<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
WORLD HOUSE ENTERTAINMENT, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
NEVADA 7389 87-0567884
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
2831 DOGWOOD PLACE 2831 DOGWOOD PLACE
NASHVILLE, TENNESSEE 37204 NASHVILLE, TENNESEE 37204
(615) 269-8682 (Address of Principal Place of Business
(Address and Telephone Number of or
Principal Executive Offices) Intended Principal Place of Business)
ELIZABETH ANN PETERS
PRESIDENT
WORLD HOUSE ENTERTAINMENT, INC.
2831 DOGWOOD PLACE
NASHVILLE, TENNESSEE 37204
(615) 269-8682
(Name, Address and Telephone Number of Agent for Service)
--------------------------
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
GARY L. HOFFMAN, ESQ.
ERICKSON & SEDERSTROM, P.C.
10330 REGENCY PARKWAY DRIVE
OMAHA, NEBRASKA 68114
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
--------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
DOLLAR PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE] REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per
share.............................. $200,000 $2.50 $200,000 $59.00
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), SHALL DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
CROSS REFERENCE SHEET
BETWEEN ITEMS IN PART I OF FORM SB-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus................................ Facing Page; Cross Reference Sheet; Outside Front
Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors................. Facing Page; Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...................... Risk Factors; Terms of the Offering
6. Dilution............................................. Risk Factors; Dilution
7. Selling Security Holders............................. *
8. Plan of Distribution................................. Terms of the Offering
9. Legal Proceedings.................................... Business
10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Security Ownership of Certain Beneficial Owners and
Management
12. Description of Securities............................ Description of Capital Stock; Dividend Policy
13. Interest of Named Experts and Counsel................ *
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Description of Capital Stock
15. Organization within Last Five Years.................. Business
16. Description of Business.............................. Business
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Plan of Operation
18. Description of Property.............................. Business
19. Certain Relationships and Related Transactions....... Certain Relationships and Related Transactions
20. Market for Common Equity and Related Shareholder
Matters............................................ Risk Factors; Shares Eligible for Future Sale
21. Executive Compensation............................... Management
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ *
</TABLE>
- ------------------------
* Omitted because answer is negative or item is not applicable.
<PAGE>
80,000 SHARES
WORLD HOUSE ENTERTAINMENT, INC.
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
World House Entertainment, Inc. (the "Company") is offering (the "Offering")
hereby 80,000 shares of its common stock (the "Common Stock"). Prior to the
Offering, there has been no public market for the Common Stock. For factors to
be considered in determining the initial public offering price, see "TERMS OF
THE OFFERING." The Offering is being made on a "best efforts" basis.
Upon completion of the Offering, the present directors, executive officers
and principal shareholders of the Company will beneficially own approximately
90% of the outstanding Common Stock. See "RISK FACTORS--Control by Existing
Shareholders."
THESE ARE SPECULATIVE SECURITIES. THIS OFFERING INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 4 HEREOF.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.......................................... $2.50 $0.00 $2.50
Total.............................................. $200,000.00 $0.00 $200,000.00
</TABLE>
(1) The Common Stock is being offered on a "best efforts" basis by the Company
(employees, officers and directors). No sales commission will be paid for
Common Stock sold by the Company. The Company reserves the right to
withdraw, cancel or reject an offer in whole or in part. The Offering will
terminate on or before , 1998. In the Company's sole discretion, the
Offering may be extended from time to time, but in no event later than one
(1) year from the date of this Prospectus. There is no minimum offering
amount and no escrow account. Proceeds of this Offering are to be deposited
directly into the operating account of the Company. See "TERMS OF THE
OFFERING--Plan of Distribution and Offering Period."
(2) Before deducting estimated expenses of $23,559 payable by the Company.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
SB-2 under the Securities Act of 1933 with respect to the Offering. This
prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. The Company will be subject to the reporting
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), but is
currently not a reporting company. The reports and other information filed by
the Company may be inspected and copied at the public reference facilities of
the Commission in Washington, D.C. Copies of such material can be obtained from
the Public Reference Section of the Commission, Washington, D.C., 20549, at
prescribed rates. Descriptions contained in this prospectus as to the contents
of any contract or other document filed as an exhibit to the Registration
Statement are not necessarily complete and each such description is qualified by
reference to such contract or document.
The Company intends to furnish to its shareholders, after the close of each
fiscal year, an annual report relating to the operations of the Company and
containing audited financial statements examined and reported upon by an
independent certified public accountants. In addition, the Company may furnish
to shareholders such other reports as may be authorized, from time to time, by
the Board of Directors. The Company's year end is December 31.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE
INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. UNLESS OTHERWISE
INDICATED, ALL REFERENCES TO THE COMPANY INCLUDE SONGS FOR THE PLANET, INC.
("SONGS FOR THE PLANET"), WHICH IS A WHOLLY-OWNED SUBSIDIARY OF THE COMPANY.
THE COMPANY
The Company was incorporated in the State of Nevada on December 5, 1996,
under the name "Sportsfair Television, Inc." The Company's name was subsequently
changed to "World House Entertainment, Inc." On December 31, 1997, the Company
acquired all of the issued and outstanding capital stock of Songs for the
Planet, as a result of which Songs for the Planet became its wholly-owned
subsidiary. Prior to this acquisition, the Company was not engaged in any
business activities.
The Company is a development stage entertainment company with a limited
operating history, Songs for the Planet having commenced operations in August,
1997. The Company primarily provides copyright administration services to music
publishers, including (a) the registration of copyrights with the United States
Copyright Office, (b) the preparation of assignments of copyrights, (c) the
negotiation, preparation and execution of mechanical licenses, synchronization
licenses and other rights agreements respecting musical compositions, and (d)
the collection of royalties pertaining to the use of such compositions. The
Company anticipates that it will also provide similar services to producers of
recorded music products, including the obtaining of mechanical licenses and
synchronization licenses for the use of musical compositions and the computation
and payment of royalties. Incidental to these services, the Company owns and
operates studio facilities for the preparation of demonstration and master
recordings.
With respect to copyright administration services provided music publishers,
the Company's revenues will be derived from commissions for its services based
upon a percentage of the gross income received by the Company on behalf of its
clients after deducting certain costs and fees. With respect to copyright
administration services provided recorded music producers, the Company will be
compensated at a negotiated hourly rate. Additional revenues are expected to be
obtained from the use of the Company's studio facilities by third parties.
The Company's principal executive offices are located at 2831 Dogwood Place,
Nashville, Tennessee 37204. Its telephone number is (615) 269-8682.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offering in the
Offering........................ 80,000 shares
Common Stock Outstanding after the
Offering........................ 780,000 shares
Use of Proceeds................... The net proceeds from the Offering are estimated to be
$200,000. Of such proceeds, the Company estimates that
approximately $128,750 will be used to repay certain
debt and the balance will be used for working capital
and general corporate purposes. See "USE OF PROCEEDS."
</TABLE>
3
<PAGE>
RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS
SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE COMMON STOCK OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS IN THE FUTURE COULD DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IMMEDIATELY BELOW, IN THE SECTIONS CAPTIONED "MANAGEMENT'S PLAN OF
OPERATION" AND "BUSINESS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS
PROSPECTUS.
ABSENCE OF OPERATING HISTORY
The Company is a newly formed venture without significant assets. The
Company's success will depend in part on its ability to deal with the problems,
expenses, and delays frequently associated with establishing a new business
venture. The Company has derived no significant revenue from operations to date.
Future losses are likely before the Company's operations will become profitable.
There is no assurance that the Company's operations will prove profitable.
CERTAIN RISKS INHERENT IN THE RECORDED MUSIC INDUSTRY
By providing services relating to the recorded music business, the Company
will be subject to all the risks of establishing a new business including the
possibility of losses. The recorded music industry contains certain particular
risks. Each musical composition is an individual artistic work, and its
commercial success is primarily determined by consumer taste, which is
unpredictable and constantly changing. There can be no assurance as to the
financial success of any particular musical composition which is under the
administration of the Company. Moreover, owing to this uncertainty, there may be
significant fluctuations in quarterly results over which the Company has no
control.
RISKS ASSOCIATED WITH CLIENT DEVELOPMENT
Currently, the Company has entered into copyright administration services
agreements with only five clients (three of which are owned and controlled by
Benjamin Justin Peters). See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
There can be no assurance that the Company will be able to attract clients, or,
if the Company is able to attract clients, that the Company will be able to
derive significant revenue from the musical catalog of its clients. Moreover,
because of the highly personal and creative nature of a particular composer's
contractual obligations to a client of the Company, there can be no assurances
that an unwilling artist will perform his or her contractual obligations with
that client, which in turn will materially effect the ability of the Company to
derive revenues pertaining to that artist's future musical compositions.
COMPETITION
The Company will be competing with numerous other businesses and individuals
which provide similar services. These other businesses, including, with respect
to copyright administration services to music publishers, the Harry Fox Agency,
have greater financial resources, and in many instances have longer operating
histories than the Company. Many recorded music companies, including major
companies such as Warner Brothers Records, have their own facilities for
obtaining licenses, paying royalties and related activities. See
"BUSINESS--Competition."
RISKS ATTENDANT WITH COPYRIGHT INFRINGEMENT
Infringement of the copyrights managed by the Company may occur in the form
of unauthorized reproduction and sale of recordings of musical compositions in
its clients' catalogs. Such infringements may be difficult to detect and, even
if detected, the Company may be unable to collect royalties due its
4
<PAGE>
clients under applicable law. While the Company's primary business includes the
detection of infringements and the collection of copyright royalties, it is
impossible to estimate the potential loss in revenues that may occur as a result
of such infringements.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the abilities and continued service of
its management, Elizabeth Ann Peters and Benjamin Justin Peters. The loss of the
services of any of these individuals could have a materially adverse effect on
the Company. There can be no assurance that the Company will be successful in
attracting and retaining the personnel necessary to develop the Company's
services and to continue to grow and operate profitably. The Company does not
have in place "key man" life insurance policies covering the lives of any of
these individuals. See "MANAGEMENT."
CONTROL BY EXISTING SHAREHOLDERS
Upon completion of the Offering, the Company's directors, officers and
principal shareholders will, in the aggregate, beneficially own approximately
90% of the outstanding shares of Common Stock. As a result, these persons would
be able to elect a majority of the Board of Directors and to control the outcome
of virtually all other matters requiring shareholder approval. Such voting
concentration may have the effect of delaying or preventing a change in control
of the Company. See "DESCRIPTION OF CAPITAL STOCK", "MANAGEMENT" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
NO PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF PRICE
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained. The Company does not intend to list the Common
Stock on any national securities exchange nor to apply for quotation on either
the Nasdaq Stock Market or the Nasdaq Small Cap Stock Market. Trading, of any,
in the Common Stock may be conducted in the over-the-counter (the "OTC") market
in the so-called "pink sheets" or the "OTC Bulletin Board" service. As a result,
an investor would likely find it difficult to dispose of or to obtain accurate
quotations as to the value of the Common Stock offered hereby.
The Common Stock may become subject to Rule 15q-9 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which imposes additional
sales practice requirements upon brokers-dealers which sell "penny stocks" to
persons other than established customers and institutional accredited investors.
For transactions under this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to the sale. The Securities and
Exchange Commission (the "Commission") defines a "penny stock" to be any non-
Nasdaq Stock Market equity security that has a market price of less than $5.00
per share, subject to certain exceptions. For any transaction by broker-dealers
involving a penny stock, unless exempt, the rules of the Commission require
delivery, prior to a transaction in penny stock, of a risk disclosure document
relating to the penny stock market, together with other requirements and
restrictions. If the Common Stock were subject to the rules on penny stocks, the
market liquidity of the Company's securities could be severely adversely
affected.
In addition, the National Association of Securities Dealers, Inc. (the
"NASD") has submitted to the Commission for approval a series of proposed
changes pertaining to the OTC Bulletin Board and the OTC market. Generally
stated, these changes would:
(i) allow only those companies that report their current financial
information to the Commission, banking, or insurance regulators to be quoted
on the OTC Bulletin Board;
5
<PAGE>
(ii) require brokers, before they recommend a transaction involving an
OTC security, to review current financial statements on the company they are
recommending; and,
(iii) prior to the initial purchase of an OTC security, require that
every investor receive a standard disclosure statement (prepared by the
NASD) emphasizing the differences between OTC securities and other
market-listed securities.
The NASD is also considering the adoption of additional changes, such as seeking
the authority for the NASD to halt trading of securities on the OTC Bulletin
Board under certain circumstances. The Company can make no predictions as to the
likelihood of these proposed changes being approved by the Commission in their
current form nor as to the adoption of any additional changes by the NASD.
Even if such a public market were to develop, the vagaries of the stock
market are such that there may be significant price and volume fluctuations that
may or may not be related to the operating performance of the Company.
DILUTION
The initial public offering price of the Common Stock offered hereby is
substantially higher than the net book value of the currently outstanding Common
Stock. Therefore, purchasers of the Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of the Common
Stock in the amount of $2.33 per share. Existing shareholders paid an average of
$.01 per share of Common Stock. See "DILUTION."
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its Common Stock
and does not expect to pay dividends in the foreseeable future. See "DESCRIPTION
OF CAPITAL STOCK--Dividend Policy."
CERTAIN ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of the Company's Articles of Incorporation and Bylaws
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, control of the
Company. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Common Stock. Certain of these
provisions allow the Company to issue Preferred Stock with rights senior to
those of the Common Stock without any further vote or action by the
shareholders, eliminate the right of shareholders to act by written consent and
impose various procedural and other requirements that could make it more
difficult for shareholders to affect certain corporate actions. These provisions
could also have the effect of delaying or preventing a change in control of the
Company. The issuance of Preferred Stock could decrease the amount of earnings
and assets available for distribution to the holders of Common Stock or could
adversely affect the rights and powers, including voting rights, of the holders
of the Common Stock. In certain circumstances, such issuance could have the
effect of decreasing the market price of the Common Stock. See "DESCRIPTION OF
CAPITAL STOCK--Preferred Stock."
RISKS OF LIMITATION OF LIABILITY
The Company has included in its Articles of Incorporation provisions to
indemnify its directors and officers to the extent permitted by Nevada law. The
Company's Articles of Incorporation also include provisions to eliminate the
personal liability of its directors and officers to the Company and its
shareholders to the fullest extent permitted by Nevada law. See "DESCRIPTION OF
CAPITAL STOCK."
6
<PAGE>
RISK OF SALES OF SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial number of shares of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the Common Stock. In addition, any such sale or perception could make
it more difficult for the Company to sell equity securities or equity related
securities in the future at a time and price that the Company deems appropriate.
Upon consummation of this Offering, the Company will have a total of 780,000
shares of Common Stock outstanding, of which 80,000 shares of Common Stock
offered hereby will be eligible for immediate sale in the public market without
restrictions, unless they are held by "affiliates" of the Company within the
meaning of Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), and of which 700,000 shares will be "restricted" securities
within the meaning of Rule 144. No prediction can be made as to the effect, if
any, that future sales of Common Stock, or the availability of shares for future
sales, will have on the market price of the Common Stock from time to time or
the Company's ability to raise capital through an offering of its equity
securities. See "SHARES ELIGIBLE FOR FUTURE SALE."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $200,000, before deducting offering
expenses. The Company intends to use the net proceeds as follows: (i)
approximately $128,750 will be used to repay outstanding debt owed by Songs for
the Planet to certain related persons and (ii) the balance will be used for
working capital and general corporate purposes. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
DIVIDEND POLICY
The Company currently intends to retain earnings to finance the growth and
development of its business and for working capital and general corporate
purposes, and does not anticipate paying cash dividends on the Common Stock for
the foreseeable future. Any payment of dividends will be at the discretion of
the Board of Directors and will depend upon earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions with
respect to payment of dividends and other factors. See "MANAGEMENT'S PLAN OF
OPERATION."
7
<PAGE>
DILUTION
The pro forma net tangible book value deficiency of the Company as of
December 31, 1997 was approximately $(67,164), or $(0.10) per share of Common
Stock. Pro forma net tangible book value per share is equal to the Company's
total tangible assets less its total liabilities, divided by the number of
shares of Common Stock outstanding. After giving effect to the sale of 80,000
shares offered hereby at an assumed initial public offering price of $2.50 per
share and the application of the net proceeds therefrom, the pro forma net
tangible book value of the Company at December 31, 1997 would have been
$132,836, or $0.17 per share. This represents an immediate increase in such pro
forma net tangible book value of $0.27 per share to existing shareholders and an
immediate dilution of $2.33 per share to new investors purchasing shares at the
initial public offering price, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $ 2.50
Pro forma net tangible book value per share as of December 31,
1997............................................................ $(0.10)
Increase per share attributable to new investors.................. $ 0.27
Pro forma net tangible book value per share as of December 31,
1997, after this Offering....................................... $ 0.17
Dilution per share to new investors............................... $ 2.33
------
------
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1997, the number of shares purchased from the Company, the total cash
consideration paid and the average cash price per share paid by the existing
shareholders and the new investors (before deducting the estimated offering
expenses to be paid by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing shareholders....................................... 700,000 89.7% $ 7,000 3.38% $ 0.01
New investors............................................... 80,000 10.3% $ 200,000 96.62% $ 2.50
--------- ----- ---------- --------- -----
--------- ----- ---------- --------- -----
Total................................................... 780,000 100.0% $ 207,000 100.00%
</TABLE>
8
<PAGE>
MANAGEMENT'S PLAN OF OPERATION
The Company intends to take advantage of the current trend in the music
industry toward the establishment of independent music publishing and record
companies by providing such companies a full range of expert services. See
"BUSINESS--Business Strategy." The Company will advertise its services in trade
and industry related publications and will engage in the direct mail of a
brochure and other sales literature to prospective customers. The Company also
intends to develop a website on the Internet to provide details regarding its
services and to encourage customer inquiries.
Ms. Peters, the Company's president, has written a book entitled "Music
Publishing (For Those Who Don't Have A Clue)" and published by The Zeal Group.
This book will be offered for sale on the Company's website to help promote the
Company's services. In addition, Ms. Peters is developing a multi-media
presentation produced by The Zeal Group in conjunction with the book.
While the Company has less than one year of operating history and has
experienced losses to date, management believes that it will have numerous
opportunities in the future to establish contractual relations with significant
customers. The Company's management therefore anticipates that there will be
sufficient revenues to meet its current expenses. Management is seeking to
develop prospects located beyond its immediate geographic market.
The Company does not presently anticipate any change in the number of
employees required to sustain its operations. The Company does not conduct any
research or development activities at this time. The Company has no plant and/or
equipment requirements and anticipates no such expenditures. There are,
moreover, no plans, arrangements, commitments or understandings for the Company
to acquire, or be acquired by, any other company or business at this time.
9
<PAGE>
BUSINESS
GENERAL OVERVIEW
The Company was incorporated in the State of Nevada on December 5, 1996,
under the name "Sportsfair Television, Inc." The Company's plan at that time was
to create and promote sporting goods shows for home shopping networks
transmitted via satellite or cable television. These plans did come into
fruition. On December 31, 1997, the Company acquired from Elizabeth Ann Peters
all of the issued and outstanding common stock of Songs for the Planet in
exchange for 200,000 shares of Common Stock. Songs for the Planet was organized
in August of 1997 and had limited operations at the time of the foregoing
acquisition. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." The Company
conducted no business operations prior to the acquisition of Songs for the
Planet and, as of the date of this Prospectus, the Company serves as a holding
company of shares of common stock of Songs for the Planet. Business operations
of the Company are conducted through Songs for the Planet.
COPYRIGHT ADMINISTRATION SERVICES
The primary business of the Company is to provide copyright administration
services to the music and entertainment industry. These copyright administration
services include (a) the registration of copyrights with the United States
Copyright Office, (b) the preparation of assignments of copyrights, (c) the
negotiation, preparation and execution of mechanical licenses, synchronization
licenses and other rights agreements respecting musical compositions, and (d)
the collection of royalties in connection with such licenses or rights
agreements. The Company anticipates that it will also provide similar services
to producers of recorded music products, including the obtaining of mechanical
licenses and synchronization licenses for the use of musical compositions and
the computation and payment of royalties. The following describes the legal and
market context in which these services are provided.
COPYRIGHTS
Original musical compositions, as well as derivative works such as
arrangements and editions, are primarily created by individuals or small groups.
Upon creation of an original or derivative work, the creator possesses a
copyright in the work. A copyright is a form of protection provided by the laws
of the United States to the authors of "original works of authorship" including
literary, dramatic, musical, artistic, and certain other intellectual works. A
copyright arises simply from creation of the work. The owner of a copyright has
the exclusive right to: (i) reproduce copies of the work; (ii) prepare
derivative works; (iii) distribute copies of the work; (iv) perform the work
publicly; (v) display the work publicly; and (vi) in the case of sound
recordings, to perform the copyrighted work publicly by means of a digital audio
transmission.
If the composition is the product of more than one author (for example, a
composer and a lyricist), the work is treated as a joint work. Each author has
an undivided ownership interest in the work taken as a whole which interest does
not terminate upon his or her death (i.e., there is no right of survivorship).
Each owner is therefore entitled to exploit the copyright, subject to a right of
accounting to the co-owners.
While registration with the United States Copyright Office is not required
for copyright protection, it is a prerequisite for filing a copyright
infringement action based on a work of United States origin and for the recovery
of statutory damages and attorneys' fee incident thereto. Registration also
serves as prima facie evidence of ownership and validity of the copyright.
