05-1 and 1.05-2, respectively.
(b) Shares and Options. Except as contemplated hereby, until
the earlier of the Effective Time or the Termination of this Agreement pursuant
to Article VI (the "Release Time") without the prior written consent of
Takeoutmusic.com, no share of capital stock of the Parent or the Merger-Sub or
any option or warrant for any such share, right to subscribe to or purchase any
such share, or security convertible into or exchangeable for any such share,
shall be issued or sold by the Parent or the Merger-Sub, nor shall the Parent or
the Merger-Sub enter into any agreement or commitment to effect any such
issuance or sale.
(c) Dividends and Purchases of Stock. Until the Release Time,
without the prior written consent of Takeoutmusic.com, no cash or non-cash
dividend, or liquidating or other distribution or stock split shall be
authorized, declared, paid, or effected by the Parent or the Merger- Sub in
connection with their respective outstanding capital stock except as set forth
in Schedule 4.01(c) hereto.
(d) Borrowing of Money; Working Capital. Until the Release
Time, neither the Parent nor the Merger-Sub shall incur indebtedness for
borrowed money except as set forth on Schedule 3.02(b)(iv). Until the Release
Time, neither the Parent nor the Merger-Sub shall guarantee the borrowing of
money by any third party, enter into or modify any capital or operating lease or
enter into any agreement.
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(e) Access. Until the Release Time, the Parent and the
Merger-Sub will afford the directors, stockholders, counsel, agents, investment
bankers, accountants, and other representatives of Takeoutmusic.com reasonable
access to the plants, properties, books, and records of the Parent and the
Merger-Sub, will permit them to make extracts from and copies of such books and
records, and will from time to time furnish Takeoutmusic.com with such
additional financial and operating data and other information as to the
financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of the Parent and the Merger-Sub as
Takeoutmusic.com from time to time may reasonably request.
(f) Conduct of Business. Except as otherwise contemplated or
permitted hereby, until the Release Time, neither the Parent nor the Merger-Sub
shall take any action that would or is reasonably likely to result in any of the
representations or warranties of the Parent or the Merger-Sub set forth in this
Agreement being untrue at the Closing Date, or in any of the conditions to the
Merger set forth in Article V not being satisfied. Except as otherwise
contemplated or permitted hereby, until the Release Time, the Parent or the
Merger-Sub will conduct their affairs in all respects only in the ordinary
course.
(g) Advice of Changes. Until the Release Time, the Parent and
the Merger-Sub will promptly advise Takeoutmusic.com in a reasonably detailed
written notice of any fact or occurrence or any pending threatened occurrence of
which it obtains knowledge and which (if existing and known at the date of the
execution of this Agreement) would have been required to be set forth or
disclosed in or pursuant to this Agreement, which (if existing or known at any
time prior to or at the Effective Time) would make the performance by any party
of a covenant contained in this Agreement impossible or make such performance
materially more difficult in the absence of
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such fact or occurrence, or which (if existing or known at the time of the
Effective Time) would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
(h) Public Statements. Before either the Parent or the
Merger-Sub releases any information concerning this Agreement, the Merger, or
any other transactions contemplated by this Agreement which is intended for or
is reasonably expected to result in public dissemination thereof, the Parent and
the Merger-Sub shall cooperate with Takeoutmusic.com, shall furnish drafts of
all documents or proposed oral statements to Takeoutmusic.com for comments, and
shall not release any such information without the prior consent of
Takeoutmusic.com; provided, however, that the foregoing shall not be deemed to
prevent the Parent or the Merger-Sub from releasing any information or making
any disclosure to the extent that the Parent or the Merger-Sub reasonably
determines that it is required to do so by law.
