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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
MUSICMAKER.COM, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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MUSICMAKER.COM, INC.
1740 Broadway
23rd Floor
New York, New York 10019
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INFORMATION STATEMENT PURSUANT TO
REGULATION 14C PROMULGATED UNDER THE
SECURITIES EXCHANGE ACT OF 1934
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WE ARE NOT ASKING YOU FOR YOUR PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ACTIONS DESCRIBED BELOW HAVE ALREADY BEEN APPROVED BY WRITTEN
CONSENT OF HOLDERS OF A MAJORITY OF MUSICMAKER.COM'S OUTSTANDING SHARES OF
COMMON STOCK. A VOTE OF THE REMAINING STOCKHOLDERS IS NOT NECESSARY.
This information statement is being mailed on or about September 29, 2000 to
holders of record as of August 10, 2000 (the "Record Date") of shares of
common stock, par value $0.01 ("Common Stock"), of musicmaker.com, Inc., a
Delaware corporation (the "Company"). It is being furnished in connection with
the adoption of an amendment to the Company's Amended and Restated Certificate
of Incorporation by written consent of the holders of a majority of the
outstanding shares of Common Stock.
On August 28, 2000, the Company's Board of Directors approved an amendment
to the Company's Amended and Restated Certificate of Incorporation to effect a
one-for-ten reverse stock split (the "Reverse Split") of the Company's issued
and outstanding Common Stock (the "Existing Common"). On September 12, 2000,
the amendment was approved in a written consent executed by the holders of
more than a majority of the outstanding shares of Common Stock. Approval by
the Board of Directors and by the holders of a majority of the outstanding
shares of Common Stock is adequate under Delaware law to effect the amendment.
The amendment will become effective following a waiting period of 20 calendar
days from the date this information statement is mailed to stockholders (the
"Effective Date"). The form of the Certificate of Amendment is attached to
this information statement as Exhibit A. Stockholders have no right under
Delaware law or the Company's Amended and Restated Certificate of
Incorporation or bylaws to dissent from the reverse stock split.
Pursuant to the Reverse Split, each ten shares of Existing Common issued and
outstanding immediately prior to the Effective Date will be reclassified as,
and exchanged for, one share of newly issued Common Stock, par value $.01
("New Common").
The Reverse Split will not materially affect the proportionate equity
interest in the Company of any holder of Existing Common or the relative
rights, preferences, privileges or priorities of any such stockholder. In
addition, the approximately 4,543,053 shares issuable upon exercise of the
Company's outstanding options and warrants, and the exercise price per share,
will be proportionately adjusted, and the par value per share of the Common
Stock will not be changed.
This information statement is being provided for your informational purposes
only.
Outstanding Stock and Voting Rights
As of the Record Date, there were 33,140,421 shares of Common Stock
outstanding. Each share of Common Stock entitles its holder to one vote.
<PAGE>
Reasons for the Reverse Stock Split
The Existing Common has been trading below $1.00 per share, which is the
minimum bid price for continued listing on The Nasdaq National Market (the
"National Market"). The closing bid price for the Existing Common on September
25, 2000 was $0.50 per share. The Company believes that The Nasdaq Stock
Market, Inc. ("NASDAQ") may remove the Company from listing on the National
Market if the minimum bid price requirement continues not to be met. In an
effort to avoid such action by NASDAQ, the Board believes that it is in the
best interest of the Company and its stockholders to effect the Reverse Split.
While the Company currently does not meet the minimum bid price requirement,
the Reverse Split should positively affect the trading price per share of the
New Common. However, there can be no assurance that the Company will meet in
the future the listing standards for the National Market.
An additional effect of the Reverse Split will be to decrease the number of
issued and outstanding shares of Common Stock from 33,140,421 shares of
Existing Common to approximately 3,314,042 shares of New Common. No assurance
can be given, however, that the market price of the New Common will rise in
proportion to the reduction in the number of outstanding shares resulting from
the Reverse Split. The New Common issued pursuant to the Reverse Split will be
fully paid and non-assessable. All shares of New Common will have the same par
value, voting rights and other rights as shares of the Existing Common have.