For works created on or after January 1, 1978, a copyright exists from the
date of creation and, generally stated, a period of fifty years beyond the life
of the author. In the case of anonymous works, pseudonymous works or works made
for hire, the term of a copyright is seventy-five years from the date of first
publication or 100 years from the date of creation, whichever comes first.
10
<PAGE>
For works created but neither in public domain, nor published or copyrighted
prior to January 1, 1978, the basic term of the copyright is the same as
indicated above. In all cases, however, the copyright will not expire before
December 31, 2002; and, if the work is published on or before December 31, 2002,
the copyright will not expire before December 31, 2027.
For works that were either published or copyrighted before January 1, 1978,
the copyright was secured on the date the work was published or on the date of
registration if the work was registered. In either case, the works are protected
for an initial term of twenty-eight years and, during the last year of the first
term, the copyright may be renewed for an additional forty-seven years.
The federal courts have original and exclusive jurisdiction over all civil
actions arising under the federal copyright statute. Such an action must be
brought within three years from the date the copyright owner has knowledge of a
violation (or is imputed to have such knowledge). In addition to injunctive
relief, a copyright owner may recover either (i) actual damages and any
additional profits of the infringer or (ii) statutory damages between $500 and
$20,000 for all infringements with respect to any one work. If the infringement
was willful, the court has the discretion to increase the award of statutory
damages to $100,000; but, if the defendant had no reason to know that it was
infringing a copyright, the court has the discretion to decrease the award of
statutory damages to $200. The court has the discretion to award attorneys' fees
and costs to the prevailing party in a copyright action.
LICENSES AND ASSIGNMENTS
Copyright ownership allows the owner to reproduce and distribute copies of
the work or to permit someone else to perform these functions (which is
generally called a "license") on either an exclusive or non-exclusive basis.
Under the federal copyright statute, transfers of copyright ownership (which are
generally called "assignments") must be in a written instrument signed by the
transferor which explicitly identifies those rights being transferred. A
non-exclusive license is not generally considered an assignment of ownership. An
assignment is recordable with the Copyright Office so as to give others
constructive notice of the assignment. Each of the exclusive rights granted to a
copyright owner are distinct and may be assigned separately. For example, the
owner of a copyright may assign the right to reproduce a copyrighted work, but
retain the right to authorize and prepare derivative works.
Although licenses are generally negotiated transactions, the copyright
statute provides for mandatory licenses under certain situations. For example,
the statute permits proprietors of establishments to perform nondramatic musical
works in public by means of a coin operated phonorecord player (i.e., a jukebox)
as long as there are no direct or indirect charges for admission.
The copyright statute also permits others to record a musical work and to
distribute phonorecords to the public for private use. Compact discs which
encode both the audio rendition of a song and also contemporaneous display of
the song's lyrics (known as "compact discs plus graphics" or "CD+G's") are not
phonorecords under the statute. Moreover, except when embodied in a phonorecord,
the lyrics to a song may enjoy independent copyright protection as a literary
work which may not be reproduced without the owner's consent. On the other hand,
a compulsory license includes the privilege of making a musical arrangement of
the work as long as the arrangement does not change the basic melody or
fundamental character of the work. But, such an arrangement is not subject to
copyright protection without the express consent of the copyright owner of the
original work.
There are four types of licenses or rights agreements which frequently
pertain to musical compositions. A mechanical license is an authorization from
the owner of the copyright (or the owner's agent) to manufacture and distribute
an audio recording of the composition. A synchronization license is an
authorization from the owner of the copyright (or the owner's agent) to use an
audio recording of the composition in conjunction with visual images such as
motion pictures, television, videotapes and computer programs. A performance
right is an authorization from the owner of the copyright (or the owner's agent)
to perform a musical composition publicly, including the broadcast of a work
over radio or television or the
11
<PAGE>
playing of a recording at a place of business. A music publishing license
involves the right to create printed sheet music for a composition.
For every phonorecord made and distributed on or after January 1, 1996, the
royalty rate payable with respect to each composition is the greater of 6.95
cents or 1.3 cents per minute of playing time or fraction thereof. The Copyright
Office adjusted this rate, effective January 1, 1998, as follows:
<TABLE>
<CAPTION>
DATE PHONORECORD MADE
AND DISTRIBUTED RATE
- -------------------------------------------- --------------------------------------
<S> <C>
On or after January 1, 1998................. greater of 7.1 cents or 1.35 cents per
minute of playing time or fraction
thereof
On or after January 1, 2000................. greater of 7.55 cents or 1.45 cents
per minute of playing time or fraction
thereof
On or after January 1, 2002................. greater of 8.0 cents or 1.55 cents per
minute of playing time or fraction
thereof
On or after January 1, 2004................. greater of 8.5 cents or 1.65 cents per
minute of playing time or fraction
thereof
On or after January 1, 2006................. greater of 9.1 cents or 1.75 cents per
minute of playing time or fraction
thereof
</TABLE>
These rates are subject to change.
A copyright owner (or the owner's agent) may grant a mechanical license for
less than the statutory rate. For synchronization licenses and music publishing
licenses, the royalty rate is negotiated on a case by case basis between the
copyright owner (or owner's agent) and the prospective user.
Performance rights are generally licensed through performing rights
associations, such as the American Society of Composers, Authors and Publishers
("ASCAP"), Broadcast Music, Inc. ("BMI"), and the Society of European Stage
Authors and Composers ("SESAC"), on either a blanket fee or per program fee
basis.
MUSIC INDUSTRY MARKET
The music industry is the business of (i) discovering and signing musical
artists, (ii) licensing the recording and performance of their music, and (iii)
engaging in printing, manufacturing, packaging, distributing and marketing
activities in connection therewith. According to the most recent survey of the
National Music Publishers Association (the "NMPA"), world soundcarrier sales in
1995 were $39.68 billion and royalty payments totaled $6.2 billion. The United
States represents approximately 21% of the world market. The following table
shows the allocation of these royalty payments according to source.
<TABLE>
<CAPTION>
SOURCE OF INCOME PERCENTAGE
- ------------------------------------------------------------------------ -----------
<S> <C>
Performance Based Income................................................ 44.00%
Reproduction Based Income............................................... 43.00%
Distribution Based Income............................................... 10.00%
Interest Investment Income.............................................. 3.00%
Miscellaneous Income.................................................... 0.31%
</TABLE>
[Source: NMPA 6th Annual International Survey]
12
<PAGE>
Typically, music publishing agreements with songwriters grant the music
publishing company exclusive rights with respect to all compositions created by
the songwriter, in whole or in part, during the term of the agreement usually in
exchange for the payment of an advance to the songwriter and, after the
recoupment of the advance, the payment of royalties on sales of soundcarriers
using such compositions. In some cases, the publishing company may be required
to seek the songwriter's approval before licensing the composition for certain
uses.
Music publishing companies frequently acquire a catalog of compositions
previously created by a songwriter or group of songwriters as a music publishing
asset. It is not uncommon for music publishing companies to be owned or
controlled by individual songwriters. Music publishing companies derive revenues
primarily from (a) license fees paid for the use of such musical compositions on
radio, on television, in motion pictures and in other public performances, (b)
royalties paid for the use of such musical compositions on compact discs, audio
cassettes, music videos and in television commercials, and (c) sales of
published sheet music and song books. There are literally thousands of music
publishing companies in business throughout the world. Competition amongst music
publishing companies is intense in acquiring musical compositions and in having
them recorded and performed.
The recorded music industry produces, manufactures, distributes and markets
recorded music products on a retail or wholesale basis. The recorded music
industry is dominated by six major companies: Warner Bros. Records, Inc.;
PolyGram Records, Inc.; Sony Corporation of America; BMG Music; MCA
Inc./Universal City Studios, Inc.; and Thorn EMI Music. These six companies are
vertically integrated, such that they (or their affiliates) are able to perform
all aspects of the business. The remainder of the recorded music industry is
represented by numerous small independent companies.
Copyright owners generally receive royalties based upon a percentage of
gross sales and of performance-related income. On the other hand, it is the
general practice in the recorded music industry to sell recorded music products
on a returnable basis. As a consequence, music publishing revenues tend to be
collected later than soundcarrier sales.
Revenues of the music industry are adversely affected by the unauthorized
reproduction of recordings for commercial sale, commonly referred to as
"piracy," and by home taping for personal use. The industry may also be
adversely affected by the ability of consumers to download quality sound
recordings via the Internet.
BUSINESS STRATEGY
The Company's business strategy is to provide a full range of administration
services to music publishers, the recorded music industry and the entertainment
industry generally. These services will include administering (1) mechanical
licenses, (2) synchronization licenses for media other than phonorecords
(including licenses relating to motion pictures, television and video
productions, and multimedia), and (3) literary licenses with respect to song
lyrics (when used, for example, in print advertising). The Company's management
believes that this strategy sets the Company apart from its competition in that
the competition tends to specialize in certain aspects of the business. The
Company, however, does not intend to provide services relating to performance
rights.
The Company's revenue for providing copyright administration services is a
percentage of royalties actually collected on behalf of its music publishing
clients, less all costs of collection and fees paid by the Company to collection
agents and subpublishers. Typically, such services are expected to be transacted
pursuant to written agreements having a term of three years. The amount of the
Company's fee is negotiated with each client; however, it is estimated that the
average fee will be five percent (5%) for licensing services and ten percent
(10%) for full administration services. The Company's revenues will be dependent
upon the demand for its clients' musical compositions. For recorded music
clients, the Company will bill at hourly rates between $40.00 to $60.00 per
hour.
13
<PAGE>
The Company's business operations to date have been limited. As of the date
of this Prospectus, the Company has five clients: Truthworks Music of Brentwood,
Tennessee, Tourmaline Music, Inc. ("Tourmaline"), LITA Music ("LITA"), Justin
Peters Music ("JPM"), and Platinum Planet Music, Inc. ("Platinum Planet"), each
of Nashville, Tennessee. Tourmaline is an affiliate of Mr. Peters. LITA, JPM and
Platinum Planet are each owned and controlled by Benjamin Justin Peters. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
RECORDING SERVICES
As a service incidental to its primary business, the Company provides
recording services to musical artists. These recording services are primarily
furnished for preparing demonstration records ("demos") on behalf of artists for
use in soliciting recording companies to sign the artist. In addition, these
services may also include producing master recordings suitable for the purpose
of manufacturing quality phonograph records and for the purpose of assisting in
the development of the artist's career. The Company receives a negotiated fee
for these services. The Company is generally responsible for paying musicians
and acquiring additional equipment used in connection with a recording project.
COMPETITION
Copyright administration and recording services of the type provided music
publishing companies are provided by numerous other companies throughout the
world. The market for licensing services to music publishing companies is
dominated by the Harry Fox Agency, a division of the NMPA, which represents more
than 17,000 music publishers. Moreover, the six major recorded music companies
have their own staffs which furnish for internal use copyright administration
services provided or contemplated by the Company to recording companies.
As indicated above, copyright administration services relating to
performance rights are provided primarily through ASCAP, BMI and/or SESAC. The
Company does not intend to provide such services.
LEGAL PROCEEDINGS
There are no legal proceedings, pending or threatened, to which the Company
is a party.
PROPERTIES
The following is a list of the ten most significant copyrights which the
Company administers:
<TABLE>
<CAPTION>
NAME OF SONG MUSIC PUBLISHER RECORDING ARTIST
- ---------------------------------------------- ------------------------------------ ---------------------------
<S> <C> <C>
Saved By Love Justin Peters Music Amy Grant
Big Fat Nothing Platinum Planet/Truthworks Music Believable Picnic
Making War in the Heavenlies Tourmaline Music Ron Kenoly
Joy in Your Presence Tourmaline Music Various Artists
All Nations Tourmaline Music Various Artists
Making a New Start Lita Music Kingdom Heirs
Chisel Meets the Stone Justin Peters Music 4 Him
Nothing Can Separate Us Justin Peters Music Al Denson
Lost in the Shadow of the Cross Lita Music Steven Curtis Chapman
One Moment in His Presence Lita Music Andrew Towe and Others
</TABLE>
The Company does not own any real property. The Company's corporate offices
are located in a building owned by Mr. Peters' father. Mr. Peters is given
unrestricted use of this building in consideration for services rendered to
Tourmaline. The Company pays no cash consideration for the use of this building;
however, it permits Tourmaline limited access to the Company's recording studio.
14
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of the
date of this Prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------------------------ --- ----------------------------------------
<S> <C> <C>
Elizabeth Ann Peters.............................................. 34 President and Director
Benjamin Justin Peters............................................ 35 Chairman of the Board and Secretary
</TABLE>
ELIZABETH ANN PETERS co-founded Songs for the Planet in August of 1997. Mrs.
Peters received a bachelors degree in mass communications from Belmont
University of Nashville, Tennessee, in 1986. From 1987 until 1995, Mrs. Peters
was employed in various capacities by Copyright Management, Inc. of Nashville,
Tennessee, a firm which provides copyright administration services to music
publishers similar to those provided by the Company. From 1995 to 1997, Mrs.
Peters administered publishing companies owned or controlled by Mr. Peters. Mrs.
Peters has served as President and Director of the Company since December 31,
1997. Mrs. Peters and Mr. Peters are wife and husband.
BENJAMIN JUSTIN PETERS co-founded Songs for the Planet in August of 1997.
Mr. Peters received a bachelors degree in music business from Belmont University
of Nashville, Tennessee, in 1986. Since 1981, Mr. Peters has been a professional
songwriter and has been involved in numerous music publishing ventures. In 1988,
Mr. Peters was named American Songwriter of the Year (Gospel Music Category) by
American Songwriter Magazine. Mr. Peters has served as Chairman of the Board and
Secretary of the Company since December 31, 1997. Mr. Peters and Mrs. Peters are
husband and wife.
The directors of the Company are elected each year at the annual meeting of
shareholders for a term of one year. Each director serves until the expiration
of his or her term and thereafter until his or her successor is duly elected and
qualified. Executive officers of the Company are appointed by the Board of
Directors on an annual basis.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation of the Company's chief executive officer and the four other most
highly compensated executive officers of the Company (collectively, the "Named
Executive Officers") since the Company's inception. There were no stock
appreciation rights outstanding during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
AWARDS
--------------- PAYOUTS
ANNUAL COMPENSATION SECURITIES ---------------
-------------------------------------------------------- UNDERLYING LONG-TERM
FISCAL SALARY BONUS OTHER ANNUAL OPTIONS INCENTIVE
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION (#) PAYOUTS ($)
- -------------------------------- ----------- --------- ----------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Elizabeth Ann Peters............ 1997 10,000 * * * *
President
Benjamin Justin Peters.......... 1997 * * * * *
Secretary
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)
- -------------------------------- -------------------
<S> <C>
Elizabeth Ann Peters............ *
President
Benjamin Justin Peters.......... *
Secretary
</TABLE>
- ------------------------
* Not applicable.
EMPLOYMENT AGREEMENTS
There are no employment agreements between the Company and any of its
management. Mrs. Peters currently receives a salary of $30,000 per year.
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the Common Stock as of December 31, 1997, for (a) each person known
to the Company to be a beneficial owner of the Common Shares; (b) each director;
(c) each executive officer designated in the section captioned
"MANAGEMENT--Executive Compensation;" and (d) all directors and executive
officers as a group. Except as otherwise noted, each person named below had sole
voting and investment power with respect to such securities.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING
---------------------- ----------------------
NAME AND ADDRESS(2) SHARES PERCENTAGE SHARES PERCENTAGE
- ------------------------------------------------------------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Elizabeth Ann Peters............................................... 200,000 28.6% 200,000 25.6%
Benjamin Justin Peters............................................. 0 0.0% 0 0.0%
Melissa K. Meyer................................................... 20,000 2.9% 20,000 2.6%
519 S. Madison
Raymore, Missouri 64803
Brenda M. Hall..................................................... 240,000 34.3% 240,000 30.8%
907 Artistic Circle
Springville, Utah 84663
Peterson & Sons Holding Co......................................... 240,000 34.3% 240,000 30.8%
4001 W. 104th Terrace
Overland Park, Kansas 66207
All directors and executive officers as a group (2 persons)........ 200,000 28.6% 200,000 25.6%
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In a series of transactions, Songs for the Planet borrowed in the aggregate
$128,750 at an interest rate of 10% per annum, all of which was lent by the
Company's principal shareholders (or affiliates thereof) (the "Related Party
Loans"). The following table sets forth basic information relating to the
Related Party Loans.
<TABLE>
<CAPTION>
LENDER DATE AMOUNT
- ------------------------------------------------------------------------------------------ --------- ----------
<S> <C> <C>
Owen & Associates, Inc. Profit Sharing Plan(3)............................................ 10/2/97 $ 12,500
Peterson & Sons Holding Company........................................................... 10/7/97 $ 37,500
Dassity, Inc.(4).......................................................................... 10/9/97 $ 37,500
Owen & Associates Inc. Profit Sharing Plan................................................ 10/14/97 $ 25,000
Owen Enterprises, L.L.C.(5)............................................................... 11/11/97 $ 10,000
Owen Enterprises, L.L.C................................................................... 12/4/97 $ 6,250
----------
----------
Total................................................................................... $ 128,750
</TABLE>
- ------------------------
(1) Under the rules of the Commission, shares are deemed to be "beneficially
owned" by a person if such person directly or indirectly has or shares (i)
the power to vote or dispose of such shares whether or not such person has
any pecuniary interest in such shares, or (ii) the right to acquire the
power to vote or dispose of such shares within 60 days, including any right
to acquire through the exercise of any option, warrant or right.
(2) The address of each executive officer and director of the Company is c/o
World House Entertainment, Inc., 2831 Dogwood Place, Nashville, TN 37204.
(3) Owen & Association, Inc. is controlled by David Owen, the father of
Elizabeth Ann Peters.
(4) Dassity, Inc. is controlled by Brenda M. Hall.
(5) Owen Enterprises, L.L.C. is controlled by David Owen, the father of
Elizabeth Ann Peters.
16
<PAGE>
In a series of transactions, Songs for the Planet loaned the aggregate amount of
$100,000 to Platinum Planet Music, Inc., a Tennessee corporation wholly-owned by
Benjamin Justin Peters, at an interest rate of 10% per annum. Such loans are due
on December 31, 1999. Platinum Planet Music used the proceeds of these loans to
acquire a 50% undivided interest in certain music compositions owned by Dez
Dickerson d/b/a Truthworks Music. In connection with this acquisitions,
Truthworks and Platinum Planet entered into a copublishing and coadministration
agreement under which each agreed to utilize the administration services of
Songs for the Planet for a period of 3 years. With respect to the note
evidencing this loan, an allowance for uncollectible note receivable of $50,000
was established by management to reflect the note at its estimated net
realizable value in the accompanying financial statements to this prospectus.
Songs for the Planet has entered into administration agreements with
Tourmaline, LITA, JPM and Platinum Planet. Each of these agreements has an
initial term of three years. The Company will receive compensation for its
services in an amount equal to 10% of the annual gross income derived as a
result of the Company's efforts.
The Company's corporate offices are located in a building owned by Mr.
Peters' father. Mr. Peters is given unrestricted use of this building in
consideration for services rendered to Tourmaline. The Company pays no cash
consideration for the use of this building; however, it permits Tourmaline
limited access to the Company's recording studio.
On December 31, 1997, the Company entered into an exchange agreement with
Elizabeth Ann Peters. Under this agreement, Mrs. Peters received 200,000 shares
of Common Stock in exchange for all of the shares of common stock of Songs for
the Planet then issued and outstanding. As a result of this transaction, Songs
for the Planet became the wholly-owned subsidiary of the Company. There was no
cash consideration paid by either party in connection with this transaction.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, par value $0.001 per share, and 5,000,000 shares of Preferred
Stock, par value $0.001 per share.
COMMON STOCK
As of the date of this Prospectus, there were 700,000 shares of Common Stock
outstanding.
Holders of Common Stock are entitled to one vote per share in all matters to
be voted on by the shareholders. Subject to preferences that may be applicable
to any Preferred Stock outstanding at the time, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"DIVIDEND POLICY." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of the Company's liabilities and the liquidation
preference, if any, of any outstanding Preferred Stock. All of the outstanding
shares of Common Stock are fully paid and non-assessable. The rights,
preferences and privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
PREFERRED STOCK
The Board of Directors has the authority, without any further vote or action
by the shareholders, to provide for the issuance of up to 5,000,000 shares of
Preferred Stock from time to time in one or more series with such designations,
rights, preferences and limitations as the Board of Directors may determine,
including the consideration received therefor. The Board also has the authority
to determine the number of shares comprising each series, dividend rates,
redemption provisions, liquidation preferences, sinking
17
<PAGE>
fund provisions, conversion rights and voting rights without approval by the
holders of Common Stock. Although it is not possible to state the effect that
any issuance of Preferred Stock might have on the rights of holders of Common
Stock, the issuance of Preferred Stock may have one or more of the following
effects (i) to restrict Common Stock dividends if Preferred Stock dividends have
not been paid, (ii) to dilute the voting power and equity interest of holders of
Common Stock to the extent that any Preferred Stock series has voting rights or
is convertible into Common Stock or (iii) to prevent current holders of Common
Stock from participating in the Company's assets upon liquidation until any
liquidation preferences granted to holders of Preferred Stock are satisfied. In
addition, the issuance of Preferred Stock may, under certain circumstances, have
the effect of discouraging a change in control of the Company by, for example,
granting voting rights to holders of Preferred Stock that require approval by
the separate vote of the holders of Preferred Stock for any amendment to the
Certificate of Incorporation or any reorganization, consolidation, merger or
other similar transaction involving the Company. As a result, the issuance of
such Preferred Stock may discourage bids for the Company's Common Stock at a
premium over the market price therefor, and could have a materially adverse
effect on the market value of the Common Stock. The Board of Directors does not
presently intend to issue any shares of Preferred Stock.