(i) Other Proposals. Until the Release Time the Parent shall
not authorize or permit any officer, director, employee, counsel, agent,
investment banker, accountant, or other representative of the Parent, directly
or indirectly, to: (i) initiate contact with any person or entity in an effort
to solicit any Takeover Proposal (as such term is defined in this Section
4.01(i)); (ii) cooperate with, or furnish or cause to be furnished any
non-public information concerning the financial condition, results of
operations, businesses, properties, assets, liabilities, or future prospects of
the Parent to, any person or entity in connection with any Takeover Proposal;
(iii) negotiate with any person or entity with respect to any Takeover Proposal;
or (iv) enter into any agreement or understanding with the intent to effect a
Takeover Proposal; provided, however, that the Parent shall be entitled to take
any action described in the foregoing clauses (ii)-(iv) if and to the extent
that the Board of Directors of the Parent determines in good faith, based on the
advice of their respective
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counsel, that the failure to take any such action would violate their fiduciary
duties to the stockholders of the Parent. The Parent will immediately give
written notice to Takeoutmusic.com of the details of any Takeover Proposal of
which the Parent becomes aware. As used in Section 4.01(i), "Takeover Proposal"
shall mean any proposal, other than as contemplated by this Agreement, for a
merger, consolidation, reorganization, other business combination, or
recapitalization involving the Parent, for the acquisition of a ten percent
(10%) or greater interest in the equity or in any class or series of capital
stock of the Parent, for the acquisition of the right to cast ten percent (10%)
or more of the votes on any matter with respect to the Parent, or for the
acquisition of one of their divisions or of a substantial portion of any of
their respective assets, the effect of which may be to prohibit, restrict, or
delay the consummation of the Merger or any of the other transactions
contemplated by this Agreement, or impair the contemplated benefits to
Takeoutmusic.com of the Merger or any of the other transactions contemplated by
this Agreement.
(j) Consents Without Any Condition. Neither the Parent nor the
Merger-Sub shall make any agreement or reach any understanding, not approved in
writing by Takeoutmusic.com, as a condition for obtaining any consent,
authorization, approval, order, license, certificate, or permit required for the
consummation of the transactions contemplated by this Agreement..
(k) Transfer Taxes. The Parent and the Merger-Sub shall timely
prepare and file any declaration or filing necessary to comply with any transfer
tax statutes that require any such filing before the Effective Time.
(l) Exchange Act Filings. The Parent shall use reasonable
efforts to prepare and file in a timely manner any Exchange Act Filings to be
made prior to or after the Closing Date. If
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at any time prior to the Closing Date the Parent finds that any Exchange Act
Filings contained an untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the Parent shall, upon becoming aware of any such untrue statement
or omission, promptly notify Takeoutmusic.com.
(m) CUSIP; Symbol. The Parent shall use its best efforts to
obtain a CUSIP number from the CUSIP Service Bureau for the Parent Common Stock
to be issued pursuant to the Merger and to cause the Parent's trading symbol to
be changed on the OTCBB as instructed by Takeoutmusic.com as soon as
practicable.
Section 4.02 Covenants of Takeoutmusic.com.
Takeoutmusic.com covenants and agrees as follows:
(a) Certificate of Incorporation and By-Laws. As of the
Closing Date, the Certificate of Incorporation and By-Laws of Takeoutmusic.com
shall be substantially in the form of Exhibits 1.04-1 and 1.04-2, respectively.
(b) Shares and Options. Except as contemplated hereby, until
the earlier of the Effective Time or the Termination of this Agreement pursuant
to Article VI (the "Release Time") without the prior written consent of Parent
and Merger-Sub, no share of capital stock of Takeoutmusic.com or any option or
warrant for any such share, right to subscribe to or purchase any such share, or
security convertible into or exchangeable for any such share, shall be issued or
sold by Takeoutmusic.com, nor shall Takeoutmusic.com enter into any agreement or
commitment to effect any such issuance or sale.
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(c) Dividends and Purchases of Stock. Until the Release Time,
without the prior written consent of the Parent and Merger-Sub, no cash or
non-cash dividend, or liquidating or other distribution or stock split shall be
authorized, declared, paid, or effected by Takeoutmusic.com in connection with
its outstanding capital stock.
(d) Borrowing of Money; Working Capital. Until the Release
Time, Takeoutmusic.com shall not incur indebtedness for borrowed money or
guarantee the borrowing of money by any third party, or enter into or modify any
capital or operating lease.
