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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 333-07727
TAKEOUTMUSIC.COM HOLDINGS CORP.
(Name of Small Business Issuer as Specified in Its Charter)
Washington 98-0138706
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
381 Broadway, New York, New York 10013
(Address of Principal Executive Offices)
(212) 871-0714
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Act")
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / / No /X/
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/
The issuer had no revenues for the fiscal year ended December 31,
1999.
The aggregate market value of the voting stock of the Registrant
held by non-affiliates of the Registrant, based upon the closing price of the
Common Stock on the OTC Bulletin Board on March 31, 2000 was approximately
$37,386,910. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
The registrant had 12,579,677 shares of common stock, $.01 par
value per share, outstanding at March 31, 2000.
Documents Incorporated by Reference: None.
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TAKEOUTMUSIC.COM HOLDINGS CORP.
ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
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Page
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PART I.............................................................................................................1
ITEM 1. DESCRIPTION OF BUSINESS..............................................................................1
ITEM 2. DESCRIPTION OF PROPERTY..............................................................................3
ITEM 3. LEGAL PROCEEDINGS....................................................................................3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................................3
PART II............................................................................................................3
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............................................3
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS..........................................4
ITEM 7. FINANCIAL STATEMENTS.................................................................................7
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..................7
PART III...........................................................................................................7
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT.......................................................................................7
ITEM 10. EXECUTIVE COMPENSATION...............................................................................10
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................11
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................12
PART IV............................................................................................................13
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................................................13
SIGNATURES.........................................................................................................15
EXHIBIT INDEX......................................................................................................16
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PART I
SPECIAL NOTE REGARDING SUBSEQUENT EVENT
The Registrant has determined that the inclusion of certain events and
transactions subsequent to December 31, 1999 is necessary to make a fair
presentation of the business of the Registrant and to enable the reader to have
a fair understanding of the events and transactions that have transpired. Unless
otherwise indicated herein, all references to shares of the Registrant's common
stock, par value $.01 per share (the "Common Stock"), and to prices with respect
to shares of the Registrant's Common Stock, give effect to a 1 for 3 reverse
stock split effective December 20, 1999 and a 1 for 4 reverse stock split
effective July 21, 1998.
ITEM 1. DESCRIPTION OF BUSINESS.
General
takeoutmusic.com Holdings Corp. (hereinafter referred to as the
"Company") was originally organized under the laws of the State of Washington on
December 28, 1993 under the name "Allegiant Technologies Inc." On July 21, 1998
the Company changed its name to "Shampan, Lamport Holdings Limited". On February
9, 2000, the Company changed its name to its present name. The Company's
wholly-owned subsidiary, takeoutmusic.com, Inc., was organized under the laws of
the State of Delaware on December 29, 1999 under the name TOMCI Acquisition
Corp. ("TOMCI").
Certain Background Information
Limited History of Operations
The Company has a limited history of operations. On December 28, 1993,
the Company acquired SuperCard, a multimedia software development tool, together
with its customer franchise, from Aldus Corporation on February 4, 1994, and
thereafter developed for sale various product upgrades and ancillary software
products. The Company incurred substantial start up, development and other
expenses in excess of revenues, which resulted in cumulative net losses
exceeding $5.0 million. The Company's revenues were substantially derived from
the sale of SuperCard and to a much lesser extent the sale of ancillary software
products, all for the Macintosh platform.
The Company's results of operations were adversely impacted by the
following factors: (1) the Company was not able to secure adequate financing to
complete new product under development, including a Windows version of
SuperCard, and to maintain effective marketing strategies, (2) the Company's
existing products were sold into a market segment that had experienced
significant sales declines, and (3) the decline in sales of Macintosh computers
and related Macintosh software in general particularly in 1995 and 1996. As a
consequence of these factors the Company was forced to cease operations, change
management and undertake a reorganization of its capital.
On May 31, 1998, the Company disposed of its technology assets to an
arms length purchaser. The proceeds from the sale were used to settle certain
obligations of the Company. Following such sale, management explored new lines
of business and remained dormant except for activities in connection with
securing additional financing and such new operations.
As disclosed in the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission (the "Commission") on December 9, 1999, the
Company entered into a non-binding letter of intent to acquire, by way of
merger, all of the issued shares of takeoutmusic.com, Inc., a privately held
Delaware corporation ("takeoutmusic.com") (see "Certain Background Information -
Merger").
Changes in Capitalization During the Fiscal Year Ended December 31, 1999
On December 20, 1999, the Company effected a 1-for-3 reverse stock
split of its issued and outstanding Common Stock, resulting in each 3 issued and
outstanding shares of the Common Stock being changed into one share. Following
the reverse split the total number of shares of Common Stock of the Company
issued and
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outstanding as of December 31, 1999 was 2,438,889. In addition, the Company had,
at December 31, 1999, outstanding warrants entitling the holders to purchase, in
the aggregate, an additional 561,111 shares of Common Stock at a purchase price
of $0.5175 per share. The warrants expire at the close of business on October
15, 2000.
Recent Merger
As disclosed in the Company's Current Report on Form 8-K filed with the
Commission on February 18, 2000, on February 4, 2000, TOMCI merged (the
"Merger") with and into 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 is required
to issue 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 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 to be 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 $0.579713.
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.
takeoutmusic.com is engaged in the business of developing and marketing
musical recordings and offering such recordings by digital download over the
Internet on its website, takeoutmusic.com. The site employs 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.
Content offered on the website is focused on modern independent music
for audiences aged 14-34, and is specifically targeted to the young,
computer-savvy music consumer. The site offers artist's biographies and
discographies, news clippings and concert listings. Visitors to the site may
hear and view cybercasts, recordings and video samples, purchase sound
recordings and music-related merchandise, and chat with artists and other
visitors to the site. Artists on the site represent the dance, hip hop, rock,
jazz, electronica, and drum and bass music genres. The Company intends to add
additional websites to include artists from other genres, including pop and
Latin, and to expand internationally. The first such site, takeoutpop.com, was
launched in April, 2000.
takeoutmusic.com currently represents approximately 184 artists and 909
tracks, and currently has approximately 148,100 unique users per month.
takeoutmusic.com intends to increase the size of its user base and consequently
increase revenues from sales of music, clothes, concert tickets and related
merchandise, in addition to advertising and sponsorship programs. In addition to
employing traditional forms of media for promotion, takeoutmusic.com has
established a "Rep Network" comprised of approximately 200 representatives at
over 150 college campuses in the United States. These representatives promote
the site through give-aways and campus activities, market company-sponsored
promotional events and advise takeoutmusic.com of prospective independent
artists.
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ITEM 2. DESCRIPTION OF PROPERTY.
As of December 31, 1999, the Company had no plants or other property.
ITEM 3. LEGAL PROCEEDINGS.
As of December 31, 1999, the Company was not party to any pending legal
proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Item 4 is not applicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
As of February 10, 2000, the Company's Common Stock has been traded on
the OTC Bulletin Board under the symbol "TOMU". From July 21, 1998 through
February 10, 2000, the Company's Common Stock traded on the OTC Bulletin Board
under the symbol "SLHX". Prior to such time, the Company's Common Stock traded
on the OTC Bulletin Board under the symbol "ALGT".
The Company's Common Stock was also traded on the Vancouver Stock
Exchange under the symbol "SLL.U" for the period commencing July 21, 1998
through May 28, 1999, when the Company voluntarily delisted the Common Stock
from trading on the Vancouver Stock Exchange. Prior to July 21, 1998, the Common
Stock traded on the Vancouver Stock Exchange under the symbol "AGH.U".
The following table sets forth the high and low prices per share of the
Company's Common Stock on the OTC Bulletin Board for all fiscal quarters since
January 1, 1998. These quotations reflect prices between dealers and do not
reflect retail mark-ups, mark-downs or commissions and may not necessarily
represent actual transactions. The information has been adjusted, where
appropriate, to reflect the one for three reverse stock split effective December
20, 1999 and the one for four reverse stock split effective July 21, 1998.
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Bid Prices of Common Stock
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High Low
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Year Ended December 31, 1999:
First Quarter............................................... $0.15 $0.03
Second Quarter.............................................. $0.15 $0.15
Third Quarter............................................... $1.13 $0.15
Fourth Quarter.............................................. $11.00 $0.30
Year Ended December 31, 1998:
First Quarter............................................... $0.75 $0.24
Second Quarter.............................................. $1.08 $0.48
Third Quarter............................................... $0.84 $0.21
Fourth Quarter.............................................. $0.90 $0.03
</TABLE>
The following table sets forth the high and low prices per share of the
Company's Common Stock on the Vancouver Stock Exchange for all fiscal quarters
since January 1, 1998 through May 28, 1999, when the Company voluntarily
delisted the Common Stock from trading on the Vancouver Stock Exchange. These
prices have been adjusted, where appropriate, to reflect the one for three
reverse stock split effective December 20, 1999 and the one for four reverse
stock split effective July 21, 1998.
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Bid Prices of Common Stock
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High Low
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Year Ended December 31, 1999:
First Quarter............................................... $0.30 $0.27
Second Quarter.............................................. $0.30 $0.27
Third Quarter............................................... N/A N/A
Fourth Quarter.............................................. N/A N/A
Year Ended December 31, 1998:
First Quarter............................................... $0.84 $0.48
Second Quarter.............................................. $0.84 $0.48
Third Quarter............................................... $0.60 $0.60
Fourth Quarter.............................................. $0.60 $0.27
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HOLDERS
As of December 31, 1999, there were approximately 64 holders of record
of the Company's Common Stock. Such number of record owners was determined from
the Company's shareholder records, and does not include beneficial owners of our
Common Stock whose shares are held in the names of various security holders,
dealers and clearing agencies. The Company believes that the number of
beneficial owners of Common Stock held by others as or in nominee names exceeds
300 in number.
DIVIDENDS
The Company has never paid a dividend, whether in cash or property, on
its shares of Common Stock, and has no present expectation of doing so in the
future.
RECENT SALES OF UNREGISTERED SECURITIES
Sales of unregistered securities by the Company during the year ended
December 31, 1999 are as follows:
On July 31, 1999, the Company issued 56,138(1) shares of Common Stock
to certain creditors of the Company in settlement of debt of the Company in the
amount of $26,750. The issuance was made pursuant to Regulation S of the
Securities Act of 1933, as amended (the "Act") (see "Item 12. Certain
Relationships and Related Transactions").
On July 31, 1999, the Company issued an aggregate of 133,333(1) shares
of Common Stock to certain creditors of the Company in settlement of debt of the
Company in an aggregate amount equal to $36,250. The issuance was made pursuant
to Section 4(2) of the Act (see "Item 12. Certain Relationships and Related
Transactions").
(1) The number of shares issued have been adjusted to reflect the one for three
reverse stock split effective December 20, 1999.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements of the Company and related notes included elsewhere in this
Report. All statements contained herein (other than historical facts) including,
but not limited to, statements regarding the Company's future development plans,
the Company's ability to generate cash from its operations and any losses
related thereto, are based upon current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially from the anticipated results or other
expectations expressed in the Company' forward looking statements. Generally,
the words "anticipate," "believe," "estimate," "expects," and similar
expressions as they relate to the Company and/or its management, are intended to
identify forward looking statements. Among the factors that could
4
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cause actual results to differ materially are the following: the inability of
the Company to obtain additional financing to meet its capital needs and general
business and economic conditions.
Overview
The Company has a limited history of operations and no history of profitability.
It was incorporated as Allegiant Technologies Inc. on December 28, 1993 and
thereafter until the cessation of operations developed for sale various software
products primarily for the Macintosh platform. On May 31, 1998 the Company sold
its technology assets and product inventory to an arms length purchaser,
commenced a reorganization of its capital (see "Capital Reorganization") and
thereafter remained dormant in search of a new line of business.
On December 9, 1999 the Company announced and reported on Form 8-K that it
entered into a letter of intent to merge with takeoutmusic.com, Inc. (see
"Description of Business - Certain Background Information - Limited History of
Operations"). The merger was completed on February 4, 2000 (see "Description of
Business - Certain Background Information - Merger").
As of December 31, 1999 the Company had cumulative net losses of $5,248,854.
See Notes to the Financial Statements for a description of the Company's
significant accounting policies.
Liquidity and Capital Resources
The Company sustained substantial operating losses and used substantial amounts
of working capital in its operations to December 31, 1999. As of December 31,
1999 the Company had cash equivalents of $8,497 and a working capital deficit of
$91,789. Total liabilities exceeded the book value of total assets by $274,689.
Included in liabilities, are notes payable to a former director of the Company
in the amount of $183,000. These notes, and interest accrued thereon, are
automatically converted into common stock of the Company at $3.50 per share if
the market price of the Company's common stock is equal to or in excess of $7.00
per share for a period of ten consecutive trading days at anytime after August
4, 2000 and before February 4, 2003. See Note 3 to the Financial Statements.
The Company's ability to satisfy its liabilities, meet its obligations as they
become due and carry out its business plans over the next twelve months is
dependent upon its ability to secure additional funding through public or
private sales of securities, including equity securities of the Company and
there are no assurances that the Company will be successful in securing
additional funding.
Capital Reorganization
The Company completed the following reorganization of its capital prior to its
merger with takeoutmusic.com, Inc.:
1. During the years ended December 31, 1998 and 1997, former
principals of the Company surrendered for cancellation 166,666
escrowed shares of common stock. (2,000,000 shares adjusted for
reverse share splits described below).
2. On July 21, 1998 the Company completed a four for one reverse
split of its common stock and changed its name from Allegiant
Technologies Inc. to Shampan, Lamport Holdings Limited.
3. On January 15, 1998, the Company issued 1,200,000 shares of common
stock at a deemed price of $0.45 per share, adjusted for reverse
share splits, and a non-transferable warrant to purchase 94,444
shares of common stock at $0.5175 per share until October 15,
1999, in full settlement and satisfaction of debts of the Company
amounting to $540,000. The term of the warrant was subsequently
extended to October 15, 2000.
4. On January 15, 1998, the Company issued 466,666 Units at $0.45 per
Unit, adjusted for reverse splits, for aggregate proceeds of
$210,000. Each Unit consisted of one share of common stock and one
non-
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transferable warrant to purchase one additional share of common
stock at $0.5175 per share until October 15, 1999. The term of the
warrant was subsequently extended to October 15, 2000. The
proceeds of the private placement were primarily used to fund the
settlement of trade debts of the Company.
5. On May 31, 1998, the Company sold its technology assets and
product inventory for $40,000. The proceeds were used to fund the
settlement of trade debts of the Company.
6. During May 1998, the Company borrowed $55,000 from a director of
the Company. The proceeds were used to fund certain ongoing
obligations of the Company. In addition, during May 1998, the
Company negotiated new terms of payment on an outstanding secured
promissory note in the amount of $100,000, which was in default as
a result of the Company having failed to make timely interest
payments. Subsequent to the year ended December 31, 1999, these
notes were amended such that the principal together with accrued
interest in the amount of $28,000 ($183,000 in total) are
automatically converted into common stock of the Company at $3.50
per share if the market price of the Company's common stock is
equal to or in excess of $7.00 per share for a period of ten
consecutive trading days at anytime after August 4, 2000 and
before February 4, 2003. See Note 3 to the Financial Statements.
7. On December 20, 1998 the Company completed a three for one reverse
split of its common stock and on February 9, 2000 changed its name
from Shampan, Lamport Holdings Limited to takeoutmusic.com
Holdings Corp. in connection with the announced merger with
takeoutmusic.com, Inc.
As at December 31, 1999 the Company's capital was as follows:
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<CAPTION>
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Number of Shares of Common Stock Issued 2,438,889
Number of Shares to be Issued Upon the Exercise of Warrants 561,111
Number of Shares to be Issued Upon Conversion of Notes(1) 52,287
---------
Fully-diluted Shares of Common Stock before the Merger 3,052,287
=========
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(1) Conversion feature added subsequent to year ended December 31, 1999 (see
paragraph 6 above).
Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues in the 1998 fiscal year were generated from the sale of its inventory
of software products. The Company did not have the requisite capital to maintain
sales and marketing staff or to undertake an effective marketing campaign and as
a consequence sales declined precipitously from prior periods. As a further
consequence, the Company was not able to continue product development, which was
necessary if it were to continue with the business as a going concern. On May
31, 1998 the Company ceased operations and sold the balance of its product
inventory and technology assets for $40,000.
During the year ended December 31, 1999, management pursued numerous business
opportunities until it reached an agreement to merge with takeoutmusic.com, Inc.
As a consequence the Company's only material expense during the period was
administrative in nature.
General and administrative expenses consist primarily of the costs of the
Company's finance and administrative personnel, including the chief executive
officer, rent, telephone, legal and other expenses incurred in pursuit of new
business opportunities and all general costs associated with maintaining a
public company in good standing. General and administrative expenses decreased,
as expected, from $123,116 in 1998 to $78,170 in 1999. The decrease in general
and administrative expenses is attributable primarily to a reduction in staffing
and the closure of the San Diego office. It is expected that these expenses will
increase with the development of the Company's new line of business.
6
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Year 2000
The Company was dormant during the year ended December 31, 1999 and did not
experience any Year 2000 related problems. During the year ended December 31,
1999, the Company expended no additional funds to ensure that its computer
systems would be Year 2000 compliant. There can be no assurance Year 2000
related problems will not arise in connection with customers, suppliers, other
third parties or the merger of the Company's wholly-owned subsidiary with and
into takeoutmusic.com, Inc. (see "Description of Business - Certain Background
Information - Merger").
ITEM 7. FINANCIAL STATEMENTS.
See Index to Financial Statements attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Item 8 is not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Set forth below is certain information relating to the members of the
Board of Directors of the Company as of December 31, 1999. Where appropriate,
such information has been supplemented to reflect events that occurred
subsequent to the year ended December 31, 1999. There are no family
relationships between any of the Directors and officers.
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NAME AGE POSITION
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Mori S. Ninomiya 26 Chairman of the Board of Directors, President and Chief Executive
Officer
John Lavallo 31 Executive Vice President Business Affairs, Secretary and Director
Edwin O'Loughlin 55 Director
Steven A. Saltzman 41 Director
Steven A. Rothstein 49 President, Chief Executive Officer and Director until February 4, 2000
William D. McCartney 44 Director until February 4, 2000
Craig Gould 30 Director until February 4, 2000
Edward Lewis 70 Director until February 4, 2000
Robert H. Daskal 58 Chief Financial Officer until February 4, 2000 and Secretary from
September 1999 until February 4, 2000
Leonard Petersen 45 Secretary until September 1999
</TABLE>
At the effective time of the Merger, the then current directors of the
Company were to elect to the Board of Directors between five and seven nominees
of the former takeoutmusic.com stockholders, as designated by such stockholders,
and immediately thereafter tender their own resignations from the Board of
Directors of the Company. At that time, the former takeoutmusic.com stockholders
nominated Messrs. Ninomiya, Lavallo and O'Loughlin to the Board of Directors.
Mr. Saltzman was elected to the Board of Directors of the Company by the then
existing members of the Board effective as of April 9, 2000.