NO PREEMPTIVE RIGHTS
No holder of any capital stock of the Company has any preemptive right to
subscribe for or purchase securities of any class or kind of the Company, nor
any redemption or conversion rights.
NO CUMULATIVE VOTING
No holder of any capital stock of the Company has the right cumulate his or
her votes in an election of directors or for any other matter or matters to be
voted upon by the shareholders of the Company.
CERTAIN PROVISIONS OF THE NEVADA GENERAL CORPORATION LAW
The Company is subject to the Nevada General Corporation Law (the "NGCL").
Under certain circumstances, the following described provisions of the NGCL may
delay or make more difficult acquisitions or changes of control of the Company.
Neither the Company's Amended and Restated Articles of Incorporation nor its
Amended and Restated Bylaws exclude the Company from these provisions. Such
provisions may make it more difficult to accomplish transactions that
shareholders believe are in their best interests. Such provisions may also have
the effect of preventing changes in the Company's management.
CONTROL SHARE ACQUISITIONS.
Under Sections 78.378 to 78.3793 of NGCL, an "acquiring person," who
acquires a "controlling interest" in an "issuing corporation," may not exercise
voting rights on any "control shares" unless such voting rights are conferred by
a majority vote of the disinterested shareholders of the issuing corporation at
a special meeting of the such shareholders held upon the request and at the
expense of the acquiring person. If the control shares are accorded full voting
rights and the acquiring person acquires control shares with a majority or more
of all the voting power, any shareholder, other than the acquiring person, who
does not vote for authorizing voting rights for the control shares, is entitled
to demand payment for the fair value of their shares, and the corporation must
comply with the demand. For the above provisions, "acquiring person" means
(subject to certain exceptions) any person who, individually or in association
with others, acquires or offers to acquire, directly or indirectly, a
controlling interest in an issuing corporation. "Controlling interest" means the
ownership of outstanding voting shares of an issuing corporation sufficient to
enable the acquiring person, individually or in association with others,
directly or indirectly, to exercise (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, and/or (iii) a
majority or more of the voting power of the issuing corporation in the election
of directors. Voting rights must be conferred by a majority of the disinterested
shareholders as each threshold
18
<PAGE>
is reached and/or exceeded. "Control Shares" means those outstanding voting
shares of an issuing corporation which an acquiring person acquires or offers to
acquire in an acquisition or within 90 days immediately preceding the date when
the acquiring person becomes an acquiring person. "Issuing corporation" means a
corporation that is organized in Nevada, has 200 or more shareholders (at least
100 of whom are shareholders of record and residents of Nevada) and does
business in Nevada directly or through an affiliated corporation. The above does
not apply if the articles of incorporation or by-laws of the corporation in
effect on the 10th day following the acquisition of a controlling interest by an
acquiring person provide that said provisions do not apply. The Company's
Amended and Restated Articles of Incorporation and Amended and Restated Bylaws
do not exclude the Company from the restrictions imposed by these provisions.
CERTAIN BUSINESS COMBINATIONS.
Sections 78.411 to 78.444 of the NGCL restrict the ability of a "resident
domestic corporation" to engage in any combination with an "interested
shareholder" for three years following the interested shareholder's date of
acquiring the shares that cause such shareholder to become an interested
shareholder, unless the combination or the purchase of shares by the interested
shareholder on the interested shareholder's date of acquiring the shares that
cause such shareholder to become an interested shareholder is approved by the
board of directors of the resident domestic corporation before that date. If the
combination was not previously approved, the interested shareholder may effect a
combination after the three-year period only if such shareholder receives
approval from a majority of the disinterested shares or the offer meets certain
fair price criteria. For the above provisions, "resident domestic corporation"
means a Nevada corporation that has 200 or more shareholders. "Interested
shareholder" means any person, other than the resident domestic corporation or
its subsidiaries, who is (i) the beneficial owner, directly or indirectly, of
10% or more of the voting power of the outstanding voting shares of the resident
domestic corporation or (ii) an affiliate or associate of the resident domestic
corporation and, at any time within three years immediately before the date in
question, was the beneficial owner, directly or indirectly, of 10% or more of
the voting power of the then outstanding shares of the resident domestic
corporation. The above does not apply to corporations that so elect in a charter
amendment approved by a majority of the disinterested shares. Such a charter
amendment, however, would not become effective for 18 months after its passage
and would apply only to stock acquisitions occurring after its effective date.
The Company's Amended and Restated Articles of Incorporation do not exclude the
Company from the restrictions imposed by such provisions.
DIRECTORS' DUTIES.
Section 78.138 of the NGCL allows directors and officers, in exercising
their respective powers to further the interests of the corporation, to consider
the interests of the corporation's employees, suppliers, creditors and
customers. They can also consider the economy of the state and the nation; the
interests of the community and of society and the long-term and short-term
interests of the corporation and its shareholders, including the possibility
that these interests may be best served by the continued independence of the
corporation. Directors may resist a change or potential change in control if the
directors, by a majority vote of a quorum, determine that the change or
potential change is opposed to or not in the best interest of the corporation.
In so determining, the board of directors may consider the interests described
above or have reasonable grounds to believe that, within a reasonable time, the
debt created as a result of the change in control would cause (i) the assets of
the corporation or any successor to be less than its liabilities, (ii) the
corporation or any successor to become insolvent or (iii) the commencement of
any voluntary or involuntary proceeding under the federal bankruptcy laws
concerning the corporation.
19
<PAGE>
CERTAIN CHARTER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws could make more difficult the
acquisition of the Company by means of a tender offer, a proxy contest or
otherwise as well as the removal of incumbent officers and directors. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of the Company to first negotiate with the Company. The Company
believes that the benefits of an unfriendly or unsolicited proposal to acquire
or restructure the Company outweigh the disadvantages of discouraging such
proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS
The Amended and Restated Articles of Incorporation establish an advance
notice procedure for shareholder proposals to be brought before a meeting of
shareholders of the Company and for nominations by shareholders of candidates
for election as directors at an annual meeting or a special meeting at which
directors are to be elected. Subject to any other applicable requirements,
including, without limitation, Regulation 14A under the Exchange Act, only such
business may be conducted at a meeting of shareholders as has been brought
before the meeting by, or at the direction of, the Company's Board of Directors,
or by a shareholder who has given the Secretary of the Company timely notice, in
proper form, of the shareholder's intention to bring such business before the
meeting. The presiding officer at such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Company's Board of Directors, or who are nominated by a shareholder who has
given timely written notice, in proper form, to the Secretary prior to a meeting
at which directors are to be elected will be eligible for election as directors
of the Company.
To be timely, notice of nominations before an annual meeting must be
received by the Secretary of the Company not later than 90 days prior to the
date of such annual meeting. Notice of other business before an annual meeting
must be received by the Secretary of the Company not less than 20 days nor more
than 50 days prior to the meeting. Similarly, notice of nominations or other
business to be brought before a special meeting must be delivered to the
Secretary at the principal executive office of the Company no later than the
close of business on the 10th day following the day on which notice of the date
of a special meeting of shareholders was given.
The notice of any nomination for election as a director must set forth (i)
the name and address of the shareholder who intends to make the nomination and
of the person or persons to be nominated; (ii) a representation that the
shareholder is a holder of record stock of the Company entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iii) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (iv) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Commission, had the nominee been nominated, or intended to be nominated,
by the Board of Directors; and (v) the consent of each nominee to serve as a
director of the Company if so elected.
The notice with respect to other business to be brought before the annual
meeting must set forth (i) a brief description of the business proposed to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and address, as they appear on the
Company's books, of the shareholder proposing such business; (iii) the number of
shares of the Company which are beneficially owned by the shareholder; and (iv)
any material interest of the shareholder in such business.
20
<PAGE>
AMENDMENTS TO BYLAWS
The Amended and Restated Articles of Incorporation provide that the power to
adopt, alter, amend, or repeal the bylaws of the Company is vested exclusively
with the Board of Directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Amended and Restated Articles of Incorporation contain a provision
permitted under the NGCL relating to the liability of directors. This provision
eliminates a director's personal liability for monetary damages resulting from a
breach of fiduciary duty, except in certain circumstances involving certain
wrongful acts, such as a breach of a director's duty of loyalty or acts or
omissions that involve intentional misconduct or a knowing violation of law.
This provision does not limit or eliminate the rights of the Company or any
shareholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's fiduciary duty. This provision will not
alter a director's liability under federal securities laws.
The Amended and Restated Articles of Incorporation and the Amended and
Restated Bylaws also contain provisions indemnifying the directors and officers
of the Company to the fullest extent permitted by the NGCL. The Company believes
that these provisions will assist the Company in attracting and retaining
qualified individuals to serve as directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
TRANSFER AGENT AND REGISTRAR
Prior to the effective date of this offering, the Company intends to engage
Interwest Transfer Company, Inc. of Salt Lake City, Utah, as the transfer agent
and registrar of the Common Stock.
TERMS OF THE OFFERING
PLAN OF DISTRIBUTION
The Company hereby offers up to 80,000 shares of Common Stock at the
purchase price of $2.50 per share. The Common Stock is being offered on a "best
efforts" basis by the Company (employees, officers and directors). The
employees, officers and directors who shall sell the offering on behalf of the
Company are Elizabeth Peters and Justin Peters. These individuals will be
relying on the safe harbor in Rule 3a4-1 under the Securities Exchange Act of
1934 to sell the Company's securities. No sales commission will be paid for
Common Stock sold by the Company. The Company reserves the right to withdraw,
cancel or reject an offer in whole or in part. The Common Stock offered hereby
will not be sold to insiders, control persons, or affiliates of the Company.
There are no plans, proposals, arrangements or understandings with any potential
sales agent with respect to participating in the distribution of the Company's
securities. When, in the future, assuming such participation develops, the
registration statement will be amended to identify such persons.
DETERMINATION OF OFFERING PRICE.
The offering price and other terms of the Common Stock were arbitrarily
determined by the Company after considering the total offering amount needed and
the possible dilution to existing and new shareholders.
21
<PAGE>
OFFERING PROCEDURE.
This Offering will terminate on or before , 1998. In the Company's
sole discretion, the offering of Common Stock may be extended from time to time,
but in no event later than one (1) year from the date of this Prospectus.
SUBSCRIPTION PROCEDURE.
The full amount of each subscription will be required to be paid with a
check payable to the Company in the amount of the subscription. Such payments
are to be remitted directly to the Company by the purchaser before 12:00 noon,
on the following business day, together with a list showing the names and
addresses of the person subscribing for the offered Common Stock or copies of
subscribers confirmations.
NO ESCROW ACCOUNT.
There is no minimum offering amount and no escrow account. As a result, any
and all offering proceeds will be deposited directly into the operating account
of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding 780,000
shares of Common Stock. Of such outstanding shares, the shares sold in
connection with the Offering will be freely tradeable in the United States
without restriction under the Securities Act, except that shares purchased by an
"affiliate" of the Company, within the meaning of the rules and regulations
adopted under the Securities Act, may be subject to resale restrictions. The
remaining outstanding shares are "restricted securities," as that term is
defined under such rules and regulations, and may not be sold unless they are
registered under the Securities Act or they are sold in accordance with Rule 144
under the Securities Act or some other exemption from such registration
requirement. As those restrictions under the Securities Act lapse, such shares
may be sold to the public pursuant to Rule 144.
In general, under Rule 144, beginning 90 days after the date of this
Prospectus, subject to certain conditions with respect to the manner of sale,
the availability of current public information concerning the Company and other
matters, each of the existing shareholders who has beneficially owned shares of
Common Stock for at least one year will be entitled to sell within any three
month period that number of such shares which does not exceed the greater of the
total number of then outstanding shares of Common Stock or the average weekly
trading volume of shares of Common Stock during the four calendar weeks
preceding the date on which notice of the proposed sale is sent to the
Commission. Moreover, each of the existing shareholders who is not deemed to be
an affiliate of the Company at the time of the proposed sale and who has
beneficially owned his or her shares of Common Stock for at least two years will
be entitled to sell such shares under Rule 144 without regard to such volume
limitations.
Prior to the Offering, there has been no public market for the Common Stock.
No assurance can be given that such a market will develop or, if it develops,
will be sustained after the Offering or that the purchasers of the shares of
Common Stock will be able to resell such shares of Common Stock at a price
higher than the initial public offering or otherwise. If such a market develops,
no prediction can be made as to the effect, if any, that future sales of shares
of Common Stock, or the availability of shares of Common Stock for future sale,
to the public will have on the market price of the Common Stock prevailing from
time to time. Sales of substantial amounts of presently outstanding or
subsequently issued stock, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital in the future through an offering of its
additional shares of Common Stock that may be offered for sale or sold to the
public in the future.
22
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
FOR THE YEAR ENDED DECEMBER 31, 1997
AND DECEMBER 5, 1996 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
Independent auditor's report......................................................... F-2
Consolidated balance sheets.......................................................... F-3
Consolidated statements of operations................................................ F-4
Consolidated statement of shareholder's equity....................................... F-5
Consolidated statements of cash flows................................................ F-6
Notes to consolidated financial statements........................................... F-7
</TABLE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND FOR THE PERIOD
AUGUST 6, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
Independent auditor's report......................................................... F-11
Balance sheet........................................................................ F-12
Statement of operations.............................................................. F-13
Statement of shareholder's equity.................................................... F-14
Statement of cash flows.............................................................. F-15
Notes to financial statements........................................................ F-16
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
World House Entertainment, Inc.
We have audited the consolidated balance sheet of World House Entertainment,
Inc. and subsidiary (a development stage company) as of December 31, 1997 and
1996, and the related consolidated statements of operations, shareholders'
equity and cash flows for the year ended December 31, 1997 and for the period
from December 5, 1996 (inception) through December 31, 1997 and 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and 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 consolidated financial statements referred to in the
first paragraph present fairly, in all material respects, the financial position
of World House Entertainment, Inc., and subsidiary as of December 31, 1997 and
the results of their operations and their cash flows for the year ended December
31, 1997 and for the period from December 5, 1996 (inception) through December
31, 1997 and 1996 in conformity with generally accepted accounting principles,
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note A to
the consolidated financial statements, the Company has incurred net losses since
inception and has not yet commenced operations which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to this matter are also discussed in Note A. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Cordovano and Harvey, P.C.
Denver, Colorado
February 25, 1998
F-2
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
<S> <C> <C>
1997 1996
---------- ---------
ASSETS
CURRENT ASSETS
Cash...................................................................................... $ 7,709 $ 3,585
Accrued interest receivable............................................................... 2,174 --
---------- ---------
TOTAL CURRENT ASSETS.................................................................... 9,883 3,585
Note receivable, related party, net of allowance of $50,000 (Note B)...................... 50,000 --
Property and equipment, net of accumulated depreciation of $790 and $-0-, respectively
(Note C)................................................................................ 23,798 --
Intangible assets, net of accumulated amortization of $60 and $-0-, respectively.......... 264 --
Other assets.............................................................................. 450 --
---------- ---------
$ 84,395 $ 3,585
---------- ---------
---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses..................................................... $ 19,723 $ --
Accrued interest payable.................................................................. 3,086 --
Notes payable, related parties (Note D)................................................... 128,750 --
---------- ---------
TOTAL CURRENT LIABILITIES............................................................... 151,559 --
---------- ---------
COMMITMENTS (NOTE G)...................................................................... -- --
SHAREHOLDERS' EQUITY (DEFICIT) (NOTE F)
Preferred stock, $.001 par value; 5,000,000 shares authorized, -0- and -0- issued and
outstanding............................................................................. -- --
Common stock, $.001 par value; 50,000,000 shares authorized, 700,000 and 360,000 issued
and outstanding in 1997 and 1996, respectively.......................................... 700 360
Additional paid-in capital................................................................ 6,300 3,240
Deficit accumulated during development stage.............................................. (74,164) (15)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT).................................................... (67,164) 3,585
---------- ---------
$ 84,395 $ 3,585
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
DECEMBER 5, DECEMBER 5,
1996 1996
(INCEPTION) (INCEPTION)
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997
------------ --------------- ---------------
<S> <C> <C> <C>
REVENUES
Agent fees..................................................... $ -- $ -- $ --
------------ ------- -------
OPERATING EXPENSES
Product development............................................ -- -- --
Reserve for uncollectible note receivable (Note B)............. -- -- --
Depreciation and amortization.................................. 66 -- 66
General and administrative..................................... 5,025 15 5,040
------------ ------- -------
5,091 15 5,106
------------ ------- -------
LOSS FROM OPERATIONS......................................... (5,091) (15) (5,106)
OTHER INCOME (EXPENSE)
Interest income................................................ -- -- --
Interest expense............................................... -- -- --
------------ ------- -------
LOSS BEFORE INCOME TAXES..................................... (5,091) (15) (5,106)
INCOME TAX BENEFIT (EXPENSE) (NOTE E)
Current........................................................ 764 -- 764
Deferred....................................................... (764) -- (764)
------------ ------- -------
NET LOSS..................................................... $ (5,091) $ (15) $ (5,106)
------------ ------- -------
------------ ------- -------
Basic weighted average common shares outstanding................. 700,000 360,000 700,000
------------ ------- -------
------------ ------- -------
Basic loss per share............................................. $ (0.01) $ * $ (0.01 )
------------ ------- -------
------------ ------- -------
</TABLE>
- ------------------------
* Less than $0.01
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
DECEMBER 5, 1996 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEVELOP
------------------------ ---------------------- PAID-IN STAGE
SHARES AMOUNT SHARES AMOUNT CAPITAL (NOTE A)
----------- ----------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 5, 1996 (Inception)...... -- $ -- -- $ -- $ -- $ --
Sale of common stock, December 13, 1996... -- -- 360,000 360 3,240 --
Net loss.................................. -- -- -- -- -- (15)
----------- ----------- --------- ----------- ----------- ------------
BALANCE DECEMBER 31, 1996................. -- -- 360,000 360 3,240 (15)
Sale of common stock, October 21, 1997.... -- -- 120,000 120 1,080 --
Sale of common stock, November 5, 1997.... -- -- 20,000 20 180 --
Issuance of common stock for all of the
issued and outstanding voting shares of
Songs For The Planet, Inc (Note F)...... -- -- 200,000 200 1,800 --
Net loss.................................. -- -- -- -- -- (74,149)
----------- ----------- --------- ----------- ----------- ------------
BALANCE DECEMBER 31, 1997................. -- $ -- 700,000 $ 700 $ 6,300 $ (74,164)
----------- ----------- --------- ----------- ----------- ------------
----------- ----------- --------- ----------- ----------- ------------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
Balance December 5, 1996 (Inception)...... $ --
Sale of common stock, December 13, 1996... 3,600
Net loss.................................. (15)
-------------
BALANCE DECEMBER 31, 1996................. 3,585
Sale of common stock, October 21, 1997.... 1,200
Sale of common stock, November 5, 1997.... 200
Issuance of common stock for all of the
issued and outstanding voting shares of
Songs For The Planet, Inc (Note F)...... 2,000
Net loss.................................. (74,149)
-------------
BALANCE DECEMBER 31, 1997................. $ (67,164)
-------------
-------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 5, DECEMBER 5,
1996 1996
(INCEPTION) (INCEPTION)
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss..................................................... $ (5,091) $ (15) $ (5,106)
Expenses not requiring cash:
Depreciation and amortization.............................. 66 -- 66
Accounts payable and accrued expenses........................ 2,316 -- 2,316
------- ------ -------
NET CASH (USED IN) OPERATING ACTIVITIES.................. (2,709) (15) (2,724)
------- ------ -------
INVESTING ACTIVITIES
Cash paid for organizational matters......................... (330) -- (330)
------- ------ -------
NET CASH (USED IN) INVESTING ACTIVITIES.................. (330) -- (330)
------- ------ -------
FINANCING ACTIVITIES
Issuance of common stock to acquire SFPI..................... 5,763 -- 5,763
Sale of common stock......................................... 1,400 3,600 5,000
------- ------ -------
NET CASH PROVIDED BY FINANCING ACTIVITIES................ 7,163 3,600 10,763
------- ------ -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........... (4,124) 3,585 7,709
Cash and cash equivalents, beginning of period............... 3,585 -- --
------- ------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................... $ 7,709 $ 3,585 $ 7,709
------- ------ -------
------- ------ -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest....................................... $ -- $ -- $ --
Cash paid for income taxes................................... $ -- $ -- $ --
NON-CASH INVESTING ACTIVITIES:
On December 31, 1997 WHE issued 200,000 shares of its common stock in exchange for all of the outstanding
common stock of SFPI. See Note F.
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: World House Entertainment, Inc. and subsidiary (the
"Company") is a development stage company engaged in promoting and administering
copyright royalties in the recorded music industry. Upon completion of
development activities, the Company plans to establish a consulting practice
specializing in intellectual property rights and licensing agreements and to
provide administrative services to prospective clients who hold musical
copyrights. Since inception, the Company has been primarily engaged in product
development.
