SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12.
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MUSICMAKER.COM, INC.
(Name of Registrant as Specified in Its Charter)
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BCG STRATEGIC INVESTORS, LLC
BARINGTON CAPITAL GROUP, L.P., BARINGTON COMPANIES EQUITY PARTNERS, L.P., DOT
COM INVESTMENT CORPORATION,
JAMES A. MITAROTONDA and SEYMOUR HOLTZMAN
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
-----------------------------------------------------------------------------
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PRELIMINARY COPY; SUBJECT TO COMPLETION
DATED JANUARY 5, 2001
CONSENT STATEMENT
TO STOCKHOLDERS OF
MUSICMAKER.COM, INC.
BY
BCG STRATEGIC INVESTORS, LLC
This Consent Solicitation Statement and the accompanying form of written
consent are being furnished by BCG Strategic Investors, LLC ("BCG") to the
holders of shares of common stock, par value $.01 per share, of musicmaker.com,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation by BCG of written stockholder consents to take the actions
described below without a meeting of the Company's stockholders, as permitted by
Delaware law. This Consent Statement and the accompanying WHITE consent card are
first being sent to stockholders on or about January __, 2001.
The purpose of this solicitation is to obtain control of the Company's
board of directors in order to maximize for all stockholders on a pro rata basis
distributions upon the liquidation of the Company. On January 3, 2001, the board
of directors of the Company announced that it intended to liquidate the Company.
BCG and other members of its group, with ownership of over 38% of the
outstanding common stock, in contrast to the nominal ownership of the current
board, have the greatest incentive of any stockholder to maximize the return on
liquidation. BCG believes that its nominees for director will bring to the board
the judgment, experience, energy and objectivity needed to produce the maximum
possible liquidation distribution to the Company's stockholders.
In furtherance of its objectives, BCG is soliciting stockholder consents
to authorize the following actions:
1. Amend Article III, Section 1 of the Amended By-laws of the
Company to set the number of directors on the Company's board of directors at
fifteen (the "Board Size Proposal");
2. Amend Article III, Section 3 of the By-laws to provide that any
vacancies in the board of directors which result from an increase in the number
of directors as a result of an amendment to the By-laws by a stockholder consent
solicitation shall be filled only by the holders of a majority of the shares
then entitled to vote at any election of directors, with or without a meeting
(the "Board Vacancy Proposal");
3. Elect BCG's eight nominees for director, consisting of Seymour
Holtzman, James A. Mitarotonda and Joseph R. Wright, Jr. as Class A directors
to serve until the 2003 annual meeting of stockholders, Barry J. Booth and
Michael A. McManus, Jr. as Class B directors to serve until the 2001 annual
meeting of stockholders and Jesse H. Choper, William J. Fox and Allan R.
Lyons as Class C directors to serve until the 2002 annual meeting of
stockholders (the "Director Election Proposal"); and
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4. Repeal any By-laws adopted by the board of directors subsequent to
February 17, 1999 (the effective date of the By-laws most recently filed by the
Company with the Securities and Exchange Commission) prior to the effectiveness
of BCG's proposals, other than the Board Size Proposal and the Board Vacancy
Proposal (the "By-laws Proposal"). The Board Size Proposal, the Board Vacancy
Proposal, the Director Election Proposal and the By-laws Proposal are referred
to herein collectively as the "Proposals."
See "The Proposals" for a complete description of the actions proposed by
BCG. See "Information About BCG" and "Certain Other Information Regarding BCG
and the BCG Nominees" for information regarding BCG, the BCG Nominees and
certain other persons who may be deemed to be participants in this Consent
Solicitation.
The consent of a majority of the shares of common stock outstanding on
January 5, 2001, the record date for this Consent Solicitation as further
discussed under "Summary of Consent Procedure," is required to approve each of
the Proposals. Each share of common stock outstanding on the record date is
entitled to one vote on each of the Proposals. According to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, as of
November 6, 2000, 3,314,042 shares of common stock were outstanding.
This consent solicitation is being made by BCG and not on behalf of the
board of directors of the Company.