The following sets forth certain biographical information for the
current Directors and officers:
Mori S. Ninomiya. Mr. Ninomiya was elected to the Board of Directors on
February 4, 2000, at which time he was also appointed President and Chief
Executive Officer of the Company. Mr. Ninomiya has served as Chairman of the
Board, President and Chief Executive Officer of takeoutmusic.com, Inc. from July
1999 until
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present. From February 1999 through July 1999, Mr. Ninomiya was primarily
engaged in activities related to the formation of takeoutmusic.com, Inc. From
September, 1997 until February, 1999, Mr. Ninomiya served in the Artist &
Repertoire department at Tommy Boy Music LLC, an affiliate of Time-Warner, Inc.
From June, 1995 until September, 1997, Mr. Ninomiya was an audio and music
producer for Time Warner Interactive. From June, 1991 until September, 1992, Mr.
Ninomiya was an audio engineer at Atlantic Recording Studios. Mr. Ninomiya
obtained a B.M. from New York University in 1994.
John Lavallo. Mr. Lavallo was elected to the Board of Directors on
February 4, 2000, at which time he was also appointed Executive Vice-President,
Business Affairs and Secretary of the Company. Mr. Lavallo has served Executive
Vice-President, Business Affairs and Secretary of takeoutmusic.com, Inc. from
August 1999 until present. From December 1997 through August 1999, Mr. Lavallo
served as an attorney in the Business Affairs/Legal Department at Tommy Boy
Music LLC. From August 1997 through December 1997, Mr. Lavallo served as a legal
consultant to the law firm of McCarter & English, LLP. From March 1995 through
May, 1997, Mr. Lavallo worked as a Contract/Business Analyst at EMI Capital
Music. Mr. Lavallo holds a J.D., cum laude, from Michigan State University and a
B.A., cum laude, from Drew University.
Edwin O'Loughlin. Mr. O'Loughlin was elected to the Board of Directors
on February 4, 2000. Mr. O'Loughlin has served as a Director of
takeoutmusic.com, Inc. from August 2, 1999 until present. From December 1999
through the present, Mr. O'Loughlin has served as an advisor to Sharp End
Records Ltd. From April 1998 through present Mr. O'Loughlin has served as a
producer in the Artist & Repertoire Department at Tommy Boy Music LLC. Prior to
such time, Mr. O'Loughlin served as Chairman of Next Plateau Records, a rap and
dance music label, where Mr. O'Loughlin was credited with over thirty top-40
Billboard hits and the sextuple-platinum "Very Necessary" by Salt N' Pepa. In
addition, during the 1970's Mr. O'Loughlin founded Midland International, a
Disco label whose roster included Silver Convention and Carol Douglas.
Steven A. Saltzman. Mr. Saltzman was elected to the Board of Directors
on April 9, 2000. Since October, 1998, Mr. Saltzman has been a radio consultant
for the Finelco radio group, based in Milan and Monaco. During 1997 through
1998, Mr. Saltzman was a founder and director of a German radio consortium, Mega
Radio. From 1995 through 1998, he was a founder and board member of Delta Radio,
an Amsterdam-based radio station. During 1993 through 1997, Mr. Saltzman was the
radio consultant to Scandinavian Broadcasting (SBS). Over the last ten years,
Mr. Saltzman has served as a consultant to various radio groups including
Hachette/Europe Communications of France. From 1984 through the present, he has
been chairman of Rock Over London, a radio syndicator. In 1983, Mr. Saltzman set
up global radio syndicator Radio International Inc. Mr. Saltzman received his
B.A. from the University of South Florida in 1981.
The following sets forth certain biographical information for the
additional Directors and officers of the Company during the period covered by
this Report:
Steven A. Rothstein. Mr. Rothstein served as Chairman of the Board of
Directors and Chief Executive Officer of the Company from October 31, 1997
through February 4, 2000. He has served as Chairman of the Board of Directors
and Chief Executive Officer of Olympic Cascade Financial Corp. since its
inception in February 1997. He became a member of the Board of National
Securities Corporation in May 1995 and was appointed Chairman on August 1, 1995.
From 1979 through 1989, Mr. Rothstein was registered representative, and Limited
Partner at Bear Steams & Co., Chicago, Illinois and Los Angeles, California.
From 1989 to 1992, Mr. Rothstein was a Senior Vice President in the Chicago
office of Oppenheimer and Company, Inc. In December 1992 he joined Rodman and
Renshaw, Inc., a Chicago-based broker-dealer serving as Managing Director, and
joined H.J. Meyers, Inc. in Beverly Hills, California, a New York Stock Exchange
member firm in March 1994. He resigned from H.J. Meyers and Company in 1995 to
associate with National Securities Corporation. Mr. Rothstein is a 1972 graduate
of Brown University, Providence, Rhode Island. Presently, Mr. Rothstein is a
board member of Gateway Data Sciences, Inc., SigmaTron International, Inc. and
Vita Food Products, Inc.
William D. McCartney. Mr. McCartney served as a Director of the Company
from January, 1994 through February 4, 2000. He served as Chief Financial
Officer and Secretary of the Company from January 1994 to October 31, 1997. From
1990 to the present, he has been the President of Pemcorp Management Inc., which
provides corporate finance services to public and private companies. Mr.
McCartney is a chartered accountant in the Province of British Columbia, Canada
and has a bachelors degree in business from Simon Fraser University.
8
<PAGE>
Craig Gould. Mr. Gould served as a Director of the Company from October
31, 1997 through February 4, 2000. From 1995 to the present, he has been a Vice
President Corporate Finance of National Securities Corporation. Prior to 1995,
Mr. Gould was a finance consultant at Merrill, Lynch, Pierce, Fenner and Smith,
Inc. He has a B.A. degree from the University of Wisconsin.
Edward Lewis. Mr. Lewis served as a Director of the Company for the
periods from June, 1997 to September 1997, from June, 1998 to February, 1999 and
from May, 1999 to February 4, 2000. He presently serves as proprietor of Lewis
Enterprises, a private business engaged in the managing of several limited
partnerships that are involved in the exploration, development and marketing of
natural gas. Mr. Lewis is a graduate of the University in Michigan (1951) and
Yale University Law School (1955).
Robert H. Daskal. Mr. Daskal served as Chief Financial Officer of the
Company from October 21, 1998 through February 4, 2000. He has served as Senior
Vice President, Chief Financial Officer and Treasurer of Olympic Cascade
Financial Corp. since its inception in February, 1997. From 1994 to 1997 Mr.
Daskal was a Director, Executive Vice President and Chief Financial Officer of
Inco Homes Corporation, and from 1985 to 1994 he was a Director, Executive Vice
President-Finance and Chief Financial Officer of UDC Homes, Inc. (and its
predecessors). UDC Homes, Inc. filed a petition for relief under Chapter 11 of
the Bankruptcy Code in May, 1995. Mr. Daskal, is a former Tax Partner with
Arthur Andersen & Co., became a CPA in Illinois in 1967, received his B.B.A. and
J.D. from the University of Michigan in Ann Arbor. Mr. Daskal is presently a
director of Inco Homes Corporation.
Leonard Petersen. Mr. Petersen served as Secretary of the Company from
October 31, 1997 through September, 1999. He was a Director of the Company from
February, 1994 to October 31, 1997. From 1990 to the present, he has been a
senior officer of Pemcorp Management Inc., which provides corporate finance
services to public and private companies. Mr. Petersen has been a director of
CVD Financial Corporation since May 1995 and of Logan International Corp. since
January 1994. Mr. Petersen is a chartered accountant in the Province of British
Columbia, Canada.
Indemnification of Directors and Officers
The Business Corporation Act of the State of Washington provides
generally that a corporation may indemnify any person who was or is a party to
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative in nature, whether formal or informal, by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against reasonable expenses (including
attorneys' fees) and, in a proceeding not by or in the right of the corporation,
judgments, fines and amounts paid in settlement, reasonably incurred by him in
connection with such suit or proceeding, if, in the case of conduct in the
individual's official capacity with the corporation, he acted in a manner
believed to be in the best interests of the corporation, and in all other cases
that his conduct was not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, he had no reasonable cause to
believe his conduct was unlawful. Washington law further provides that, unless
otherwise provided in the articles of incorporation or a bylaw, contract, or
resolution approved or ratified by the shareholders, a corporation will not
indemnify any person against expenses incurred in connection with an action by
or in the right of the corporation if such person shall have been adjudged to be
liable to the corporation or, in connection with any proceeding in which he was
adjudged liable on the basis that personal benefit was improperly received,
whether or not involving action in his official capacity, unless the court in
which such action or suit was brought shall determine that, despite the
adjudication of liability but in view of all the relevant circumstances, such
person is fairly and reasonably entitled to indemnification for the reasonable
expenses incurred.
The ByLaws of the Company provide for indemnification of officers and
directors of the Company to the full extent permitted by Washington law for any
and all fees, costs and expenses incurred in connection with any action, suit or
other proceeding, whether civil, criminal, administrative or investigative,
commenced or threatened, arising out of services by or on behalf of the Company.
The ByLaws also provide for advancing funds to pay for anticipated costs and
authorize the Board to enter into an indemnification agreement with each officer
or director.
9
<PAGE>
In accordance with Washington law, the Company's Articles of
Incorporation contain provisions eliminating the personal liability of
directors, except for (i) liability for unlawful distributions if it is
established that the director did not perform his duties in compliance with the
applicable standard of conduct for directors, (ii) acts or omissions which
involve intentional misconduct or a knowing violation of the law, and (iii) any
transaction in which a director receives an improper personal benefit. These
provisions only pertain to breaches of duty by directors as such, and not in any
other corporate capacity, e.g., as an officer. As a result of the inclusion of
such provisions, neither the Company nor its stockholders may be able to recover
monetary damages against directors for actions taken by them which are
ultimately found to have constituted negligence or gross negligence, or which
are ultimately found to have been in violation of their fiduciary duties,
although it may be possible to obtain injunctive or equitable relief with
respect to such actions. If equitable remedies are found not to be available to
stockholders in any particular case, stockholders may not have an effective
remedy against the challenged conduct.
The Company has entered into Indemnification Agreements with each of
its directors and officers (the "Indemnitees") pursuant to which it has agreed
to provide for indemnification, to the fullest extent permitted by law and the
Company's ByLaws, against any and all expenses, judgments, fines, penalties and
amounts paid in settlement arising out of any claim in connection with any
event, occurrence or circumstance related to such individual serving as a
director or officer of the Company. Such indemnification includes the advance of
expenses to the Indemnitees (including the payment of funds in trust therefor
under certain circumstances) and is subject to there not having been determined
that the Indemnitee would not be permitted to be indemnified under applicable
law. The rights of indemnification are in addition to any other rights which the
Indemnitees may have under the Company's Certificate of Incorporation, ByLaws,
the Washington Business Corporation Act or otherwise.
Section 16(a) Beneficial Ownership Reporting Compliance
As of December 31, 1999, Item 405 disclosure is not applicable.
ITEM 10. EXECUTIVE COMPENSATION.
The following provides certain information concerning all plan and
non-plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid or accrued by the Company during the years ended December
31, 1999, 1998 and 1997, to the Chief Executive Officer. Except as described
below, no director or executive officer received total compensation in respect
of the 1999 or 1998 fiscal year exceeding $100,000.
Summary Compensation Table.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES PAYOUTS
------------------------------ ------------------------------- -------
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY COMPENSATION STOCK AWARD(S) OPTIONS COMPENSATION
------------------ ---- ------ ------------ -------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
($) ($) ($)
Steven A. Rothstein 1999 $ -- $ 26,917(2) -- -- --
President and Chief 1998 -- $34,333(3) -- -- --
Executive Officer(1) 1997 -- $8,000(4) -- -- --
Joel B. Staadecker 1997 $47,000 $17,100 -- -- --
President and Chief
Executive Officer to
October 31, 1997
</TABLE>
- ---------------------
(1) President and Chief Executive Officer commencing November 1, 1997 through
February 4, 2000.
(2) Includes: (i) $14,000 in management fees; and (ii) $12,917 in interest
accrued on certain notes issued by the Company, of which a portion was paid
through the issuance of Common Stock of the Company and the balance was
aggregated with the principal under the Note (as defined in "Item 12 - Certain
Relationships and Related Transactions").
(3) Includes: (i) $6,000 in accrued management fees; (ii) $15,000 in finance
fees paid in connection with the granting of a loan to the Company; and (iii)
$13,333 in interest accrued on certain notes issued by the Company to Mr.
10
<PAGE>
Rothstein, of which a portion was paid through the issuance of Common Stock of
the Company and the balance was aggregated with the principal under the Note
(see "Item 12 - Certain Relationships and Relations Transactions").
(4) Includes $8,000 in interest accrued on certain notes issued by the Company
to Mr. Rothstein, of which a portion was paid through the issuance of Common
Stock of the Company and the balance was aggregated with the principal under the
Note (see "Item 12 - Certain Relationships and Related Transactions").
Options/SAR Grants in Fiscal Year Ended December 31, 1999
<TABLE>
<CAPTION>
(B) (C)
NUMBER OF SECURITIES % OF TOTAL (D)
UNDERLYING OPTIONS/SARS GRANTED EXERCISE (E)
(A) OPTIONS/SARS TO EMPLOYEES IN OR BASE EXPIRATION
YEAR NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) DATE
---- ---- ---------- ----------- ------------ ----
<S> <C> <C> <C> <C> <C>
1999 Steven A. Rothstein - - - -
</TABLE>
Aggregated Options/SAR Exercises in Most Recent Fiscal Year
and Fiscal Year-End Options/SAR Values.
The following table summarizes options exercised by the named executive
officers during the year ended December 31, 1999, and the number and value of
options held by all executive officers named in the Summary Compensation Table
at the respective year end. The Company does not have any outstanding stock
appreciation rights granted to executive officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS OPTIONS/WARRANTS
AT FY-END AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
YEAR NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
---- ---- ----------- -------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
1999 Steven A. Rothstein - - 233,333 $2,199,980
</TABLE>
Compensation of Directors
Employee and non-employee Directors of the Company at December 31, 1999 do not
receive any fee for serving on the Board of Directors however, such Directors
are reimbursed for travel expenses for attendance at board meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of March 31, 2000
with respect to the ownership of Common Stock by (i) the persons (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), known by the Company to be the beneficial owner of more
than five percent of any class of the Company's voting securities, (ii) each
director and each officer identified in the Summary Compensation Table, and
(iii) directors and executive officers as a group.
The most current information available to the Company is set forth
below. The Company believes that relevant to an understanding of the ownership
of the Common Stock is the fact that effective February 4, 2000, in connection
with the merger (the "Merger") of the Company's wholly-owned subsidiary with and
into takeoutmusic.com, Inc. ("takeoutmusic.com") pursuant to an Agreement and
Plan of Merger dated January 26, 2000, 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.
11
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF AND NATURE PERCENTAGE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
<S> <C> <C>
Sofisco Nominees Limited............ 1,724,964 13.7%
Le Panorama AB
57 Rue Grimaldi, Mc 98000 Monaco
Mori S. Ninomiya.................... 1,642,660 (1) 12.9%
381 Broadway, Suite 201
New York, NY 10013
Jason Brunka........................ 1,188,410 (2) 9.4%
381 Broadway, Suite 201
New York, NY 10013
Rich Pangilinan..................... 1,109,750 (3) 8.8%
381 Broadway, Suite 201
New York, NY 10013
John Lavallo........................ 987,160 (4) 7.8%
381 Broadway, Suite 201
New York, NY 10013
Steven A. Rothstein................. 734,509 (5) 5.7%
2737 Illinois Road
Wilmette, Illinois 60091
Steven A. Saltzman.................. 43,125 (6) *
6, Rue Malher
Code de Porte B247
75004 Paris, France
Edwin O'Loughlin.................... 43,125 (6) *
381 Broadway, Suite 201
New York, NY 10013
All Officers and Directors as a Group (4
persons in number)................ 2,716,070 (1)(2)(6) 21.1%
- --------------------------
</TABLE>
* Less than one percent.
(1) Includes 1,527,660 shares of Common Stock and options to purchase 115,000
shares of Common Stock.
(2) Includes 1,113,660 shares of Common Stock and options to purchase 74,750
shares of Common Stock.
(3) Includes 1,035,000 shares of Common Stock and options to purchase 74,750
shares of Common Stock.
(4) Includes 895,160 shares of Common Stock and options to purchase 92,000
shares of Common Stock.
(5) Includes 401,150 shares of Common Stock and warrants to purchase 233,333
shares of Common Stock held directly by Mr. Rothstein, and 100,026 shares of
Common Stock held by minor children of Mr. Rothstein.
(6) Includes options to purchase 43,125 shares of Common Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pemcorp Management Inc., a management advisory services company
controlled by Mr. McCartney, a Director of the Company during the fiscal year
ended December 31, 1999 and Mr. Petersen, a Secretary of the Company during the
fiscal year ended December 31, 1999, was paid $18,000 for services rendered and
$8,750 for the use of office facilities during the year ended December 31, 1999,
through the issuance by the Company of 56,138(1) shares of Common Stock of the
Company (see "Item 5. Market for Common Equity and Related Stockholder Matters -
Recent Sales of Unregistered Securities").
The Company accrued management fees of $14,000 and $6,000 during the
fiscal years ended December 31, 1999 and 1998, respectively, payable to Mr.
Rothstein, the Company's Chief Executive Officer during the fiscal year ended
December 31, 1999, and $7,000 and $3,000 during the fiscal years ended December
31, 1999 and 1998, respectively, payable to Mr. Daskal, the Company's Chief
Financial Officer during the year ended December 31, 1999. These accrued
management fees plus interest in the amount of $6,250, which interest was not
aggregated into the Note (as defined below), were paid through the issuance by
the Company of an aggregate of 133,333(1) shares of Common Stock (see "Item 5.
Market for Common Equity and Related Stockholder Matters - Recent Sales of
Unregistered Securities").
12
<PAGE>
On February 13, 1997, the Company issued a secured promissory note in
the amount of $100,000 to Mr. Rothstein. The note was in default during the year
ended December 31, 1999 as a result of the Company's failure to make timely
interest payments. The terms of the note were amended on May 1, 1998 to provide
that it is not secured and is payable on demand together with interest accrued
at the rate of 10% per annum. On February 4, 2000, the principal amount of
$100,000 and accrued interest in the amount of $28,000 were aggregated into a
three year long term convertible note issued to Steven A. Rothstein (IRA) (the
"Note") which Note, commencing August 4, 2000, shall automatically convert as to
principal and interest into Common Stock of the Company at $3.50 per share if
the price of the Common Stock shall be equal to or in excess of $7.00 per share
for a period of ten consecutive trading days. The Note bears interest at the
rate of 8% per annum which interest is payable at maturity or upon conversion.
No cash payments are due under the Note unless it remains outstanding at the end
of the 3-year term, at which time the Note shall be paid in cash in full,
including accrued interest.
In May, 1998 and April, 1999, the Company borrowed $50,000 and $5,000,
respectively, from Mr. Rothstein. The proceeds were used to fund certain ongoing
obligations of the Company. In May, 1998, the Company issued 50,000(1) shares of
Common Stock at a value of $0.30 per share as a finance fee to Mr. Rothstein in
connection with the loans in the aggregate amount of $55,000 made by Mr.
Rothstein to the Company. The promissory note was amended July 31, 1999 to
provide that it was unsecured and payable on demand without interest. Interest
was paid on the note to July 31, 1999. On February 4, 2000, the Company agreed
that that the note payable to Mr. Rothstein in the principal amount of $55,000
would be restated upon the same terms as the Note, except that it would not bear
interest.