In the course of its development activities, the Company has sustained
continuing operating losses and expects such losses to continue for the
foreseeable future. The Company plans to continue to finance its development
with a combination of common stock sales and debt financings and beginning in
1998, through consulting fees and commission income. The Company's ability to
continue as a going concern is dependent on successful completion of additional
financings and ultimately, upon achieving profitable operations.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of World House Entertainment, Inc. (WHEI) and its wholly owned
subsidiary, Songs for the Planet, Inc. (SFPI). All intercompany transactions
have been eliminated.
USE OF ESTIMATES: The preparation of the financial statements in conformity
with generally accepted accounting principals requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
CASH EQUIVALENTS: For the purpose of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT AND DEPRECIATION: Property and equipment are stated
at cost and depreciated using the straight-line method over their useful lives.
ORGANIZATION COSTS AND AMORTIZATION: Organization costs are recorded at
cost. Amortization is calculated by the straight-line method over a period of
sixty months.
INCOME TAXES: Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the recorded book basis
and tax basis of assets and liabilities for financial and income tax reporting.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred taxes are
also recognized for operating losses that are available to offset future taxable
income and tax credits that are available to offset future federal income taxes.
EARNINGS (LOSS) PER SHARE: In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards 128 (SFAS
128), "Earnings Per Share". SFAS 128 specifies the computation, presentation,
and disclosure requirements of earnings per share and supersedes Accounting
Principles Board Opinion 15, "Earnings Per Share". SFAS 128 requires a dual
presentation of basic and diluted earnings per share. Basic earnings per share,
which excludes the impact of common stock equivalents, replaces primary earnings
per share. Diluted earnings per share, which utilizes the average market price
per share as opposed to the greater of the average market price per share or
ending market
F-7
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
price per share when applying the treasury stock method in determining common
stock equivalents, replaces fully-diluted earnings per share. SFAS 128 is
effective for the Company in 1997 however, the Company has a simple capital
structure for the periods presented and, therefore, there is no affect on the
earnings per share presented due to the Company's adoption of SFAS 128.
The basis loss per share has been computed on the basis of the weighted
average number of shares outstanding during the period, according to the rules
of the Securities and Exchange Commission. Such rules require that any shares
sold at a nominal value prior to a public offering, should be considered
outstanding for all periods presented.
NOTE B: RELATED PARTY TRANSACTIONS
During the period from October 2 through October 15, 1997, certain
shareholders of the Company provided temporary financing to the Company in the
amount of $128,750 (See Note D). The temporary financing is expected to be
repaid with the proceeds of an initial public offering, planned for in 1998.
During the period from October 2 through October 15, 1997, the Company
loaned a total of $100,000 to an affiliate pursuant to the terms of an unsecured
promissory note. The business purpose of this transaction was to provide the
affiliate with cash sufficient to purchase an assignment of right, title and
interest in certain published musical copyrights. An allowance for uncollectible
note receivable of $50,000 was established by management to reflect the note at
its estimated net realizable value in the accompanying financial statements.
The Company has used office space on a rent-free basis from the Chairman of
the board of directors of the Company.
NOTE C: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Furniture.................................................................. $ 771 $ --
Office equipment........................................................... 5,401 --
Studio equipment........................................................... 18,416 --
--------- ---------
24,588 --
Less: accumulated depreciation............................................. (790) --
--------- ---------
$ 23,798 $ --
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for the year ended December 31, 1997 and for the period
from December 6, 1996 through December 31, 1997 was $790 and $-0-, respectively.
F-8
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE D: NOTES PAYABLE TO RELATED PARTIES
Notes payable, all due on demand, at 10 percent interest, to related parties
consisted of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Note payable to affiliate................................................. $ 37,500 $ --
Note payable to affiliate................................................. 25,000 --
Note payable to affiliate................................................. 12,500 --
Note payable to affiliate................................................. 37,500 --
Note payable to affiliate................................................. 10,000 --
Note payable to affiliate................................................. 6,250 --
---------- ---------
$ 128,750 $ --
---------- ---------
---------- ---------
</TABLE>
NOTE E: INCOME TAXES
A reconciliation of the U.S. statutory federal income tax rate to the
effective tax rate follows for the year ended December 31, 1997:
<TABLE>
<S> <C>
U.S. statutory federal rate on amounts less than $50,000............. 15.0%
State income tax rate................................................ 6.0%
Other................................................................ (2.9)%
Temporary differences--write down of receivables..................... (13.6)%
Net operating loss for which no tax benefit Is currently available... (4.5)%
---------
(--)%
---------
---------
</TABLE>
The benefit for income taxes from operations consisted of the following
components: current tax benefit of $3,398 resulting from a net loss before
income taxes, and deferred tax expense of $3,398 resulting from the valuation
allowance recorded against the deferred tax asset resulting from net operating
losses. The change in the valuation allowance from December 31, 1996 through
December 31, 1997 was $3,398. The net operating loss carryforwards for 1997 will
expire in 2012.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax asset is no longer
impaired and the allowance is no longer required.
NOTE F: SHAREHOLDERS' EQUITY
PREFERRED STOCK
The Company is authorized to issue five million shares of $.001 par value
preferred stock which may be issued in series, with such designations,
preferences, stated values, rights, qualifications or limitations as determined
by the Board of Directors.
F-9
<PAGE>
WORLD HOUSE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE F: SHAREHOLDERS' EQUITY (CONTINUED)
AGREEMENT TO ACQUIRE SHARES
Effective December 31, 1997, WHEI entered into an agreement with the sole
shareholder of SFPI to acquire all of the issued and outstanding common stock of
SFPI in exchange for 200,000 shares of WHEI's $.001 par value common stock. The
purchase price was valued at the fair value of WHEI's common stock, $2,000. For
financial accounting purposes, the transaction was accounted for as a transfer
of assets between companies under common control and has been recorded at
historical cost in the separate financial statements of each entity. The excess
of $69,058 of the purchase price over historical cost was recorded as a
reduction of equity in the unconsolidated separate financial statements of WHEI.
NOTE G: COMMITMENTS
The Company has entered into a vehicle lease which is classified as an
operating lease. The lease expires in August 2000, at which time the Company may
elect to purchase the vehicle at fair market value as determined by the lessor.
Rent expense for the year ended December 31, 1997 was $1,748. Future minimum
lease payments are $5,243, $5,243 and 3,495 for the next three years.
NOTE H: UNAUDITED PRO FORMA CONDENSED, COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed consolidated statement of
operations gives effect to the combination of WHEI and SFPI for the one year
period ended December 31, 1997. The unaudited condensed combined statements of
operations are presented as if the combination had occurred at the beginning of
the period presented. SFPI became a wholly-owned subsidiary of WHEI on December
31, 1997.
The unaudited pro forma condensed consolidated financial information should
be read in conjunction with the separate audited financial statements and notes
thereto of each of the companies included in the pro forma as of their
respective balance sheet dates and for the year ended December 31, 1997 for WHEI
and the period August 6, 1997 (Inception) through December 31, 1997 for SFPI.
These unaudited pro forma condensed statements are not necessarily
indicative of results of operations had the combination occurred at the
beginning of the period nor of results to be expected in the future.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
WHEI SFPI ADJUSTMENTS COMBINED
---------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues....................................................... $ -- $ 1,553 $ -- $ 1,553
Operating Expenses............................................. 5,091 69,406 -- 74,497
---------- ---------- ----- -----------
Loss from operations......................................... (5,091) (67,853) -- (72,944)
Other income (expense), net.................................... -- (1,205) -- (1,205)
---------- ---------- ----- -----------
Net loss..................................................... $ (5,091) $ (69,058) $ -- $ (74,149)
---------- ---------- ----- -----------
---------- ---------- ----- -----------
Weighted shares outstanding.................................... 700,000 200,000 N/A 700,000
---------- ---------- -----------
---------- ---------- -----------
Basic loss per share........................................... $ (0.01) $ (0.35) N/A $ (0.11 )
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder
Songs for the Planet, Inc.
We have audited the balance sheet of Songs for the Planet, Inc. (a
development stage company) as of December 31, 1997, and the related statements
of operations, shareholders' equity and cash flows for the period from August 6,
1997 (inception) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Songs for
the Planet, Inc. as of December 31, 1997 and the results of its operations and
its cash flows for the period from August 6, 1997 (inception) through December
31, 1997 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note A to
the financial statements, the Company has incurred net losses since inception
and has not yet commenced operations which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to this
matter is also discussed in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Cordovano and Harvey, P.C.
Denver, Colorado
February 25, 1998
F-11
<PAGE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash............................................................................ $ 5,763
Accrued interest receivable..................................................... 2,174
---------
TOTAL CURRENT ASSETS.......................................................... 7,937
Note receivable, related party, net of allowance of $50,000 (Note B)............ 50,000
Property and equipment, net of accumulated depreciation of $790 (Note C)........ 23,798
Other assets.................................................................... 450
---------
$ 82,185
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses........................................... $ 17,407
Accrued interest payable........................................................ 3,086
Notes payable, related parties (Note D)......................................... 128,750
---------
TOTAL CURRENT LIABILITIES..................................................... 149,243
---------
---------
COMITMENTS (NOTE G)............................................................. --
SHAREHOLDERS' EQUITY (DEFICIT) (NOTE F)
Common stock, no par value; 200,000 shares authorized, 200,000 issued and
outstanding................................................................... 2,000
Deficit accumulated during development stage.................................... (69,058)
---------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT).......................................... (67,058)
---------
$ 82,185
---------
---------
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
AUGUST 6, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
Agent fees........................................................................ $ 1,553
---------
Product development............................................................... 18,384
Reserve for uncollectible note receivable (Note B)................................ 50,000
Depreciation...................................................................... 790
General and administrative........................................................ 232
---------
69,406
---------
LOSS FROM OPERATIONS............................................................ (67,853)
Interest income................................................................... 2,174
Interest expense.................................................................. (3,379)
---------
LOSS BEFORE INCOME TAXES........................................................ (69,058)
Current........................................................................... 2,687
Deferred.......................................................................... (2,687)
---------
NET LOSS........................................................................ $ (69,058)
---------
---------
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
AUGUST 6, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE TOTAL
COMMON STOCK DEVELOPMENT SHAREHOLDERS'
-------------------- STAGE EQUITY
SHARES AMOUNT (NOTE A) (DEFICIT)
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balance August 6, 1997 (Inception).............................. -- $ -- $ -- $ --
Sale of common stock, August 22, 1997........................... 200,000 2,000 -- 2,000
Net loss........................................................ -- -- (69,058) (69,058)
--------- --------- ------------ -------------
BALANCE DECEMBER 31, 1997....................................... 200,000 $ 2,000 $ (69,058) $ (67,058)
--------- --------- ------------ -------------
--------- --------- ------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-14
<PAGE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
AUGUST 6, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss....................................................................... $ (69,058)
Expenses not requiring cash:
Depreciation and amortization................................................ 790
Reserve for uncollectible note receivable (Note B)........................... 50,000
Changes in current assets and current liabilities:
Accrued interest receivable.................................................. (2,174)
Accounts payable and accrued expenses........................................ 20,493
---------
NET CASH (USED IN) OPERATING ACTIVITIES.................................... $ 51
---------
INVESTING ACTIVITIES
Purchase of furniture and equipment............................................ (24,588)
Cash paid for security deposit................................................. (450)
Investment in related party promissory note (Note B)........................... (100,000)
---------
NET CASH (USED IN) INVESTING ACTIVITIES.................................... (125,038)
---------
FINANCING ACTIVITIES
Sale of common stock........................................................... 2,000
Proceeds from the issuance of demand promissory notes (Note D)................. 128,750
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES.................................. 130,750
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ 5,763
Cash and cash equivalents, beginning of period................................. --
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................................... $ 5,763
---------
---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest......................................................... $ --
Cash paid for income taxes..................................................... $ --
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: Songs for the Planet, Inc. (the "Company") was
incorporated on August 6, 1997 under the laws of the State of Tennessee. The
Company is a development stage company engaged in promoting and administering
copyright royalties in the recorded music industry. Upon completion of
development activities, the Company plans to establish a consulting practice
specializing in intellectual property rights and licensing agreements and to
provide administrative services to prospective clients who hold musical
copyrights. On December 31, 1997 all of the outstanding common stock of the
Company was acquired by World House Entertainment, Inc. ("WHEI"). At that time,
the Company became a wholly-owned subsidiary of WHEI. Since inception, the
Company has been primarily engaged in product development.
In the course of its development activities, the Company has sustained
continuing operating losses and expects such losses to continue for the
foreseeable future. The Company plans to continue to finance its development
with a combination of common stock sales and debt financings and beginning in
1998, through consulting fees and commission income. The Company's ability to
continue as a going concern is dependent on successful completion of additional
financings and ultimately, upon achieving profitable operations.
USE OF ESTIMATES: The preparation of the financial statements in conformity
with generally accepted accounting principals requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
CASH EQUIVALENTS: For the purpose of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT AND DEPRECIATION: Property and equipment are stated
at cost and depreciated using the straight-line method over their useful lives.
ORGANIZATION COSTS AND AMORTIZATION: Organization costs are recorded at
cost. Amortization is calculated by the straight-line method over a period of
sixty months.
INCOME TAXES: Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the recorded book basis
and tax basis of assets and liabilities for financial and income tax reporting.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred taxes are
also recognized for operating losses that are available to offset future taxable
income and tax credits that are available to offset future federal income taxes.
NOTE B: RELATED PARTY TRANSACTIONS
During the period from October 2 through October 15, 1997, certain
shareholders of the Company provided temporary financing to the Company in the
amount of $128,750 (See Note D). The temporary financing is expected to be
repaid with the proceeds of an initial public offering of its parent company's
common stock, planned for in 1998.
F-16
<PAGE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE B: RELATED PARTY TRANSACTIONS (CONTINUED)
During the period from October 2 through October 15, 1997, the Company
loaned a total of $100,000 to an affiliate pursuant to the terms of an unsecured
promissory note. The business purpose of this transaction was to provide the
affiliate with cash sufficient to purchase an assignment of right, title and
interest in certain published musical copyrights. An allowance for uncollectible
note receivable of $50,000 was established by management to reflect the note at
its estimated net realizable value in the accompanying financial statements.
NOTE C: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<S> <C>
Furniture.......................................................... $ 771
Office equipment................................................... 5,401
Studio equipment................................................... 18,416
---------
24,588
Less: accumulated depreciation..................................... (790)
---------
$ 23,798
---------
---------
</TABLE>
Depreciation expense for the year ended December 31, 1997 was $790.
NOTE D: NOTES PAYABLE TO RELATED PARTIES
Notes payable, all due on demand, at 10 percent interest, to related parties
consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
Note payable to affiliate......................................... $ 37,500
Note payable to affiliate......................................... 25,000
Note payable to affiliate......................................... 12,500
Note payable to affiliate......................................... 37,500
Note payable to affiliate......................................... 10,000
Note payable to affiliate......................................... 6,250
---------
$ 128,750
---------
---------
</TABLE>
F-17
<PAGE>
SONGS FOR THE PLANET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE E: INCOME TAXES
A reconciliation of the U.S. statutory federal income tax rate to the
effective tax rate follows for the year ended December 31, 1997:
<TABLE>
<S> <C>
U.S. statutory federal rate on amounts less than $50,000............. 15.0%
State income tax rate................................................ 6.0%
Other................................................................ (2.9)%
Temporary differences--write down of receivables..................... (14.2)%
Net operating loss for which no tax benefit
is currently available............................................. (3.9)%
---------
(--)%
---------
---------
</TABLE>
The benefit for income taxes from operations consisted of the following
components: current tax benefit of $2,687 resulting from a net loss before
income taxes, and deferred tax expense of $2,687 resulting from the valuation
allowance recorded against the deferred tax asset resulting from net operating
losses. The change in the valuation allowance from August 5, 1997 through
December 31, 1997 was $2,687. The net operating loss carryforwards for 1997 will
expire in 2012.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax asset is no longer
impaired and the allowance is no longer required.
NOTE F: SHAREHOLDERS' EQUITY
AGREEMENT TO SELL 100% OF OUTSTANDING COMMON STOCK
Effective December 31, 1997, the Company entered into an agreement with WHEI
to sell all of the issued and outstanding common stock of the Company in
exchange for 200,000 shares of WHEI's $.001 par value common stock. The purchase
price was valued at the fair value of WHEI's common stock, $2,000. For financial
accounting purposes, the transaction was accounted for as a transfer of assets
between companies under common control and has been recorded at historical cost
in the separate financial statements of each entity.
NOTE G: COMMITMENTS
The Company has entered into a vehicle lease which is classified as an
operating lease. The lease expires in August 2000, at which time the Company may
elect to purchase the vehicle at fair market value as determined by the lessor.
Rent expense for the year ended December 31, 1997 was $1,748. Future minimum
lease payments are $5,243, $5,243 and 3,495 for the next three years.
F-18
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 3
USE OF PROCEEDS........................................................... 6
DIVIDEND POLICY........................................................... 6
DILUTION.................................................................. 6
MANAGEMENT'S PLAN OF OPERATION............................................ 7
BUSINESS.................................................................. 8
MANAGEMENT................................................................ 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 14
DESCRIPTION OF CAPITAL STOCK.............................................. 15
TERMS OF THE OFFERING..................................................... 18
SHARES ELIGIBLE FOR FUTURE SALE........................................... 19
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................ F-1
</TABLE>
80,000 SHARES
WORLD HOUSE ENTERTAINMENT, INC.
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5 of Chapter 208 of the Laws of 1997 of the State of Nevada permits
indemnification by a corporation of certain officers, directors, employees and
agents. Consistent therewith, Article XIII of the Registrant's Amended and
Restated Articles of Incorporation provides that the Registrant shall have the
power to indemnify a director or officer of the Registrant or a person who is or
was serving at the request of the Registrant as director, trustee, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, who was or is made (or threatened to be made) a party to a civil,
criminal, administrative or investigative proceeding (an "indemnified person").
Article XIII also provides that expenses incurred by an indemnified person will
be paid in advance by the Registrant upon delivery of an undertaking, by or on
behalf of the indemnified person, to repay all amounts so advanced if it shall
ultimately be determined by final adjudication that the indemnified person is
not entitled to be indemnified for such expenses.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following represents the Registrant's estimate of expenses in connection
with the issuance and distribution of the securities being registered hereunder.
Except for the SEC registration fee, all amounts are estimates.
<TABLE>
<CAPTION>
ESTIMATED
TYPE OF EXPENSE AMOUNT
- ----------------------------------------------------------------------------------- -----------
<S> <C>
Securities and Exchange Commission Registration Fee................................ $ 59
Transfer Agent Fees and Expenses................................................... 1,000
Legal Fees and Expenses............................................................ 12,500
Accounting Fees and Expenses....................................................... 4,000
Printing and Engraving Expenses.................................................... 5,000
Miscellaneous...................................................................... 1,000
-----------
-----------
Total............................................................................ $ 23,559
-----------
-----------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In reliance upon Section 4(2) of the Securities Act of 1933 (the "Securities
Act"), the Company accepted subscription agreements, dated as of December 9,
1996, from Owen & Associates, Inc. Profit Sharing Plan, Peterson & Sons Holding
Company, Melissa K. Meyer, Brenda M. Hall and David N. Nemelka, representing in
the aggregate 500,000 shares of common stock. David N. Nemelka subsequently
transferred his shares in the Company to Brenda M. Hall without consideration.
Owen & Associates, Inc. Profit Sharing Plan subsequently sold its shares to
Peterson & Sons Holding Company.
Pursuant to an exchange agreement dated as of December 31, 1997, the
Company, in reliance upon Section 4(2) of the Securities Act, issued 200,000
shares of its common stock to Elizabeth Ann Peters in exchange for all of the
issued and outstanding shares of common stock of Songs for the Planet.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
3.01 Amended and Restated Articles of Incorporation of Company
3.02 Amended and Restated Bylaws of Company
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
4.01 Form of Common Stock Certificate*
5.01 Form of Opinion re legality*
10.01 Exchange Agreement, dated as of December 31,1997, by and between the
Company and Elizabeth Ann Peters
10.02 Administration Agreement, dated October 20, 1997, by and between Songs for
the Planet and Truthworks Music*
10.03 Administration Agreement, dated February 1, 1998, by and between Songs for
the Planet and Tourmaline Music, Inc.*
10.04 Administration Agreement, dated February 1, 1998, by and between Songs for
the Planet and LITA Music*
10.05 Administration Agreement, dated February 1, 1998, by and between Songs for
the Planet and Justin Peters Music*
10.06 Administration Agreement, dated October 20, 1997, by and between Songs for
the Planet and Platinum Planet Music, Inc.*
10.07 Promissory Note, dated October 2, 1997, issued by Platinum Planet Music,
Inc. to Songs for the Planet in the principal amount of $100,000*
10.08 Promissory Note, dated Octrober 2, 1997, issued by Songs for the Planet to
Owen & Associates, Inc. Profit Sharing Plan in the principal amount of
$12,500*
10.09 Promissory Note, dated October 2, 1997, issued by Songs for the Planet to
Peterson & Sons Holding Company in the principal amount of $37,500*
10.10 Promissory Note, dated October 9, 1997, issued by Songs for the Planet to
Dassity, Inc. in the principal amount of $37,500*
10.11 Promissory Note, dated October 14, 1997, issued by Songs for the Planet to
Owen & Associates, Inc. Profit Sharing Plan in the principal amount of
$25,000*
10.12 Promissory Note, dated November 11, 1997, issued by Songs for the Planet
to Owen Enterprises, L.L.C. in the principal amount of $10,000*
10.13 Promissory Note, dated December 4, 1997, issued by Songs for the Planet to
Owen Enterprises, L.L.C. in the principal amount of $6,250*
21.01 Subsidiaries of the Company*
23.01 Consent of Erickson & Sederstrom, P.C. (included in Exhibit 5.01)
23.02 Consent of Cordovano and Harvey, P.C.
27.01 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
II-2
<PAGE>
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Nashville, state of Tennessee, on May 1, 1998.