(e) Access. Until the Release Time, Takeoutmusic.com will
afford the directors, stockholders, counsel, agents, investment bankers,
accountants, and other representatives of the Parent and the Merger-Sub
reasonable access to the plants, properties, books, and records of
Takeoutmusic.com, will permit them to make extracts from and copies of such
books and records, and will from time to time furnish the Parent and the
Merger-Sub with such additional financial and operating data and other
information as to the financial condition, results of operations, businesses,
properties, assets, liabilities, or future prospects of Takeoutmusic.com as the
Parent and the Merger- Sub from time to time may reasonably request.
(f) Conduct of Business. Until the Release Time,
Takeoutmusic.com shall not take any action that would or is reasonably likely to
result in any of the representations or warranties of Takeoutmusic.com set forth
in this Agreement being untrue at the Closing Date or to any of the conditions
to the Merger set forth in Article V not being satisfied. Until the Release
Time, Takeoutmusic.com will use all reasonable efforts to preserve the business
operations of Takeoutmusic.com intact, to keep available the services of its
present personnel, and to preserve the good will of its suppliers, customers,
and others having business relations with any of them.
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(g) Advice of Changes. Until the Release Time,
Takeoutmusic.com will promptly advise the Parent and the Merger-Sub in a
reasonably detailed written notice of any fact or occurrence or any pending
threatened occurrence of which it obtains knowledge and which (if existing or
known at the date of the execution of this Agreement) would have been required
to be set forth or disclosed in or pursuant to this Agreement, which (if
existing and known at any time prior to or at the Effective Time) would make the
performance by any party of a covenant contained in this Agreement impossible or
make such performance materially more difficult than in the absence of such fact
or occurrence, or which (if existing and known at the time of the Effective
Time) would cause a condition to any party's obligations under this Agreement
not to be fully satisfied.
(h) Public Statements. Before Takeoutmusic.com releases any
information concerning this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement which is intended for, or is
reasonably expected to, result in public dissemination thereof, Takeoutmusic.com
shall cooperate with the Parent and the Merger-Sub, shall furnish drafts of all
documents or proposed oral statements to the Parent and the Merger-Sub for
comments, and shall not release any such information without the prior consent
of the Parent and the Merger-Sub; provided, however, that the foregoing shall
not be deemed to prevent Takeoutmusic.com from releasing any information or
making any disclosure to the extent Takeoutmusic.com reasonably determines that
it is required to do so by law.
(i) Other Proposals. Until the Release Time, Takeoutmusic.com
shall not authorize or permit any officer, director, employee, counsel, agent,
investment banker, accountant, or other representative of Takeoutmusic.com,
directly or indirectly, to (i) initiate contact with any
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person or entity in an effort to solicit any Takeover Proposal (as such term is
defined in this Section 4.02(i)); (ii) cooperate with, or furnish or cause to be
furnished any non-public information concerning the financial condition, results
of operations, businesses, properties, assets, liabilities, or future prospects
of Takeoutmusic.com to, any person or entity in connection with any Takeover
Proposal; (iii) negotiate with any person or entity with respect to any Takeover
Proposal; or (iv) enter into any agreement or understanding with the intent to
effect a Takeover Proposal; provided, however, that Takeoutmusic.com shall be
entitled to take any action described in the foregoing clauses (ii)-(iv) if and
to the extent that the Board of Directors of Takeoutmusic.com determines in good
faith, based on the advice of their counsel, that the failure to take any such
action would violate their fiduciary duties to the stockholders of
Takeoutmusic.com. Takeoutmusic.com will immediately give written notice to the
Parent of the details of any Takeover Proposal of which Takeoutmusic.com becomes
aware. As used in Section 4.02(i), "Takeover Proposal" shall mean any proposal,
other than as contemplated by this Agreement, for a merger, consolidation,
reorganization, other business combination, or recapitalization involving
Takeoutmusic.com, for the acquisition of a ten percent (10%) or greater interest
in the equity or in any class or series of capital stock of Takeoutmusic.com,
for the acquisition of the right to cast ten percent (10%) or more of the votes
on any matter with respect to Takeoutmusic.com, or for the acquisition of one of
their divisions or of a substantial portion of any of their respective assets,
the effect of which may be to prohibit, restrict, or delay the consummation of
the Merger or any of the other transactions contemplated by this Agreement, or
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impair the contemplated benefits to the Parent of the Merger or any of the other
transactions contemplated by this Agreement.