During the fiscal year ended December 31, 1999, the Company accrued
interest payable in the amount of $12,917 on the then outstanding notes payable
to Mr. Rothstein.
(1) The number of shares issued have been adjusted to reflect the one for three
reverse stock split effective December 20, 1999.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(A) 1. Financial Statements.
See Index to Financial Statements Attached hereto.
2. Financial Statement Schedules.
Not Applicable.
3. Exhibits.
Incorporated by reference to the Exhibit Index at the end of this
Report.
(B) Reports on Form 8-K.
During the period commencing last quarter of the period covered by this
Report to date, the following reports on Form 8-K were filed by the Registrant:
<TABLE>
<CAPTION>
DATE OF REPORT ITEM REPORTED DESCRIPTION OF ITEM
-------------- ------------- -------------------
<S> <C> <C>
October 14, 1999 Item 5. Other Events The Company reported the extension of the expiration
dates on outstanding warrants from October 15, 1999
to October 31, 2000.
December 9, 1999 Item 5. Other Events The Company announced a one for three reverse stock
split effective December 20, 1999 and it's having
entered into a letter of intent to merge with
Takeoutmusic.com, Inc.
February 1, 2000 Item 5. Other Events The Company announced the execution of an Agreement
and Plan of Merger to acquire Takeoutmusic.com, Inc.
in exchange for
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
approximately 10.0 million shares of Common Stock of
the Company.
February 18, 2000 Item 1. Change in Control. The Company reported the merger of TOMCI Acquisition
Item 2. Acquisition or Disposition Corp., a wholly-owned subsidiary of the Company,
of Assets. with and into takeoutmusic.com, Inc. and the new
Item 5. Other Events board of directors of the Company.
Item 7. Financial Statements
</TABLE>
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TAKEOUTMUSIC.COM HOLDINGS CORP.
Date: April 14, 2000 By: /s/ MORI S. NINOMIYA
-------------------------
Mori S. Ninomiya
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ MORI S. NINOMIYA April 14, 2000
-----------------------
Mori S. Ninomiya
Chairman, President and
Chief Executive Officer
/s/ JOHN LAVALLO April 14, 2000
----------------
John Lavallo
Executive Vice President
Business Affairs and Director
/s/ EDWIN O'LOUGHLIN April 14, 2000
---------------------
Edwin O'Loughlin
Director
_______________________ April ___, 2000
Steven A. Saltzman
Director
15
<PAGE>
EXHIBIT INDEX
Exhibits designated with an asterisk (*) have previously been filed
with the Commission and are incorporated herein by reference to the
document referenced in parentheticals following the descriptions of
such exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description Page
--- ----------------
<S> <C>
2.1* Agreement and Plan of Merger dated January 26, 2000 among takeoutmusic.com Holdings Corp. (f/k/a
Shampan, Lamport Holdings Limited), TOMCI Acquisition Corp. and takeoutmusic.com, Inc. (filed
without exhibits or schedules) (filed as Exhibit 2.1 to Current Report on Form 8-K filed
February 18, 2000).
3.1* Articles of Incorporation filed with the Secretary of State of the State of Washington on
December 28, 1993 (filed as Exhibit 3.1 to Registration Statement on Form SB-2, File No.
333-07727).
3.2* Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the
State of Washington effective as of June 6, 1996 (filed as Exhibit 3.1(b) to Registration
Statement on Form 10-SB, File No. 0-28805).
3.3* Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the
State of Washington effective as of July 21, 1998 (filed as Exhibit 3.1(c) to Registration
Statement on Form 10-SB, File No. 0-28805).
3.4* Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the
State of Washington effective as of December 20, 1999 (filed as Exhibit 3.1(d) to Registration
Statement on Form 10-SB, File No. 0-28805).
3.5* Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the
State of Washington effective as of February 9, 2000 (filed as Exhibit 3.1 to Current Report on
Form 8-K filed February 18, 2000).
3.6* By-Laws (filed as Exhibit 3.2 to Registration Statement Form SB-2, File No. 333-07727).
4.1 Common Stock Purchase Warrant dated February 4, 2000 issued to Steven A. Rothstein to purchase
233,333 shares of Common Stock at an exercise price of $.5175 per share.
4.2 Common Stock Purchase Warrant dated February 4, 2000 issued to Steven Rabinovici to purchase
233,333 shares of Common Stock at an exercise price of $.5175 per share.
4.3 Common Stock Purchase Warrant dated February 4, 2000 issued to Geller & Friend Partnership I to
purchase 94,444 shares of Common Stock at an exercise price of $.5175 per share.
4.4 Common Stock Purchase Warrant dated February 4, 2000 issued to National Securities Corporation
to purchase 314,638 shares of Common Stock at an exercise price of $.579713 per share.
10.1 Incentive Compensation Plan.
10.2 Form of Indemnification Agreement.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
16
<PAGE>
FINANCIAL STATEMENTS
SHAMPAN, LAMPORT HOLDINGS LIMITED
Years Ended December 31, 1998 and 1999
with Independent Auditor's Report
F-1
<PAGE>
CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
FINANCIAL STATEMENTS
BALANCE SHEETS F-4
STATEMENTS OF OPERATIONS F-5
STATEMENT OF SHAREHOLDERS' DEFICIT F-6
STATEMENT OF CASH FLOWS F-7
NOTES TO FINANCIAL STATEMENTS F-8
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Shampan, Lamport Holdings Limited
We have audited the balance sheets of Shampan, Lamport Holdings Limited as of
December 31, 1998 and 1999, and the related statements of operations,
shareholders' deficit, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
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 Shampan, Lamport Holdings
Limited as of December 31, 1998 and 1999, and the results of its operations and
cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that Shampan,
Lamport Holdings Limited will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has sustained substantial operating
losses since inception and has a working capital deficit of approximately
$275,000 at December 31, 1999. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The 1999 financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classifications of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
/s/ Moss Adams LLP
Seattle, Washington
January 26, 2000, except for Notes 1(b), 3(a)
and 5(b), as to which the date is February 4, 2000
F-3
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
BALANCE SHEETS
AS OF DECEMBER 31
================================================================================
<TABLE>
<CAPTION>
1998 1999
---------- ----
<S> <C> <C>
ASSETS
Current assets:
Cash $ 10,776 $ 8,497
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Notes payable to shareholder $ 150,000 $ -
Notes payable 42,500 67,500
Accounts payable 31,522 31,522
Accrued liabilities 33,336 1,164
------------ ------------
Total current liabilities 257,358 100,186
------------ ------------
Notes payable to shareholder - 183,000
------------ ------------
Shareholders' deficit:
Preferred stock, 50,000,000 shares authorized, $0.01 par value, none issued or
outstanding - -
------------ ------------
Common stock, 100,000,000 shares authorized, $0.01 par value, 2,249,417 and
2,438,889 issued and outstanding, in 1998 and 1999, respectively 22,494 24,389
Additional paid-in capital 4,888,671 4,949,776
Accumulated deficit (5,157,747) (5,248,854)
------------ ------------
(246,582) (274,689)
------------ ------------
$ 10,776 $ 8,497
============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31
==============================================================================
<TABLE>
<CAPTION>
1998 1999
---------- ----
<S> <C> <C>
NET REVENUE $ 62,541 $ -
COST OF REVENUE 18,415 -
------------ ------------
GROSS PROFIT 44,126 -
------------ ------------
EXPENSES
Sales and marketing 24,837 -
General and administrative 123,116 78,170
------------ ------------
147,953 78,170
------------ ------------
LOSS FROM OPERATIONS (103,827) (78,170)
OTHER INCOME (EXPENSE)
Interest expense (13,333) (12,937)
Finance fee (15,000) -
Gain on disposal of property and equipment 4,972 -
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (127,188) (91,107)
EXTRAORDINARY ITEM, gain on settlement of obligations 7,113 -
------------ ------------
NET LOSS $ (120,075) $ (91,107)
============ ============
BASIC LOSS PER SHARE $ (0.06) $ (0.04)
============ ============
SHARES USED IN COMPUTING PER SHARE AMOUNTS 2,153,116 2,328,363
============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
STATEMENT OF SHAREHOLDERS' DEFICIT
================================================================================
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Shareholders'
------------
Shares Amount Capital Deficit Deficit
------------- -------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 645,250 $ 6,452 $ 4,139,713 $ (5,037,672) $ (891,507)
Shares issued 1,666,667 16,667 733,333 - 750,000
Shares cancelled (112,500) (1,125) 1,125 - -
Shares issued - bonus 50,000 500 14,500 - 15,000
Net loss - - - (120,075) (120,075)
------------- -------------- ------------- --------------- --------------
Balances at December 31, 1998 2,249,417 22,494 4,888,671 (5,157,747) (246,582)
Shares issued - settlement 189,472 1,895 61,105 - 63,000
Net loss - - - (91,107) (91,107)
------------- -------------- ------------- --------------- --------------
Balance at December 31, 1999 2,438,889 $ 24,389 $ 4,949,776 $ (5,248,854) $ (274,689)
============= ============== ============= =============== ==============
</TABLE>
See accompanying notes.
F-6
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31
================================================================================
<TABLE>
<CAPTION>
1998 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (120,075) $ (91,107)
Adjustments to reconcile net loss to net cash from operating activities
Gain on disposal of property and equipment (4,972) -
Expenses settled through issuance of common stock - 63,000
Extraordinary gain on settlement of obligations (7,113) -
Accrued interest converted to notes payable - 28,000
Finance fee paid in common stock 15,000 -
Changes in operating assets and liabilities
Accounts receivable 12,642 -
Inventories 38,146 -
Accounts payable and accrued liabilities (7,208) (32,172)
------------ ------------
(73,580) (32,279)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of property and equipment 21,611 -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 50,000 30,000
Payments on notes payable (22,500) -
------------ ------------
27,500 30,000
------------ ------------
Change in cash and cash equivalents (24,469) (2,279)
Cash and cash equivalents, beginning of year 35,245 10,776
------------ ------------
Cash and cash equivalents, end of year $ 10,776 $ 8,497
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Common stock issued for settlement of share subscriptions $ 750,000 $ -
============ ============
</TABLE>
See accompanying notes.
F-7
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
================================================================================
1. ORGANIZATION AND SUBSEQUENT EVENT
(a) Nature of Operations
The Company was incorporated in Washington State, U.S.A. on December
28, 1993 and changed its name from Allegiant Technologies Inc. to
Shampan, Lamport Holdings Limited effective July 21, 1998. In February
2000 the Company changed its name to takeoutmusic.com Holdings Corp.
The Company discontinued its principal line of business, developing,
marketing and supporting interactive multimedia development software
during 1997. On May 31, 1998 the Company disposed of its remaining
inventory and technology assets.
(b) Management Plans on Continued Existence, Merger Agreement and Subsequent
Event
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, in the United States,
which contemplates the continuation of the Company as a going concern.
However, the Company sustained substantial operating losses and used
substantial amounts of working capital in its prior operations. As of
December 31, 1999, current liabilities exceeded current assets by
$274,689.
On January 26, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger") with takeoutmusic.com, Inc. ("takeoutmusic"), a
privately held Delaware corporation engaged in the business of
distributing music in digital format over the world wide web. The
Merger provides for the issuance of approximately 10 million shares of
the Company's common stock in exchange for all of the issued and
outstanding shares of takeoutmusic.com. The Merger will be accounted
for as a reverse merger with takeoutmusic being the accounting
acquirer.
The Company's ability to continue as a going concern is dependent upon,
among other things, its ability to integrate the operations of
takeoutmusic.com. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
(b) Revenue Recognition
Prior to the Company being dormant, revenue was derived from product
sales and licenses, maintenance contracts and consulting, training and
other services. Revenues from product sales and licenses were
recognized upon shipment of the products. Revenue from software
maintenance contracts was recognized on a straight-line basis over the
term of the contract, generally one year. Revenues from consulting,
training and other services were recognized in the period in which
services were performed and earned in accordance with the respective
agreements. To the extent that an engagement was projected to be
completed at a loss, a provision for the full amount of the loss was
provided at that time.
(c) Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB
25, because the exercise price of the Company's employee stock options
equals, or is greater than, the market price of the underlying stock on
the date of grant, no compensation expense is recognized.
(d) Stock Split
In July 1998, outstanding shares of common stock were reverse split
one-for-four. In December 1999, outstanding shares of common stock were
reverse split one-for-three. All share and per share amounts have been
restated.
F-8
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Earnings Per Share
In accordance with SFAS No. 128 "Earnings Per Share", basic earnings
per share (EPS) of common stock is calculated based upon the weighted average
number of common stock outstanding. The computation of diluted EPS is similar to
the computation of basic EPS except that the denominator is increased to include
the number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued. As the Company recorded losses
in 1998 and 1999 there were no dilutive potential common shares.
3. NOTES PAYABLE
<TABLE>
<CAPTION>
1998 1999
---------- ------------
<S> <C> <C>
(a) Notes Payable to Shareholder
Notepayable to Shareholder - On February 13, 1997 the Company issued a
note payable in connection with a proposed private placement of
debt securities in the amount of $750,000. The Company was advanced
the sum of $100,000 under the Note. The Note is secured by the
assets of the Company and bore interest at 10% per annum. On
February 3, 2000 the Note was amended to include accrued interest
through December 31, 1999 of $28,000, commencing six months from
the closing of the Merger, the automatic conversion into common
stock at $3.50 per share, if the market price of the common stock
is equal to or in excess of $7 per share for a period of 10
consecutive trading days, and accrue interest at 8% per annum
payable on conversion or maturity. If not converted, the Note
matures three years from the closing date of the Merger. $ 100,000 $ 128,000
Notepayable to Shareholder - On May 1, 1998, the Company issued a note
payable in connection with the receipt of $50,000. The Note is
unsecured and bears interest at the fixed rate of 10% per annum.
The Shareholder advanced the further sum of $5,000 in 1999. On July
31, 1999, the Shareholder agreed not to accrue interest thereafter
on the Note. On February 3, 2000, the Note was amended to,
commencing six months from the closing of the Merger, the automatic
conversion into common stock at $3.50 per share, if the market
price of the common stock is equal to or in excess of $7 per share
for a period of 10 consecutive trading days. If not converted the
Note matures three years from the closing date of the Merger. 50,000 55,000
------------- -------------
$ 150,000 $ 183,000
============= =============
The conversion feature represents a beneficial conversion, which at
issuance had a value of $183,000. The Company will recognize a charge
to interest expense, based on the value of the beneficial conversion at
issuance, upon conversion of the notes.
(b) Note Payable
Note payable, due November 4, 1998. The Note is unsecured, non-
interest bearing and currently in default. $ 42,500 $ 42,500
Notes payable - On December 15, 1999, the Company issued a note payable
to takeoutmusic in connection with the receipt of $25,000. The Note
is unsecured and bears interest at the fixed rate of 6% per annum.
The principal amount of the Note together with interest is due and
payable upon demand but not prior to the earlier to occur of 60
days following the effective date of the Merger (Note 1) or April 15, 2000. - 25,000
------------- -------------
$ 42,500 $ 67,500
============= =============
</TABLE>
F-9
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
================================================================================
4. INCOME TAXES
Significant components of the Company's deferred tax assets as of
December 31, 1998 and 1999, respectively, are shown below. A valuation allowance
has been recognized to offset the deferred tax assets, as realization of such
assets is uncertain.
<TABLE>
<CAPTION>
1998 1999
------------ -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 2,007,000 $ 1,781,000
Research and development credits 157,000 114,000
Other - net 26,000 -
------------ -------------
Total deferred tax assets 2,190,000 1,895,000
Valuation allowance for deferred tax assets (2,190,000) (1,895,000)
------------ -------------
$ - $ -
============ =============
</TABLE>
At December 31, 1999, the Company has federal net operating loss
carryforwards of approximately $5.2 million. The Company also has
federal research credit carryforwards of approximately $114,000. The
federal tax loss carryforward and the research credit carryforwards
will begin expiring in 2009 unless previously utilized. During 1999 the
Company filed for withdrawal with the Secretary of State in California.
As such, in the State of California, the Company lost the potential
future benefit of net operating loss carryforwards of approximately
$2.2 million and research credits of approximately $64,000.
In accordance with certain provisions of the Internal Revenue Code, a
change in ownership of a corporation of greater than 50 percent within
a three-year period will place an annual limitation on the
corporation's ability to utilize its existing tax loss and tax credit
carryforwards.
5. CAPITAL STOCK
(a) Stock options
The Company established a stock option plan ("the Plan") to grant
options to purchase common stock to employees, officers, non-employee
directors of the Company and certain other individuals. The Plan
authorizes the Company to issue or grant stock options to purchase up
to 209,825 shares of its common stock as of December 31, 1999. As of
December 31, 1999, the Company has no outstanding stock options.
(b) Warrants
As of December 31, 1999, the Company has outstanding warrants, issued
in connection with a private placement of common stock during 1997,
entitling the holders to purchase a total of 561,111 common shares of
the Company at $0.5175 per share originally to expire October 15, 1999.
During 1999, the warrant expiration date was extended to October 15,
2000. On February 4, 2000, warrants for the purchase of 406,667 shares
were further amended to provide for the cashless exercise of the
warrants.
F-10
<PAGE>
SHAMPAN, LAMPORT HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
================================================================================
6. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1998 and 1999, the Company paid or
accrued, the following amounts to related parties:
<TABLE>
<CAPTION>
1998 1999
------------- ------------
<S> <C> <C>
Management fees $ 45,000 $ 42,000
Rent 15,000 8,750
Interest 13,333 12,937
Finance fee 15,000 -
------------- -------------
$ 88,333 $ 63,687
============= =============
</TABLE>
Notes payable to a director are $150,000 and $183,000 at December 31,
1998 and 1999, respectively.
Included in accrued liabilities at December 31, 1998 is $21,333 of
accrued interest due to a director of the Company.
F-11
<PAGE>
EXHIBIT 4.1
TRANSFER OF THIS WARRANT IS PROHIBITED, EXCEPT AS PROVIDED IN SECTION 2. THE
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED, OR UNDER THE LAWS OF ANY STATE, AND THUS MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER
SUCH LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
Warrant No. 4 Warrant to Purchase 233,333
Warrant Shares (subject to
adjustment)
TAKEOUTMUSIC.COM HOLDINGS CORP.
a Washington corporation
takeoutmusic.com Holdings Corp., a Washington corporation (the "Company"), for
value received, hereby grants to Steven A. Rothstein (the "Holder"), the right,
subject to the terms and conditions set forth herein, to purchase from the
Company, at any time and from time to time, up to Two Hundred Thirty-Three
Thousand Three Hundred Thirty-Three (233,333) duly authorized, validly issued,
fully paid and non-assessable shares (the "Warrant Shares") of the common stock,
par value $.01 per share, of the Company (the "Common Stock"), at a per share
exercise price of fifty-one and three-quarter cents ($0.5175) subject to
adjustment as provided in Section 3 hereof (the "Exercise Price"). This Warrant
shall terminate if not exercised in full on or prior to October 15, 2000. The
number and character of the securities purchasable upon exercise of such rights
of purchase, and the Exercise Price, are subject to adjustment as provided
herein. The term "Warrant" as used herein shall include this Warrant, any
Warrant or Warrants issued in substitution for or replacement of this Warrant,
or any Warrant or Warrants into which this Warrant may be divided or exchanged.