<TABLE>
<S> <C> <C>
WORLD HOUSE ENTERTAINMENT, INC.
By: /s/ ELIZABETH ANN PETERS
-----------------------------------------
Elizabeth Ann Peters, President
(PRINCIPAL EXECUTIVE OFFICER)
</TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
President and Director
/s/ ELIZABETH ANN PETERS (Principal Executive
- ------------------------------ Officer and Principal May 1, 1998
Elizabeth Ann Peters Financial and Accounting
Officer)
/s/ BENJAMIN JUSTIN PETERS
- ------------------------------ Chairman of the Board and May 1, 1998
Benjamin Justin Peters Secretary
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.01 Amended and Restated Articles of Incorporation of Company
3.02 Amended and Restated Bylaws of Company
4.01 Form of Common Stock Certificate*
5.01 Form of Opinion re legality*
10.01 Exchange Agreement, dated as of December 31,1997, by and between the Company and Elizabeth Ann Peters
10.02 Administration Agreement, dated October 20, 1997, by and between Songs for the Planet and Truthworks
Music*
10.03 Administration Agreement, dated February 1, 1998, by and between Songs for the Planet and Tourmaline
Music, Inc.*
10.04 Administration Agreement, dated February 1, 1998, by and between Songs for the Planet and LITA Music*
10.05 Administration Agreement, dated February 1, 1998, by and between Songs for the Planet and Justin Peters
Music*
10.06 Administration Agreement, dated October 20, 1997, by and between Songs for the Planet and Platinum
Planet Music, Inc.*
10.07 Promissory Note, dated October 2, 1997, issued by Platinum Planet Music, Inc. to Songs for the Planet in
the principal amount of $100,000*
10.08 Promissory Note, dated Octrober 2, 1997, issued by Songs for the Planet to Owen & Associates, Inc.
Profit Sharing Plan in the principal amount of $12,500*
10.09 Promissory Note, dated October 2, 1997, issued by Songs for the Planet to Peterson & Sons Holding
Company in the principal amount of $37,500*
10.10 Promissory Note, dated October 9, 1997, issued by Songs for the Planet to Dassity, Inc. in the principal
amount of $37,500*
10.11 Promissory Note, dated October 14, 1997, issued by Songs for the Planet to Owen & Associates, Inc.
Profit Sharing Plan in the principal amount of $25,000*
10.12 Promissory Note, dated November 11, 1997, issued by Songs for the Planet to Owen Enterprises, L.L.C. in
the principal amount of $10,000*
10.13 Promissory Note, dated December 4, 1997, issued by Songs for the Planet to Owen Enterprises, L.L.C. in
the principal amount of $6,250*
21.01 Subsidiaries of the Company*
23.01 Consent of Erickson & Sederstrom, P.C. (included in Exhibit 5.01)
23.02 Consent of Cordovano and Harvey, P.C.
27.01 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
II-5
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WORLD HOUSE ENTERTAINMENT, INC.
(FORMERLY NAMED SPORTSFAIR TELEVISION, INC.)
ARTICLE I. NAME.
The name of the corporation is WORLD HOUSE ENTERTAINMENT, INC. (the
"Corporation").
ARTICLE II. REGISTERED OFFICE.
The registered office in the State of Nevada is located at 3230 E.
Flamingo Road, Suite 156, Las Vegas, Nevada 89121. The name of its resident
agent at that address is Gateway Enterprises, Inc.
ARTICLE III. DURATION.
The period of its duration is perpetual.
ARTICLE IV. PURPOSES.
The purpose for which the Corporation is organized is the transaction of
any and all lawful business for which corporations may be incorporated under the
General Corporation Law of the State of Nevada.
ARTICLE V. CAPITAL STOCK.
SECTION 5.01 GENERAL.
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 55,000,000, consisting of (1) 5,000,000 shares
of Preferred Stock, $.001 par value per share ("Preferred Stock"), which shall
be governed by the rights, limitations and preferences set forth in Section 5.02
hereof and (2) 50,000,000 shares of Common Stock, $.001 par value per share
("Common Stock").
SECTION 5.02 PREFERRED STOCK.
(a) The Board of Directors is hereby expressly authorized, by resolution
or resolutions from time to time adopted, to provide, out of the unissued shares
of Preferred Stock, for the issuance of serial Preferred Stock. Before any
shares of any such series are issued, the Board of Directors shall fix and
state, and hereby is expressly empowered to fix, by resolution or resolutions,
the designations, preferences, and relative, participating, optional or other
special rights of the shares of each such series, and the qualifications,
limitations or restrictions thereon, including but not limited to, determination
of any of the following:
(1) the designation of such series, the number of shares to
constitute such series and the stated value thereof if different from the
par value thereof;
(2) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of
such voting rights, which may be full or limited;
<PAGE>
(3) the dividends, if any, payable on such series and at what rates,
whether any such dividends shall be cumulative, and, if so, from what
dates, the conditions and dates upon which such dividends shall be payable,
the preference or relation that such dividends shall bear to the dividends
payable on any such shares of stock of any other class or any other series
of this class;
(4) whether the shares of such series shall be subject to redemption
by the corporation, and, if so, prices and other terms and conditions of
such redemption;
(5) the amount or amounts payable upon shares of such series upon,
and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up of, or upon any
distribution of the assets of, the corporation;
(6) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of
this class or any other class or classes of securities and, if so, the
price or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and conditions
of conversion or exchange;
(8) the limitation and restrictions, if any, to be effective while
the shares of such series are outstanding, upon the payment of dividends or
the making of other distributions on, and upon the purchase, redemption or
other acquisition by the corporation of, the Common Stock or shares of
stock of any other class or any other series of this class;
(9) the conditions or restrictions, if any, upon the creation of
indebtedness of the corporation or upon the issue of any additional stock,
including additional shares of such series or any other series of this
class or of any other class; and
(10) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions thereof.
(b) The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereof shall be cumulative. The
Board of Directors may increase the number of shares of the Preferred Stock
designated for any existing series by a resolution adding to such series
authorized and unissued shares of the Preferred Stock not designated for any
other series. The Board of Directors may decrease the number of shares of
Preferred Stock designated for any existing series by a resolution, subtracting
from such series unissued shares of the Preferred Stock designated for such
series, and the shares so subtracted shall become authorized, unissued and
undesignated shares of the Preferred Stock.
SECTION 5.03 COMMON STOCK.
(a) Each holder of Common Stock shall be entitled to one vote for each
share of Common Stock held of record on all matters on which stockholders
generally are entitled to vote. Subject to the provisions of law and the rights
of the Preferred Stock and any other class or series of stock having a
preference as to dividends over the Common Stock then outstanding, dividends may
be paid on the Common Stock out of assets legally available for dividends, but
only at such times and in such amounts as the Board of Directors shall determine
and declare.
2
<PAGE>
(b) Upon the dissolution, liquidation or winding up of the Corporation,
after any preferential amounts to be distributed to the holders of the Preferred
Stock and any other class or series of stock having a preference over the Common
Stock then outstanding have been paid or declared and set apart for payment, the
holders of the Common Stock shall be entitled to receive all the remaining
assets of the corporation available for distribution to its stockholders ratably
in proportion to the number of shares held by them, respectively. For purposes
of this Section 5.03, neither (i) the merger or consolidation of the Corporation
with or into any other corporation or entity, (ii) the sale, transfer or lease
of all or substantially all the assets of the Corporation or (iii) a share
exchange between the Corporation and any other corporation or entity shall be
deemed to be a liquidation, dissolution or winding up of the Corporation.
ARTICLE VI. GOVERNANCE.
The governing board of this Corporation shall be known as the Board of
Directors, and the number of directors serving on such board may from time to
time be increased or decreased in such manner as shall be provided by the Bylaws
of this Corporation.
ARTICLE VII. INTERESTED TRANSACTIONS.
No contract or other transaction between the Corporation and any other
corporation and no other act of the Corporation shall, in the absence of fraud,
be invalidated or in any way affected by the fact that any of the stockholders,
directors or officers of the Corporation are pecuniarily or otherwise interested
in such contract, transaction, or other act, or are stockholders, directors or
officers of such Corporation. Any stockholder, director or officer of the
Corporation, individually, or any firm or association of which any such
stockholder, director or officer may be a member, may be a party to, or be
pecuniarily or otherwise interested in, any contract or transaction of the
Corporation, provided that the fact that he individually or such firm or
association is so interested shall be disclosed or shall have been known to the
Board of Directors or a majority of such members thereof as shall be present at
any meeting of the Board of Directors at which action upon any such contract or
transaction shall be taken; and any director of the Corporation who is a
stockholder, director or officer of such other corporation or who is so
interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors which shall authorize any such contract or
transaction and may vote thereat to authorize so interested; every stockholder,
director or officer of the Corporation being hereby relieved from any disability
which might otherwise prevent him from carrying out transactions with or
contracting with the Corporation for the benefit of himself or any firm or
corporation, association, trust or organization in which or with which he may be
in any way interested or connected.
ARTICLE VIII. AMENDMENT OF BYLAWS.
The power to adopt, alter, amend, or repeal the Bylaws of the Corporation
is hereby delegated to the Board of Directors and such power shall be deemed to
be vested exclusively in the Board of Directors and shall not be exercised by
the stockholders.
ARTICLE IX. NO PREEMPTIVE RIGHTS.
No stockholder shall have a preemptive right to acquire any shares or
securities of any kind, whether now or hereafter authorized, which may at any
time be issued, sold or offered for sale by the Corporation.
ARTICLE X. NO CUMULATIVE VOTING.
No stockholder shall have the right to cumulate his or her votes in an
election of directors or for any other matter(s) to be voted upon by the
stockholders of the Corporation.
3
<PAGE>
ARTICLE XI. NOTICE OF NOMINATIONS.
Nominations for the election of directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors generally. However, a
stockholder entitled to vote in the election of directors generally may nominate
one or more persons for election as directors at a meeting only if written
notice of such stockholder's intent to make such nomination or nominations has
been delivered to or mailed and received by the Secretary of the Corporation at
the principal executive offices of the Corporation not later than (A) with
respect to an election to be held at an annual meeting of stockholders, ninety
(90) days prior to the date one year after the immediately preceding annual
meeting of stockholders, and (B) with respect to an election to be held at a
special meeting of stockholders, the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is a holder of record
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (iii) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (iv) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by the
Board of Directors; and (v) the consent of each nominee to serve as a director
of the Corporation if so elected. The presiding officer at the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
ARTICLE XII. LIMITATION OF LIABILITY.
No director or officer of the corporation shall be personally liable to
the corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
of such director or officer except, that the foregoing provision shall not
eliminate the liability of a director or officer for (A) acts or omissions
which involve intentional misconduct, fraud or a knowing violation of law; or
(B) the payments of distributions in violation of Section 78.300 of the
Nevada General Corporation Law, as amended. Neither the amendment nor repeal
of this ARTICLEXII, nor the adoption of any provision of the Articles of
Incorporation inconsistent with this ARTICLE XII shall eliminate or reduce
the effect of this ARTICLE XII with respect to any matter occurring, or any
cause of action, suit or claim that, but for this ARTICLE XII would accrue or
arise, prior to such amendment, repeal or adoption of any inconsistent
provision.
ARTICLE XIII. INDEMNIFICATION.
SECTION 13.01 ACTIONS OTHER THAN THOSE BY OR IN THE RIGHT OF THE
CORPORATION.
The Corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
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 or is or was serving
at the request of the Corporation as a director, officer, trustee, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, if such person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interest of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, or conviction, or on
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
4
<PAGE>
SECTION 13.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall have the power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, agent or employee of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the Corporation or for amounts paid in settlement to the
Corporation, unless and only to the extent that the court in which the action
was brought or other court of competent jurisdiction determines upon application
that in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
SECTION 13.03 DETERMINATION THAT INDEMNIFICATION IS PROPER.
Any indemnification under Sections 13.01 and 13.02 hereof, unless ordered
by a court or advanced pursuant to Section 13.04 hereof, must be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
(a) By the stockholders;
(b) By the Board of Directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal counsel
in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
SECTION 13.04 EXPENSES.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the Corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
Corporation. The provisions of this Section 13.04 do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
SECTION 13.05 RIGHTS NOT EXCLUSIVE; CONTINUATION.
The indemnification and advancement of expenses provided by this ARTICLE
XIII:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under these Articles
of Incorporation or any Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to Section 13.02 hereof or
for the advancement of expenses of any director or officer, may not be made to
or on behalf of any officer or director if a final
5
<PAGE>
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and insures to the benefit of the heirs, executors and
administrators of such a person.
SECTION 13.06 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS.
(a) The Corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the Corporation has the authority to indemnify him
against such liability and expenses.
(b) The other financial arrangements made by the Corporation pursuant to
Section 13.06 hereof may include the following:
(1) The creation of a trust fund.
(2) The establishment of a program of self-insurance.
(3) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the corporation.
(4) The establishment of a letter of credit, guaranty or surety.
(c) No financial arrangement made pursuant to this Section 13.06 may
provide protection for a person adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable for intentional
misconduct, fraud or a knowing violation of law, except with respect to the
advancement of expenses or indemnification by a court.
(d) In the absence of fraud:
(1) The decision of the Board of Directors as to the propriety of the
terms and conditions of any insurance or other financial arrangement made
pursuant to this ARTICLE XIII and the choice of the person to provide the
insurance or other financial arrangement shall be conclusive; and
(2) The insurance or other financial arrangement:
(A) Is not void or voidable; and
(B) Does not subject any director approving it to personal
liability for his action, even if a director approving the insurance
or other financial arrangement is a beneficiary of the insurance or
other financial arrangement.
SECTION 13.07 MANDATORY INDEMNIFICATION.
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 13.01 or Section 13.02 hereof,
or in defense of any claim, issue or matter therein, he must be indemnified by
the Corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
6
<PAGE>
ARTICLE XIV. BUSINESS AT ANNUAL MEETINGS.
At an annual meeting of stockholders, only such business shall be conducted
as shall have been brought before the meeting (A) by or at the direction of the
Board of Directors or (B) by any stockholder of the Corporation who complies
with the notice procedures set forth in this ARTICLE XIV. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation, not less than twenty (20)
days nor more than fifty (50) days prior to the meeting; PROVIDED, HOWEVER, that
in the event that less than thirty (30) days' notice or prior public disclosure
of the date of the meeting is given or made to the stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth (10th) day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting the following
information: (i) a brief description of the business proposed to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting; (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business; (iii) the number of shares of
the Corporation which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business. The presiding officer at
an annual meeting shall, if he determines the facts so warrant, determine and
declare to the meeting that the business was not properly brought before the
meeting and in accordance with the provisions of this ARTICLE XIV. Upon such
determination and declaration, the business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this ARTICLE XIV, a stockholder seeking to have a proposal included in the
Corporation's proxy statement shall comply with the requirements of Regulation
14A under the Securities Exchange Act of 1934, as amended.
Executed on 12th February, 1998.
-------------
WORLD HOUSE ENTERTAINMENT, INC.
By: /s/ Elizabeth Ann Peters
-----------------------------------------
Elizabeth Ann Peters, President
By: /s/ Benjamin Justin Peters
-----------------------------------------
Benjamin Justin Peters, Secretary
STATE OF TENNESSEE )
) ss.
COUNTY OF DAVIDSON )
Before me, VENESSA JOHNS of the state and county mentioned, personally
appeared Elizabeth Ann Peters and Benjamin Justin Peters, with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
and who, upon oath, acknowledged such persons to the be the president and
secretary, respectively, of World House Entertainment, Inc., the within named
bargainor, a corporation, and that such president and secretary as such
president and secretary, respectively executed the foregoing instrument for the
purpose therein contained, by personally signing the name of the corporation as
president and secretary.
7
<PAGE>
/s/ Venessa Johns
---------------------------------
Notary Public
Comm Exp 1-27-2001
8
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
WORLD HOUSE ENTERTAINMENT, INC.
DATED AS OF JANUARY 20, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Place of Stockholders' Meetings. . . . . . . . . . . . . . . . . . . . . .1
1.2 Day and Time of Annual Meetings of Stockholders. . . . . . . . . . . . . .1
1.3 Purposes of Annual Meetings. . . . . . . . . . . . . . . . . . . . . . . .1
1.4 Special Meetings of Stockholders. . . . . . . . . . . . . . . . . . . . .2
1.5 Notice of Meetings of Stockholders.. . . . . . . . . . . . . . . . . . . .2
1.6 Quorum of Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . .2
1.7 Chairman and Secretary of Meeting. . . . . . . . . . . . . . . . . . . . .3
1.8 Voting by Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . .3
1.9 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.10 Inspectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.11 List of Stockholders.. . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.12 Confidential Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.13 Action by Written Consent. . . . . . . . . . . . . . . . . . . . . . . . .5
2. DIRECTORS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 Powers of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.2 Number, Method of Election, Terms of Office of Directors. . . . . . . . .5
2.3 Vacancies on Board. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.4 Meetings of the Board. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.5 Quorum and Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.6 Presiding Officer and Secretary of Meeting. . . . . . . . . . . . . . . .8
2.7 Action by Consent without Meeting. . . . . . . . . . . . . . . . . . . . .8
2.8 Standing Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.9 Other Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.10 Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 Independent Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Officers, Titles, Elections, Terms. . . . . . . . . . . . . . . . . . . 10
3.2 General Powers of Officers. . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Powers and Duties of the Chairman. . . . . . . . . . . . . . . . . . . . 12
3.4 Powers and Duties of the President. . . . . . . . . . . . . . . . . . . 12
3.5 Powers and Duties of Executive Vice Presidents, Senior Vice Presidents
and Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Powers and Duties of the Chief Financial Officer. . . . . . . . . . . . 12
3.7 Powers and Duties of the Controller and Assistant Controllers. . . . . . 12
3.8 Powers and Duties of the Treasurer and Assistant Treasurers. . . . . . . 13
ii
<PAGE>
3.9 Powers and Duties of the Secretary and Assistant Secretaries.. . . . . . 14
4. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Insurance, Contracts and Funding. . . . . . . . . . . . . . . . . . . . 15
4.3 Indemnification; Not Exclusive Right. . . . . . . . . . . . . . . . . . 15
4.4 Advancement of Expenses; Procedures; Presumptions and Effect of
Certain Proceedings; Remedies. . . . . . . . . . . . . . . . . . . . . . 15
4.5 Indemnification of Employees and Agents. . . . . . . . . . . . . . . . . 19
4.6 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5. CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 Stock Certificates.. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Record Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Transfer of Record Ownership. . . . . . . . . . . . . . . . . . . . . . 21
5.4 Lost, Stolen or Destroyed Certificates. . . . . . . . . . . . . . . . . 21
5.5 Transfer Agent; Registrar; Rules Respecting Certificates.. . . . . . . . 21
5.6 Fixing Record Date for Determination of Stockholders of Record.. . . . . 21
6. SECURITIES HELD BY THE CORPORATION. . . . . . . . . . . . . . . . . . . . . . 22
6.1 Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 General Authorization to Transfer Securities Held by the Corporation.. . 22
7. DEPOSITARIES AND SIGNATORIES. . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Depositaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Signatories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8. SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9. FISCAL YEAR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10. WAIVER OF OR DISPENSING WITH NOTICE.. . . . . . . . . . . . . . . . . . . . . 23
10.1 Meetings of Stockholders.. . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Meetings of Board or Committee of the Board. . . . . . . . . . . . . . . 24
10.3 Unlawful Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11. POLITICAL CONTRIBUTIONS BY THE CORPORATION. . . . . . . . . . . . . . . . . . 24
12. AMENDMENT OF BY-LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. OFFICES AND AGENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.1 Registered Office and Agent. . . . . . . . . . . . . . . . . . . . . . . 25
13.2 Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
WORLD HOUSE ENTERTAINMENT, INC.
1. STOCKHOLDERS.
1.1 Place of Stockholders' Meetings.
All meetings of the stockholders of the Corporation shall be held at such
place or places, within or outside the state of Nevada, as may be fixed by the
Corporation's Board of Directors (the "Board", and each member thereof a
"Director") from time to time or as shall be specified in the respective notices
thereof.
1.2 Day and Time of Annual Meetings of Stockholders.
An annual meeting of stockholders shall be held at such place (within or
outside the state of Nevada), date and hour as shall be determined by the Board
and designated in the notice thereof. Failure to hold an annual meeting of
stockholders at such designated time shall not affect otherwise valid corporate
acts or work a forfeiture or dissolution of the Corporation.
1.3 Purposes of Annual Meetings.
(a) At each annual meeting, the stockholders shall elect the members
of the Board for the succeeding year. At any such annual meeting any
business properly brought before the meeting may be transacted.