(j) Approval of Stockholders. Takeoutmusic.com shall, through
its Board of Directors, duly call, give notice of, convene, and hold a meeting
of its stockholders for the purpose of voting on the ratification and approval
of this Merger Agreement as soon as reasonably practicable following the date
hereof, or shall take such other action as will satisfy the requirement of
stockholder approval under Delaware law.
Section 4.03 British Columbia Reporting.
Prior to the Effective Time, the Parent shall make an
application to the British Columbia Securities Commission ("BCSC") to change the
reporting status of the Parent in the province of British Columbia such that the
Parent shall not be required to report pursuant to the rules of the BCSC at or
following the Effective Time.
Section 4.04 Amendment to Form 10-SB.
The Parent shall prepare and file with the SEC an amendment to
the Form 10-SB as soon as reasonably practicable after the date hereof if
required to effect the transactions contemplated hereby. The Parent shall use
its best efforts to have the Form 10-SB declared effective by the SEC as
promptly as practicable after filing such amendment. The Parent shall also take
any action (other than qualifying as a foreign corporation or taking any action
which would subject it to service of process in any jurisdiction where the
Parent is not now so qualified or subject) required to be taken under applicable
state "Blue Sky" or securities laws in connection with the issuance of the
Parent Common Stock in connection with the Merger. If at any time prior to the
Effective Time any event shall occur that should be set forth in an amendment of
or a supplement to the Form 10-
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SB, the Parent shall prepare and file with the SEC such amendment or supplement
as soon thereafter as is reasonably practicable. The Parent, Merger-Sub and
Takeoutmusic.com shall cooperate with each other in the preparation of the Form
10-SB and any amendment or supplement thereto, and each shall notify the other
of the receipt of any comments of the SEC with respect to the Form 10-SB and of
any requests by the SEC for any amendment or supplement thereto or for
additional information. Takeoutmusic.com agrees to use its best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments and requests of the SEC and to cause the Form 10-SB to be declared
effective by the SEC.
V. CONDITIONS.
Section 5.01 Conditions to Each Party's Obligation to Effect the
Merger.
The respective obligations of each party to effect the Merger
are subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been adopted by the requisite vote of the stockholders of Takeoutmusic.com.
(b) State Securities Laws. The Parent shall have received all
state securities or "Blue Sky" permits and other authorizations necessary to
issue the Parent Common Stock pursuant to the Merger.
(c) No Injunctions or Restraints. No court of competent
jurisdiction or other competent Governmental or Regulatory Authority shall have
enacted, issued, promulgated, enforced, or entered any Law or Order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal or otherwise restricting, preventing, or prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement.
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(d) Consents and Approvals. Other than the filings provided
for by Section 1.02, all consents, approvals and actions of, filings with and
notices to any Governmental or Regulatory Authority or any other public or
private third parties required of the Parent, the Merger-Sub or Takeoutmusic.com
to consummate the Merger shall have been obtained, all in form and substance
reasonably satisfactory to the Parent, the Merger-Sub and Takeoutmusic.com, and
no such consent, approval, or action shall contain any term or condition which
could be reasonably expected to result in a material diminution of the benefits
of the Merger to the stockholders of the Parent, the Merger- Sub and
Takeoutmusic.com.
Section 5.02 Conditions to Obligations of the Parent and the
Merger-Sub.
The obligations of the Parent and the Merger-Sub to effect the
Merger is further subject to the fulfillment, at or prior to the Closing, of
each of the following additional conditions (all or any of which may be waived
in whole or in part by the Parent and the Merger-Sub and in their sole
discretion):
(a) Representations and Warranties. The representations and
warranties made by Takeoutmusic.com in this Agreement shall be true and correct
in all material respects as of the Closing Date as though made on and as of the
Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
and Takeoutmusic.com shall have delivered to the Parent and Merger-Sub a
certificate, dated the Closing Date and executed on behalf of Takeoutmusic.com
by a duly authorized officer, to such effect.