The term "Warrant Shares" shall mean the Common Stock issuable upon exercise of
this Warrant.
1. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE
(a) Subject to the other terms and conditions of this Warrant, the
purchase rights evidenced by this Warrant may be exercised in whole or
in part, from time to time, subject to the conditions set forth above,
by the Holder's presentation of this Warrant to the Company at its
principal offices, accompanied by a duly executed Notice of Exercise,
in the form attached hereto as Exhibit I and by this reference
incorporated herein, and by payment of the aggregate Exercise Price in
the manner specified in Section 1(b) hereof, for the number of Warrant
Shares specified in the Notice of Exercise.
<PAGE>
(b) The aggregate Exercise Price for the number of Warrant Shares
specified in any Notice of Exercise may be paid in cash by certified
check or bank cashier's check or wire transfer of immediately
available funds. Alternatively, this Warrant may be exercised by
surrendering this Warrant in exchange for the number of Warrant Shares
equal to the product of (x) the number of shares of Common Stock as to
which this Warrant is being exercised, multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) of one
share of Common Stock minus the Exercise Price of one Warrant Share
and the denominator of which is the Market Price per share of Common
Stock. Solely for the purposes of this Section 1 Market Price shall be
calculated either (i) on the date on which the form of election
attached hereto is deemed to have been sent to the Company pursuant to
this Section 1 ("Notice Date") or (ii) as the average of the Market
Price for each of the five trading days immediately preceding the
Notice Date, whichever of (i) or (ii) results in a greater Market
Price. As used herein, the phrase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such
reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on
which the Common Stock is listed or admitted to trading, or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange, the average closing sale price as furnished by
the NASD through The Nasdaq Stock Market, Inc. ("Nasdaq") or by the
OTC Electronic Bulletin Board or similar organization if Nasdaq is no
longer reporting such information, or if the Common Stock is not
publicly quoted, as determined in good faith by resolution of the
Board of Directors of the Company, based on the best information
available to it.
(c) In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Shares so
purchased shall be dated the date of such exercise and delivered to
the Holder hereof within a reasonable time, not exceeding fifteen (15)
days after such exercise. If this Warrant is exercised in part only,
as soon as is practicable after the presentation and surrender of this
Warrant to the Company for exercise, the Company shall execute and
deliver to the Holder a new Warrant, containing the same terms and
conditions as this Warrant, evidencing the right of the Holder to
purchase the number of Warrant Shares as to which this Warrant has not
been exercised. Upon receipt of this Warrant by the Company at its
principal offices accompanied by the items required for exercise
specified in subsection (a) above, the Holder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise
and a shareholder of the Company, notwithstanding that the stock
transfer books of the Company may then be closed or that certificates
representing such Warrant Shares may not then be actually delivered to
the Holder.
2. TRANSFERABILITY, EXCHANGE OR LOSS OF WARRANT
(a) Except as provided herein, the Warrants shall not be transferable, in
whole or in part. The Warrants may be transferred to any person
receiving the Warrants from the Holder at the Holder's death pursuant
to a will or trust or the laws of intestate succession.
2
<PAGE>
(b) This Warrant, alone or with any other Warrant owned by the same Holder
containing substantially the same terms and conditions, is
exchangeable at the option of the Holder but at the Company's sole
expense, at any time prior to its expiration either by its terms or by
its exercise in full, upon presentation and surrender to the Company
at its principal offices, for another Warrant or other Warrants, of
different denominations but containing the same terms and conditions
as this Warrant, entitling the Holder to purchase the same aggregate
number of Warrant Shares that were purchasable pursuant to the Warrant
or Warrants presented and surrendered. At the time of presentation and
surrender by the Holder to the Company, the Holder shall also deliver
to the Company a written notice, signed by the Holder, specifying the
denominations in which new Warrants are to be issued to the Holder.
(c) The Company shall execute and deliver to the Holder a new Warrant
containing the same terms and conditions as this Warrant upon receipt
by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, provided that: (i)
in the case of loss, theft or destruction, the Company receives from
the Holder a reasonably satisfactory indemnification; and (ii) in the
case of mutilation, the Company receives from the Holder a reasonably
satisfactory form of indemnity and the Holder presents and surrenders
this Warrant to the Company for cancellation. Any new Warrant executed
and delivered shall constitute an additional contractual obligation on
the part of the Company regardless of whether the Warrant that was
lost, stolen, destroyed, or mutilated is enforceable by anyone at any
time.
(d) The Company will, at the time of or at any time after each exercise of
this Warrant, upon the request of the Holder hereof or of any Warrant
Shares issued upon such exercise, acknowledge in writing its
continuing obligation to afford to such Holder all rights to which
such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided, that if any such
Holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Company to afford such rights
to such Holder.
3. ADJUSTMENTS OF EXERCISE PRICE
(a) Except as provided herein, upon the occurrence of any of the events
specified in this Section 3, the Exercise Price in effect at the time
of such event and the number of Warrant Shares then purchasable
pursuant to this Warrant at that time shall be proportionately
adjusted as provided herein.
(b) If the number of shares of Common Stock outstanding at any time after
the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is
effective, the Exercise Price shall be appropriately decreased so that
the number of Warrant Shares issuable on the exercise of this Warrant
shall be increased in proportion to such increase of outstanding
shares.
3
<PAGE>
(c) If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such
combination, the Exercise Price shall be appropriately increased so
that the number of Warrant Shares issuable on the exercise of this
Warrant shall be decreased in proportion to such decrease of
outstanding shares.
(d) All calculations under this Section 3 shall be made to the nearest one
hundredth (1/100) cent or to the nearest one hundredth (1/100) of a
share, as the case may be. In no event shall the Exercise Price be
reduced to less than $.01.
(e) No adjustment in the Exercise Price need be made if such adjustment
would result in a change in the Exercise Price of less than $0.01. Any
adjustment of less than $0.01 which is not made shall be carried
forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Exercise Price.
(f) Upon the occurrence of each adjustment or readjustment of the Exercise
Price pursuant to this Section 3, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with
the terms hereof and prepare and furnish to the Holder hereof a
certificate of an Officer of the Company setting forth such adjustment
or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon written
request at any time of any Holder hereof, furnish or cause to be
furnished to such Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Exercise Price at the time in
effect, and (iii) the number of Warrant Shares and the amount, if any,
of other property which at the time would be received upon the
exercise of this Warrant.
(g) In the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property or to receive any right, the Company shall mail
to the Holder hereof at least ten (10) days prior to such record date,
a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution or right, and the
amount and character of such dividend, distribution or right.
(h) For purposes of this Section 3, equity securities owned or held at any
relevant time by or for the account of the Company in its treasury
shall not be deemed to be outstanding for purposes of the calculations
and adjustments described.
4
<PAGE>
4. STOCK FULLY PAID; RESERVATION OF WARRANT STOCK
The Company covenants and agrees that all Warrant Shares that may be issued upon
the exercise of this Warrant will, upon issuance, be fully paid and
non-assessable and free from all taxes, liens and charges with respect to
issuance. The Company further covenants and agrees that during the period within
which this Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of the issue upon exercise of the rights
evidenced by this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
5. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933
(a) This Warrant is non-transferable. The Warrant Shares, and all other
equity securities issued or issuable upon exercise of this Warrant,
may not be offered, sold or transferred, in whole or in part, in the
absence of an effective registration statement under the Securities
Act of 1933, as amended (the "Act"), and all applicable state
securities statutes, or an opinion of counsel acceptable to the
Company to the effect that such registration is not required.
(b) The Company shall cause the following legends to be set forth on each
certificate representing the Warrant Shares issuable upon exercise of
this Warrant:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (B) IN COMPLIANCE WITH RULE 144
UNDER THE SECURITIES ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT NO
REGISITRATION IS REQUIRED IN CONNECTION WITH SUCH SALE, ASSIGNMENT OR
TRANSFER OR THAT AN EXEMPTION TO SUCH REGISTRATION IS AVAILABLE."
6. FRACTIONAL SHARES
No fractional shares of Warrant Shares or scrip representing fractional shares
of Warrant Shares shall be issued upon the exercise of all or any part of this
Warrant. With respect to any fraction of a unit or any security called for upon
any exercise of this Warrant, the Company shall pay to the Holder an amount in
money equal to that fraction multiplied by the then Current Market Price. For
purposes of this Agreement, the term "Current Market Price" shall mean the
average for the 20 consecutive trading days immediately preceding the date in
question of the daily per share closing prices of the Common Stock as reported
by the OTC Bulletin Board or the Nasdaq SmallCap Market or the principal
securities exchange on which it is listed, as the case made be. The closing
price referred to above shall be the last reported sale price or, if no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, in either case as reported by the
5
<PAGE>
OTC Bulletin Board of the Nasdaq SmallCap Market or the principal securities
exchange on which it is listed, as the case may be.
7. RIGHTS OF THE HOLDER
Prior to the exercise hereof, the Holder shall not be entitled to any rights as
a shareholder of the Company by reason of this Warrant, either at law or equity.
8. NOTICES
Except as may be otherwise expressly provided herein, any notice, consent, or
other communication required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given: (i) five business days after the
date sent by United States certified mail, return receipt requested, with proper
postage thereon; (ii) one day after sent if sent by overnight courier of
national cognition; or (iii) when transmitted or delivered, if sent by facsimile
or personally delivered (as the case may be), and shall be addressed as follows:
(a) if to the Company, at 381 Broadway Suite 201, New York, New York
10013, and
(b) if to the Holder, at 2737 Illinois Road, Wilmette, Illinois 60091
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
9. APPLICABLE LAW
Washington law shall govern the interpretation, construction, and enforcement of
this Warrant and all transactions and agreements contemplated hereby,
notwithstanding any state's choice of law rules to the contrary.
10. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Warrant
shall be binding on the Company and its successors and shall inure to
the benefit of the original Holder, its successors and assigns and all
holders of Warrant Shares.
(b) This Warrant may not be modified or terminated, nor may any
performance or condition hereof be waived in whole or in part except
by an agreement in writing signed by the party against whom
enforcement of such modification, termination, or waiver is sought.
(c) If any provision of this Warrant is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such provision
shall be severed, enforced to the extent possible, or modified in such
a way as to make it enforceable, and the invalidity, illegality or
unenforceability thereof shall not affect the remainder of this
Warrant.
6
<PAGE>
(d) Paragraph headings used in this Warrant are for convenience only and
shall not be taken or construed to define or limit any of the terms of
this Warrant. Unless otherwise provided herein, or unless the context
otherwise requires, the use of the singular shall include the plural
and the use of any gender shall include all genders.
ISSUED and executed as of the 4th day of February, 2000.
TAKEOUTMUSIC.COM HOLDINGS CORP.
By: /s/ MORI S. NINOMIYA
---------------------------------
Name: Mori S. Ninomiya
Title: President and CEO
7
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Warrant
Shares pursuant to the Warrant.)
TAKEOUTMUSIC.COM HOLDINGS CORP.
The undersigned Holder of the Warrant hereby:
1. irrevocably elects to exercise the Warrant to the extent of purchasing
_____________Warrant Shares;
2. makes payment in full of the aggregate Exercise Price for those Warrant
Shares in the amount of $________________ by certified check or wire
transfer of immediately available funds;
3. requests, if the number of Warrant Shares purchased are not all the Warrant
Shares purchasable pursuant to the Warrant, that a new Warrant of like
tenor for the remaining Warrant Shares purchasable pursuant to the Warrant
be issued and delivered to the undersigned at the address indicated below.
Dated: Holder:
------------------------ --------------------------
By:
-------------------------
Its:
-------------------------
Address:
---------------------------------
---------------------------------
<PAGE>
EXHIBIT 4.2
TRANSFER OF THIS WARRANT IS PROHIBITED, EXCEPT AS PROVIDED IN SECTION 2. THE
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED, OR UNDER THE LAWS OF ANY STATE, AND THUS MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER
SUCH LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
Warrant No. 6 Warrant to Purchase 233,333
Warrant Shares (subject to
adjustment)
TAKEOUTMUSIC.COM HOLDINGS CORP.
a Washington corporation
takeoutmusic.com Holdings corp., a Washington corporation (the "Company"), for
value received, hereby grants to Steven Rabinovici (the "Holder"), the right,
subject to the terms and conditions set forth herein, to purchase from the
Company, at any time and from time to time, up to Two Hundred Thirty-Three
Thousand Three Hundred Thirty-Three (233,333) duly authorized, validly issued,
fully paid and non-assessable shares (the "Warrant Shares") of the common stock,
par value $.01 per share, of the Company (the "Common Stock"), at a per share
exercise price of fifty-one and three-quarter cents ($0.5175) subject to
adjustment as provided in Section 3 hereof (the "Exercise Price"). This Warrant
shall terminate if not exercised in full on or prior to October 15, 2000. The
number and character of the securities purchasable upon exercise of such rights
of purchase, and the Exercise Price, are subject to adjustment as provided
herein. The term "Warrant" as used herein shall include this Warrant, any
Warrant or Warrants issued in substitution for or replacement of this Warrant,
or any Warrant or Warrants into which this Warrant may be divided or exchanged.
The term "Warrant Shares" shall mean the Common Stock issuable upon exercise of
this Warrant.
1. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE
(a) Subject to the other terms and conditions of this Warrant, the
purchase rights evidenced by this Warrant may be exercised in whole or
in part, from time to time, subject to the conditions set forth above,
by the Holder's presentation of this Warrant to the Company at its
principal offices, accompanied by a duly executed Notice of Exercise,
in the form attached hereto as Exhibit I and by this reference
incorporated herein, and by payment of the aggregate Exercise Price in
the manner specified in Section 1(b) hereof, for the number of Warrant
Shares specified in the Notice of Exercise.
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(b) The aggregate Exercise Price for the number of Warrant Shares
specified in any Notice of Exercise may be paid in cash by certified
check or bank cashier's check or wire transfer of immediately
available funds. Alternatively, this Warrant may be exercised by
surrendering this Warrant in exchange for the number of Warrant Shares
equal to the product of (x) the number of shares of Common Stock as to
which this Warrant is being exercised, multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) of one
share of Common Stock minus the Exercise Price of one Warrant Share
and the denominator of which is the Market Price per share of Common
Stock. Solely for the purposes of this Section 1 Market Price shall be
calculated either (i) on the date on which the form of election
attached hereto is deemed to have been sent to the Company pursuant to
this Section 1 ("Notice Date") or (ii) as the average of the Market
Price for each of the five trading days immediately preceding the
Notice Date, whichever of (i) or (ii) results in a greater Market
Price. As used herein, the phrase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such
reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on
which the Common Stock is listed or admitted to trading, or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange, the average closing sale price as furnished by
the NASD through The Nasdaq Stock Market, Inc. ("Nasdaq") or by the
OTC Electronic Bulletin Board or similar organization if Nasdaq is no
longer reporting such information, or if the Common Stock is not
publicly quoted, as determined in good faith by resolution of the
Board of Directors of the Company, based on the best information
available to it.
(c) In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Shares so
purchased shall be dated the date of such exercise and delivered to
the Holder hereof within a reasonable time, not exceeding fifteen (15)
days after such exercise. If this Warrant is exercised in part only,
as soon as is practicable after the presentation and surrender of this
Warrant to the Company for exercise, the Company shall execute and
deliver to the Holder a new Warrant, containing the same terms and
conditions as this Warrant, evidencing the right of the Holder to
purchase the number of Warrant Shares as to which this Warrant has not
been exercised. Upon receipt of this Warrant by the Company at its
principal offices accompanied by the items required for exercise
specified in subsection (a) above, the Holder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise
and a shareholder of the Company, notwithstanding that the stock
transfer books of the Company may then be closed or that certificates
representing such Warrant Shares may not then be actually delivered to
the Holder.
2. TRANSFERABILITY, EXCHANGE OR LOSS OF WARRANT
(a) Except as provided herein, the Warrants shall not be transferable, in
whole or in part. The Warrants may be transferred to any person
receiving the Warrants from the Holder at the Holder's death pursuant
to a will or trust or the laws of intestate succession.
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<PAGE>
(b) This Warrant, alone or with any other Warrant owned by the same Holder
containing substantially the same terms and conditions, is
exchangeable at the option of the Holder but at the Company's sole
expense, at any time prior to its expiration either by its terms or by
its exercise in full, upon presentation and surrender to the Company
at its principal offices, for another Warrant or other Warrants, of
different denominations but containing the same terms and conditions
as this Warrant, entitling the Holder to purchase the same aggregate
number of Warrant Shares that were purchasable pursuant to the Warrant
or Warrants presented and surrendered. At the time of presentation and
surrender by the Holder to the Company, the Holder shall also deliver
to the Company a written notice, signed by the Holder, specifying the
denominations in which new Warrants are to be issued to the Holder.
(c) The Company shall execute and deliver to the Holder a new Warrant
containing the same terms and conditions as this Warrant upon receipt
by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, provided that: (i)
in the case of loss, theft or destruction, the Company receives from
the Holder a reasonably satisfactory indemnification; and (ii) in the
case of mutilation, the Company receives from the Holder a reasonably
satisfactory form of indemnity and the Holder presents and surrenders
this Warrant to the Company for cancellation. Any new Warrant executed
and delivered shall constitute an additional contractual obligation on
the part of the Company regardless of whether the Warrant that was
lost, stolen, destroyed, or mutilated is enforceable by anyone at any
time.
(d) The Company will, at the time of or at any time after each exercise of
this Warrant, upon the request of the Holder hereof or of any Warrant
Shares issued upon such exercise, acknowledge in writing its
continuing obligation to afford to such Holder all rights to which
such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided, that if any such
Holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Company to afford such rights
to such Holder.
3. ADJUSTMENTS OF EXERCISE PRICE
(a) Except as provided herein, upon the occurrence of any of the events
specified in this Section 3, the Exercise Price in effect at the time
of such event and the number of Warrant Shares then purchasable
pursuant to this Warrant at that time shall be proportionately
adjusted as provided herein.
(b) If the number of shares of Common Stock outstanding at any time after
the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is
effective, the Exercise Price shall be appropriately decreased so that
the number of Warrant Shares issuable on the exercise of this Warrant
shall be increased in proportion to such increase of outstanding
shares.
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<PAGE>
(c) If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such
combination, the Exercise Price shall be appropriately increased so
that the number of Warrant Shares issuable on the exercise of this
Warrant shall be decreased in proportion to such decrease of
outstanding shares.
(d) All calculations under this Section 3 shall be made to the nearest one
hundredth (1/100) cent or to the nearest one hundredth (1/100) of a
share, as the case may be. In no event shall the Exercise Price be
reduced to less than $.01.
(e) No adjustment in the Exercise Price need be made if such adjustment
would result in a change in the Exercise Price of less than $0.01. Any
adjustment of less than $0.01 which is not made shall be carried
forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Exercise Price.
(f) Upon the occurrence of each adjustment or readjustment of the Exercise
Price pursuant to this Section 3, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with
the terms hereof and prepare and furnish to the Holder hereof a
certificate of an Officer of the Company setting forth such adjustment
or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon written
request at any time of any Holder hereof, furnish or cause to be
furnished to such Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Exercise Price at the time in
effect, and (iii) the number of Warrant Shares and the amount, if any,
of other property which at the time would be received upon the
exercise of this Warrant.