(b) To be properly brought before an annual meeting, business must be
(i) specified in the notice of the meeting (or any supplement thereto)
given by or at the direction of the Board, (ii) otherwise properly brought
before the meeting by or at the direction of the Board or (iii) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder
must have given written notice thereof, either by personal delivery or by
United States mail, postage prepaid, to the Secretary, not later than 90
days in advance of the anniversary date of the immediately preceding annual
meeting. Any such notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for
conducting such business at the meeting and in the event that such business
includes a proposal to amend either the Articles of Incorporation or
By-laws of the Corporation, the language of the proposed amendment, (ii)
the name and address of the stockholder proposing such business, (iii) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to propose such business, and (iv) any
material interest of the stockholder in such business. No business shall be
conducted at an annual meeting of stockholders except in accordance with
this Section
<PAGE>
1.3(b), and the chairman of any annual meeting of stockholders
may refuse to permit any business to be brought before an annual meeting
without compliance with the foregoing procedures.
1.4 Special Meetings of Stockholders.
Except as otherwise expressly required by applicable law, special meetings
of the stockholders or of any class or series entitled to vote may be called for
any purpose or purposes by the Chairman or by a majority vote of the entire
Board, to be held at such place (within or outside the state of Nevada), date
and hour as shall be determined by the Board and designated in the notice
thereof. Only such business as is specified in the notice of any special meeting
of the stockholders shall come before such meeting.
1.5 Notice of Meetings of Stockholders.
Except as otherwise expressly required or permitted by applicable law, not
less than ten days nor more than sixty days before the date of every
stockholders' meeting the Secretary shall give to each stockholder of record
entitled to vote at such meeting written notice stating the place, day and time
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called. Except as provided in Section 1.6(d) or as
otherwise expressly required by applicable law, notice of any adjourned meeting
of stockholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken. Any notice, if mailed, shall be
deemed to be given when deposited in the United States mail, postage prepaid,
addressed to the stockholder at the address for notices to such stockholder as
it appears on the records of the Corporation.
1.6 Quorum of Stockholders.
(a) Unless otherwise expressly required by applicable law, at any
meeting of the stockholders, the presence in person or by proxy of
stockholders entitled to cast a majority of votes thereat shall constitute
a quorum for the entire meeting, notwithstanding the withdrawal of
stockholders entitled to cast a sufficient number of votes in person or by
proxy to reduce the number of votes represented at the meeting below a
quorum. Shares of the Corporation's stock belonging to the Corporation or
to another corporation, if a majority of the shares entitled to vote in an
election of the directors of such other corporation is held by the
Corporation, shall neither be counted for the purpose of determining the
presence of a quorum nor entitled to vote at any meeting of the
stockholders.
(b) At any meeting of the stockholders at which a quorum shall be
present, a majority of those present in person or by proxy may adjourn the
meeting from time to time without notice other than announcement at the
meeting. In the absence of a quorum, the officer presiding thereat shall
have power to adjourn the meeting from time to time until a quorum shall be
present. Notice of any adjourned meeting other than announcement at the
2
<PAGE>
meeting shall not be required to be given, except as provided in Section
1.6(d) below and except where expressly required by applicable law.
(c) At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called, but only those stockholders entitled to vote at the
meeting as originally noticed shall be entitled to vote at any adjournment
or adjournments thereof unless a new record date is fixed by the Board.
(d) If an adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given in the manner specified in Section
1.5 to each stockholder of record entitled to vote at the meeting.
1.7 Chairman and Secretary of Meeting.
The Chairman or, in his or her absence, another officer of the Corporation
designated by the Chairman, shall preside at meetings of the stockholders. The
Secretary shall act as secretary of the meeting, or in the absence of the
Secretary, an Assistant Secretary shall so act, or if neither is present, then
the presiding officer may appoint a person to act as secretary of the meeting.
1.8 Voting by Stockholders.
(a) Except as otherwise expressly required by applicable law, at
every meeting of the stockholders each stockholder shall be entitled to the
number of votes specified in the Articles of Incorporation, in person or by
proxy, for each share of stock standing in his or her name on the books of
the Corporation on the date fixed pursuant to the provisions of Section 5.6
of these By-laws as the record date for the determination of the
stockholders who shall be entitled to receive notice of and to vote at such
meeting.
(b) When a quorum is present at any meeting of the stockholders, all
questions shall be decided by the vote of a majority in voting power of the
stockholders present in person or by proxy and entitled to vote at such
meeting, unless a question is one upon which by express provision of law,
the Articles of Incorporation or these By-laws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
(c) Except as required by applicable law, the vote at any meeting of
stockholders on any question need not be by ballot, unless so directed by
the chairman of the meeting. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his or her proxy, if there be such
proxy, and shall state the number of shares voted.
3
<PAGE>
1.9 Proxies.
Any stockholder entitled to vote at any meeting of stockholders may vote
either in person or by his or her attorney-in-fact. Every proxy shall be in
writing and shall be subscribed by the stockholder or his or her duly authorized
attorney-in-fact, but need not be sealed, witnessed or acknowledged.
1.10 Inspectors.
(a) The election of Directors and any other vote by ballot at any
meeting of the stockholders shall be supervised by at least two inspectors.
Such inspectors may be appointed by the Chairman before or at the meeting.
If the Chairman shall not have so appointed such inspectors or if one or
both inspectors so appointed shall refuse to serve or shall not be present,
such appointment shall be made by the officer presiding at the meeting.
Each inspector, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector
with strict impartiality and according to the best of his or her ability.
(b) The inspectors shall (i) ascertain the number of shares of the
Corporation outstanding and the voting power of each, (ii) determine the
shares represented at any meeting of stockholders and the validity of the
proxies and ballots, (iii) count all proxies and ballots, (iv) determine
and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify
their determination of the number of shares represented at the meeting, and
their count of all proxies and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the
performance of the duties of the inspectors.
1.11 List of Stockholders.
(a) At least ten days before every meeting of stockholders, the Chief
Financial Officer shall cause to be prepared and made a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order and showing the address of each stockholder and the number of shares
registered in the name of each stockholder.
(b) During ordinary business hours for a period of at least ten days
prior to the meeting, such list shall be open to examination by any
stockholder for any purpose germane to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the
Corporation's registered office.
(c) The list shall also be produced and kept at the time and place of
the meeting during the whole time of the meeting, and it may be inspected
by any stockholder who is present.
4
<PAGE>
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by
this Section 1.11 or the books of the Corporation, or to vote in person or
by proxy at any meeting of stockholders.
1.12 Confidential Voting.
(a) Proxies and ballots that identify the votes of specific
stockholders shall be kept in confidence by the tabulators and the
inspectors of election unless (i) there is an opposing solicitation with
respect to the election or removal of Directors, (ii) disclosure is
required by applicable law, (iii) a stockholder expressly requests or
otherwise authorizes disclosure, or (iv) the Corporation concludes in good
faith that a bona fide dispute exists as to the authenticity of one or more
proxies, ballots or votes, or as to the accuracy of any tabulation of such
proxies, ballots or votes.
(b) The tabulators and inspectors of election and any authorized
agents or other persons engaged in the receipt, count and tabulation of
proxies and ballots shall be advised of this By-law and instructed to
comply herewith.
(c) The inspectors of election shall certify, to the best of their
knowledge based on due inquiry, that proxies and ballots have been kept in
confidence as required by this Section 1.12.
1.13 Action by Written Consent.
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special stockholders'
meeting and may not be effected by consent in writing by such stockholders.
2. DIRECTORS.
2.1 Powers of Directors.
The business and affairs of the Corporation shall be managed by or under
the direction of the Board, which may exercise all the powers of the Corporation
except such as are by applicable law, the Articles of Incorporation or these
By-laws required to be exercised or performed by the stockholders.
2.2 Number, Method of Election, Terms of Office of Directors.
(a) The number of Directors which shall constitute the whole Board
shall be such as from time to time shall be determined by resolution
adopted by a majority of the entire Board, but the number shall not be less
than one nor more than twenty-five, provided that
5
<PAGE>
the tenure of a Director shall not be affected by any decrease in the
number of Directors so made by the Board. Each Director shall hold
office until the next annual meeting of stockholders and until his or
her successor is elected and qualified or until his or her earlier
death, retirement, resignation or removal. Directors need not be
stockholders of the Corporation or citizens of the United States of
America.
(b) Nominations of persons for election as Directors may be made by
the Board or by any stockholder entitled to vote for the election of
Directors. Any stockholder entitled to vote for the election of Directors
may nominate a person or persons for election as Directors only if written
notice of such stockholder's intent to make such nomination is given in
accordance with the procedures for bringing business before the meeting set
forth in Section 1.3(b) of these By-laws, either by personal delivery or by
United States mail, postage prepaid, to the Secretary not later than (i)
with respect to an election to be held at an annual meeting of
stockholders, 90 days in advance of the anniversary date of the immediately
preceding annual meeting and (ii) with respect to an election to be held at
a special meeting of stockholders for the election of Directors, the close
of business on the seventh day following the date on which notice of such
meeting is first given to stockholders. Each such notice shall set forth:
(a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would
have been required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had each nominee
been nominated, or intended to be nominated, by the Board; and (e) the
consent of each nominee to serve as a Director if so elected. The chairman
of any meeting of stockholders to elect Directors and the Board may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
(c) At each meeting of the stockholders for the election of Directors
at which a quorum is present, the persons receiving the greatest number of
votes, up to the number of Directors to be elected, shall be the Directors.
2.3 Vacancies on Board.
(a) Any Director may resign from office at any time by delivering a
written resignation to the Chairman or the Secretary. The resignation will
take effect at the time specified therein, or, if no time is specified, at
the time of its receipt by the Corporation. The acceptance of a resignation
shall not be necessary to make it effective, unless expressly so provided
in the resignation.
6
<PAGE>
(b) Any vacancy and any newly created Directorship resulting from any
increase in the authorized number of Directors may be filled by vote of a
majority of the Directors then in office, though less than a quorum, and
any Director so chosen shall hold office until the next annual election of
Directors by the stockholders and until a successor is duly elected and
qualified or until his or her earlier death, retirement, resignation or
removal. If there are no Directors in office, then an election of Directors
may be held in the manner provided by applicable law.
2.4 Meetings of the Board.
(a) The Board may hold its meetings, both regular and special, either
within or outside the state of Nevada, at such places as from time to time
may be determined by the Board or as may be designated in the respective
notices or waivers of notice thereof.
(b) Regular meetings of the Board shall be held at such times and at
such places as from time to time shall be determined by the Board.
(c) The first meeting of each newly elected Board shall be held as
soon as practicable after the annual meeting of the stockholders and shall
be for the election of officers and the transaction of such other business
as may come before it.
(d) Special meetings of the Board shall be held whenever called by
direction of the Chairman or at the request of Directors constituting
one-third of the number of Directors then in office.
(e) Members of the Board or any Committee of the Board may
participate in a meeting of the Board or Committee, as the case may be, by
means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
such participation shall constitute presence in person at such meeting.
(f) The Secretary, or an Assistant Secretary designated by the
Secretary, shall give notice to each Director of any meeting of the Board
by mailing the same at least two days before the meeting or by telegraphing
or delivering the same not later than the day before the meeting. Such
notice need not include a statement of the business to be transacted at, or
the purpose of, any such meeting. Any and all business may be transacted at
any meeting of the Board. No notice of any adjourned meeting need be given.
No notice to or waiver by any Director shall be required with respect to
any meeting at which the Director is present.
2.5 Quorum and Action.
7
<PAGE>
Except as otherwise expressly required by applicable law, the Articles of
Incorporation or these By-laws, at any meeting of the Board, the presence of at
least one-third of the entire Board shall constitute a quorum for the
transaction of business; but if there shall be less than a quorum at any meeting
of the Board, a majority of those present may adjourn the meeting from time to
time. Unless otherwise provided by applicable law, the Articles of Incorporation
or these By-laws, the vote of a majority of the Directors present (and not
abstaining) at any meeting at which a quorum is present shall be necessary for
the approval and adoption of any resolution or the approval of any act of the
Board.
2.6 Presiding Officer and Secretary of Meeting.
The Chairman or, in the absence of the Chairman, a member of the Board
selected by the members present, shall preside at meetings of the Board. The
Secretary, or an Assistant Secretary designated by the Secretary, shall act as
secretary of the meeting, but in the absence of the Secretary, or an Assistant
Secretary designated by the Secretary, the presiding officer may appoint a
secretary of the meeting.
2.7 Action by Consent without Meeting.
Any action required or permitted to be taken at any meeting of the Board or
of any Committee thereof may be taken without a meeting if all members of the
Board or Committee, as the case may be, consent thereto in writing and the
writing or writings are filed with the minutes of proceedings of the Board or
the Committee.
2.8 Standing Committees.
By resolution adopted by a majority of the entire Board, the Board shall
elect, from among its members, individuals to serve on the Standing Committees
established by this Section 2.8. Each Standing Committee shall be comprised of
such number of Directors, not less than three, as shall be elected to such
Committee, provided that no officer or employee of the Corporation shall be
eligible to serve on the Audit, Compensation and Personnel or Nominating
Committees and provided further that no officer or employee of the Corporation,
other than the Chairman, shall be eligible to serve on the Executive and Policy
Committee. Each Committee shall keep a record of all its proceedings and report
the same to the Executive and Policy Committee and/or the Board. One-third of
the members of a Committee, but not less than two, shall constitute a quorum,
and the act of a majority of the members of a Committee present at any meeting
at which a quorum is present shall be the act of the Committee. Each Standing
Committee shall meet at the call of its chairman or any two of its members. The
chairmen of the various Committees shall preside, when present, at all meetings
of such Committees, and shall have such powers and perform such duties as the
Board may from time to time prescribe. The Standing Committees of the Board, and
functions of each, are as follows:
(a) Executive and Policy Committee. The Executive and Policy
Committee shall, during the intervals between the meetings of the Board,
possess and exercise all of the
8
<PAGE>
powers of the Board in the management of the business and affairs of the
Corporation, except as otherwise provided by applicable law, the
Articles of Incorporation or these By-laws.
(b) Compensation and Personnel Committee. The Compensation and
Personnel Committee shall exercise the power of oversight of the
compensation and benefits of the employees of the Corporation, and shall be
charged with evaluating management performance, and establishing executive
compensation. This Committee shall have access to its own independent
outside compensation counsel and shall consist of a majority of independent
directors. For purposes of this Section 2.8(b), "independent director"
shall mean a Director who: (i) has not been employed by the Corporation in
an executive capacity within the past five years; (ii) is not, and is not
affiliated with a company or firm that is, an advisor or consultant to the
Corporation; (iii) is not affiliated with a significant customer or
supplier of the Corporation; (iv) has no personal services contract(s) with
the Corporation; (v) is not affiliated with a tax-exempt entity that
receives significant contributions from the Corporation; and (vi) is not a
familial relative of any person described by Clauses (i) through (v). This
By-law shall not be amended or repealed except by a majority of the voting
power of the stockholders present in person or by proxy and entitled to
vote at any meeting at which a quorum is present.
(c) Audit Committee. The Audit Committee shall recommend the
selection of the independent auditors for the Corporation, confirm the
scope of audits to be performed by such auditors, review audit results and
internal accounting and control procedures and policies, review the fees
paid to the Corporation's independent auditors, and review and recommend
the approval of the audited financial statements of the Corporation and the
annual reports to stockholders. The Audit Committee shall also review
expense accounts of senior executives.
(d) Capital Committee. The Capital Committee shall have the
responsibility for maximizing the effective utilization of the assets of
the Corporation and its subsidiaries and reviewing capital expenditures and
appropriations.
(e) Legal Affairs Committee. The Legal Affairs Committee shall review
and consider major claims and litigation and legal, regulatory,
intellectual property and related governmental policy matters affecting the
Corporation and its subsidiaries, and review management policies and
programs relating to compliance with legal and regulatory requirements and
business ethics.
(f) Nominating Committee. The Nominating Committee shall make
recommendations as to the organization, size and composition of the Board
and Committees thereof, select candidates for election to the Board and the
Committees thereof, and consider the qualifications, compensation and
retirement of Directors.
9
<PAGE>
(g) Public Affairs Committee. The Public Affairs Committee shall
review and define the Corporation's social responsibilities, including
issues of significance to the Corporation, its stockholders and its
employees.
2.9 Other Committees.
By resolution passed by a majority of the entire Board, the Board may also
appoint from among its members such other Committees, Standing or otherwise, as
it may from time to time deem desirable and may delegate to such Committees such
powers of the Board as it may consider appropriate, consistent with applicable
law, the Articles of Incorporation and these By-laws.
2.10 Compensation of Directors.
Unless otherwise restricted by the Articles of Incorporation or these
By-laws, Directors shall receive for their services on the Board or any
Committee thereof such compensation and benefits, including the granting of
options, together with expenses, if any, as the Board may from time to time
determine. The Directors may be paid a fixed sum for attendance at each meeting
of the Board or Committee thereof and/or a stated annual sum as a Director,
together with expenses, if any, of attendance at each meeting of the Board or
Committee thereof. Nothing herein contained shall be construed to preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
2.11 Independent Directors.
(a) Independence of Nominees for Election as Directors at the Annual
Meeting. The persons nominated by the Board for election as Directors at
any annual meeting of the stockholders of the Corporation shall include a
sufficient number of persons who have been, on the date of their
nomination, determined by the Board to be eligible to be classified as
independent directors such that if all such nominees are elected, the
majority of all Directors holding office would be independent directors.
(b) Directors Elected to Fill Vacancies on the Board. If the Board
elects Directors between annual meetings of stockholders to fill vacancies
or newly created Directorships, the majority of all Directors holding
office immediately after such elections shall be independent directors.
(c) Definition of Independent Director. For purposes of this Section
2.11, "independent director" shall mean a Director who: (i) has not been
employed by the Corporation in an executive capacity within the past five
years; (ii) is not, and is not affiliated with a company or a firm that is,
an adviser or consultant to the Corporation; (iii) is not affiliated with a
significant customer or supplier of the Corporation; (iv) has no personal
services contract(s) with the Corporation; (v) is not affiliated with a
tax-exempt entity that receives significant contributions from the
Corporation; (vi) is not a familial
10
<PAGE>
relative of any person described by clauses (i) through (v); and (vii)
is free of any other relationship which would interfere with the
exercise of independent judgment by such Director.
3. OFFICERS.
3.1 Officers, Titles, Elections, Terms.
(a) The Board may from time to time elect a Chairman, a President,
one or more Executive Vice Presidents, one or more Senior Vice Presidents,
one or more Vice Presidents, a Chief Financial Officer, a Controller, a
Treasurer, a Secretary, a General Counsel, one or more Assistant
Controllers, one or more Assistant Treasurers, one or more Assistant
Secretaries, and one or more Associate or Assistant General Counsels, to
serve at the pleasure of the Board or otherwise as shall be specified by
the Board at the time of such election and until their successors are
elected and qualified or until their earlier death, retirement, resignation
or removal.
(b) The Board may elect or appoint at any time such other officers or
agents with such duties as it may deem necessary or desirable. Such other
officers or agents shall serve at the pleasure of the Board or otherwise as
shall be specified by the Board at the time of such election or appointment
and, in the case of such other officers, until their successors are elected
and qualified or until their earlier death, retirement, resignation or
removal. Each such officer or agent shall have such authority and shall
perform such duties as may be provided herein or as the Board may
prescribe. The Board may from time to time authorize any officer or agent
to appoint and remove any other such officer or agent and to prescribe such
person's authority and duties.
(c) No person may be elected or appointed an officer who is not a
citizen of the United States of America if such election or appointment is
prohibited by applicable law or regulation.
(d) Any vacancy in any office may be filled for the unexpired
portion of the term by the Board. Each officer elected or appointed during
the year shall hold office until the next annual meeting of the Board at
which officers are regularly elected or appointed and until his or her
successor is elected or appointed and qualified or until his or her earlier
death, retirement, resignation or removal.
(e) Any officer or agent elected or appointed by the Board may be
removed at any time by the affirmative vote of a majority of the entire
Board.
(f) Any officer may resign from office at any time. Such resignation
shall be made in writing and given to the President or the Secretary. Any
such resignation shall take effect at the time specified therein, or, if no
time is specified, at the time of its receipt by the
11
<PAGE>
Corporation. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly so provided in the resignation.
3.2 General Powers of Officers.
Except as may be otherwise provided by applicable law or in Article 6 or
Article 7 of these By-laws, the Chairman, the President, any Executive Vice
President, any Senior Vice President, any Vice President, the Chief Financial
Officer, the General Counsel, the Controller, the Treasurer and the Secretary,
or any of them, may (i) execute and deliver in the name of the Corporation, in
the name of any Division of the Corporation or in both names any agreement,
contract, instrument, power of attorney or other document pertaining to the
business or affairs of the Corporation or any Division of the Corporation,
including without limitation agreements or contracts with any government or
governmental department, agency or instrumentality, and (ii) delegate to any
employee or agent the power to execute and deliver any such agreement, contract,
instrument, power of attorney or other document.
3.3 Powers and Duties of the Chairman.
The Chairman shall be the Chief Executive of the Corporation and shall
report directly to the Board. Except in such instances as the Board may confer
powers in particular transactions upon any other officer, and subject to the
control and direction of the Board, the Chairman shall manage and direct the
business and affairs of the Corporation and shall communicate to the Board and
any Committee thereof reports, proposals and recommendations for their
respective consideration or action. He or she may do and perform all acts on
behalf of the Corporation and shall preside at meetings of the Board and the
stockholders.