BCG recommends that you consent to each of the proposals. Your consent is
important, no matter how many or how few shares of common stock you own. BCG
urges you to sign, date and return the enclosed WHITE consent card promptly in
accordance with the instructions set forth below. Please do NOT sign any consent
revocation card you may receive.
BCG urges you to read this entire Consent Statement carefully.
BCG requests that signed and dated WHITE consent cards be returned to it
on or before _______, 2001. A failure to sign, date and return the WHITE consent
card in a timely manner will have the same effect as voting against the
proposals. If you need assistance in voting your shares of common stock, please
call BCG's information agent, D.F. King & Co., Inc., toll-free at 1-800-431-9643
or if you are a bank or broker please call collect at 1-212-269-5550.
SUMMARY OF CONSENT PROCEDURE
General; Effectiveness of Consents
Section 228(a) of the Delaware General Corporation Law provides that,
unless otherwise provided in the certificate of incorporation of a corporation,
any action required to be or that may be taken at a meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if written
consents setting forth the action so taken are signed, dated and delivered to
the corporation by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to take such action at a meeting
at which all shares entitled to vote thereon were present and voted. Section
228(c) of the Delaware corporation law further provides that no written consent
will be effective to take the corporate
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action referred to therein unless, within 60 days of the earliest dated consent
delivered to the corporation in the manner required by the Delaware corporation
law, written consents signed by a sufficient number of holders to take action
are delivered to the corporation in the manner required by the Delaware
corporation law.
The Amended and Restated Certificate of Incorporation of the Company does
not prohibit stockholder action by written consent. The By-laws provide that the
board of directors may fix a record date to determine the stockholders entitled
to consent to corporate action in writing without a meeting. The record date is
not permitted to precede the date upon which the resolution fixing the record
date is adopted by the board of directors and may not be more than ten days
after the date upon which the resolution fixing the record date is adopted by
the board of directors. If the board of directors has not fixed the record date
with respect to a corporate action and no prior action by the board of directors
is required in connection with such corporate action under the Delaware
corporation law, the record date will be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Company by delivery to its registered office in Delaware, its
principal place of business, or an officer or agent of the Company have custody
of the book in which proceedings of meetings of stockholders are recorded.
On January 5, 2001, BCG delivered a signed written consent to the
Company's registered agent in Delaware and to the Company's principal offices.
Accordingly, BCG believes that January 5, 2001 is the record date for purposes
of this Consent Solicitation.
According to the Company's September 30, 2000 Form 10-Q, 3,314,042 shares
of common stock were outstanding as of November 6, 2000. Each share of common
stock outstanding on the record date is entitled to one vote on each of the
Proposals. Accordingly, based on the number of shares reported by the Company as
outstanding on November 6, 2000, written consents by holders representing
1,657,022 shares of common stock will be required to adopt and approve each of
the Proposals. By execution of the written consent, BCG has consented with
respect to all 1,209,866 shares of common stock it owns in favor of the
Proposals. The stock owned by BCG represents approximately 36.51% of the shares
of common stock reported by the Company as outstanding as of November 6, 2000.
In addition, Barington Capital Group, L.P., Barington Companies Equity
Partners, L.P. and dot com Investment Corporation jointly filed with BCG a
Statement on Schedule 13D with the SEC on December 18, 2000 and are acting as a
group with BCG. These entities, which own 18,500, 16,900 and 26,200 shares of
common stock respectively, will also consent to the Proposals. The total number
of shares owned by the BCG group is 1,271,466 shares or approximately 38.36% of
the shares of common stock reported by the Company as outstanding as of November
6, 2000. Accordingly, based on the number of shares of common stock reported by
the Company as outstanding as of November 6, 2000, written consents by holders
representing an additional 385,556 shares of common stock will be required to
adopt and approve each of the Proposals. Each abstention and broker non-vote
with respect to any of the Proposals will have the same effect as voting against
the adoption of such Proposal.
The effectiveness of each of the Proposals is conditioned upon the
approval of all other Proposals.