(g) In the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property or to receive any right, the Company shall mail
to the Holder hereof at least ten (10) days prior to such record date,
a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution or right, and the
amount and character of such dividend, distribution or right.
(h) For purposes of this Section 3, equity securities owned or held at any
relevant time by or for the account of the Company in its treasury
shall not be deemed to be outstanding for purposes of the calculations
and adjustments described.
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<PAGE>
4. STOCK FULLY PAID; RESERVATION OF WARRANT STOCK
The Company covenants and agrees that all Warrant Shares that may be issued upon
the exercise of this Warrant will, upon issuance, be fully paid and
non-assessable and free from all taxes, liens and charges with respect to
issuance. The Company further covenants and agrees that during the period within
which this Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of the issue upon exercise of the rights
evidenced by this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
5. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933
(a) This Warrant is non-transferable. The Warrant Shares, and all other
equity securities issued or issuable upon exercise of this Warrant,
may not be offered, sold or transferred, in whole or in part, in the
absence of an effective registration statement under the Securities
Act of 1933, as amended (the "Act"), and all applicable state
securities statutes, or an opinion of counsel acceptable to the
Company to the effect that such registration is not required.
(b) The Company shall cause the following legends to be set forth on each
certificate representing the Warrant Shares issuable upon exercise of
this Warrant:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, PLEDGED, ASSIGNED, OR OTHERWISE
TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (B) IN COMPLIANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT NO REGISITRATION
IS REQUIRED IN CONNECTION WITH SUCH SALE, ASSIGNMENT OR TRANSFER OR
THAT AN EXEMPTION TO SUCH REGISTRATION IS AVAILABLE."
6. FRACTIONAL SHARES
No fractional shares of Warrant Shares or scrip representing fractional shares
of Warrant Shares shall be issued upon the exercise of all or any part of this
Warrant. With respect to any fraction of a unit or any security called for upon
any exercise of this Warrant, the Company shall pay to the Holder an amount in
money equal to that fraction multiplied by the then Current Market Price. For
purposes of this Agreement, the term "Current Market Price" shall mean the
average for the 20 consecutive trading days immediately preceding the date in
question of the daily per share closing prices of the Common Stock as reported
by the OTC Bulletin Board or the Nasdaq SmallCap Market or the principal
securities exchange on which it is listed, as the case made be. The closing
price referred to above shall be the last reported sale price or, if no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, in either case as reported by the
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<PAGE>
OTC Bulletin Board of the Nasdaq SmallCap Market or the principal securities
exchange on which it is listed, as the case may be.
7. RIGHTS OF THE HOLDER
Prior to the exercise hereof, the Holder shall not be entitled to any rights as
a shareholder of the Company by reason of this Warrant, either at law or equity.
8. NOTICES
Except as may be otherwise expressly provided herein, any notice, consent, or
other communication required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given: (i) five business days after the
date sent by United States certified mail, return receipt requested, with proper
postage thereon; (ii) one day after sent if sent by overnight courier of
national cognition; or (iii) when transmitted or delivered, if sent by facsimile
or personally delivered (as the case may be), and shall be addressed as follows:
(a) if to the Company, at 381 Broadway #201, New York, New York 10013, and
(b) if to the Holder, at 48 Country Drive, Plainview, New York 11803
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
9. APPLICABLE LAW
Washington law shall govern the interpretation, construction, and enforcement of
this Warrant and all transactions and agreements contemplated hereby,
notwithstanding any state's choice of law rules to the contrary.
10. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Warrant
shall be binding on the Company and its successors and shall inure to
the benefit of the original Holder, its successors and assigns and all
holders of Warrant Shares.
(b) This Warrant may not be modified or terminated, nor may any
performance or condition hereof be waived in whole or in part except
by an agreement in writing signed by the party against whom
enforcement of such modification, termination, or waiver is sought.
(c) If any provision of this Warrant is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such provision
shall be severed, enforced to the extent possible, or modified in such
a way as to make it enforceable, and the invalidity, illegality or
unenforceability thereof shall not affect the remainder of this
Warrant.
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(d) Paragraph headings used in this Warrant are for convenience only and
shall not be taken or construed to define or limit any of the terms of
this Warrant. Unless otherwise provided herein, or unless the context
otherwise requires, the use of the singular shall include the plural
and the use of any gender shall include all genders.
ISSUED and executed as of the 4th day of February, 2000.
TAKEOUTMUSIC.COM HOLDINGS CORP.
By: /s/ MORI S. NINOMIYA
-------------------------------
Name: Mori S. Ninomiya
Title: President and CEO
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<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Warrant
Shares pursuant to the Warrant.)
TAKEOUTMUSIC.COM HOLDINGS CORP.
The undersigned Holder of the Warrant hereby:
1. irrevocably elects to exercise the Warrant to the extent of purchasing
_____________Warrant Shares;
2. makes payment in full of the aggregate Exercise Price for those Warrant
Shares in the amount of $________________ by certified check or wire
transfer of immediately available funds;
3. requests, if the number of Warrant Shares purchased are not all the Warrant
Shares purchasable pursuant to the Warrant, that a new Warrant of like
tenor for the remaining Warrant Shares purchasable pursuant to the Warrant
be issued and delivered to the undersigned at the address indicated below.
Dated: Holder:
-------------------------- ------------------------------
By:
--------------------------
Its:
------------------------
Address:
---------------------------------
---------------------------------
<PAGE>
EXHIBIT 4.3
TRANSFER OF THIS WARRANT IS PROHIBITED, EXCEPT AS PROVIDED IN SECTION 2. THE
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED, OR UNDER THE LAWS OF ANY STATE, AND THUS MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER
SUCH LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
Warrant No. 5 Warrant to Purchase 94,444
Warrant Shares (subject to
adjustment)
TAKEOUTMUSIC.COM HOLDINGS CORP.
a Washington corporation
takeoutmusic.com Holdings Corp., a Delaware corporation (the "Company"), for
value received, hereby grants to Geller & Friend Partnership I (the "Holder"),
the right, subject to the terms and conditions set forth herein, to purchase
from the Company, at any time and from time to time, up to Ninety-Four Thousand
Four Hundred Forty-Four (94,444) duly authorized, validly issued, fully paid and
non-assessable shares (the "Warrant Shares") of the common stock, par value $.01
per share, of the Company (the "Common Stock"), at a per share exercise price of
fifty-one and three-quarter cents ($0.5175) subject to adjustment as provided in
Section 3 hereof (the "Exercise Price"). This Warrant shall terminate if not
exercised in full on or prior to October 15, 2000. The number and character of
the securities purchasable upon exercise of such rights of purchase, and the
Exercise Price, are subject to adjustment as provided herein. The term "Warrant"
as used herein shall include this Warrant, any Warrant or Warrants issued in
substitution for or replacement of this Warrant, or any Warrant or Warrants into
which this Warrant may be divided or exchanged. The term "Warrant Shares" shall
mean the Common Stock issuable upon exercise of this Warrant.
1. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE
(a) Subject to the other terms and conditions of this Warrant, the
purchase rights evidenced by this Warrant may be exercised in whole or
in part, from time to time, subject to the conditions set forth above,
by the Holder's presentation of this Warrant to the Company at its
principal offices, accompanied by a duly executed Notice of Exercise,
in the form attached hereto as Exhibit I and by this reference
incorporated herein, and by payment of the aggregate Exercise Price in
the manner specified in Section 1(b) hereof, for the number of Warrant
Shares specified in the Notice of Exercise.
<PAGE>
(b) The aggregate Exercise Price for the number of Warrant Shares
specified in any Notice of Exercise may be paid in cash by certified
check or bank cashier's check or wire transfer of immediately
available funds.
(c) In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Shares so
purchased shall be dated the date of such exercise and delivered to
the Holder hereof within a reasonable time, not exceeding fifteen (15)
days after such exercise. If this Warrant is exercised in part only,
as soon as is practicable after the presentation and surrender of this
Warrant to the Company for exercise, the Company shall execute and
deliver to the Holder a new Warrant, containing the same terms and
conditions as this Warrant, evidencing the right of the Holder to
purchase the number of Warrant Shares as to which this Warrant has not
been exercised. Upon receipt of this Warrant by the Company at its
principal offices accompanied by the items required for exercise
specified in subsection (a) above, the Holder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise
and a shareholder of the Company, notwithstanding that the stock
transfer books of the Company may then be closed or that certificates
representing such Warrant Shares may not then be actually delivered to
the Holder.
2. TRANSFERABILITY, EXCHANGE OR LOSS OF WARRANT
(a) Except as provided herein, the Warrants shall not be transferable, in
whole or in part. The Warrants may be transferred to any person
receiving the Warrants from the Holder at the Holder's death pursuant
to a will or trust or the laws of intestate succession.
(b) This Warrant, alone or with any other Warrant owned by the same Holder
containing substantially the same terms and conditions, is
exchangeable at the option of the Holder but at the Company's sole
expense, at any time prior to its expiration either by its terms or by
its exercise in full, upon presentation and surrender to the Company
at its principal offices, for another Warrant or other Warrants, of
different denominations but containing the same terms and conditions
as this Warrant, entitling the Holder to purchase the same aggregate
number of Warrant Shares that were purchasable pursuant to the Warrant
or Warrants presented and surrendered. At the time of presentation and
surrender by the Holder to the Company, the Holder shall also deliver
to the Company a written notice, signed by the Holder, specifying the
denominations in which new Warrants are to be issued to the Holder.
(c) The Company shall execute and deliver to the Holder a new Warrant
containing the same terms and conditions as this Warrant upon receipt
by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, provided that: (i)
in the case of loss, theft or destruction, the Company receives from
the Holder a reasonably satisfactory indemnification; and (ii) in the
case of mutilation, the Company receives from the Holder a reasonably
satisfactory form of indemnity and the Holder presents and surrenders
this Warrant to the Company for cancellation. Any new Warrant executed
and delivered shall constitute
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an additional contractual obligation of the part of the Company
regardless of whether the Warrant that was lost, stolen, destroyed, or
mutilated is enforceable by anyone at anytime.
(d) The Company will, at the time of or at any time after each exercise of
this Warrant, upon the request of the Holder hereof or of any Warrant
Shares issued upon such exercise, acknowledge in writing its
continuing obligation to afford to such Holder all rights to which
such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided, that if any such
Holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Company to afford such rights
to such Holder.
3. ADJUSTMENTS OF EXERCISE PRICE
(a) Except as provided herein, upon the occurrence of any of the events
specified in this Section 3, the Exercise Price in effect at the time
of such event and the number of Warrant Shares then purchasable
pursuant to this Warrant at that time shall be proportionately
adjusted as provided herein.
(b) If the number of shares of Common Stock outstanding at any time after
the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is
effective, the Exercise Price shall be appropriately decreased so that
the number of Warrant Shares issuable on the exercise of this Warrant
shall be increased in proportion to such increase of outstanding
shares.
(c) If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such
combination, the Exercise Price shall be appropriately increased so
that the number of Warrant Shares issuable on the exercise of this
Warrant shall be decreased in proportion to such decrease of
outstanding shares.
(d) All calculations under this Section 3 shall be made to the nearest one
hundredth (1/100) cent or to the nearest one hundredth (1/100) of a
share, as the case may be. In no event shall the Exercise Price be
reduced to less than $.01.
(e) No adjustment in the Exercise Price need be made if such adjustment
would result in a change in the Exercise Price of less than $0.01. Any
adjustment of less than $0.01 which is not made shall be carried
forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Exercise Price.
(f) Upon the occurrence of each adjustment or readjustment of the Exercise
Price pursuant to this Section 3, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with
the terms hereof and prepare and
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<PAGE>
furnish to the Holder hereof a certificate of an Officer of the Company
setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The Company
shall, upon written request at any time of any Holder hereof, furnish
or cause to be furnished to such Holder a like certificate setting
forth (i) such adjustments and readjustments, (ii) the Exercise Price
at the time in effect, and (iii) the number of Warrant Shares and the
amount, if any, of other property which at the time would be received
upon the exercise of this Warrant.
(g) In the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property or to receive any right, the Company shall mail
to the Holder hereof at least ten (10) days prior to such record date,
a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution or right, and the
amount and character of such dividend, distribution or right.
(h) For purposes of this Section 3, equity securities owned or held at any
relevant time by or for the account of the Company in its treasury
shall not be deemed to be outstanding for purposes of the calculations
and adjustments described.
4. STOCK FULLY PAID; RESERVATION OF WARRANT STOCK
The Company covenants and agrees that all Warrant Shares that may be issued upon
the exercise of this Warrant will, upon issuance, be fully paid and
non-assessable and free from all taxes, liens and charges with respect to
issuance. The Company further covenants and agrees that during the period within
which this Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of the issue upon exercise of the rights
evidenced by this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
5. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933
(a) This Warrant is non-transferable. The Warrant Shares, and all other
equity securities issued or issuable upon exercise of this Warrant,
may not be offered, sold or transferred, in whole or in part, in the
absence of an effective registration statement under the Securities
Act of 1933, as amended (the "Act"), and all applicable state
securities statutes, or an opinion of counsel acceptable to the
Company to the effect that such registration is not required.
(b) The Company shall cause the following legends to be set forth on each
certificate representing the Warrant Shares issuable upon exercise of
this Warrant:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, PLEDGED, ASSIGNED, OR
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OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (B) IN COMPLIANCE WITH RULE 144
UNDER THE SECURITIES ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT NO
REGISITRATION IS REQUIRED IN CONNECTION WITH SUCH SALE, ASSIGNMENT OR
TRANSFER OR THAT AN EXEMPTION TO SUCH REGISTRATION IS AVAILABLE."
6. FRACTIONAL SHARES
No fractional shares of Warrant Shares or scrip representing fractional shares
of Warrant Shares shall be issued upon the exercise of all or any part of this
Warrant. With respect to any fraction of a unit or any security called for upon
any exercise of this Warrant, the Company shall pay to the Holder an amount in
money equal to that fraction multiplied by the then Current Market Price. For
purposes of this Agreement, the term "Current Market Price" shall mean the
average for the 20 consecutive trading days immediately preceding the date in
question of the daily per share closing prices of the Common Stock as reported
by the OTC Bulletin Board or the Nasdaq SmallCap Market or the principal
securities exchange on which it is listed, as the case made be. The closing
price referred to above shall be the last reported sale price or, if no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, in either case as reported by the OTC Bulletin Board of the
Nasdaq SmallCap Market or the principal securities exchange on which it is
listed, as the case may be.
7. RIGHTS OF THE HOLDER
Prior to the exercise hereof, the Holder shall not be entitled to any rights as
a shareholder of the Company by reason of this Warrant, either at law or equity.
8. NOTICES
Except as may be otherwise expressly provided herein, any notice, consent, or
other communication required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given: (i) five business days after the
date sent by United States certified mail, return receipt requested, with proper
postage thereon; (ii) one day after sent if sent by overnight courier of
national cognition; or (iii) when transmitted or delivered, if sent by facsimile
or personally delivered (as the case may be), and shall be addressed as follows:
(a) if to the Company, at 381 Broadway #201, New York, New York 10013, and
(b) if to the Holder, at 433 North Camden Drive, Suite 500, Beverly Hills,
California 90210
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
5
<PAGE>
9. APPLICABLE LAW
Washington law shall govern the interpretation, construction, and enforcement of
this Warrant and all transactions and agreements contemplated hereby,
notwithstanding any state's choice of law rules to the contrary.
10. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Warrant
shall be binding on the Company and its successors and shall inure to
the benefit of the original Holder, its successors and assigns and all
holders of Warrant Shares.
(b) This Warrant may not be modified or terminated, nor may any
performance or condition hereof be waived in whole or in part except
by an agreement in writing signed by the party against whom
enforcement of such modification, termination, or waiver is sought.
(c) If any provision of this Warrant is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such provision
shall be severed, enforced to the extent possible, or modified in such
a way as to make it enforceable, and the invalidity, illegality or
unenforceability thereof shall not affect the remainder of this
Warrant.
(d) Paragraph headings used in this Warrant are for convenience only and
shall not be taken or construed to define or limit any of the terms of
this Warrant. Unless otherwise provided herein, or unless the context
otherwise requires, the use of the singular shall include the plural
and the use of any gender shall include all genders.
ISSUED and executed as of the 4th day of February, 2000.
TAKEOUTMUSIC.COM HOLDINGS CORP.
By: /s/ MORI S. NINOMIYA
-------------------------------
Name: Mori S. Ninomiya
Title: President and CEO
6
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Warrant
Shares pursuant to the Warrant.)
TAKEOUTMUSIC.COM HOLDINGS CORP.
The undersigned Holder of the Warrant hereby:
1. irrevocably elects to exercise the Warrant to the extent of purchasing
_____________Warrant Shares;
2. makes payment in full of the aggregate Exercise Price for those Warrant
Shares in the amount of $________________ by certified check or wire
transfer of immediately available funds;
3. requests, if the number of Warrant Shares purchased are not all the Warrant
Shares purchasable pursuant to the Warrant, that a new Warrant of like
tenor for the remaining Warrant Shares purchasable pursuant to the Warrant
be issued and delivered to the undersigned at the address indicated below.
Dated: Holder:
-------------------------- ------------------------------
By:
--------------------------
Its:
------------------------
Address:
---------------------------------
---------------------------------
<PAGE>
EXHIBIT 4.4
No. WC-01 February 4, 2000
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED AS DESCRIBED HEREIN.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF TAKEOUTMUSIC.COM HOLDINGS, CORP.
(Void after December 28, 2004)
This certifies that National Securities Corporation (the "Holder"), for
value received, is entitled to purchase from TAKEOUTMUSIC.COM HOLDINGS, CORP., a
Washington corporation (the "Company"), having a place of business at 381
Broadway, Suite 201, New York, NY 10013, 314,638 shares of fully paid and
nonassessable shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), at a price of $.579713 per share (the "Exercise Price"),
at any time or from time to time beginning on the date hereof and ending at 5:00
p.m. (New York time) December 28, 2004 ( the "Expiration Date"), upon surrender
to the Company at its principal office (or at such other location as the Company
may advise the Holder in writing) of this Warrant properly endorsed with the
Notice of Exercise attached hereto duly filled in and executed and, if
applicable, upon payment in cash or by check of the aggregate Exercise Price for
the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Exercise Price and the number of
shares purchasable hereunder are subject to adjustment as provided in Section 4
of this Warrant. In addition to the method of payment set forth in the preceding
sentence and in lieu of any cash payment required thereunder, the Holder(s) of
the Warrant shall have the right at any time and from time to time while the
Warrants are exercisable to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified herein in exchange
for the number of shares of Common Stock equal to the product of (x) the number
of shares of Common Stock as to which the Warrants are being exercised,
multiplied by (y) a fraction, the numerator of which is the Market Price (as
defined below) of the shares of Common Stock minus the Exercise Price of the
shares of Common Stock and the denominator of which is the Market Price per
share of Common Stock. For the purposes of this provision, Market Price shall be
calculated either (i) on the date on which the Notice of Exercise is deemed to
have been sent to the Company pursuant to
<PAGE>
Section 10 hereof ("Notice Date") or (ii) as the average of the Market Price for
each of the five (5) trading days immediately preceding the Notice Date,
whichever of (i) or (ii) results in a greater Market Price. As used herein, the
phrase "Market Price" at any date shall be deemed to be the last reported sale
price, or, in case no such reported sale takes place on such day, the average of
the last reported sale prices for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the average
closing sale price as furnished by the Nasdaq Stock Market ("Nasdaq") (or
similar organization if Nasdaq is no longer reporting such information), or if
the Common Stock is not quoted on Nasdaq or an exchange, as determined in good
faith by resolution of the Board of Directors of the Company, based on the best
information available to it.