3.4 Powers and Duties of the President.
The President shall have such powers and perform such duties as the Board
or the Chairman may from time to time prescribe or as may be prescribed in these
By-laws.
3.5 Powers and Duties of Executive Vice Presidents, Senior Vice Presidents
and Vice Presidents.
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents shall
have such powers and perform such duties as the Board or the Chairman may from
time to time prescribe or as may be prescribed in these By-laws.
3.6 Powers and Duties of the Chief Financial Officer.
The Chief Financial Officer shall have such powers and perform such duties
as the Board or the Chairman may from time to time prescribe or as may be
prescribed in these By-laws. The Chief Financial Officer shall cause to be
prepared and maintained (i) a stock ledger containing the names
12
<PAGE>
and addresses of all stockholders and the number of shares held by each and
(ii) the list of stockholders for each meeting of the stockholders as
required by Section 1.11 of these By-laws. The Chief Financial Officer shall
be responsible for the custody of all stock books and of all unissued stock
certificates.
3.7 Powers and Duties of the Controller and Assistant Controllers.
(a) The Controller shall be responsible for the maintenance of
adequate accounting records of all assets, liabilities, capital and
transactions of the Corporation. The Controller shall prepare and render
such balance sheets, income statements, budgets and other financial
statements and reports as the Board or the Chairman may require, and shall
perform such other duties as may be prescribed or assigned pursuant to
these By-laws and all other acts incident to the position of Controller.
(b) Each Assistant Controller shall perform such duties as from time
to time may be assigned by the Controller or by the Board. In the event of
the absence, incapacity or inability to act of the Controller, then any
Assistant Controller may perform any of the duties and may exercise any of
the powers of the Controller.
3.8 Powers and Duties of the Treasurer and Assistant Treasurers.
(a) The Treasurer shall have the care and custody of all the funds
and securities of the Corporation, except as may be otherwise ordered by
the Board, and shall cause such funds (i) to be invested or reinvested from
time to time for the benefit of the Corporation as may be designated by the
Board, the Chairman, the President the Chief Financial Officer or the
Treasurer or (ii) to be deposited to the credit of the Corporation in such
banks or depositories as may be designated by the Board, the Chairman, the
President the Chief Financial Officer or the Treasurer, and shall cause
such securities to be placed in safekeeping in such manner as may be
designated by the Board, the Chairman, the President the Chief Financial
Officer or the Treasurer.
(b) The Treasurer, any Assistant Treasurer or such other person or
persons as may be designated for such purpose by the Board, the Chairman,
the President, the Chief Financial Officer or the Treasurer may endorse in
the name and on behalf of the Corporation all instruments for the payment
of money, bills of lading, warehouse receipts, insurance policies and other
commercial documents requiring such endorsement.
(c) The Treasurer, any Assistant Treasurer or such other person or
persons as may be designated for such purpose by the Board, the Chairman,
the President, the Chief Financial Officer or the Treasurer (i) may sign
all receipts and vouchers for payments made to the Corporation; (ii) shall
render a statement of the cash account of the Corporation to the Board as
often as it shall require the same; and (iii) shall enter regularly in
books to be kept
13
<PAGE>
for that purpose full and accurate account of all moneys received and
paid on account of the Corporation and of all securities received and
delivered by the Corporation.
(d) The Treasurer shall perform such other duties as may be
prescribed or assigned pursuant to these By-laws and all other acts
incident to the position of Treasurer. Each Assistant Treasurer shall
perform such duties as may from time to time be assigned by the Treasurer
or by the Board. In the event of the absence, incapacity or inability to
act of the Treasurer, then any Assistant Treasurer may perform any of the
duties and may exercise any of the powers of the Treasurer.
3.9 Powers and Duties of the Secretary and Assistant Secretaries.
(a) The Secretary, or an Assistant Secretary designated by the
Secretary, shall keep the minutes of all proceedings of the stockholders,
the Board and the Committees of the Board. The Secretary, or an Assistant
Secretary designated by the Secretary, shall attend to the giving and
serving of all notices of the Corporation, in accordance with the
provisions of these By-laws and as required by applicable law. The
Secretary, or an Assistant Secretary designated by the Secretary, shall be
the custodian of the seal of the Corporation. The Secretary shall affix or
cause to be affixed the seal of the Corporation to such contracts,
instruments and other documents requiring the seal of the Corporation, and
when so affixed may attest the same and shall perform such other duties as
may be prescribed or assigned pursuant to these By-laws and all other acts
incident to the position of Secretary.
(b) Each Assistant Secretary shall perform such duties as may from
time to time be assigned by the Secretary or by the Board. In the event of
the absence, incapacity or inability to act of the Secretary, then any
Assistant Secretary may perform any of the duties and may exercise any of
the powers of the Secretary.
4. INDEMNIFICATION.
4.1 Generally.
(a) Right to Indemnification. The Corporation, to the fullest extent
permitted by applicable law as then in effect, shall indemnify any person
who is or was a Director or officer of the Corporation and who is or was
involved in any manner (including, without limitation, as a party or a
witness) or is threatened to be made so involved in any threatened, pending
or completed investigation, claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (including, without
limitation, any action, suit or proceeding by or in the right of the
Corporation to procure a judgment in its favor) (a "Proceeding") by reason
of the fact that such person 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, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, any employee benefit plan) (a "Covered
Entity"),
14
<PAGE>
against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
such person in connection with such Proceeding; provided, however, that the
foregoing shall not apply to a Director or officer of the Corporation with
respect to a Proceeding that was commenced by such Director or officer
prior to a Change in Control (as defined in Section 4.4(e)(i) of this
Article 4). Any Director or officer of the Corporation entitled to
indemnification as provided in this Section 4.1(a) is hereinafter called an
"Indemnitee". Any right of an Indemnitee to indemnification shall be a
contract right and shall include the right to receive, prior to the
conclusion of any Proceeding, payment of any expenses incurred by the
Indemnitee in connection with such Proceeding, consistent with the
provisions of applicable law as then in effect and the other provisions of
this Article 4.
(b) Effect of Amendments. Neither the amendment or repeal of, nor
the adoption of a provision inconsistent with, any provision of this
Article 4 (including, without limitation, this Section 4.1(b)) shall
adversely affect the rights of any Director or officer under this Article
4: (i) with respect to any Proceeding commenced or threatened prior to such
amendment, repeal or adoption of an inconsistent provision or (ii) after
the occurrence of a Change in Control, with respect to any Proceeding
arising out of any action or omission occurring prior to such amendment,
repeal or adoption of an inconsistent provision, in either case without the
written consent of such Director or officer.
4.2 Insurance, Contracts and Funding.
The Corporation may purchase and maintain insurance to protect itself and
any indemnified person against any expenses, judgments, fines and amounts paid
in settlement as specified in Section 4.1(a) or Section 4.5 of this Article 4 or
incurred by any indemnified person in connection with any Proceeding referred to
in such Sections, to the fullest extent permitted by applicable law as then in
effect. The Corporation may enter into contracts with any Director, officer,
employee or agent of the Corporation or any director, officer, employee,
fiduciary or agent of any Covered Entity in furtherance of the provisions of
this Article 4 and may create a trust fund or use other means (including,
without limitation, a letter of credit) to ensure the payment of such amounts as
may be necessary to effect indemnification as provided in this Article 4.
4.3 Indemnification; Not Exclusive Right.
The right of indemnification provided in this Article 4 shall not be
exclusive of any other rights to which any indemnified person may otherwise be
entitled, and the provisions of this Article 4 shall inure to the benefit of the
heirs and legal representatives of any indemnified person under this Article 4
and shall be applicable to Proceedings commenced or continuing after the
adoption of this Article 4, whether arising from acts or omissions occurring
before or after such adoption.
4.4 Advancement of Expenses; Procedures; Presumptions and Effect of
Certain Proceedings; Remedies.
15
<PAGE>
In furtherance, but not in limitation, of the foregoing provisions, the
following procedures, presumptions and remedies shall apply with respect to the
advancement of expenses and the right to indemnification under this Article 4:
(a) Advancement of Expenses. All reasonable expenses incurred by or
on behalf of an Indemnitee in connection with any Proceeding shall be
advanced to the Indemnitee by the Corporation within 20 days after the
receipt by the Corporation of a statement or statements from the Indemnitee
requesting such advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Any such statement or
statements shall reasonably evidence the expenses incurred by the
Indemnitee and shall include any written affirmation or undertaking
required by applicable law in effect at the time of such advance.
(b) Procedures for Determination of Entitlement to Indemnification.
(i) To obtain indemnification under this Article 4, an
Indemnitee shall submit to the Secretary of the Corporation a written
request, including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine
whether and to what extent the Indemnitee is entitled to
indemnification (the "Supporting Documentation"). The determination of
the Indemnitee's entitlement to indemnification shall be made not
later than 60 days after receipt by the Corporation of the written
request for indemnification together with the Supporting
Documentation. The Secretary of the Corporation shall, promptly upon
receipt of such a request for indemnification, advise the Board in
writing that the Indemnitee has requested indemnification.
(ii) The Indemnitee's entitlement to indemnification under this
Article 4 shall be determined in one of the following ways: (A) by a
majority vote of the Disinterested Directors (as hereinafter defined),
if they constitute a quorum of the Board; (B) by a written opinion of
Independent Counsel (as hereinafter defined) if (x) a Change in
Control (as hereinafter defined) shall have occurred and the
Indemnitee so requests or (y) a quorum of the Board consisting of
Disinterested Directors is not obtainable or, even if obtainable, a
majority of such Disinterested Directors so directs; (C) by the
stockholders of the Corporation (but only if a majority of the
Disinterested Directors, if they constitute a quorum of the Board,
presents the issue of entitlement to indemnification to the
stockholders for their determination); or (D) as provided in Section
4.4(c) of this Article 4.
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 4.4(b)(ii), a majority of the Disinterested Directors shall
select the Independent Counsel, but only an Independent Counsel to
which the Indemnitee does not reasonably object; provided, however,
16
<PAGE>
that if a Change in Control shall have occurred, the Indemnitee shall
select such Independent Counsel, but only an Independent Counsel to
which a majority of the Disinterested Directors does not reasonably
object.
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Article 4, if a Change in Control
shall have occurred, the Indemnitee shall be presumed to be entitled to
indemnification under this Article 4 (with respect to actions or failures
to act occurring prior to such Change in Control) upon submission of a
request for indemnification together with the Supporting Documentation in
accordance with Section 4.4(b) of this Article 4, and thereafter the
Corporation shall have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4.4(b) of this Article 4 to determine entitlement
to indemnification shall not have been appointed or shall not have made a
determination within 60 days after receipt by the Corporation of the
request therefor together with the Supporting Documentation, the Indemnitee
shall be deemed to be, and shall be, entitled to indemnification unless (A)
the Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification or in the Supporting Documentation
or (B) such indemnification is prohibited by law. The termination of any
Proceeding described in Section 4.1 of this Article 4, or of any claim,
issue or matter therein, by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
adversely affect the right of the Indemnitee to indemnification or create a
presumption that the Indemnitee did not act in good faith and in a manner
which the Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation or, with respect to any criminal
Proceeding, that the Indemnitee had reasonable cause to believe that his or
her conduct was unlawful.
(d) Remedies of Indemnitee.
(i) In the event that a determination is made pursuant to
Section 4.4(b) of this Article 4 that the Indemnitee is not entitled
to indemnification under this Article 4, (A) the Indemnitee shall be
entitled to seek an adjudication of his or her entitlement to such
indemnification either, at the Indemnitee's sole option, in (x) an
appropriate court of the State of Nevada or any other court of
competent jurisdiction or (y) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association; (B) any such judicial proceeding or arbitration shall be
de novo and the Indemnitee shall not be prejudiced by reason of such
adverse determination; and (C) if a Change in Control shall have
occurred, in any such judicial proceeding or arbitration the
Corporation shall have the burden of proving that the Indemnitee is
not entitled to indemnification under this Article 4 (with respect to
actions or failures to act occurring prior to such Change in Control).
(ii) If a determination shall have been made or deemed to have
been made, pursuant to Section 4.4(b) or (c) of this Article 4, that
the Indemnitee is
17
<PAGE>
entitled to indemnification, the Corporation shall be obligated to
pay the amounts constituting such indemnification within five days
after such determination has been made or deemed to have been made
and shall be conclusively bound by such determination unless (A)
the Indemnitee misrepresented or failed to disclose a material fact
in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In
the event that (x) advancement of expenses is not timely made
pursuant to Section 4.4(a) of this Article 4 or (y) payment of
indemnification is not made within five days after a determination
of entitlement to indemnification has been made or deemed to have
been made pursuant to Section 4.4(b) or (c) of this Article 4, the
Indemnitee shall be entitled to seek judicial enforcement of the
Corporation's obligation to pay to the Indemnitee such advancement
of expenses or indemnification. Notwithstanding the foregoing, the
Corporation may bring an action, in an appropriate court in the
State of Nevada or any other court of competent jurisdiction,
contesting the right of the Indemnitee to receive indemnification
hereunder due to the occurrence of an event described in Subclause
(A) or (B) of this Clause (ii) (a "Disqualifying Event"); provided,
however, that in any such action the Corporation shall have the
burden of proving the occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in
any judicial proceeding or arbitration commenced pursuant to this
Section 4.4(d) that the procedures and presumptions of this Article 4
are not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the Corporation is bound by
all the provisions of this Article 4.
(iv) In the event that the Indemnitee, pursuant to this Section
4.4(d), seeks a judicial adjudication of or an award in arbitration to
enforce his or her rights under, or to recover damages for breach of,
this Article 4, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any
expenses actually and reasonably incurred by the Indemnitee if the
Indemnitee prevails in such judicial adjudication or arbitration. If
it shall be determined in such judicial adjudication or arbitration
that the Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in connection with such judicial
adjudication or arbitration shall be prorated accordingly.
(e) Definitions. For purposes of this Article 4:
(i) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 6(e) (or any successor provision) of Schedule 14A of
Regulation 14A (or any amendment or successor provision thereto)
promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Corporation is then subject to such reporting
18
<PAGE>
requirement; provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly
or indirectly, of securities of the Corporation representing 20% or
more of the voting power of all outstanding shares of stock of the
Corporation entitled to vote generally in an election of Directors
without the prior approval of at least two-thirds of the members of
the Board in office immediately prior to such acquisition; (B) the
Corporation is a party to any merger or consolidation in which the
Corporation is not the continuing or surviving corporation or pursuant
to which shares of the Corporation's common stock would be converted
into cash, securities or other property, other than a merger of the
Corporation in which the holders of the Corporation's common stock
immediately prior to the merger have the same proportionate ownership
of common stock of the surviving corporation immediately after the
merger; (C) there is a sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, the assets of the Corporation, or liquidation or
dissolution of the Corporation; (D) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization, or a
proxy contest, as a consequence of which members of the Board in
office immediately prior to such transaction or event constitute less
than a majority of the Board thereafter; or (E) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board (including for this purpose any new Director
whose election or nomination for election by the stockholders was
approved by a vote of at least two-thirds of the Directors then still
in office who were Directors at the beginning of such period) cease
for any reason to constitute at least a majority of the Board.
(ii) "Disinterested Director" means a Director who is not or was
not a party to the proceeding in respect of which indemnification is
sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a
law firm that neither presently is, nor in the past five years has
been, retained to represent: (a) the Corporation or the Indemnitee in
any matter material to either such party or (b) any other party to the
Proceeding giving rise to a claim for indemnification under this
Article 4. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under applicable standards
of professional conduct, would have a conflict of interest in
representing either the Corporation or the Indemnitee in an action to
determine the Indemnitee's rights under this Article 4.
4.5 Indemnification of Employees and Agents.
Notwithstanding any other provision of this Article 4, the Corporation, to
the fullest extent permitted by applicable law as then in effect, may indemnify
any person other than a Director or
19
<PAGE>
officer of the Corporation who is or was an employee or agent of the
Corporation and who is or was involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved
in any threatened, pending or completed Proceeding by reasons of the fact
that such person is or was an employee or agent of the Corporation or, at the
request of the Corporation, a director, officer, employee, fiduciary or agent
of a Covered Entity against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding. The Corporation
may also advance expenses incurred by such employee, fiduciary or agent in
connection with any such Proceeding, consistent with the provisions of
applicable law as then in effect.
4.6 Severability.
If any of this Article 4 shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (i) the validity, legality and
enforceability of the remaining provisions of this Article 4 (including, without
limitation, all portions of any Section of this Article 4 containing any such
provision held to be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby; and (ii) to the fullest extent possible, the provisions of this Article
4 (including, without limitation, all portions of any Section of this Article 4
containing any such provision held to be invalid, illegal or unenforceable, that
are not themselves invalid, illegal or unenforceable) shall be construed so as
to give effect to the intent manifested by the provision held invalid, illegal
or unenforceable.
5. CAPITAL STOCK
5.1 Stock Certificates.
(a) Every holder of stock in the Corporation shall be entitled to
have a certificate certifying the number of shares owned by him or her in
the Corporation and designating the class and series of stock to which such
shares belong, which certificate shall otherwise be in such form as the
Board shall prescribe and as provided in Section 5.1(d). Each such
certificate shall be signed by, or in the name of, the Corporation by the
Chairman or the President or any Vice President, and by the Treasurer or
any Assistant Treasurer or the Secretary or any Assistant Secretary.
(b) If such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or by a registrar other than the
Corporation or its employee, the signatures of the officers of the
Corporation may be facsimiles, and, if permitted by applicable law, any
other signature on the certificate may be a facsimile.
(c) In case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the Corporation with
the same effect as if such person were such officer at the date of issue.
20
<PAGE>
(d) Certificates of stock shall be issued in such form not
inconsistent with the Articles of Incorporation. They shall be numbered and
registered in the order in which they are issued. No certificate shall be
issued until fully paid
(e) All certificates surrendered to the Corporation shall be
cancelled (other than treasury shares) with the date of cancellation and
shall be retained by the Chief Financial Officer, together with the powers
of attorney to transfer and the assignments of the shares represented by
such certificates, for such period of time as such officer shall designate.
5.2 Record Ownership.
A record of the name of the person, firm or corporation and address of such
holder of each certificate, the number of shares represented thereby and the
date of issue thereof shall be made on the Corporation's books. The Corporation
shall be entitled to treat the holder of record of any share of stock as the
holder in fact thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any person,
whether or not it shall have express or other notice thereof, except as required
by applicable law.
5.3 Transfer of Record Ownership.
Transfers of stock shall be made on the books of the Corporation only by
direction of the person named in the certificate or such person's attorney,
lawfully constituted in writing, and only upon the surrender of the certificate
therefor and a written assignment of the shares evidenced thereby. Whenever any
transfer of stock shall be made for collateral security, and not absolutely, it
shall be so expressed in the entry of the transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and transferee
request the Corporation to do so.
5.4 Lost, Stolen or Destroyed Certificates.
Certificates representing shares of the stock of the Corporation shall be
issued in place of any certificate alleged to have been lost, stolen or
destroyed in such manner and on such terms and conditions as the Board from time
to time may authorize in accordance with applicable law.
5.5 Transfer Agent; Registrar; Rules Respecting Certificates.
The Corporation shall maintain one or more transfer offices or agencies
where stock of the Corporation shall be transferable. The Corporation shall also
maintain one or more registry offices where such stock shall be registered. The
Board may adopt such rules and regulations as it may deem proper concerning the
issue, transfer and registration of stock certificates in accordance with
applicable law.
5.6 Fixing Record Date for Determination of Stockholders of Record.
21
<PAGE>
(a) The Board may fix, in advance, a date as the record date for the
purpose of determining the stockholders entitled to notice of, or to vote
at, any meeting of the stockholders or any adjournment thereof, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board, and which record date shall not be
more than sixty days nor less than ten days before the date of a meeting of
the stockholders. If no record date is fixed by the Board, the record date
for determining the stockholders entitled to notice of or to vote at a
stockholders' meeting shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for
the adjourned meeting.
(b) The Board may fix, in advance, a date as the record date for the
purpose of determining the stockholders entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or in order to make a determination of the stockholders for the
purpose of any other lawful action, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the
Board, and which record date shall not be more than sixty calendar days
prior to such action. If no record date is fixed by the Board, the record
date for determining the stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the resolution
relating thereto.
6. SECURITIES HELD BY THE CORPORATION.
6.1 Voting.
Unless the Board shall otherwise order, the Chairman, the President, any
Executive Vice President, any Senior Vice President, any Vice President, the
Chief Financial Officer, the Controller, the Treasurer or the Secretary shall
have full power and authority, on behalf of the Corporation, to attend, act and
vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock and at such meeting to exercise any or all rights and
powers incident to the ownership of such stock, and to execute on behalf of the
Corporation a proxy or proxies empowering another or others to act as aforesaid.
The Board from time to time may confer like powers upon any other person or
persons.
6.2 General Authorization to Transfer Securities Held by the Corporation.
(a) Any of the following officers, to wit: the Chairman, the
President, any Executive Vice President, any Senior Vice President, any
Vice President, the Chief Financial Officer, the Controller, the Treasurer,
any Assistant Controller, any Assistant Treasurer, and
22
<PAGE>
each of them, hereby is authorized and empowered to transfer, convert,
endorse, sell, assign, set over and deliver any and all shares of stock,
bonds, debentures, notes, subscription warrants, stock purchase
warrants, evidences of indebtedness, or other securities now or
hereafter standing in the name of or owned by the Corporation, and to
make, execute and deliver any and all written instruments of assignment
and transfer necessary or proper to effectuate the authority hereby
conferred.