(b) Performance of Obligations. Takeoutmusic.com shall have
performed and complied with, in all material respects, each agreement, covenant
and obligation required by this
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Agreement to be so performed or complied with by Takeoutmusic.com at or prior to
the Closing, and Takeoutmusic.com shall have delivered to the Parent and
Merger-Sub a certificate dated the Closing Date and executed on behalf of
Takeoutmusic.com by a duly authorized officer, to such effect.
(c) Other Closing Documents. Takeoutmusic.com shall have
delivered to the Parent and the Merger-Sub at or prior to the Closing Date such
other documents as the Parent and the Merger-Sub may reasonably request in order
to enable the Parent and the Merger-Sub to determine whether the conditions to
their obligations under this Agreement have been met and otherwise to carry out
the provisions of this Agreement.
(d) Review of Proceedings. All actions, proceedings,
instruments, and documents required by the Parent and the Merger-Sub to carry
out this Agreement or incidental thereto and all other related legal matters
shall be subject to the reasonable approval of D'Ancona & Pflaum, counsel to the
Parent and the Merger-Sub, and Takeoutmusic.com shall have furnished such
documents as such counsel may have reasonably requested for the purpose of
enabling it to pass upon such matters.
(e) Legal Opinion. The Parent and the Merger-Sub shall receive
at the Closing Date an opinion of Camhy Karlinsky & Stein LLP, counsel for
Takeoutmusic.com, addressed to the Parent and the Merger-Sub, in a form
reasonably acceptable to the Parent and the Merger-Sub.
(f) Legal Action. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit, or
otherwise challenge the consummation of, the transactions contemplated by this
Agreement, or to obtain substantial damages with respect thereto.
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Section 5.03 Conditions to Obligation of Takeoutmusic.com to Effect the
Merger.
The obligation of Takeoutmusic.com to effect the Merger is
further subject to the fulfillment, at or prior to the Closing, of each of the
following additional conditions (all or any of which may be waived in whole or
in part by Takeoutmusic.com in its sole discretion):
(a) Representations and Warranties. The representations and
warranties made by the Parent and the Merger-Sub in this Agreement shall be true
and correct in all material respects as of the Closing Date as though made on
and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, and the Parent and the Merger-Sub shall have delivered to
Takeoutmusic.com a certificate, dated the Closing Date and executed on behalf of
the Parent and the Merger-Sub by a duly authorized officer, to such effect.
(b) Performance of Obligations. The Parent and the Merger-Sub
shall have performed and complied with in all material respects, each agreement,
covenant, and obligation required by this Agreement to be so performed or
complied with by the Parent and the Merger-Sub at or prior to the Closing, and
the Parent and the Merger-Sub shall have delivered to Takeoutmusic.com a
certificate, dated the Closing Date and executed on behalf of the Parent and the
Merger-Sub by a duly authorized officer, to such effect.
(c) Other Closing Documents. The Parent and the Merger-Sub
shall have delivered to Takeoutmusic.com at or prior to the Effective Time such
other documents as Takeoutmusic.com may reasonably request in order to enable
Takeoutmusic.com to determine whether the conditions to its obligations under
this Agreement have been met and otherwise to carry out the provisions of this
Agreement.
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(d) Review of Proceedings. All actions, proceedings,
instruments, and documents required by Takeoutmusic.com to carry out this
Agreement or incidental thereto and all other related legal matters shall be
subject to the reasonable approval of Camhy Karlinsky & Stein LLP, counsel to
Takeoutmusic.com, and the Parent and the Merger-Sub shall have furnished such
documents as such counsel may have reasonably requested for the purpose of
enabling it to pass upon such matters.
(e) Legal Opinion. Takeoutmusic.com shall receive at the
Closing Date an opinion of D'Ancona & Pflaum, counsel for the Parent and the
Merger-Sub, addressed to Takeoutmusic.com, in a form reasonably acceptable to
Takeoutmusic.com.
(f) Legal Action. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or otherwise
challenge the consummation of, the trans actions contemplated by this Agreement,
or to obtain substantial damages with respect thereto.