Stockholders of the Company do not have preemptive rights to acquire
additional shares of Common Stock which may be issued.
Stock Certificates and Fractional Shares
The Reverse Split will occur on the Effective Date without any further
action on the part of stockholders of the Company and without regard to the
date or dates on which certificates representing shares of Existing Common are
actually surrendered by each holder thereof for certificates representing the
number of shares of the New Common which each such stockholder is entitled to
receive as a consequence of the Reverse Split. After the Effective Date of the
Reverse Split, the certificates representing shares of Existing Common will be
deemed to represent one-tenth the number of shares of New Common. Certificates
representing shares of New Common will be issued in due course as old
certificates are tendered for exchange or transfer to Computershare Investor
Services, 12039 West Alameda Parkway, Suite Z-2, Lakewood, CO 80228,
Attention: Shareholder Relations (the "Exchange Agent" or "Transfer Agent"),
telephone number: 303-986-5400. No fractional shares of New Common will be
issued and, in lieu thereof, stockholders holding a number of shares of
Existing Common not evenly divisible by 10, and stockholders holding fewer
than 10 shares of Existing Common prior to the Effective Date, upon surrender
of their old certificates, will receive cash in lieu of fractional shares of
New Common. Such cash payment will not be made until a stockholder's
certificates of Existing Common are presented to the Exchange Agent. The price
payable by the Company for those shares of Existing Common which are not
divisible by 10 will be equal to the product of (a) the number of such shares
which cannot be exchanged for a whole number of shares of New Common and (b)
the average of the closing price of one share of Existing Common as reported
on the National Market for the 10 business days immediately preceding the
Effective Date of the Reverse Split for which transactions in the Existing
Common are reported.
Source of Funds; Number of Holders
The funds required to purchase the fractional shares are available and will
be paid from the current cash reserves of the Company. The Company cannot
predict with certainty the number of fractional shares or the total amount
that the Company will be required to pay for fractional share interests.
However, it is not anticipated that the funds necessary to effect the
cancellation of fractional shares will be material. As of August 10, 2000,
there were approximately 169 holders of record of Existing Common. The Company
does not anticipate that, as a result of the Reverse Split, the number of
holders of record or beneficial owners of Existing Common or New Common will
change significantly.
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No Change in Company's Status
The Company does not anticipate any change in the Company's status as a
reporting company for federal securities law purposes as a result of the
Reverse Split.
Exchange of Stock Certificates
On or around the Effective Date, the Company will provide a transmittal form
(the "Transmittal Form") that each stockholder of record on the Effective Date
should use to transmit certificates representing shares of Existing Common
("Old Certificates") to the Exchange Agent for exchange or transfer. The
Transmittal Form contains instructions for the surrender of Old Certificates
to the Exchange Agent in exchange for certificates representing the
appropriate number of whole shares in New Common. No new certificates will be
issued to a stockholder until such stockholder has surrendered all Old
Certificates together with a properly completed and executed Transmittal Form
to the Exchange Agent.
Upon proper completion and execution of the Transmittal Form and its return
to the Exchange Agent together with all of a stockholder's Old Certificates
and/or an Affidavit of Loss for any lost or destroyed certificates, as
applicable, that stockholder will receive a new certificate or certificates
representing the number of whole shares of New Common into which the shares of
Common Stock represented by the Old Certificates are being converted as a
result of the Reverse Split. Until surrendered to the Exchange Agent, Old
Certificates retained by stockholders will be deemed for all purposes,
including voting and payment of dividends, if any, to represent the number of
whole shares of New Common to which such stockholders are entitled as a result
of the Reverse Split. Stockholders should not send their Old Certificates to
the Exchange Agent until after the Effective Date. Shares of Existing Common
surrendered after the Effective Date will be replaced by certificates
representing shares of New Common as soon as practicable after such surrender.
No service charge will be payable by holders of shares of Existing Common in
connection with the exchange of shares and all expenses of the exchange and
issuance of new certificates will be borne by the Company.