(b) Whenever there shall be annexed to any instrument of assignment
and transfer executed pursuant to and in accordance with the foregoing
Section 6.2(a), a certificate of the Secretary or any Assistant Secretary
in office at the date of such certificate setting forth the provisions
hereof and stating that they are in full force and effect and setting forth
the names of persons who are then officers of the corporation, all persons
to whom such instrument and annexed certificate shall thereafter come shall
be entitled, without further inquiry or investigation and regardless of the
date of such certificate, to assume and to act in reliance upon the
assumption that (i) the shares of stock or other securities named in such
instrument were theretofore duly and properly transferred, endorsed, sold,
assigned, set over and delivered by the Corporation, and (ii) with respect
to such securities, the authority of these provisions of these By-laws and
of such officers is still in full force and effect.
7. DEPOSITARIES AND SIGNATORIES.
7.1 Depositaries.
The Chairman, the President, the Chief Financial Officer and the Treasurer
are each authorized to designate depositaries for the funds of the Corporation
deposited in its name or that of a Division of the Corporation, or both, and the
signatories with respect thereto in each case, and from time to time, to change
such depositaries and signatories, with the same force and effect as if each
such depositary and the signatories with respect thereto and changes therein had
been specifically designated or authorized by the Board; and each depositary
designated by the Board or by the Chairman, the President, the Chief Financial
Officer or the Treasurer shall be entitled to rely upon the certificate of the
Secretary or any Assistant Secretary of the Corporation or of a Division of the
Corporation setting forth the fact of such designation and of the appointment of
the officers of the Corporation or of the Division or of both or of other
persons who are to be signatories with respect to the withdrawal of funds
deposited with such depositary, or from time to time the fact of any change in
any depositary or in the signatories with respect thereto.
7.2 Signatories.
Unless otherwise designated by the Board or by the Chairman, the President,
the Chief Financial Officer or the Treasurer, all notes, drafts, checks,
acceptances, orders for the payment of money and all other negotiable
instruments obligating the Corporation for the payment of money shall be (a)
signed by the Treasurer or any Assistant Treasurer and (b) countersigned by the
Controller or any Assistant Controller, or (c) either signed or countersigned by
the Chairman, the
23
<PAGE>
President, any Executive Vice President, any Senior Vice President or any
Vice President in lieu oft either the officers designated in Clause (a) or
the officers designated in Clause (b) of this Section 7.2.
8. SEAL.
The seal of the Corporation shall be in such form and shall have such
content as the Board shall from time to time determine.
9. FISCAL YEAR.
The fiscal year of the Corporation shall end on December 31 in each year,
or on such other date as the Board shall determine.
10. WAIVER OF OR DISPENSING WITH NOTICE.
10.1 Meetings of Stockholders.
Whenever any notice of the time, place or purpose of any meeting of the
stockholders is required to be given by applicable law, the Articles of
Incorporation or these By-laws, a written waiver of notice, signed by a
stockholder entitled to notice of a stockholders' meeting, whether by telegraph,
cable or other form of recorded communication, whether signed before or after
the time set for a given meeting, shall be deemed equivalent to notice of such
meeting. Attendance of a stockholder in person or by proxy at a stockholders'
meeting shall constitute a waiver of notice to such stockholder of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting was not lawfully called or convened.
10.2 Meetings of Board or Committee of the Board.
Whenever any notice of the time or place of any meeting of the Board or
Committee of the Board is required to be given by applicable law, the Articles
of Incorporation or these By-laws, a written waiver of notice signed by a
Director, whether by telegraph, cable or other form of recorded communication,
whether signed before or after the time set for a given meeting, shall be deemed
equivalent to notice of such meeting. Attendance of a Director at a meeting
shall constitute a waiver of notice to such Director of such meeting.
10.3 Unlawful Notices.
No notice need be given to any person with whom communication is made
unlawful by any law of the United States or any rule, regulation, proclamation
or executive order issued under any such law.
11. POLITICAL CONTRIBUTIONS BY THE CORPORATION.
24
<PAGE>
The Corporation and its direct and indirect subsidiaries shall be permitted
to make contributions or expenditures (a) in connection with the election of any
candidate for state or local political office in jurisdictions which permit such
contributions, including contributions to any committee supporting such a
candidate, to the extent such contributions or expenditures are permitted by
applicable law, and (b) to the extent necessary to permit in the United States
the expenditure of corporate assets for the payment of expenses for
establishing, registering and administering any political action committee and
of soliciting contributions thereto, all as may be authorized by federal or
state laws.
12. AMENDMENT OF BY-LAWS.
Except as otherwise provided in Section 2.8(b) of these By-laws, these
By-laws, or any of them, may from time to time be supplemented, amended or
repealed, or new By-laws may be adopted, by the Board at any regular or special
meeting of the Board, if such supplement, amendment, repeal or adoption is
approved by a majority of the entire Board. These By-laws, or any of them, may
from time to time be supplemented, amended or repealed, or new By-laws may be
adopted, by the stockholders at any regular or special meeting of the
stockholders at which a quorum is present, if such supplement, amendment, repeal
or adoption is approved by the affirmative vote of the holders of at least a
majority of the voting power of all outstanding shares of stock of the
Corporation entitled to vote generally in an election of directors.
13. OFFICES AND AGENT.
13.1 Registered Office and Agent.
The registered office of the Corporation in the State of Nevada shall be
3230 E. Flamingo Road, Suite 156, Las Vegas, Nevada 89121. The name of the
registered agent is Gateway Enterprises, Inc. Such registered agent has a
business office identical with such registered office.
13.2 Other Offices.
The Corporation may also have offices at other places, either within or
outside the State of Nevada, as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
25
<PAGE>
AGREEMENT TO EXCHANGE SHARES
THIS AGREEMENT TO EXCHANGE SHARES (this "Agreement") is made and entered
into as of the 31st day of December, 1997, by and among World House
Entertainment, Inc., a Nevada corporation (hereinafter called "Holding
Company"), and Elizabeth Ann Peters (the "Shareholder").
WHEREAS the Shareholder owns all of the outstanding shares of the common
stock of Songs for the Planet, Inc., a Tennessee corporation (the "Subsidiary
Corporation");
WHEREAS Holding Company desires to acquire all of the issued and
outstanding shares of common stock of the Subsidiary Corporation on the terms
and conditions hereinafter set forth; and
WHEREAS the parties desire that the transactions contemplated by this
Agreement constitute an exchange of property as provided in Section 351 of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants set forth herein, the parties agree as follows:
1. Representations of Shareholder and Officers. The Shareholder
represents and warrants with respect to herself and the Subsidiary Corporation
as provided in this Section 1. As used herein, "Knowledge" shall mean the
knowledge of the Shareholder in her capacity as shareholder and, if the
Shareholder is also an officer, director or employee of the Subsidiary
Corporation, the knowledge of such Shareholder in her capacity as an officer,
director or employee of the Subsidiary Corporation.
a. The Shareholder is the record owners and holder of the number of fully
paid and nonassessable shares of common stock of the Subsidiary
Corporation as of the date hereof as set forth at Schedule I attached
hereto, and all such shares of common stock are owned free and clear
of all liens, claims, encumbrances, charges, and assessments and are
subject to no restrictions with respect to transferability.
b. To the knowledge of the Shareholder, the authorized capital stock of
the Subsidiary Corporation consists of 200,000 shares of common stock,
without par value, of which 200,000 shares are issued and outstanding.
There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require such corporation to
issue, sell or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights
with respect to such corporation. There are no voting trusts, proxies,
or other agreements or
<PAGE>
understandings with respect to the voting of the capital stock of
such corporation.
c. To the knowledge of the Shareholder, the Subsidiary Corporation is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, and
is duly qualified to do business as a foreign corporation, if
required, and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
require such qualification, except where the failure to be so
qualified would not have a material adverse effect on the assets,
business, results of operations or conditions (financial or otherwise)
of each of such corporation. The Subsidiary Corporation has
previously delivered to Holding Company true, complete and correct
copies of its charter and by-laws, as currently in effect.
d. To the knowledge of the Shareholder, the Subsidiary Corporation has no
subsidiaries, or any direct or indirect interest, whether by way of
stock ownership or otherwise, in any corporation, firm, association or
business enterprise.
e. To the knowledge of the Shareholder, the Subsidiary Corporation owns
and possesses, or is duly licensed in respect of, all licenses,
trademarks, trademark rights, applications for trademarks, trade
names, trade name rights, processes, and formulas, necessary for the
operation of its business, with no known material conflict with the
rights of others, and the same are subject to no liens, encumbrances,
claims, or charges.
f. As of the date of this Agreement, to the knowledge of the Shareholder,
there are no actions, suits, or proceedings pending or, to the
knowledge of the Shareholder, threatened, against the Subsidiary
Corporation, at law or in equity, or before or by any federal, state,
municipal, or other governmental agency or instrumentality, domestic
or foreign, except for those actions, suits, or proceedings which
would not have a material and adverse effect on the financial
condition of the Subsidiary Corporation. The Subsidiary Corporation
is not in default with respect of any order or decree of any court or
of any such governmental agency or instrumentality.
g. Neither the execution and delivery of this Agreement nor the
consummation of the transactions herein contemplated, will conflict
with or result in the breach of, or accelerate the performance
required by, any terms of any agreement to which any of the Subsidiary
Corporation or the Shareholder are now a party, or constitute a
default thereunder, or result in the creation of any lien, charge, or
encumbrance upon any of the properties or assets of the Subsidiary
Corporation.
<PAGE>
h. To the knowledge of the Shareholder, the Subsidiary Corporation is not
a party to any agreement or instrument subject to any charter or other
corporate restriction materially and adversely effecting the business,
property, or assets, operations or condition (financial or otherwise)
of such corporation.
i. To the knowledge of the Shareholder, the Subsidiary Corporation and
the Shareholder have timely filed all tax returns and reports required
to be filed by each, including without limitation all federal, state,
local and foreign tax returns, and all such tax returns and reports
are true, complete and correct in all material respects. The
Subsidiary Corporation has paid in full or made adequate provision by
the establishment of reserves for all such taxes and other charges
which have become due or have been asserted in writing by any taxing
authority to be due, relating to such corporation, including, if such
corporation was an S Corporation prior to the consummation of the
transactions contemplated by this Agreement, taxes and other charges
attributable to the S Corporation election by such corporation, and
has withheld with respect to their employees all federal and state
income taxes, FICA, FUTA and any other taxes or charges required to be
withheld except for those taxes or other charges the failure of which
to pay or withhold would not have a material and adverse effect on the
financial condition of the Subsidiary Corporation. To the knowledge of
the Shareholder, there is no tax deficiency proposed or threatened
against the Subsidiary Corporation and the Shareholder relating to
such corporation have no knowledge or any basis for the assertion of
any such claim, including if such corporation was an S Corporation
prior to the consummation of the transactions contemplated by this
Agreement, taxes and other charges attributable to the S Corporation
election by such corporation and its Shareholder except where such
deficiency would not have a material and adverse effect on the
financial condition of the Subsidiary Corporation. To the knowledge of
the Shareholder, the Subsidiary Corporation has made all payments of
estimated taxes, if any, when due in amounts sufficient to avoid the
imposition of any penalty except where such penalty would not have a
material and adverse effect on the financial condition of the
Subsidiary Corporation. There are no outstanding agreements, waivers,
or arrangements extending the statutory period of limitation
applicable to any claim for, or the period for the collection or
assessment of, taxes due from or with respect to the Subsidiary
Corporation for any taxable period, and no power of attorney granted
by or with respect to the Subsidiary Corporation relating to taxes is
currently in force. No closing agreement pursuant to Section 7121 of
the Internal Revenue Code of 1986, as amended, (or any predecessor
provision) or any similar provision of any state, local, or foreign
law has been entered into by or with respect to the Subsidiary
Corporation that could materially and negatively effect the future
liability for taxes of the Subsidiary Corporation. No audit or other
proceeding by any governmental authority has formally commenced and no
written notification has been given that such an audit or other
proceeding is
<PAGE>
pending or threatened with respect to any taxes due from or with
respect to the Subsidiary Corporation that could materially and
negatively affect the future liability for taxes of the Subsidiary
Corporation. No unpaid assessment of tax has been proposed in writing
against the Subsidiary Corporation other than assessment of a type
that arise on a recurring basis in the ordinary course of business.
j. To the knowledge of the Shareholder, the Subsidiary Corporation has no
direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, accrued, absolute,
contingent or otherwise ("Liabilities"), which would be required by
generally accepted accounting principles to be disclosed in their
respective financial statements (including, without limitation, in the
notes thereto), other than liabilities fully and adequately reflected
or reserved against their respective balance sheet, prepared in
accordance with generally accepted accounting principles. To the
knowledge of the Shareholder, since the date of the attached financial
statement, October 31, 1997, the Subsidiary Corporation has incurred
no liabilities which would be required by generally accepted
accounting principles to be disclosed in its financial statements
(including, without limitation, in the notes thereto), other than
Liabilities incurred since that date in the ordinary course of
business.
k. To the knowledge of the Shareholder, the Subsidiary Corporation is in
compliance in all material respects with all applicable laws
(including, but not limited to, rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of all federal, state or local governments, or any agency
or instrumentality of the foregoing, domestic or foreign, in respect
of the conduct of its business and ownership or leasing of its
properties, except where the failure to so comply would not have a
material adverse effect on the assets, business, results of operations
or condition (financial or otherwise) of such corporation. To the
knowledge of the Shareholder, the Subsidiary Corporation has all
licenses, permits, orders or approvals of all federal, state or local
governmental bodies, quasi-governmental bodies or authorities,
domestic or foreign, which are material to, or necessary for, the
conduct of the operations of such corporation. To the knowledge of the
Shareholder, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or
commenced against the Subsidiary Corporation alleging any failure so
to comply, except where the failure to so comply would not have a
material and adverse effect on the assets, business, results of
operations or condition (financial or otherwise) of such corporation.
l. The following financial statements of the Subsidiary Corporation which
are attached hereto as Schedule II are true, correct and complete in
all material respects, have been prepared from and are in accordance
with the books and
<PAGE>
records of the Subsidiary Corporation in accordance with
generally accepted accounting principles ("GAAP") consistently
applied except where otherwise indicated, and fairly present the
financial condition of the Subsidiary Corporation in all material
respects as at the dates stated and the results of operations of
such Subsidiary Corporation for the periods then ended
(collectively, the "Financial Statements").
m. Since the date of the Financial Statements, there has not been any
material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the
Subsidiary Corporation.
n. The Subsidiary Corporation has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown in its balance sheet, or acquired
after the date thereof, free and clear of all liens, claims,
encumbrances, charges, and assessments, except for properties and
assets disposed of in the ordinary course of business since the date
of the Financial Statements.
2. Exchange of Stock. On the closing date, as hereinafter fixed, the
Shareholder shall deliver, or cause to be delivered, to Holding Company
certificates representing all of the issued and outstanding shares of common
stock of the Subsidiary Corporation, as the same shall be constituted on the
closing date, duly endorsed in blank by the owner of record, or accompanied by
duly executed stock powers in blank, and accompanied by requisite revenue stamps
evidencing the payment of the transfer tax, if any. In consideration therefor
Holding Company shall, at the closing, deliver to the Shareholder a certificate
representing shares of common stock, $.001 par value per share, of Holding
Company (the "Common Stock"), as set forth below:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES OF NO. OF SHARES OF
- --------- ----------
SUBSIDIARY CORPORATION HOLDING COMPANY
- --------- ----------
<S> <C> <C>
Elizabeth Ann Peters 200,000 200,000
</TABLE>
3. Closing. The closing date under this Agreement shall be simultaneous
with the execution of this Agreement or such other time as Holding Company and
the Shareholder may agree. The closing shall be held at the law offices of
Erickson & Sederstrom, P.C., 10330 Regency Parkway Drive, Omaha, Nebraska 68114
unless another place is mutually agreed upon by the Holding Company and the
Shareholder.
4. Indemnity for Damages. The Shareholder shall indemnify, fully defend
and save and hold harmless the Holding Company at all times from and against all
demands, claims, actions, causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses, but net of any tax
savings and insurance proceeds actually received by the indemnitee as a result
of the matter
<PAGE>
giving rise to the indemnification, asserted against, resulting to, imposed
upon or incurred by the Holding Company, by reason of or resulting from any
inaccurate representation made by the Shareholder in this Agreement, breach
of any of the warranties made by the Shareholder in this Agreement and breach
or default in performance by the Shareholder of any of the covenants which
she is to perform hereunder.
5. Conditions to Obligations of Holding Company. The obligations of
Holding Company hereunder are, except as may be waived in writing by Holding
Company, subject to the conditions that:
a. Certificates representing 100% of the issued and outstanding shares of
common stock of the Subsidiary Corporation, as such stock shall then
be constituted shall be tendered for exchange at the closing by the
Shareholder.
b. The representations contained in Sections 1 and 7 hereof shall be true
on and as of the closing date with the same effect as though such
representations had been made on and as of the closing date, and there
shall be delivered to Holding Company at the closing, if requested, a
certificate, in form and substance satisfactory to Holding Company and
its counsel, duly signed by the Shareholder to that effect.
6. Conditions to Obligations of Shareholder. The obligation of the
Shareholder hereunder to deliver to Holding Company shares of common stock of
the Subsidiary Corporations is, except as may be waived in writing by the
Shareholder, subject to the conditions that (i) Holding Company was formed for
the purpose of participating in the exchanges as contemplated in this Agreement
and no shares of Common Stock are issued or outstanding (other than as
contemplated pursuant to the terms of this Agreement); (ii) Holding Company is a
duly organized and existing corporation in good standing under the laws of the
State of Nevada; (iii) the shares of Common Stock of Holding Company being
delivered hereunder are validly issued, fully paid, and nonassessable; (iv) this
Agreement has been duly executed and delivered by Holding Company, and
constitutes the legal, valid, and binding obligation of Holding Company,
enforceable in accordance with its terms; and (v) as to such other matters
incident to the transactions contemplated by this Agreement as the Shareholder
may reasonably require.
7. Stock Received as Investment. The Shareholder represents that the
shares of Common Stock of Holding Company being acquired by her pursuant to the
terms and provisions of this Agreement are being acquired for her own account
for purposes of investment and not with a view to or for resale in connection
with any distribution thereof.
8. Survival of Representations. The representations and warranties of the
parties hereto shall survive the making of this agreement, any examination on
behalf of such parties, and the closing hereunder. Any waiver of any term or
condition of this agreement shall not operate as a waiver of any other breach of
such term or condition, or of any other term or condition, nor
<PAGE>
shall any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision hereof.
9. Notices. All communications hereunder shall be in writing and
delivered or mailed to Holding Company, Suite 260, 11011 King Street, Overland
Park, Kansas 66210, and to the Shareholder, as set forth at Schedule I hereof,
or at such other address as each party may specify in writing.
10. Broker. Holding Company and the Shareholder represent to each other
that no broker has been employed in connection with any transaction or
transactions involved in this Agreement.
11. Entire Agreement. This Agreement constitutes the entire contract
between the parties hereto and no party shall be liable or bound to another in
any manner by any warranties, representations or guarantees except as
specifically set forth herein.
12. Modification. This Agreement may not be changed or modified except by
an agreement in writing by the Holding Company and by the Shareholder or by any
person authorized to act on their behalf.
13. Benefit. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective legal representatives, successors,
and assigns of the parties hereto.
14. Governing law. This Agreement is made pursuant to and shall be
construed under the laws of the State of Tennessee, without regard to any
applicable conflicts of law provisions.
15. Counterparts. This Agreement may be executed and endorsed in one or
more counterparts, and each of such counter parts shall, for all purposes, be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
IN WITNESS WHEREOF the parties hereto have duly caused this Agreement to be
executed as of the day and year first above written.
HOLDING COMPANY: SHAREHOLDER:
WORLD HOUSE ENTERTAINMENT, INC.
By: /s/ Brenda M. Hall /s/ Elizabeth Ann Peters
Brenda M. Hall, President ELIZABETH ANN PETERS
<PAGE>
Schedule I
SCHEDULE OF SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND ADDRESS NO. OF SHARES
<S> <C>
Elizabeth Ann Peters, 2831 Dogwood Place, Nashville, Tenn. 37204 200,000
</TABLE>
<PAGE>
Schedule II
FINANCIAL STATEMENTS
(Omitted)
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of World House
Entertainment, Inc. on Form SB-2 of our report dated February 25, 1998,
appearing in the Prospectus, which is part of this Registration Statement.
Cordovano & Harvey, P.C.
Denver, Colorado
April 29, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,709
<SECURITIES> 0
<RECEIVABLES> 102,174
<ALLOWANCES> (50,000)
<INVENTORY> 0
<CURRENT-ASSETS> 9,883
<PP&E> 24,588
<DEPRECIATION> (790)
<TOTAL-ASSETS> 84,395
<CURRENT-LIABILITIES> 151,559
<BONDS> 0
0
0
<COMMON> 700
<OTHER-SE> (67,864)
<TOTAL-LIABILITY-AND-EQUITY> 84,395
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,091
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,091)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,091)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,091)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