(g) Indemnification. As of the Closing Date, Takeoutmusic.com
shall have received from each of Steven A. Rothstein and Steven Rabinovici an
agreement to indemnify Takeoutmusic.com for up to $16,000 each, on a pari passu
basis, from all liabilities of the Parent incurred prior to the Closing Date,
for an aggregate of up to $32,000, in form and substance satisfactory to
Takeoutmusic.com.
(h) Capital. The Parent and the Merger-Sub shall be in strict
compliance with Section 3.02(b)(iii).
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VI. TERMINATION.
Section 6.01 Termination.
This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether prior to or after the Takeoutmusic.com stockholders' approval:
(a) By mutual written agreement of the parties hereto duly
authorized by action taken by or on behalf of their respective Boards of
Directors.
(b) By either Takeoutmusic.com, the Parent or the Merger-Sub
upon written notification to the other party, if:
(i) the Takeoutmusic.com stockholders' approval shall
not be obtained by reason of the failure to obtain the requisite vote
upon a vote held at a meeting of such stockholders or pursuant to a
written consent; or
(ii) facts exist which render impossible the
satisfaction of one or more of the conditions set forth in Section 5.01
and such are not waived by the Parent, the Merger- Sub and
Takeoutmusic.com.
(c) By the Parent and the Merger-Sub upon written notification
to Takeoutmusic.com, if:
(i) there has been a material breach of any
representation, warranty, covenant, or agreement on the part of
Takeoutmusic.com set forth in this Agreement which breach has not been
cured within ten (10) business days following receipt by
Takeoutmusic.com of notice of such breach from the Parent or the
Merger-Sub or assurance
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of such cure reasonably satisfactory to the Parent or the Merger-Sub
have not been given by or on behalf of Takeoutmusic.com within such ten
(10) business day period; or
(ii) facts exist which render impossible the
satisfaction of one or more of the conditions set forth in Section 5.02
and such are not waived by the Parent or the Merger- Sub; or
(iii) the Parent or its stockholders receive a
proposal or offer for any Takeover Proposal, other than pursuant to the
transactions contemplated by this Agreement, in connection with which
the Board of Directors of the Parent exercises any of its rights
specified in Section 4.01(i).
(d) By Takeoutmusic.com upon written notification to the
Parent or the Merger-Sub, if:
(i) at any time after June 30, 2000 if the Merger
shall not have been consummated on or prior to such date and such
failure to consummate the Merger is not caused by a breach of this
Agreement by Takeoutmusic.com; or
(ii) there has been a material breach of any
representation, warranty, covenant, or agreement on the part of the
Parent or the Merger-Sub set forth in this Agreement which breach has
not been cured with ten (10) business days following receipt by the
Parent or the Merger-Sub of notice of such breach from Takeoutmusic.com
or assurance of such cure reasonably satisfactory to Takeoutmusic.com
shall not have been given by or on behalf of the Parent or the
Merger-Sub within such ten (10) business day period; or
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(iii) facts exist which render impossible the
satisfaction of one or more of the conditions set forth in Section 5.03
and such are not waived by Takeoutmusic.com.
Section 6.02 Effect of Termination.
If this Agreement is validly terminated by the Parent, the
Merger-Sub or Takeoutmusic.com pursuant to Section 6.01, this Agreement shall
forthwith become null and void and there shall be no liability or obligation on
the part of either the Parent, the Merger-Sub or Takeoutmusic.com (or any of
their respective officers, directors, representatives, or affiliates), except
that (i) the provisions of this Section 6.02 will continue to apply following
any such termination, and (ii) nothing contained herein shall relieve the
Parent, the Merger-Sub or Takeoutmusic.com from liability for wilful or
intentional breach of their respective obligations contained in this Agreement
or for fraud.
VII. MISCELLANEOUS.
Section 7.01 Fees and Expenses.
Except as otherwise provided in this Agreement, all fees and
expenses incurred in connection with this Agreement, the documents appurtenant
hereto and the transactions contemplated hereby and thereby shall be paid by the
party incurring such fees or expenses, whether or not the Closing occurs.
Section 7.02 Further Actions.