1. Issuance of Certificates. Upon the exercise of the Warrant,
the issuance of certificates for shares of Common Stock, properties or rights
underlying the Warrant ("Warrant Shares") shall be made forthwith (and in any
event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax, other than income taxes, which
may be payable in respect of the issuance thereof, and such certificates shall
(subject to the provisions of Sections 2 and 3 hereof) be issued in the name of,
or in such names as may be directed by, the Holder thereof; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the Holder and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
This Warrant and the certificates representing the Warrant
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the then present President or any Vice President of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the then present Secretary or any Assistant Secretary of
the Company. This Warrant shall be dated the date of execution by the Company
upon initial issuance, division, exchange, substitution or transfer.
2. Transfer of Warrant. This Warrant shall be transferable
only on the books of the Company maintained at its principal office, where its
principal office may then be located, upon delivery thereof duly endorsed by any
Holder or by its duly authorized attorney or representative accompanied by
proper evidence of succession, assignment or authority to transfer. Upon any
registration of transfer, the Company shall execute and deliver the new Warrant
Certificate to the person entitled thereto.
3. Restriction on Transfer of Warrant. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that this Warrant
is being acquired as an investment and not with a view to the distribution
thereof, and that it may not be sold, transferred, assigned, hypothecated or
otherwise disposed of, in whole or in part, for a period of one year following
the date hereof.
2
<PAGE>
4. Adjustments to Exercise Price and Number of Securities. The
Exercise Price in effect at any time and the number of Warrant Shares shall be
subject to adjustment from time to time only upon the happening of the following
events:
(a) Stock Dividend, Subdivision and Combination. In
case the Company shall (i) declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
(b) Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section 4,
the number of shares of Common Stock issuable upon the exercise at the adjusted
Exercise Price of this Warrant shall be adjusted to the nearest number of whole
shares of Common Stock by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
(c) Merger or Consolidation. In case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder
then outstanding a warrant agreement providing that each of such Holders shall
have the right thereafter (until the expiration of such Warrants) to receive,
upon exercise of such Warrants, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock for which such Warrants might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such warrant agreement shall provide for adjustments which shall be identical to
the adjustments provided in this Section 4 and registration rights which shall
be identical to the registration rights provided in Section 5 below. The above
provision of this subsection shall similarly apply to successive consolidations
or mergers.
(d) No Adjustment of Exercise Price in Certain Cases.
No adjustment of the Exercise Price shall be made if the amount of said
adjustment shall be less than two cents ($.02) per share, provided, however,
that in such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents ($.02).
3
<PAGE>
(e) No Adjustment in Number of Warrant Shares in
Certain Cases. No adjustment in the number of Warrant Shares shall be required
if such adjustment is less than one; provided, however, that any adjustments
which by reason of this Section 4(f) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 4 shall be made to the nearest one-thousandth of
a share.
(f) Deferred Issuance. In any case in which this
Section 4 shall require that an adjustment in the number of Warrant Shares be
made effective as of a record date for a specified event, the Company may elect
to defer, until the occurrence of such event, issuing to the Holder, if the
Holder exercised this Warrant after the record date, the Warrant Shares, if any,
issuable upon such exercise over and above the Warrant Shares, if any, issuable
upon such exercise prior to such adjustment; provided, however, that the Company
shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional Warrant Shares upon the
occurrence of the event requiring such adjustment.
(g) Notice of Adjustment. Whenever there shall be an
adjustment as provided in this Section 4, the Company shall promptly cause
written notice thereof to be sent by certified mail, postage prepaid, to the
Holder, at its address as it shall appear in the Warrant Register, which notice
shall be accompanied by an officer's certificate setting forth the number of
Warrant Shares issuable upon the exercise of this Warrant if such Warrant were
exercisable on the date of such notice, and setting forth a brief statement of
the facts requiring such adjustment and the computation thereof, which officer's
certificate shall be conclusive evidence of the correctness of any such
adjustment absent manifest error.
5. (a) Piggyback Registration. If, at any time during the
Exercise Period and for a period of two (2) years thereafter, the Company
proposes to register any of its securities under the Securities Act of 1933, as
amended (the "Act") (other than on a Form S-4 or a Form S-8 or successor form
thereto) it will give written notice by registered mail, at least thirty (30)
days prior to the filing of each such registration statement, to the Holders of
this Warrant or the Warrant Shares of its intention to do so. If any of the
Holders of this Warrant or the Warrant Shares notify the Company within twenty
(20) days after mailing of any such notice of its or their desire to include any
such securities in such proposed registration statement, the Company shall
afford such Holders the opportunity to have any such Warrant Shares registered
under such registration statement. In the event that the managing underwriter
for said offering advises the Company in writing that in its opinion the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering without causing a diminution in the offering
price or otherwise adversely affecting the offering, the Company will include in
such registration (a) first, the securities the Company proposes to sell, (b)
second, the securities held by entities that made have demand registration
rights, (c) third, the Warrant Shares requested to be included in such
registration which in the opinion of such underwriter can be sold, pro rata
among those persons having registration rights similar those set forth in this
Section 5 who requested such registration, and (d) fourth, other securities
requested to be included in such registration. Notwithstanding the provisions of
this Section 5, the Company shall have the right at any time after it shall have
given written notice pursuant to this Section 5 (irrespective of whether a
written request for inclusion of any such securities shall have been made) to
elect not to file any such proposed registration statement or to
4
<PAGE>
withdraw the same after the filing but prior to the effective date thereof.
(b) Demand Registration. At any time during the
Exercise Period and for a period of two (2) years thereafter, the Holder shall
have the right, exercisable by written notice to the Company, to have the
Company prepare and file with the Securities and Exchange Commission, on one
occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holder, in order to comply with the provisions of the Act,
so as to permit a public offering and sale by the Holder. The Company shall use
its commercially reasonable efforts to have such registration statement filed
with and declared effective by the Commission within one hundred twenty (120)
days of receipt of the notice from the Holder.
(c) Legend. Unless registered as contemplated by
Section 5 hereof, the Warrant Shares issued upon exercise of the Warrants shall
be subject to a stop transfer order and the certificate or certificates
evidencing such Warrant Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN NOT REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT. SUCH SHARES ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN A
WARRANT, DATED FEBRUARY 4, 2000, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY."
6. Exchange and Replacement of Warrant Certificates. This
Warrant is exchangeable, without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company for a new
Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of shares of Common Stock in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the Warrant,
if mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu thereof.
7. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of this Warrant, nor shall it be required to issue scrip
or pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
5
<PAGE>
8. Reservation and Listing of Securities. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of this Warrant,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof. Every transfer agent ("Transfer
Agent") for the Common Stock and other securities of the Company issuable upon
the exercise of this Warrant will be irrevocably authorized and directed at all
times to reserve such number of authorized shares of Common Stock and other
securities as shall be requisite for such purpose. The Company will keep a copy
of this Warrant on file with every Transfer Agent for the Common Stock and other
securities of the Company issuable upon the exercise of this Warrant. The
Company will supply every such Transfer Agent with duly executed stock and other
certificates, as appropriate, for such purpose. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as this Warrant shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of this Warrant to be listed (subject to
official notice of issuance) on all securities exchanges on which the Common
Stock issued to the public in connection herewith may then be listed and/or
quoted.
9. Notices to Holder. Nothing contained in this Warrant shall
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as a stockholder in respect of any meetings of stockholders
for the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of this Warrant and its exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed;
then in any one or more of said events, the Company shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend,
6
<PAGE>
or the issuance of any convertible or exchangeable securities, or subscription
rights, options or warrants, or any proposed dissolution, liquidation, winding
up or sale.
10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made and sent when delivered, or mailed by registered or certified mail,
return receipt requested:
(a) if to the Holder of this Warrant, to the address
as shown on the books of the Company; or
(b) if to the Company, to the address set forth in
the preamble hereof or to such other address as the Company may designate by
notice to the Holders.
11. Supplements; Amendments; Entire Agreement. This Warrant
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought. The Company and the Holder of this Warrant may from time to
time supplement or amend this Warrant in writing.
12. Successors. All of the covenants and provisions of this
Warrant shall be binding upon and inure to the benefit of the Company, the
Holder and his/her respective successors and assigns hereunder.
13. Survival of Representations and Warranties. All statements
in any schedule, exhibit or certificate or other instrument delivered by or on
behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf of
the parties to this Warrant, all representations, warranties and agreements made
by the parties to this Warrant or pursuant hereto shall survive.
14. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said State without giving effect to
the rules of said State governing the conflicts of laws.
15. Severability. If any provision of this Warrant shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Warrant.
16. Captions. The caption headings of the Sections of this
Warrant are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Warrant and shall be given no substantive
effect.
17. Benefits of this Warrant. Nothing in this Warrant shall be
construed to give to any person or corporation other than the Company the
registered Holder of this Warrant any legal
7
<PAGE>
or equitable right, remedy or claim under this Warrant; and this
Warrant shall be for the sole and exclusive benefit of the Company and
the Holder of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its officers, thereunto duly authorized as of the 4th day of
February, 2000.
TAKEOUTMUSIC.COM HOLDINGS, CORP.
a Washington corporation
By: /s/ MORI S. NINOMIYA
---------------------------
Mori S. Ninomiya
President
8
<PAGE>
NOTICE OF EXERCISE
Date:
-------------------
takeoutmusic.com Holdings, Corp.
Attention: President
Ladies and Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
takeoutmusic.com Holdings, Corp. (the "Company") dated February 4, 2000, Warrant
No. WC-01 (the "Warrant") and to purchase thereunder
__________________________________ shares of Common Stock of the Company (the
"Shares") at a purchase price of $.579713 Dollars per Share or an aggregate
purchase price of _______________________ Dollars ($__________) (the "Purchase
Price").
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(name)
-----------------------------------
-----------------------------------
(address)
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price, if any, herewith in full in cash or by certified check or wire
transfer.
Very truly yours,
By:
---------------------------
Name:
Title:
9
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________ here sells, assigns and transfers unto ___________
[NAME OF TRANSFEREE] this Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
-----------
Signature:
-----------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Address:
------------------------------------------
------------------------------------------
---------------------------------------------------
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed:
-----------------------------------------------------------
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
10
<PAGE>
EXHIBIT 10.1
TAKEOUTMUSIC.COM HOLDINGS CORP.
- --------------------------------------------------------------------------------
1999 Incentive Compensation Plan
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. Purpose.............................................................-1-
2. Definitions.........................................................-1-
3. Administration......................................................-4-
(a) Authority of the Committee.................................-4-
(b) Manner of Exercise of Committee Authority..................-4-
(c) Limitation of Liability....................................-4-
4. Stock Subject to Plan...............................................-5-
(a) Overall Number of Shares Available for Delivery............-5-
(b) Application of Limitation to Grants of Awards..............-5-
(c) Availability of Shares Not Delivered under Awards..........-5-
5. Eligibility; Per-Person Award Limitations...........................-5-
6. Specific Terms of Awards............................................-5-
(a) General....................................................-6-
(b) Options....................................................-6-
(c) Stock Appreciation Rights..................................-6-
(d) Restricted Stock...........................................-7-
(e) RSUs.......................................................-8-
(f) Bonus Stock and Awards in Lieu of Obligations..............-9-
(g) Dividend Equivalents.......................................-9-
(h) Annual Incentive and Performance Awards....................-9-
(i) Other Stock-Based Awards...................................-9-
7. Certain Provisions Applicable to Awards.............................-9-
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.....-9-
(b) Term of Awards............................................-10-
(c) Form and Timing of Payment under Awards; Deferrals........-10-
(d) Exemptions from Section 16(b) Liability...................-10-
8. Performance and Annual Incentive Awards............................-10-
(a) Performance Conditions....................................-10-
(b) Performance Awards Granted to Designated Covered
Employees.................................................-11-
(c) Annual Incentive Awards Granted to Designated Covered
Employees.................................................-12-
(d) Written Determinations....................................-13-
(e) Status of Section 8(b) and Section 8(c) Awards under
Code Section 162(m).......................................-13-
-i-
<PAGE>
9. Change in Control..................................................-14-
(a) Effect of "Change In Control."............................-14-
(b) Definition of "Change in Control."........................-14-
(c) Definition of "Change in Control Price"...................-16-
10. Options Granted Automatically to Non-Employee Directors............-16-
(a) Annual Option Grants......................................-16-
(b) Number of Shares Subject to Automatic Option Grants.......-16-
(c) Other Non-Employee Director Annual Option Terms...........-16-
(d) Method of Exercise........................................-16-
(e) Availability of Shares....................................-17-
11. General Provisions.................................................-17-
(a) Compliance with Legal and Other Requirements..............-17-
(b) Limits on Transferability; Beneficiaries..................-17-
(c) Adjustments...............................................-17-
(d) Taxes.....................................................-18-
(e) Changes to the Plan and Awards............................-18-
(f) Limitation on Rights Conferred under Plan.................-19-
(g) Unfunded Status of Awards, Creation of Trusts.............-19-
(h) Nonexclusivity of the Plan................................-19-
(i) Payments in the Event of Forfeitures; Fractional Shares...-19-
(j) Governing Law.............................................-19-
(k) Plan Effective Date and Shareholder Approval..............-20-
-ii-
<PAGE>
TAKEOUTMUSIC.COM HOLDINGS CORP.
1999 Incentive Compensation Plan
1. Purpose. The purpose of this 1999 Incentive Compensation Plan (the
"Plan") is to assist takeoutmusic.com Holdings Corp., a Washington corporation
(the "Corporation"), and its subsidiaries in attracting, retaining, and
rewarding high-quality executives, employees, directors and other persons who
provide services to the Corporation and/or its subsidiaries, enabling such
persons to acquire or increase a proprietary interest in the Corporation to
strengthen the mutuality of interests between such persons and the Corporation's
shareholders, and providing such persons with annual and long-term performance
incentives to expend their maximum efforts in the creation of shareholder value.
The Plan is also intended to qualify certain compensation awarded under the Plan
for tax deductibility under Code Section 162(m) (as hereafter defined) to the
extent deemed appropriate by the Committee (or any successor committee) of the
Board of Directors of the Corporation.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, RSU, Stock granted as a bonus or in lieu of another award,
Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 11 (b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner"shall have the meaning ascribed to such term
in Rule 13d- 3 under the Exchange Act and any successor to such Rule.
(e) "Board" means the Corporation's Board of Directors.
(f) "Change in Control" means Change in Control as defined with
related terms in Section 9 of the Plan.
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(g) "Change In Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee of two or more directors
designated by the Board to administer the Plan; provided, however, that, unless
otherwise determined by the Board, the Committee shall consist solely of two or
more directors, each of whom shall be (i) a "non employee director" within the
meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan
by "non-employee directors" is not then required in order for exemptions under
Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside
director" as defined under Code Section 162(m), unless administration of the
Plan by "outside directors" is not then required to qualify for tax
deductibility under Code Section 162(m).
(j) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(k) "Dividend Equivalent" means a right granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards or other property equal
in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.
(l) "Effective Date" means July 16, 1999, subject to approval by
stockholders of the Company.
(m) "Eligible Person" means each Executive Officer and other
officers and employees of the Corporation or of any subsidiary, and other
persons who provide services to the Corporation or any of its subsidiaries
including directors of the Corporation. An employee on leave of absence may be
considered as still in the employ of the Corporation or a subsidiary for
purposes of eligibility for participation in the Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
(o) "Executive Officer" means an executive officer of the
Corporation as defined under the Exchange Act.
(p) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures established
by the Committee. Unless otherwise determined by the Committee, the Fair Market
Value of Stock shall be the last reported sale price, or, in case no such
reported sale takes place on such day, the average of the last reported sale
prices for the last three (3) trading days, in either case as officially
reported by the principal securities exchange on which the Stock is listed or
admitted to trading or by the Nasdaq National Market or the Nasdaq Small Cap
Market, or, if the Stock is not listed or admitted to trading on any national
securities exchange or quoted by the National Association of Securities Dealers
Automated
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<PAGE>
Quotation System ("Nasdaq"), the average closing bid price as furnished by the
National Association of Securities Dealers, Inc. through Nasdaq or by the OTC
Electronic Bulletin Board or similar organization if Nasdaq is no longer
reporting such information.
(q) "Incentive Stock Option" or "ISO" means any Option intended to
be and designated as an incentive stock option within the meaning of Code
Section 422 or any successor provision thereto.
(r) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(s) "Option" means a right, granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(t) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(u) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(v) "Performance Award" means a right, granted to a Participant
under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee.
(w) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a "group" as defined in Section 13(d) thereof.
(x) "Qualified Member" means a member of the Committee who is a
"Non- Employee Director" within the meaning of Rule 16b-3(b)(3) and an "outside
director" within the meaning of Regulation 1-162-27 under Code Section 162(m).
(y) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.
(z) "Restricted Stock Unit or "RSU" means a right, granted to a
Participant under Section 6(e) hereof, to receive Stock, cash or a combination
thereof at the end of a specified deferral period.
(aa) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(bb) "Stock" means the Corporation's Common Stock, $0.01 par value
per share, and such other securities as may be substituted (or resubstituted)
for Stock pursuant to Section 11(c) hereof.
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<PAGE>
(cc) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by
the Committee except to the extent the Board elects to administer the Plan, in
which case references herein to the "Committee" shall be deemed to include
references to the "Board." The Committee shall have full and final authority, in
each case subject to and consistent with the provisions of the Plan, to select
Eligible Persons to become Participants, grant Awards, determine the type,
number and other terms and conditions of, and all other matters relating to,
Awards, prescribe Award agreements (which need not be identical for each
Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee may deem necessary or advisable for the
administration of the Plan.
(b) Manner of Exercise of Committee Authority. At any time that a
member of the Committee is not a Qualified Member, any action of the Committee
relating to an Award granted or to be granted to a Participant who is then
subject to Section 16 of the Exchange Act in respect of the Corporation, or
relating to an Award intended by the Committee to qualify as "performance- based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder, may be taken either (i) by a subcommittee, designated by the
Committee, composed solely of two or more Qualified Members, or (ii) by the
Committee but with each such member who is not a Qualified Member abstaining or
recusing himself or herself from such action; provided, however, that, upon such
abstention or recusal, the Committee remains composed solely of two or more
Qualified Members. Such action, authorized by such a subcommittee or by the
Committee upon the abstention or recusal of such non-Qualified Member(s), shall
be the action of the Committee for purposes of the Plan. Any action of the
Committee shall be final, conclusive and binding on all persons, including the
Corporation, its subsidiaries, Participants, Beneficiaries, transferees under
Section 11(b) hereof or other persons claiming rights from or through a
Participant, and shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Corporation or any subsidiary, or committees
thereof, the authority, subject to such terms as the Committee shall determine,
to perform such functions, including administrative functions, as the Committee
may determine, to the extent that such delegation will not result in the loss-of
an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject
to Section 16 of the Exchange Act in respect of the Corporation and will not
cause Awards intended to qualify as "performance-based compensation" under Code
Section 162(m) to fail to so qualify. The Committee may appoint agents to assist
it in administering the Plan.