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If the Proposals are adopted pursuant to this Consent Solicitation, prompt
notice will be given by the Company pursuant to Section 228(d) of the Delaware
corporation law to eligible stockholders who have not signed and returned
consent cards indicating consent to each of the Proposals.
BCG recommends that you consent to each of the proposals. Your consent is
important. Please mark, sign and date the enclosed WHITE consent card and return
it in the enclosed postage-paid envelope promptly. Failure to sign and return
your consent will have the same effect as voting against the Proposals.
Procedural Instructions
If a stockholder is the record holder of shares of common stock as of the
close of business on the record date, the stockholder may elect to consent to,
withhold consent to or abstain with respect to each Proposal by marking the
"CONSENTS," "WITHHOLDS CONSENT" or "ABSTAINS" box, as applicable, underneath
each such Proposal on the accompanying WHITE consent card and signing, dating
and returning it promptly in the enclosed envelope. In addition, a stockholder
may withhold consent to the election of any individual BCG Nominee by writing
such person's name where indicated on the consent card.
If a stockholder returns a consent card that is signed and not marked with
respect to any Proposal, the stockholder will thereby consent to that Proposal
in its entirety, except that the stockholder will not thereby consent to the
election of any BCG Nominee whose name is written by the stockholder on the
consent card. Failure to return a signed consent card will have the same effect
as voting against the Proposals.
Under the Delaware corporation law, only stockholders of record on the
record date are eligible to give their consent to the Proposals. Therefore, BCG
urges each stockholder, even if the stockholder has subsequent to the record
date sold its shares of common stock, to grant its consent pursuant to the
enclosed WHITE consent card with respect to all shares held as of the record
date. The failure to consent by a former stockholder who was a stockholder on
the record date may adversely affect those who continue to be stockholders of
the Company.
In addition, if your shares are held of record in the name of a brokerage
firm, bank nominee or other institution, only that entity can execute a consent
on your behalf and only upon receipt of your specific instructions. Accordingly,
you should sign, date and return the enclosed WHITE consent card in the envelope
provided by your broker.
Revocation of Consents
Consents with respect to any Proposal may be revoked at any time prior to
the time that the Proposal becomes effective, provided that a written, dated
revocation that clearly identifies the consent being revoked is executed and
delivered either to (i) BCG, c/o D.F. King & Co. Inc., 77 Water Street, 20th
Floor, New York, New York 10005, Attn: Thomas Long or (ii) the principal
executive offices of the Company at 1740 Broadway, 23rd Floor, New York, New
York 10019.
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A revocation may be in written form validly signed by the record holder as
long as it clearly states that the consent previously given is no longer
effective. BCG requests that a copy of any revocation sent to the Company be
sent to BCG in care of D.F. King, at the address set forth above, so that BCG
may more accurately determine if and when consents to the Proposals have been
received from the holders of the requisite number of shares of the common stock.
You may revoke any previous consent revocation by subsequently signing, dating
and returning the WHITE consent card included with this Consent Statement. In
the event you require an additional WHITE consent card, please contact D.F.
King.
INFORMATION ABOUT BCG
BCG, the BCG Nominees and certain other persons named below may be deemed
to be "participants" in this Consent Solicitation as such term is defined in
Schedule 14A promulgated under the Securities Exchange Act of 1934. BCG is a
Delaware limited liability company formed to acquire, hold and dispose of the
common stock. The address of the principal business and principal offices of BCG
is 888 Seventh Avenue, 17th Floor, New York, New York 10019. Each of James A.
Mitarotonda and Seymour Holtzman is a Manager of BCG. The business address of
James A. Mitarotonda is c/o Barington Capital Group, L.P., 888 Seventh Avenue,
17th Floor, New York, New York 10019. The business address of Seymour Holtzman
is c/o dot com Investment Corporation, 100 North Wilkes Barre Blvd., 4th Floor,
Wilkes Barre, Pennsylvania 18702. Each of Barington Capital Group, L.P.,
Barington Companies Equity Partners, L.P. and dot com Investment Corporation is
a member of BCG.