Each party hereto will execute such further documents and
instruments and take such further actions as may reasonably be requested by the
other party to consummate the Merger, to vest the Surviving Corporation with
full title to all assets, properties, rights, approvals,
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immunities, and franchises of either of the Constituent Entities or to effect
the other purposes of this Agreement.
Section 7.03 Availability of Equitable Remedies.
Since a breach of the provisions of this Agreement could not
adequately be compen sated by money damages, any party shall be entitled, either
before or after the Effective Time, in addition to any other right or remedy
available to it, to an injunction restraining such breach or threatened breach
and to specific performance of any such provision of this Agreement, and, in
either case, no bond or other security shall be required in connection
therewith, and the parties hereby consent to the issuance of such an injunction
and to the ordering of specific performance.
Section 7.04 Survival.
The representations, warranties, covenants, and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Merger for a period of three (3) years after the
Effective Time.
Section 7.05 Modification.
This Agreement may be amended, supplemented, or modified by
action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Effective Time. No such amendment,
supplement, or modification shall be effective unless set forth in a written
instrument duly executed by or on behalf of each party hereto.
Section 7.06 Notices.
Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested or by Federal Express, express mail or similar
overnight delivery or courier service or delivered (in person or by
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telecopy, telex or similar telecommunications equipment) against receipt to the
party to which it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 7.06)
with copies (which copies shall not constitute notice) as follows:
If to the Parent or the Merger-Sub: 875 North Michigan Avenue, Suite 1560
Chicago, Illinois 60611
Attn: Robert H. Daskal
With a copy to: D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago, Illinois 60601
Attn: Arthur Don, Esq.
If to Takeoutmusic.com: 381 Broadway, Suite 201
New York, New York 10013
Attn: Mori S. Ninomiya
With a copy to: Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019
Attn: Alan I. Annex, Esq.
Any notice shall be addressed to the attention of the
President. Any notice or other communication given by certified mail shall be
deemed given three business days after certification thereof, except for a
notice changing a party's address which will be deemed given at the time of
receipt thereof. Any notice given by other means permitted by this Section 7.06
shall be deemed given at the time of receipt hereof.
Section 7.07 Waiver.
Any waiver by any party of a breach of any term of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that term or of any breach of any other term of this Agreement. The
failure of a party to insist upon strict adherence to any term of this
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Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing and be
authorized by a resolution of the Board of Directors or by an officer of the
waiving party.
Section 7.08 Binding Effect.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the Parent, the Merger-Sub and Takeoutmusic.com, and
their respective successors and assigns.
Section 7.09 No Third-Party Beneficiaries.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement.
Section 7.10 Severability.
If any provision of this Agreement is hereafter held to be
invalid, illegal, or unenforceable for any reason, such provision shall be
reformed to the maximum extent permitted so as to preserve the parties' original
intent, failing which, it shall be severed from this Agreement, with the balance
of this Agreement continuing in full force and effect. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. If any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
Section 7.11 Merger; Assignability.
This Agreement and the other agreements to be delivered
pursuant to this Agreement, and the Exhibits and Schedules attached hereto and
thereto, set forth the entire understanding of the parties with respect to the
subject matter hereof and supersede all existing
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agreements concerning such subject matter. This Agreement may not be assigned by
any party without the prior written consent of each other party to this
Agreement.
Section 7.12 Headings.
The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
Section 7.13 Counterparts; Governing Law; Jurisdiction.
This Agreement may be executed in any number of counterparts
(and by facsimile), each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall be governed by,
and construed in accordance with, the laws of the State of Delaware, without
giving effect to the rules governing the conflict of laws. Any action, suit, or
proceeding arising out of, based on, or in connection with this Agreement, the
Merger, or the other transactions contemplated hereby, or any document relating
hereto or delivered in connection with the transactions contemplated hereby, may
be brought only and exclusively in the Federal or State Courts located in the
State of New York; and each party covenants and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of such court if it
has been duly served with process, that its property is exempt or immune from
attachment or execution, that the action, suit, or proceeding is brought in an
inconvenient forum, that the venue of the action, suit, or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement has been executed by duly
authorized officers of each of the parties hereto as of the date first above
written.