(c) Limitation of Liability. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any executive officer, other officer or
employee of the Corporation or a subsidiary, the Corporation's independent
auditors, consultants or any other agents assisting in the administration of the
Plan. Members of the Committee and any officer or employee of the Corporation or
a subsidiary acting
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<PAGE>
at the direction or on behalf of the Committee shall not be personally liable
for any action or determination taken or made in good faith with respect to the
Plan, and shall, to the extent permitted by law, be fully indemnified and
protected by the Corporation with respect to any such action or determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject to
adjustment as provided in Section 11(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be 1,200,000. Any shares of stock delivered under the Plan shall
consist of authorized and unissued shares or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award may be
granted if the number of shares of Stock to be delivered in connection with such
Award or, in the case of an Award relating to shares of Stock but settleable
only in cash (such as cash-only SARs), the number of shares to which such Award
relates, exceeds the number of shares of Stock remaining available under the
Plan minus the number of shares of Stock issuable in settlement of or relating
to then outstanding Awards. The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards) and make adjustments if the
number of shares of Stock actually delivered differs from the number of shares
previously counted in connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares of
Stock subject to an Award under the Plan that are canceled, expired, forfeited,
settled in cash or otherwise terminated without a delivery of shares to the
Participant, including (i) the number of shares withheld in payment of any
exercise or purchase price of an Award or award or taxes relating to Awards or
awards, and (ii) the number of shares surrendered in payment of any exercise or
purchase price of an Award or award or taxes relating to any Award or award,
will again be available for Awards under the Plan, except that if any such
shares could not again be available for Awards to a particular Participant under
any applicable law or regulation, such shares shall be available exclusively for
Awards to Participants who are not subject to such limitation.
5. Eligibility; Per-Person Award Limitations. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than a number of shares of Common Stock recommended by the
Compensation Committee, subject to adjustment as provided in Section 11 (c),
under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and 8(c).
In addition, the maximum cash amount that may be earned under the Plan as a
final Annual Incentive Award or other cash annual Award in respect of any fiscal
year by any one Participant shall not exceed an amount recommended by the
Compensation Committee, and the maximum cash amount that may be earned under the
Plan as a final Performance Award or other cash Award in respect of a
performance period other than an annual period by any one Participant on an
annualized basis shall not exceed an amount recommended by the Compensation
Committee.
6. Specific Terms of Awards.
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<PAGE>
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section 11
(e)), such additional terms and conditions, not inconsistent with the provisions
of the Plan, as the Committee shall determine, including terms requiring
forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to his
or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award that
is not mandatory under the Plan; provided, however, that the Committee shall not
have any discretion to accelerate, waive or modify any term or condition of an
Award that is intended to qualify as "performance-based compensation" for
purposes of Code Section 162(m) if such discretion would cause the Award not to
so qualify. Except in cases in which the Committee is authorized to require
other forms of consideration under the Plan, or to the extent other forms of
consideration must by paid to satisfy the requirements of state law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee, provided that
such exercise price shall be not less than the Fair Market Value of a share of
Stock on the date of grant of such Option except as provided under Section 7(a)
hereof.
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of performance
goals and/or future service requirements), the methods by which such exercise
price may be paid or deemed to be paid, the form of such payment, including,
without limitation, cash, Stock, other Awards or awards granted under other
plans of the Corporation or any subsidiary, or other property (including notes
or other contractual obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Stock will be delivered or deemed
to be delivered to Participants. In no event may an Option remain exercisable
more than ten years following the date of grant.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Code Section 422. Anything in the
Plan to the contrary notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify either the Plan or any ISO under Code Section
422, unless the Participant has first requested the change that will result in
such disqualification.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one
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<PAGE>
share of Stock on the date of exercise (or, in the case of a "Limited SAR," the
Fair Market Value determined by reference to the Change in Control Price, as
defined under Section 9(c) hereof) over (B) the grant price of the SAR as
determined by the Committee provided that such grant price shall not be less
than the Fair Market Value of a share of Stock on the date of grant of such SAR
except as provided under Section 7(a) hereof.
(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances under
which a SAR may be exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the method of
exercise, method of settlement, form of consideration payable in settlement,
method by or forms in which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in combination with any
other Award, and any other terms and conditions of any SAR. Limited SARs that
may only be exercised in connection with a Change in Control or other event as
specified by the Committee may be granted on such terms, not inconsistent with
this Section 6(c), as the Committee may determine. SARs and Limited SARs may be
either freestanding or in tandem with other Awards.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse separately or
in combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date of grant
or thereafter. Except to the extent restricted under the terms of the Plan and
any Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a shareholder, including the
right to vote the Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by the
Committee). During the restricted period applicable to the Restricted Stock,
subject to Section 11(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise encumbered by the
Participant.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Corporation; provided that the Committee may
provide, by rule or regulation or in any Award agreement, or may determine in
any individual case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of the
Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such
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<PAGE>
Restricted Stock, that the Corporation retain physical possession of the
certificates, and that the Participant deliver a stock power to the Corporation,
endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an
Award of Restricted Stock, the Committee may require or permit a Participant to
elect that any cash dividends paid on a share of Restricted Stock be
automatically reinvested in additional shares of Restricted Stock or applied to
the purchase of additional Awards under the Plan. Unless otherwise determined by
the Committee, Stock distributed in connection with a Stock split or Stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the Restricted Stock
with respect to which such Stock or other property has been distributed.
(e) RSUs. The Committee is authorized to grant RSUs to Participants,
which are rights to receive Stock, cash, or a combination thereof at the end of
a specified deferral period, subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of RSUs
shall occur upon expiration of the deferral period specified for such RSUs by
the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, RSUs shall be subject to such restrictions (which may
include a risk of forfeiture) as the Committee may impose, if any, which
restrictions may lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance goals and/or
future service requirements), separately or in combination, in installments or
otherwise, as the Committee may determine. RSUs may be satisfied by delivery of
Stock, cash equal to the Fair Market Value of the specified number of shares of
Stock covered by the RSUs, or a combination thereof, as determined by the
Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment during the applicable deferral period
or portion thereof to which forfeiture conditions apply (as provided in the
Award agreement evidencing the RSUs), all RSUs that are at that time subject to
deferral (other than a deferral at the election of the Participant) shall be
forfeited; provided that the Committee, may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to RSUs shall be waived in whole or in part in
the event of terminations resulting from specified causes, and the Committee may
in other cases waive in whole or in part the forfeiture of RSUs.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified number of
shares of Stock covered by an Award of RSUs shall be either (A) paid with
respect to such RSUs at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such RSUs and the amount or value
thereof automatically deemed reinvested in additional RSUs, other Awards or
other investment vehicles, as the Committee shall determine or permit the
Participant to elect.
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<PAGE>
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of obligations to pay cash or deliver other property under the Plan or under
other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary to
ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall
be subject to such other terms as Shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing basis or in
connection with another Award. The Committee may provide that Dividend
Equivalents shall be paid or distributed when accrued or shall be deemed to have
been reinvested in additional Stock, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of forfeiture, as the
Committee may specify.
(h) Annual Incentive and Performance Awards. The Committee is
authorized to make Annual Incentive Awards and Performance Awards payable in
cash, Shares, or other Awards, on terms and conditions established by the
Committee, subject to Section 8 in the event of Annual Incentive Awards or
Performance Awards intended to qualify as "performance-based compensation" for
purposes of Code Section 162(m).
(i) Other Stock-Based Awards. The Committee is authorized, subject
to limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Corporation or any other factors
designated by the Committee, and Awards valued by reference to the book value of
Stock or the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms including, without
limitation, cash, Stock, other Awards, or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Corporation, any subsidiary, or any business entity to be acquired by the
Corporation or
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<PAGE>
a subsidiary, or any other right of a Participant to receive payment from the
Corporation or any subsidiary. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award or award, the Committee shall require
the surrender of such other Award or award in consideration for the grant of the
new Award. In addition, Awards may be granted in lieu of cash compensation,
including in lieu of cash amounts payable under other plans of the Corporation
or any subsidiary, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, RSUs or Restricted
Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair Market
Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price "discounted" by
the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the term
of any Option or SAR exceed a period of ten years (or such shorter term as may
be required in respect of an ISO under Code Section 422).
(c) Form and Timing of Payment under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be made by
the Corporation or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events (in addition to
a Change in Control). Installment or deferred payments may be required by the
Committee (subject to Section 11(e) of the Plan, including the consent
provisions thereof in the case of any deferral of an outstanding Award not
provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Corporation that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
from Section 16 pursuant to an applicable exemption (except for transactions
acknowledged in writing to be non-exempt by such Participant). Accordingly, if
any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 as then applicable to any such transaction, such
provision shall be construed or deemed amended to the extent necessary to
conform to the applicable requirements of Rule 16b-3 so that such Participant
shall avoid liability under Section 16(b).
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to exercise
or receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance
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conditions as may be specified by the Committee. The Committee may use such
business criteria and other measures of performance as it may deem appropriate
in establishing any performance conditions, and may exercise its discretion to
reduce or increase the amounts payable under any Award subject to performance
conditions, except as limited under Sections 8(b) and 8(c) hereof in the case of
a Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If
the Committee determines that a Performance Award to be granted to an Eligible
Person who is designated by the Committee as likely to be a Covered Employee
should qualify as "performance- based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award shall be
contingent upon achievement of preestablished performance goals and other terms
set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a targeted
level or levels of performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b). Performance goals
shall be objective and shall otherwise meet the requirements of Code Section
162(m) and regulations thereunder (including Regulation 1.162-27 and successor
regulations thereto), including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance
goals being "substantially uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon achievement
of any one performance goal or that two or more of the performance goals must be
achieved as a condition to grant, exercise and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Corporation, on a consolidated basis, and/or for specified
subsidiaries or business or geographical units of the Corporation (except with
respect to the total shareholder return and earnings per share criteria), shall
be used by the Committee in establishing performance goals for such Performance
Awards: (1) earnings per share; (2) increase in revenues or margin; (3) increase
in cash flow; (4) operating margin; (5) return on net assets, return on assets,
return on investment, return on capital, return on equity; (6) economic value
added; (7) direct contribution; (8) net income; pretax earnings; pretax earnings
before interest; depreciation and amortization (EBITDA); pretax earnings after
interest expense and before extraordinary or special items; operating income;
income before interest income or expense, unusual items and income taxes (local,
state or federal) and excluding budgeted and actual bonuses which might be paid
under any ongoing bonus plans of the Corporation; (9) working capital; (10)
management of fixed costs or variable costs; (11) identification or consummation
of investment opportunities or completion of specified projects in accordance
with corporate business plans, including strategic mergers, acquisitions or
divestitures; (12) total shareholder return; (13) debt reduction; and (14) any
of the above goals determined on an absolute or relative basis or as compared to
the performance of a published or special index deemed applicable by the
Committee including, but not limited to, the Standard & Poors 500 Stock Index or
a group of comparator companies. One or more of the foregoing business criteria
shall also be
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exclusively used in establishing performance goals for Annual Incentive Awards
granted to a Covered Employee under Section 8(c) hereof.
(iii) Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period of up to ten years, as specified by
the Committee. Performance goals shall be established not later than 90 days
after the beginning of any performance period applicable to such Performance
Awards, or at such other date as may be required or permitted for
"performance-based compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes of
measuring performance of the Corporation in connection with Performance Awards.
The amount of such Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the business criteria set
forth in Section 8(b)(ii) hereof during the given performance period, as
specified by the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a percentage
of any of such business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly mathematical
relationship to such business criteria.
(v) Settlement of Performance Awards; Other Terms. After the end
of each performance period, the Committee shall determine the amount, if any, of
(A) the Performance Award pool, and the maximum amount of potential Performance
Award payable to each Participant in the Performance Award pool, or (B) the
amount of potential Performance Award otherwise payable to each Participant.
Settlement of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Performance Awards, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of a Performance Award
subject to this Section 8(b). The Committee shall specify the circumstances in
which such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a performance
period or settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees.
If the Committee determines that an Annual Incentive Award to be granted to an
Eligible Person who is designated by the Committee as likely to be a Covered
Employee should qualify as a performance- based compensation" for purposes of
Code Section 162(m), the grant, exercise and/or settlement of such Annual
Incentive Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for purposes of
measuring performance of the Corporation in connection with Annual Incentive
Awards. The amount of such Annual Incentive Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the business
criteria set forth in Section 8(b)(ii) hereof during the given
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performance period, as specified by the Committee in accordance with Section
8(b)(iii) hereof. The Committee may specify the amount of the Annual Incentive
Award pool as a percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end
of the 90th day of each fiscal year, or at such other date as may be required or
permitted in the case of Awards intended to be "performance-based compensation"
under Code Section 162(m), the Committee shall determine the Eligible Persons
who will potentially receive Annual Incentive Awards, and the amounts
potentially payable thereunder, for that fiscal year, either out of an Annual
Incentive Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual Incentive
Awards intended to qualify under Code Section 162(m), the amount potentially
payable shall be based upon the achievement of a performance goal or goals based
on one or more of the business criteria set forth in Section 8(b)(ii) hereof in
the given performance year, as specified by the Committee; in other cases, such
amount shall be based on such criteria as shall be established by the Committee.
In all cases, the maximum Annual Incentive Award of any Participant shall be
subject to the limitation set forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A) the Annual
Incentive Award pool, and the maximum amount of potential Annual Incentive Award
payable to each Participant in the Annual Incentive Award pool, or (B) the
amount of potential Annual Incentive Award otherwise payable to each
Participant. The Committee may, in its discretion, determine that the amount
payable to any Participant as a final Annual Incentive Award shall be increased
or reduced from the amount of his or her potential Annual Incentive Award,
including a determination to make no final Award whatsoever, but may not
exercise discretion to increase any such amount in the case of an Annual
Incentive Award intended to qualify under Code Section 162(m). The Committee
shall specify the circumstances in which an Annual Incentive Award shall be paid
or forfeited in the event of termination of employment by the Participant prior
to the end of a fiscal year or settlement of such Annual Incentive Award.
(d) Written Determinations. All determinations by the Committee as
to the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under Code
Section 162(m). It is the intent of the Corporation that Performance Awards and
Annual Incentive Awards under Sections 8(b) and B(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder (including Regulation
1.162-27 and successor regulations thereto) shall, if so designated by the
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Committee, constitute "performance-based compensation" within the meaning of
Code Section 162(m) and regulations thereunder. Accordingly, the terms of
Sections 8(b), (c), (d) and (e), including the definitions of Covered Employee
and other terms used therein, shall be interpreted in a manner consistent with
Code Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given
Participant will be a Covered Employee with respect to a fiscal year that has
not yet been completed, the term Covered Employee as used herein shall mean only
a person designated by the Committee, at the time of grant of Performance Awards
or an Annual Incentive Award, as likely to be a Covered Employee with respect to
that fiscal year. If any provision of the Plan as in effect on the date of
adoption or any agreements relating to Performance Awards or Annual Incentive
Awards that are designated as intended to comply with Code Section 162(m) does
not comply or is inconsistent with the requirements of Code Section 182(m) or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements.
9. Change in Control.
(a) Effect of "Change In Control." In the event of a "Change in
Control," the following provisions shall apply unless otherwise provided in the
Award agreement:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and vested as
of the time of the Change in Control and shall remain exercisable and vested for
the balance of the stated term of such Award without regard to any termination
of employment by the Participant, subject only to applicable restrictions set
forth in Section 11 (a) hereof;
(ii) Any optionee who holds an Option shall be entitled to
elect, during the 60 day period immediately following a Change in Control, in
lieu of acquiring the shares of Stock covered by such Option, to receive, and
the Corporation shall be obligated to pay, in cash the excess of the Change in
Control Price over the exercise price of such Option, multiplied by the number
of shares of Stock covered by such Option;
(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall lapse and
such Awards shall be deemed fully vested as of the time of the Change in
Control, except to the extent of any waiver by the Participant and subject to
applicable restrictions set forth in Section 11(a) hereof; and
(iv) With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan, such performance
goals and other conditions will be deemed to be met if and to the extent so
provided in the Award agreement relating to such Award.
(b) Definition of "Change in Control." A "Change in Control" shall
be deemed to have occurred if:
(i) any Person (other than the Corporation, any trustee or other
fiduciary holding securities under any employee benefit plan of the Corporation,
or any company owned,
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directly or indirectly, by the stockholders of the Corporation immediately prior
to the occurrence with respect to which the evaluation is being made in
substantially the same proportions as their ownership of the common stock of the
Corporation) acquires securities of the Corporation and immediately thereafter
is the Beneficial Owner (except that a Person shall be deemed to be the
Beneficial Owner of all shares that any such Person has the right to acquire
pursuant to any agreement or arrangement or upon exercise of conversion rights,
warrants or options or otherwise, without regard to the sixty day period
referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 20% or more of the combined voting
power of the Corporation's then outstanding securities (except that an
acquisition of securities directly from the Corporation shall not be deemed an
acquisition for purposes of this clause (i));
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with the Corporation to effect a transaction described in clause (i), (iii), or
(iv) of this paragraph) whose election by the Board or nomination for election
by the Corporation's stockholders was approved by a vote of at least two thirds
of the directors then still in office who either were directors at the beginning
of the two-year period or whose election or nomination for election was
previously so approved but excluding for this purpose any such new director
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 148-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of an individual,
corporation, partnership, group, associate or other entity or Person other than
the Board, cease for any reason to constitute at least a majority of the Board;
(iii) the consummation of a merger or consolidation of the
Corporation with any other entity, other than (i) a merger or consolidation
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving or
resulting entity) more than 50% of the combined voting power of the surviving or
resulting entity outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation in which no premium is intended to be paid to any
shareholder participating in the merger or consolidation;
(iv) the stockholders of the Corporation approve a plan or
agreement for the sale or disposition of all or substantially all of the
consolidated assets of the Corporation (other than such a sale or disposition
immediately after which such assets will be owned directly or indirectly by the
stockholders of the Corporation, in substantially the same proportions as their
ownership of the common stock of the Corporation immediately prior to such sale
or disposition) in which case the Board shall determine the effective date of
the Change in Control resulting therefrom; or
(v) any other event occurs which the Board determines, in its
discretion, would materially alter the structure of the Corporation or its
ownership.
For purposes of this definition:
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(1) The term "Beneficial Owner" shall have
the meaning ascribed to such term in Rule 13d-3 under
the Exchange Act (including any successor to such
Rule).
(2) The term "Exchange Act" means the
Securities Exchange Act of 1934, as amended from time
to time, or any successor act thereto.
(3) The term "Person" shall have the meaning
ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d)
thereof, including "group" as defined in Section
13(d) thereof.
(c) Definition of "Change in Control Price." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of cash and
fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any transaction triggering the Change in
Control or any liquidation of shares following a sale of substantially all
assets of the Corporation, or (ii) the highest Fair Market Value per share at
any time during the 60-day period preceding and 60-day period following the
Change in Control.
10. Options Granted Automatically to Non-Employee Directors.
(a) Annual Option Grants. A Non-Employee Director Annual Option will
be automatically granted at the close of business on the last trading day of
each March.