Barington Capital Group, L.P. is a Delaware limited partnership formed
to engage in the business of acquiring, holding and disposing of investments
in various companies. The address of the principal business and principal
offices of Barington Capital Group, L.P. is 888 Seventh Avenue, 17th Floor,
New York, New York 10019.
The general partner of Barington Capital Group, L.P. is LNA Capital
Corp. LNA Capital Corp. is a Delaware corporation formed to be the general
partner of Barington Capital Group, L.P. The address of the principal
business and principal offices of LNA Capital Corp. is: c/o Barington
Capital Group, L.P., 888 Seventh Avenue, 17th Floor, New York, New York
10019. James A. Mitarotonda is the Chairman, President and Chief Executive
Officer of LNA Capital Corp.
Barington Companies Equity Partners, L.P. is a Delaware limited
partnership formed to engage in the business of acquiring, holding and
disposing of investments in various companies. The address of the principal
business and principal offices of Barington Companies Equity Partners, L.P.
is 888 Seventh Avenue, 17th Floor, New York, New York 10019.
The general partner of Barington Companies Equity Partners, L.P. is
Barington Companies Investors, LLC. Barington Companies Investors, LLC is a
Delaware limited liability company formed to be the general partner of Barington
Companies Equity Partners, L.P. The address of the principal business and
principal offices of Barington Companies Investors, LLC is 888 Seventh Avenue,
17th Floor, New York, New York 10019. James A. Mitarotonda is the Managing
Member of Barington Companies Investors, LLC.
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dot com Investment Corporation is a Delaware corporation formed to engage
in the business of acquiring, holding and disposing of investments in various
companies. The address of the principal business and principal offices of dot
com Investment Corporation is 100 North Wilkes Barre Blvd., 4th Floor, Wilkes
Barre, Pennsylvania 18702. Seymour Holtzman is the President and sole director,
and Barry J. Booth is the Secretary and Treasurer, of dot com Investment
Corporation. The business address of each of Seymour Holtzman and Barry J. Booth
is c/o dot com Investment Corporation, 100 North Wilkes Barre Blvd., 4th Floor,
Wilkes Barre, Pennsylvania 18702.
As of the date of this Consent Statement, the BCG group owns an aggregate
of 1,271,466 shares of common stock representing approximately 38.36% of the
outstanding shares of the common stock based upon the 3,314,042 shares of common
stock reported by the Company in the Form 10-Q to be issued and outstanding as
of November 6, 2000.
Additional information about BCG, the BCG group and the BCG Nominees
including information regarding the beneficial ownership of common stock is set
forth under the heading "Certain Other Information Regarding BCG and the BCG
Nominees" and in Annex A attached to this Consent Statement.
BCG has retained D.F. King to act as an advisor and to provide
consulting and analytic services and solicitation services in connection with
this Consent Solicitation. D.F. King is a proxy service company. It mails
documents to stockholders, responds to stockholder questions and solicits
stockholder votes for many companies. D.F. King does not believe that it or
any of its directors, officers, employees, affiliates or controlling persons,
if any, is a "participant" in this Consent Solicitation or that Schedule 14A
requires the disclosure of certain information concerning D.F. King. The
business address of D.F. King is 77 Water Street, 20th Floor, New York, New
York 10005. D.F. King has informed BCG that, as of the date of this Consent
Statement, it does not hold any shares of common stock for its own account or
for the accounts of others.
BACKGROUND OF AND REASONS FOR THE CONSENT SOLICITATION
Background
On December 6, 2000, BCG purchased from Virgin Holdings, Inc. 1,209,866
shares of common stock for an aggregate purchase price of $3,024,665, pursuant
to a stock purchase agreement dated as of December 6, 2000 between BCG and
Virgin Holdings, Inc. The stock purchase agreement is filed as an exhibit to the
BCG group's Schedule 13D. All of the funds used by BCG to acquire the 1,209,866
shares of common stock were contributed to BCG by the members of BCG.