Certificates representing shares of Existing Common which contain a
restrictive legend will be exchanged for New Common with the same restrictive
legend. As applicable, the time period during which a stockholder has held the
Existing Common will be included in the time period during which such
stockholder actually holds the New Common received in exchange for such
Existing Common for the purposes of determining the term of the restrictive
period applicable to the New Common.
Federal Income Tax Consequences
Except as described below with respect to cash received in lieu of
fractional share interests, the receipt of New Common in the Reverse Split
should not result in any taxable gain or loss to stockholders for federal
income tax purposes. The tax basis of New Common received as a result of the
Reverse Split (when added to the basis for any fractional share interests to
which a stockholder is entitled) will be equal, in the aggregate, to the basis
of the Existing Common exchanged for New Common. The per share tax basis of
the New Common is based on the tax basis of the Existing Common for which the
New Common is exchanged. For purposes of determining whether short-term or
long-term capital gains treatment will be applied to a stockholder's
disposition of New Common subsequent to the Reverse Split, a stockholder's
holding period for the shares of Existing Common will be included in the
holding period for the New Common received as a result of the Reverse Split.
A stockholder who receives cash in lieu of fractional shares of New Common
will be treated as first receiving such fractional shares and then receiving
cash as payment in exchange for such fractional shares of New Common and,
except for dealers, will recognize capital gain or loss in an amount equal to
the difference between the amount of cash received and the adjusted basis of
such fractional shares.
THE DISCUSSION SET FORTH ABOVE CONCERNING CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE REVERSE SPLIT IS INCLUDED HEREIN FOR GENERAL INFORMATION
ONLY. ALL STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO ANY
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FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES APPLICABLE TO THEM WHICH
COULD RESULT FROM THE REVERSE SPLIT.
Effectiveness
The Company reserves the right, upon notice to stockholders, to abandon or
modify the proposed amendment and the Reverse Split at any time prior to the
filing of the amendment upon consent of the Board and the holders of a
majority of the Existing Common then issued and outstanding.
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding shares of our Common
Stock beneficially owned as of August 7, 2000. Beneficial ownership is
calculated in accordance with Rule 13d-3(d) under the Securities Exchange Act
of 1934. Shares of Common Stock subject to options and warrants that are
currently exercisable or are exercisable within 60 days of August 7, 2000, are
deemed outstanding with respect to the person holding those options but are
not deemed outstanding for purposes of computing the percentage ownership of
any other person. Unless otherwise indicated, each person possesses sole
voting and investment power with respect to the shares identified as
beneficially owned. Except as otherwise indicated in the table, the address of
the stockholders listed below is that of the Company's principal executive
office. Directors not included in the table below do not hold Company
securities.
<TABLE>
<CAPTION>
Shares Beneficially Owned
As of August 7, 2000
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Name and Address Number Percent
---------------- --------------- -------------
<S> <C> <C>
Virgin Holdings, Inc. ........................ 12,098,663 36.5%
338 North Foothill Road
Beverly Hills, CA 90210
Rho Management Trust I........................ 2,814,322(1) 8.5%
767 Fifth Avenue
New York, NY 10053
Robert P. Bernardi............................ 2,443,093(2) 7.4%
Zomba Record Holdings, B.V. .................. 1,997,008 6.0%
Devarajan S. Puthukarai....................... 1,344,404(3) 4.1%
Irwin H. Steinberg............................ 388,513(4) 1.2%
William Crowley............................... 199,758(5) *
Lawrence A. Lieberman......................... 221,759(6) *
Jay A. Samit.................................. 106,250(7) *
Mark Fowler................................... 75,257(8) *
Jonathan A. B. Smith.......................... 60,417(9) *
John A. Skolas................................ 60,417(10) *
William W. Scranton, III...................... 8,333(11) *
All executive officers and directors as a
group (10 persons)........................... 4,908,201(12) 13.7%
</TABLE>
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* Less than 1%.