TAKEOUTMUSIC.COM, INC.
By: /s/ JOHN LAVALLO
-------------------------------------------
Name: John Lavallo
Title: Executive Vice President,
Business Affairs
SHAMPAN, LAMPORT HOLDINGS LIMITED
By: /s/ STEVEN A. ROTHSTEIN
-------------------------------------------
Name: Steven A. Rothstein
Title: President
TOMCI ACQUISITION CORP.
By: /s/ STEVEN A. ROTHSTEIN
-------------------------------------------
Name: Steven A. Rothstein
Title: President
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EXHIBIT 2.2
LIST OF SCHEDULES AND EXHIBITS TO
AGREEMENT AND PLAN OF MERGER
Exhibit 1.04-1 Certificate of Incorporation of Takeoutmusic.com, Inc.
Exhibit 1.04-2 By-Laws of Takeoutmusic.com, Inc.
Exhibit 1.05-1 Certificate of Incorporation of Shampan, Lamport Holdings
Limited
Exhibit 1.05-2 By-Laws of Shampan, Lamport Holdings Limited
Exhibit 2.02(a)-1 Takeoutmusic.com, Inc. Stock Option Plan
Schedule 2.02(a) Takeoutmusic.com Options
Schedule 2.02(b) Director Nominees
Schedule 2.02(d) Takeoutmusic.com Warrant
Exhibit 3.02(b)-1 Certificate of Incorporation of TOMCI Acquisition Corp.
Exhibit 3.02(b)-2 By-Laws of TOMCI Acquisition Corp.
Schedule 3.01(b)(iii) Takeoutmusic.com Common Stock Reserved for Issuance
Schedule 3.01(b)(iv) Debt, Liabilities and Other Obligations of
Takeoutmusic.com
Schedule 3.01(d)(ii) Consents and Approvals
Schedule 3.01(f) Material Intangibles of Takeoutmusic.com
Schedule 3.01(h) Absence of Certain Changes or Events
Schedule 3.02(b)(iii) Obligations of the Parent to Issue or Sell Stock
Schedule 3.02(b)(iv) Debt, Liabilities and Other Obligations of the Parent and
the Merger-Sub
Schedule 3.02(d)(i) Conflicts, Violations and Defaults of the Parent and
Merger-Sub
Schedule 3.02(d)(ii) Consents and Approvals
Schedule 3.02(f) Absence of Certain Changes or Events
Schedule 3.02(g) Absence of Undisclosed Liabilities
Schedule 3.02(h) Legal Proceedings
Schedule 3.02(j) Compliance with Laws and Order
Schedule 3.02(p) Facilities, Tangible Property and Assets
Schedule 3.02(r) Transactions with Affiliates
Schedule 3.02(s) Tax Returns Required to be Filed; Consolidated or
Affiliated Groups
Schedule 4.01(c) Dividends and Purchases of Stock by Parent and Merger-Sub
<PAGE>
EXHIBIT 3.1
AMENDMENT TO ARTICLES OF INCORPORATION
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SHAMPAN, LAMPORT HOLDINGS LIMITED
Pursuant to the provisions of RCW 23B.10 of the Washington Business
Corporation Act, Shampan, Lamport Holdings Limited, a Washington corporation,
hereby adopts the following articles of amendment to its articles of
incorporation:
FIRST: The name of the corporation is:
SHAMPAN, LAMPORT HOLDINGS LIMITED
SECOND: Article I of the articles of incorporation is amended to read
in its entirety as follows:
ARTICLE I
The name of the corporation is: takeoutmusic.com Holdings Corp.
THIRD: The foregoing amendment to the articles of incorporation was
adopted on February 1, 2000 by unanimous written consent of the Board of
Directors of the Corporation, without shareholder action, in accordance with the
provisions of RCW 23B.10.020. No shareholder action was required to adopt the
foregoing amendment to the articles of incorporation.
EXECUTED this 1st day of February, 2000.
SHAMPAN, LAMPORT HOLDINGS LIMITED
/s/ STEVEN A. ROTHSTEIN
-----------------------
Steven A. Rothstein, Chief Executive Officer