On various dates from November 28, 2000 through December 7, 2000, members
of the BCG group purchased a total of 61,600 shares of common stock in the open
market for a total purchase price of $108,437, excluding commissions and related
costs. The details of these purchases are set forth in Annex A to this Consent
Statement. Except as noted in the following sentence, all of the purchases were
funded by working capital, which may have included margin loans made by
brokerage firms in the ordinary course of business. In the case of dot com
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Investment Corporation, approximately 2/3 of the purchase price for the common
stock that it purchased was funded by a loan from an affiliate.
At the close of business on December 7, 2000, the Company announced that
its board had adopted a stockholder rights plan, effectively precluding the BCG
group from purchasing any additional shares of common stock
On December 18, 2000, the BCG group filed with the SEC its Schedule 13D
disclosing that the group members had acquired in excess of 5% of the
outstanding shares of the common stock.
On December 11, 2000, representatives of BCG met with the management of
the Company and its directors, attorneys and investment bankers. During this
meeting, BCG requested representation on the board of directors. BCG also
discussed possible ways to improve stockholder value including the immediate
reduction of expenses, the termination of the Company's current operations,
alternative uses or the sale of the manufacturing facility operated by the
Company, the buyback of the common stock and combinations with other companies.
On December 13, 2000, Mr. Mitarotonda, as a representative of BCG, met
with Devarajan S. Puthukarai, the Company's chief executive officer. At this
meeting, Mr. Mitarotonda requested that the Company's three vacant seats on the
board of directors be filled by BCG appointees. In addition, Mr. Mitarotonda
expressed the view of BCG that all current business operations of the Company
should be immediately discontinued and that the capital of the Company should be
redeployed in a manner that will preserve and enhance stockholder value.
In concluding that the Company should immediately discontinue its
current operations, BCG noted the following:
o The Company reported an operating loss of approximately $26.7 million
for the fiscal year ended December 31, 1999, as reported in the
Company's Form 10-K for that year.
o The Company reported an operating loss of approximately $11.0 million
for the quarter ended March 31, 2000, as reported in the Company's
Form 10-Q for that quarter.
o The Company reported an operating loss of approximately $14.6 million,
approximately $1.2 million of which represents a pre-tax nonrecurring
charge, for the quarter ended June 30, 2000, as reported in the
Company's Form 10-Q for that quarter.
o The Company reported an operating loss of approximately $19.0 million
for the quarter ended September 30, 2000, as reported in the Company's
Form 10-Q for that quarter.
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o The closing price for the common stock on January 3, 2000 was $58.75
adjusted for a 10-1 stock split. The closing price for the common
stock on December 15, 2000, the business day preceding the filing of
the BCG group's Schedule 13D, was $2.50 -- a decline of $56.25 or
approximately 96% from the price on January 3, 2000.
On or about December 19, 2000 and December 21, 2000, Mr. Mitarotonda
contacted Mr. Puthukarai by telephone to ascertain the Company's response to
BCG's request for representation on the board of directors and the Company's
plans with respect to future operations. On both occasions, the Company did not
respond to BCG's request for representation on the board of directors.
On January 3, 2001, the Company issued a press release announcing that its
board of directors had unanimously voted to liquidate and dissolve the Company
and that the board of directors believed that liquidation was in the best
interests of the Company and its stockholders and would return the greatest
value to stockholders. The press release also stated that, in determining to
liquidate the Company, the board considered a number of factors including that
the music industry and e-commerce in general are in a period of rapid change and
uncertainty; the potential for growth and availability of financing in this
environment is extremely limited; the Company's inability, despite significant
efforts, to identify a buyer or strategic partner willing to offer greater value
than that expected to be derived from liquidation; and the Company's stock has
traded well below the net asset value of its shares.
Following the Company's announcement, on January 4, 2001, Mr.
Mitarotonda again contacted Mr. Puthukarai by telephone. Mr. Mitarotonda
indicated that BCG supported the board's decision to liquidate, which was
consistent with the views that BCG had earlier expressed regarding the lack
of any prospects of profitability for the Company's business. Mr.