(b) Number of Shares Subject to Automatic Option Grants. Unless
otherwise determined by the Board in a resolution adopted on or prior to the
date of the annual meeting of the Company's shareholders that coincides with or
most recently precedes the date of grant of an Option to a Non-Employee
Director, the number of shares of Stock to be subject to each Annual Option
shall be 5,000, in each case subject to adjustment as provided in Section 11(c).
(c) Other Non-Employee Director Annual Option Terms. Unless
otherwise determined by the Board, other terms of Annual Options shall be as
follows:
(i) The exercise price per share of Stock purchasable upon
exercise of a Non-Employee Director Annual Option will be equal to 100% of the
Fair Market Value of a share of Stock on the date of grant of the Option.
(ii) A Non-Employee Director Annual Option will expire at the
earlier of (A) 10 years after the date of grant or (B) three months after the
date the Participant ceases to serve as a director of the Company for any
reason.
(iii) Each Non-Employee Director Annual Option will become
exercisable in three equal installments after each of the first, second and
third anniversaries of the date of grant.
(d) Method of Exercise. A Participant may exercise a Non-Employee
Director Annual Option, in whole or in part, at such time as it is exercisable
and prior to its expiration, by
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giving written notice of exercise to the Secretary of the Company, specifying
the Option to be exercised and the number of shares to be purchased, and paying
in full the exercise price in cash (including by check) or by surrender of
shares of Stock already owned by the Participant (except for shares acquired
from the Company by exercise of an option less than six months before the date
of surrender) having a Fair Market Value at the time of exercise equal to the
exercise price, or by a combination of cash and shares.
(e) Availability of Shares. If an automatic grant of Options
authorized under Section 10(a) or (b) cannot be made in full due to the
limitation set forth in Section 4(a), such grant shall be made (together with
other automatic grants to occur at the same time) to the greatest extent then
permitted under Section 4(a).
11. General Provisions.
(a) Compliance with Legal and Other Requirements. The Corporation
may, to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award until
completion of such registration or qualification of such Stock or other required
action under any federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated quotation system
upon which the Stock or other securities of the Corporation are listed or
quoted, or compliance with any other obligation of the Corporation, as the
Committee may consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and reasons, listing requirements, or other obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other
right or interest granted under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Corporation or a subsidiary), or
assigned or transferred by such Participant otherwise than by will or the laws
of descent and distribution or to a Beneficiary upon the death of a Participant,
and such Awards or rights that may be exercisable shall be exercised during the
lifetime of the Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights (other than ISOs and
SARs in tandem therewith) may be transferred to one or more Beneficiaries or
other transferees during the lifetime of the Participant, and may be exercised
by such transferees in accordance with the terms of such Award, but only if and
to the extent such transfers are permitted by the Committee pursuant to the
express terms of an Award agreement (subject to any terms and conditions which
the Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee.
(c) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization,
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merger, consolidation, spin-off, combination, repurchase, share exchange,
liquidation, dissolution or other similar transaction or event affects the Stock
such that an adjustment is determined by the Committee to be appropriate under
the Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock which may be
delivered in connection with Awards granted thereafter, (ii) the number and kind
of shares of Stock by which annual per-person Award limitations are measured
under Section 5 hereof, (iii) the number and kind of shares of Stock subject to
or deliverable in respect of outstanding Awards and (iv) the exercise price,
grant price or purchase price relating to any Award and/or make provision for
payment of cash or other property in respect of any outstanding Award. In
addition, the business unit, or the financial statements of the Corporation or
any subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the, business strategy of the Corporation,
any subsidiary or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant; provided, that no such
adjustment shall be authorized or made if and to the extent that such authority
or the making of such adjustment would cause Options, SARs, Performance Awards
granted under Section 8(b) hereof or Annual Incentive Awards granted under
Section 8(c) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as "performance-based compensation" under Code
Section 162(m) and regulations thereunder to otherwise fail to qualify as
"performance-based compensation" under Code Section 162(m) and regulations
thereunder.
(d) Taxes. The Corporation and any subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Corporation and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participants tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to grant
Awards under the Plan without the consent of shareholders or Participants,
except that any amendment or alteration to the Plan shall be subject to the
approval of the Corporation's shareholders not later than the annual meeting
next following such Board action if such shareholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to shareholders for approval; provided that, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under any previously granted and
outstanding Award. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the
Plan; provided that, without the consent of an affected Participant, no such
Committee action may materially and adversely affect the rights of such
Participant under such Award. Notwithstanding
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anything in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that would, but
for the right hereunder, be eligible for such accounting treatment, the
Committee may modify or adjust the right so that pooling of interest accounting
shall be available, including the substitution of Stock having a Fair Market
Value equal to the cash otherwise payable hereunder for that right which caused
the transaction to be ineligible for pooling of interest accounting. In
addition, the Board shall also have the authority to modify the Plan, to the
extent it deems necessary or desirable in its sole discretion, to minimize the
taxes incurred by either the Company or any Participant relating to any Award.
(f) Limitation on Rights Conferred under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ or service of the Corporation or a subsidiary, (ii) interfering in
any way with the right of the Corporation or a subsidiary to terminate any
Eligible Person's or Participant's employment or service at any time, (iii)
giving an Eligible Person or Participant any claim to be granted any Award under
the Plan or to be treated uniformly with other Participants and employees, or
(iv) conferring on a Participant any of the rights of a shareholder of the
Corporation unless and until the Participant is duly issued or transferred
shares of Stock in accordance with the terms of an Award.
(g) Unfunded Status of Awards, Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for certain incentive awards and
deferred compensation. With respect to any payments not yet made to a
Participant or obligation to deliver Stock pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant any rights
that are greater than those of a general creditor of the Corporation.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Corporation for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) Governing Law. The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of laws, and applicable federal law.
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(k) Plan Effective Date and Shareholder Approval. The Plan has been
adopted by the Board effective February 4, 2000, subject to approval by the
shareholders of the Corporation.
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EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
TAKEOUTMUSIC.COM HOLDINGS CORP. (WASHINGTON)
AGREEMENT, effective as of April ___, 2000 between takeoutmusic.com
Holdings Corp., a Washington corporation (the "Company"), and _______________
(the "Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as directors
and officers the most capable persons available; and
WHEREAS, Indemnitee is a director or officer of the Company; and
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies in today's environment; and
WHEREAS, the By-Laws of the Company provide: "The corporation shall
indemnify and hold harmless any person who is or was a director of this
corporation, and pay expenses in advance of final disposition of a proceeding,
to the full extent to which the corporation is empowered." In addition, "[t]he
corporation may, by action of its Board of Directors from time to time,
indemnify and hold harmless any person who is or was an officer, employee or
agent of the corporation, and pay expenses in advance of final disposition of a
proceeding, to the full extent to which the corporation is empowered, or to any
lesser extent which the Board of Directors may determine."
WHEREAS, this Agreement satisfies the provisions of RCW 23B.08.560 of the
Washington Business Corporation Act (the "BCA"); and
WHEREAS, in recognition of the fact that the Indemnitee continues to serve
as a director or officer of the Company in part in reliance on the aforesaid
By-Laws and Indemnitee's need for substantial protection against personal
liability in order to enhance Indemnitee's continued service to the Company in
an effective manner, and in part to provide Indemnitee with specific contractual
assurance that the protection promised by such By-Laws will be available to
Indemnitee (regardless of, among other things, any amendment to or revocation of
such By-Laws or any change in the composition of the Company's Board of
Directors or any acquisition transaction relating to the Company), and due to
the potential inadequacy of the Company's directors' and officers' liability
insurance coverage, the Company wishes to provide in this Agreement for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent (whether partial or complete) permitted by law and as set forth in this
Agreement, and, to the extent insurance is maintained, for the continued
coverage of Indemnitee under the Company's directors' and officers' liability
insurance policies;
<PAGE>
NOW, THEREFORE, in consideration of the premises and of Indemnitee
continuing to serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Certain Definitions.
(a) Approved Law Firm: shall mean any law firm (i) located in New York
City and (ii) rated "av" by Martindale-Hubbell Law Directory.
(b) Board of Directors: shall mean the Board of Directors of the Company.
(c) Change in Control: shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than any
stockholder (and/or affiliate of such stockholder) on the date of this
Agreement or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly of securities of the Company representing 15
percent or more of the total voting power represented by the Company's
then outstanding Voting Securities (such person being hereinafter
referred to as an "Acquiring Person"), or (ii) during any
24-consecutive-month period, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new
director whose election by the Board of Directors or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (iii) the shareholders of
the Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into Voting Securities of the surviving entry)
at least 80 percent of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the
shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all the Company's assets.
(d) Claim: shall mean any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the
Company or any other party, that Indemnitee in good faith believes
might lead to the institution of any such action, suit or proceeding,
whether civil, criminal, administrative, investigative or other.
2
<PAGE>
(e) Expenses: shall include attorneys' fees and all other costs, expenses
and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or participate in,
any Claim relating to any Indemnifiable Event, together with interest,
computed at the Company's average cost of funds for short-term
borrowings, accrued from the date of incurrence of such expense to the
date Indemnitee receives reimbursement therefor.
(f) Indemnifiable Event: shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the
Company as a director, officer, employee, trustee, agent or fiduciary
of another corporation of any type or kind, domestic or foreign,
partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in
such capacity. Without limitation of any indemnification provided
hereunder, an Indemnitee serving (i) another corporation, partnership,
joint venture or trust of which 10 percent or more of the voting power
or residual economic interest is held, directly or indirectly, by the
Company, or (ii) any employee benefit plan of the Company or any
entity referred to in clause (i), in any capacity shall be deemed to
be doing so at the request of the Company.
(g) Reviewing Party: shall be (i) the Board of Directors acting by quorum
consisting of directors who are not parties to the particular Claim
with respect to which Indemnitee is seeking indemnification, or (ii),
if such a quorum is not obtainable or, even if obtainable, if a quorum
of disinterested directors so directs, (A) the Board of Directors upon
the opinion in writing of independent legal counsel that
indemnification is proper in the circumstances because the applicable
standard of conduct set forth in Section 2 of this Agreement and in
RCW 23B.08.510 of the BCA has been met by the Indemnitee or (B) the
shareholders upon a finding that the Indemnitee has met the applicable
standard of conduct referred to in clause (ii)(A) of this definition.
(h) Voting Securities: shall mean any securities of the Company which vote
generally in the election of directors.
2. Basic Indemnification Arrangement. If Indemnitee was, is or becomes at any
time a party to, or witness or other participant in, or is threatened to be
made a party to, or witness or other participant in, a Claim by reason of
(or arising in part out of) an Indemnifiable Event, the Company shall
indemnify Indemnitee to the fullest extent permitted by law as soon as
practicable but in any event no later than 30 days after written demand is
presented to the Company, against any and all Expenses, judgments, fines
(including excise taxes assessed on an Indemnitee with respect to an
employee benefit plan), penalties and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection
with, or in respect of, such Expenses, judgments, fines, penalties or
amounts paid in settlement) of such Claim. If so requested by Indemnitee,
the Company shall advance (within two business days of such request)
3
<PAGE>
any and all Expenses to Indemnitee (an "Expense Advance"), in accordance
with the provisions of RCW 23B.08.530 of the BCA, upon the written
affirmation of the Indemnitee's good faith belief that he has acted in
conformance with the standard of conduct set forth in this Section 2 and in
RCW 23B.08.510 of the BCA. The Indemnitee shall further furnish and execute
a written undertaking, which states that he will repay the Expense Advance
if it is ultimately determined that the Indemnitee did not meet the
applicable standard of conduct. Notwithstanding anything in this Agreement
to the contrary, (i) Indemnitee shall not be entitled to indemnification
pursuant to this Agreement if a judgment or other final adjudication
adverse to the Indemnitee establishes that Indemnitee's acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or that
Indemnitee personally gained in fact a financial profit or other advantage
to which Indemnitee was not legally entitled and (ii) prior to a Change in
Control Indemnitee shall not be entitled to indemnification pursuant to
this Agreement in connection with any Claim initiated by Indemnitee against
the Company or any director or officer of the Company unless the Company
has joined in or consented to the initiation of such Claim.
3. Payment. Notwithstanding the provisions of Section 2, the obligations of
the Company under Section 2 (which shall in no event be deemed to preclude
any right to indemnification to which Indemnitee may be entitled under RCW
23B.08.520 of the BCA) shall be subject to the condition that the Reviewing
Party shall have authorized such indemnification in the specific case by
having determined that Indemnitee is permitted to be indemnified under the
applicable standard of conduct set forth in Section 2 and applicable law.
The Company shall promptly call a meeting of the Board of Directors with
respect to a Claim and agrees to use its best efforts to facilitate a
prompt determination by the Reviewing Party with respect to the Claim.
Indemnitee shall be afforded the opportunity to make submissions to the
Reviewing Party with respect to the Claim. The obligation of the Company to
make an Expense Advance pursuant to Section 2 shall be subject to the
condition that, if, when and to the extent that the Reviewing Party
determines that Indemnitee would not be permitted to be so indemnified
under Section 2 and applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees and undertakes to reimburse the
Company to the full extent required by RCW 23B.08.530(1)(b) of the BCA if
it is determined that the Indemnitee did not meet the required standard of
conduct) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing
Party that Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be required to
reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed). If there has been no
determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in
whole or in part under applicable law, Indemnitee shall have the right to
commence litigation in any court in the State of New York having subject
matter jurisdiction thereof and in which venue is proper seeking an initial
4
<PAGE>
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination
by the Reviewing Party otherwise shall be conclusive and binding on the
Company and Indemnitee.
4. Change in Control. If there is a Change in Control of the Company (other
than a Change in Control which has been approved by a majority of the Board
of Directors who were directors immediately prior to such Change in
Control) then (i) all determinations by the Company pursuant to the first
sentence of Section 3 hereof and RCW 23B.08.550(2) of the BCA shall be made
pursuant to subparagraphs (a), (b) or (c) of such RCW 23B.08.550(2) and
(ii) with respect to all matters thereafter arising concerning the rights
of Indemnitee to indemnity payments and Expense Advances under this
Agreement or any other agreement or By-law of the Company now or
hereinafter in effect relating to Claims for Indemnifiable Events
(including, but not limited to, any opinion to be rendered pursuant to
subparagraph (2)(c) of RCW 23B.08.550 of the BCA) the Company (including
the Board of Directors) shall seek legal advice from (and only from)
special, independent counsel selected by Indemnitee and approved by the
Company (which approval shall not be unreasonably withheld), and who has
not otherwise performed services for the Company (or any subsidiary of the
Company) or the Acquiring Person (or any affiliate or associate of such
Acquiring Person) within the last five years (other than in connection with
such matters) or Indemnitee. Unless Indemnitee has theretofore selected
counsel pursuant to this Section 4 and such counsel has been approved by
the Company, any Approved Law Firm shall be deemed to satisfy the
requirements set forth above. Such counsel, among other things, shall
render its written opinion to the Company, the Board of Directors and
Indemnitee as to whether and to what extent the Indemnitee would be
permitted to be indemnified under applicable law. The Company agrees to pay
the reasonable fees of the special, independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto. As used in
this Section 4, the terms "affiliate" and "associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended
and in effect on the date of this Agreement.
5. Indemnification for Additional Expenses. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within two business days of such request)
advance such expenses to Indemnitee, which are incurred by Indemnitee in
connection with any claim asserted or action brought by Indemnitee for (i)
indemnification or advance payment of Expenses by the Company under this
Agreement or any other agreement or By-law of the Company now or hereafter
in effect relating to Claims for Indemnifiable Events and/or (ii) recovery
under any directors' and officers' liability insurance policies maintained
by the Company, regardless of whether Indemnitee ultimately is determined
to be entitled to such indemnification, advance expenses payment or
insurance recovery, as the case may be.
5
<PAGE>
6. Partial Indemnity, Etc. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of
the Expenses, judgments, fines, penalties and amounts paid in settlement of
a Claim but not, however, for all of the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful on the
merits or otherwise in defense of any or all Claims relating in whole or in
part to an Indemnifiable Event or in defense of any issue or matter
therein, including dismissal without prejudice, Indemnitee shall be
indemnified, to the extent permitted by law, against all Expenses incurred
in connection with such Indemnifiable Event. In connection with any
determination by the Reviewing Party or otherwise as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall, to the
extent permitted by law, be on the Company to establish that Indemnitee is
not so entitled.
7. No Presumption. For purposes of this Agreement, the termination of any
claim, action, suit or proceeding, whether civil or criminal, by judgment,
order, settlement (whether with or without court approval) or conviction,
or upon a plea of nolo contendere or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct
or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law.
8. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the By-laws of the
Company, the BCA or otherwise. To the extent that a change in the BCA
(whether by statue or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the By-laws of the Company
and this Agreement, it is the intent of the parties hereto that Indemnitee
shall enjoy by this Agreement the greater benefits so afforded by such
change.
9. Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with
its or their terms, to the maximum extent of the coverage available for any
director or officer of the Company.
10. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or on behalf of the Company or any affiliate of
the Company against Indemnitee, Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of two years from
the date of accrual of such cause of action, and any claim or cause of
action of the Company or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
two-year period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
11. Amendments, Etc. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by both of the parties hereto.
No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other
6
<PAGE>
provisions hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
12. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
13. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, By-law or otherwise) of the amounts otherwise
indemnifiable hereunder.
14. Specific Performance. The parties recognize that if any provision of this
Agreement is violated by the Company, Indemnitee may be without an adequate
remedy at law. Accordingly, in the event of any such violation, the
Indemnitee shall be entitled, if Indemnitee so elects, to institute
proceedings, either at law or in equity, to obtain damages, to enforce
specific performance, to enjoin such violation, or to obtain any relief or
any combination of the foregoing as Indemnitee may elect to pursue.
15. Binding Effect, Etc. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business
and/or assets of the Company), assigns, spouses, heirs, and personal and
legal representatives. This Agreement shall continue in effect regardless
of whether Indemnitee continues to serve as an officer or director of the
Company or of any other enterprise at the Company's request.
16. Severability. The provisions of this Agreement shall be severable if any of
the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions
shall remain enforceable to the fullest extent permitted by law.
17. Governing Law. This Agreement shall be governed by, and be construed and
enforced in accordance with, the laws of the State of New York applicable
to contracts made and to be performed in such state without giving effect
to the principles of conflicts of laws.
Executed this day of .
--- ------------------
TAKEOUTMUSTIC.COM HOLDINGS CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
------------------------------------
7
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
State or Other
Name of Subsidiary Jurisdiction of Incorporation Percentage Ownership
------------------ ----------------------------- --------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
takeoutmusic.com, Inc. Delaware 100%
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
balance sheet and the statement of operations attached as an exhibit to the
Company's Form 10-KSB for the year ended December 31, 1999, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> DEC-31-1999
<CASH> 8,497
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,497
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,497
<CURRENT-LIABILITIES> 100,186
<BONDS> 0
<COMMON> 24,389
0
0
<OTHER-SE> 4,949,776
<TOTAL-LIABILITY-AND-EQUITY> 8,497
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 78,170
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,937
<INCOME-PRETAX> (91,107)
<INCOME-TAX> 0
<INCOME-CONTINUING> (91,107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (91,107)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