(1) Includes 787,904 shares of Common Stock issuable upon exercise of Series B
warrants and 438,280 shares of Common Stock issuable upon exercise of
Series C warrants. Rho Management Partners L.P., a Delaware limited
partnership may be deemed the beneficial owner of shares registered in the
name of Rho Management Trust I, under an investment advisory relationship
by which Rho Management Partners L.P. exercises sole voting and investment
control over Rho Management Trust I's shares and warrants.
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<PAGE>
(2) Includes 272,817 shares of Common Stock issuable upon exercise of Series
B warrants, 60,600 shares of Common Stock issuable upon exercise of
Series C warrants and 450,280 shares of Common Stock issuable in
connection with vested options with exercise prices ranging from $2.06 to
$5.94 per share.
(3) Includes 453,896 shares of Common Stock issuable upon the exercise of
warrants with an exercise price of $1.65 per share, 68,204 shares of
Common Stock issuable upon the exercise of Series B warrants, 15,150
shares of Common Stock issuable in connection with Series C warrants, and
450,280 shares of Common Stock issuable upon exercise of vested options
with exercise prices ranging from $2.06 to $5.94 per share.
(4) Includes 246,637 shares of Common Stock issuable upon the exercise of
warrants with exercise prices ranging from $1.65 to $1.98 per share.
(5) Includes 78,720 shares of Common Stock issuable upon the exercise of
vested options.
(6) Includes 191,500 shares of Common Stock issuable upon the exercise of
vested options.
(7) Includes 106,250 shares of Common Stock issuable upon the exercise of
vested options.
(8) Includes 75,257 shares of Common Stock issuable upon the exercise of
vested options.
(9) Includes 60,417 shares of Common Stock issuable upon the exercise of
vested options.
(10) Includes 60,417 shares of Common Stock issuable upon the exercise of
vested options.
(11) Includes 8,333 shares of Common Stock issuable upon exercise of vested
options with an exercise price of $1.98 per share.
(12) Includes 341,021 shares of Common Stock issuable upon the exercise of
Series B warrants, 75,750 shares of Common Stock issuable upon the
exercise of Series C warrants, 683,870 shares of Common Stock issuable
upon the exercise of outstanding common stock warrants and 1,711,588
shares of Common Stock issuable upon the exercise of vested options.
BY ORDER OF THE BOARD OF DIRECTORS
_____________________________________
Devarajan Puthukarai
Chief Executive Officer,
President, and
Chief Operating Officer
September 29, 2000
New York, New York
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EXHIBIT A
AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
MUSICMAKER.COM, INC.
This is to certify that the following Amendment to the Amended and Restated
Certificate of Incorporation of musicmaker.com, Inc. (the "Company"), was
adopted by the Board of Directors of the Company and approved by the written
consent of stockholders eligible to vote and holding the requisite number of
shares pursuant to the provisions of Section 228 and Section 242 of the
General Corporation Law of the State of Delaware, as amended, and to that end,
does by this Amendment to the Amended and Restated Certificate of
Incorporation set forth the following:
1. Article FOURTH of the Amended and Restated Certificate of
Incorporation is hereby amended by adding the following paragraph to
Article FOURTH:
"Effective upon the filing by the Secretary of State of the State of
Delaware of this Amendment to the Amended and Restated Certificate of
Incorporation (the "Effective Time"), each 10 shares of common stock of
the Company, par value $0.01 per share (the "Old Common Stock"), issued
and outstanding or reserved for issuance or held in treasury shall
automatically, and without any action by the holder thereof, be
reclassified into 1 share of common stock of the Company, par value
$0.01 per share (the "New Common Stock"), and each certificate which
prior to the Effective Time represented 10 shares of the Old Common
Stock shall, from and after the Effective Time, be deemed to represent
1 share of the New Common Stock"
2. This Amendment to the Restated Certificate of Incorporation has been
duly executed in accordance with Section 103 of the General Corporation Law
of the State of Delaware.
I, THE UNDERSIGNED, being the President and Chief Executive Officer of the
Company hereinabove named, for the purpose of amending the Amended and
Restated Certificate of Incorporation of the Company, pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand and seal this day
of October, 2000.
_____________________________________
Devarajan S. Puthukarai
President and Chief Executive
Officer
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