Mitarotonda then reiterated BCG's request for three board seats to fill the
current vacancies. Mr. Puthukarai responded by stating that the board would
not grant BCG's request for board representation.
That same day, in response to the rejection of BCG's request for board
representation, Mr. Mitarotonda sent the following letter to Mr. Puthukarai:
BCG Strategic Investors, LLC
c/o Barington Capital Group, L.P.
888 Seventh Avenue, 17th Floor
New York, New York 10019
January 4, 2001
musicmaker.com, Inc.
1740 Broadway
23rd Floor
New York, New York 10019
Attention: Devarajan S. Puthukarai
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Chairman, Chief Executive Officer and
President
Gentlemen:
We applaud the decision of the Company's board of directors, announced
yesterday, to engage in a prompt liquidation of the Company rather than
pursue a course of operation that had no prospects of profitability and is
rapidly dissipating the Company's remaining assets. We were deeply
disappointed, however, by the Company's failure to honor our request for
board representation that I communicated to you earlier today.
As you know, with over 38% of the Company's outstanding stock, our
group is by far the Company's largest stockholder. We have an overriding
interest in a liquidation process that will maximize the return to
stockholders. In this regard, we seek no special treatment, and indeed
cannot receive such treatment under Section 203 of the Delaware
corporation law. Our interest is to obtain the greatest possible return to
all stockholders, in which we will share on a pro rata basis.
We reiterate therefore our request for representation on the board of
directors. Commensurate with our holdings, we are asking the board to
appoint our representatives to fill the three existing vacancies on the
board. Our representatives will bring to the musicmaker board the
judgment, experience, energy, objectivity and incentive to produce the
greatest liquidation distribution to the Company's stockholders. We
understand, for example, that the Company is a party to costly leases and
other contractual arrangements, whose value to the Company was highly
questionable even at the outset. Some of these arrangements will require
great skill and determination to terminate on terms that are financially
favorable to the Company. Our representatives will have that skill and
determination.
Virgin Holdings, from whom BCG purchased its shares, had three
representatives on the board. The Company's refusal to grant us equal
representation is unreasonable, unfair and suspect.
Time is now of the essence. With each passing day, the Company's assets
diminish. Given our financial interest in the Company and our ability to
bring substantial value to the liquidation process, we reiterate our
demand that the board act promptly and affirmatively on our request for
board representation.
Please call me as soon as possible at (212) 974-5701 to discuss.
Very truly yours,
/s/ James A. Mitarotonda
Mr. Mitarotonda received no response to the letter. On January 4,
2001, Mr. Holtzman, on behalf of BCG, contacted counsel for the Company
requesting board representation. Mr. Holtzman's
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request was summarily denied. BCG has concluded that the Company will not honor
BCG's request for board representation and that the only way to protect the
interests of the BCG group and to assure a maximum return on liquidation to all
stockholders is to undertake this Consent Solicitation.
Accordingly, on January 5, 2001, BCG filed a preliminary copy of this
Consent Statement with the SEC. At the same time, BCG delivered to the Company's
registered agent in Delaware BCG's written consent in favor of the Proposals.
BCG also delivered to the Company a demand to provide to it, among other things,
a list of stockholders to assist BCG in delivering this Consent Statement to the
Company's stockholders and in communicating with such stockholders.
Reasons for the Consent Solicitation
The purpose of this solicitation is to obtain control of the Company's
board of directors in order to maximize for all stockholders on a pro rata basis
distributions upon the liquidation of the Company. If the Proposals are adopted,
the BCG nominees will constitute a majority of the members of the Company's
board of directors, even if the current board were to fill the existing board
vacancies.
In contrast to the nominal ownership of the current board, the members of
the BCG group with ownership of over 38% of the outstanding common stock, have
the greatest incentive of any stockholders to maximize the return on
liquidation. Moreover, BCG believes that its nominees for director will bring to
the board the judgment, experience, energy and objectivity needed to produce the
maximum possible liquidation distribution to the Company's stockholders.
The return to stockholders on liquidation will be a direct function of the
ability of the Company to minimize its expenditures from now until the end of
the liquidation period and to settle or discharge the Company's liabilities for
the smallest possible amounts. For example, according to its SEC filings, the
Company is the subject of a series of stockholders' securities litigation
actions seeking substantial compensatory damages or rescission of stock
issuances. Also by way of example, according to its SEC filings, the Company is
party to a number of long term leases with substantial monthly rental payment
obligations. These and other actual, potential and contingent liabilities need
to be minimized or eliminated if stockholders are to achieve a maximum return.
BCG does not believe that the current board has the focus or the incentive
to achieve the goals of maximizing stockholder return by minimizing outlays and
dealing aggressively with the Company's liabilities.
o The current board has run up an accumulated deficit of over $78
million, of which almost $45 million was incurred in the first nine
months of 2000 alone!
o The stockholdings of the current board are de minimis, so that these
board members lack the personal financial incentive to maximize the
return to stockholders on a pro rata basis.
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o Having developed and presided over the Company's failed business
plan, the current board lacks the objectivity to make the hard
choices that BCG believes will be necessary in order to implement a
liquidation plan that will maximize stockholder return.
In contrast, the BCG group, with its substantial stockholdings in the
Company, is focused and incentivized on the goal of achieving the greatest
return to stockholders in which it will share on a pro rata basis. Unlike the
current board, therefore, the interests of the BCG group and the BCG Nominees in
the liquidation will be directly aligned with the interests of all other
stockholders.
CERTAIN OTHER INFORMATION REGARDING BCG AND THE BCG NOMINEES
Set forth below are the name, age, business address, present principal
occupation, employment history and directorships of each of the BCG Nominees for
at least the past five years. This information has been furnished to BCG by the
respective BCG Nominees. Each of the BCG Nominees has consented to serve as a
director of the Company. Each of the BCG Nominees is at least 18 years of age.
None of the entities referenced below is a parent or subsidiary of the Company.
Present Principal Occupation, Five Year
Name, Age and Business Address Employment History and Directorships
-------------------------------------- ---------------------------------------
Barry J. Booth, 40 Mr. Booth is a Certified Public
100 North Wilkes Barre Blvd. Accountant and Chief Financial Officer
4th Floor of Jewelcor Management, Inc. Prior to
Wilkes Barre, Pennsylvania 18702 joining Jewelcor, Mr. Booth was Chief
Financial Officer of Farmbid.com, an
industry leading agricultural portal
and vertical e-commerce company from
September 1999 to June 2000. From
September 1998 to September 1999, Mr.
Booth was a consultant to corporate
institutions in the financial services
industry. From September 1994 to
September 1998, Mr. Booth was Chief
Financial Officer of Barber and
Bronson, Inc., an investment bank and
broker-dealer.
Jesse H. Choper, 63 Mr. Choper has been the Earl Warren
University of California at Berkeley Professor of Public Law at the
School of Law University of California at Berkeley
Berkeley, California 94720 School of Law since 1965. Professor
Choper was the Dean of the Law School
from 1982 to 1996. In 1996, he was a
visiting Professor at Universitad
Autonoma in Barcelona, Spain. From
1960 to 1961, Professor Choper was a
law clerk for Chief Justice Earl
Warren. Mr. Choper is currently a
member of the Board of Director of
Designs,
11
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Inc. (NASDAQ:DESI).
William J. Fox , 44 Mr. Fox has served as President, Chief
c/o Arcade Marketing Inc. Executive Officer and a director of
120 East 56th Street AKI Holding Corp. and as Chairman,
Suite 1200 President and a director of AKI, Inc.
New York, New York 10022 since February 1999. Mr. Fox was
President, Strategic and Corporate
Development of Revlon Worldwide, Senior
Executive Vice President of Revlon,
Inc. and Revlon Consumer Products
Corporation ("RCPC") (collectively,
"Revlon") and Chief Executive Officer,
Revlon Technologies, a division of
Revlon, from January 1998 through
January 1999. He was Executive Vice
President from 1991 through January
1997 and Senior Executive Vice
President from January 1997 through
January 1999 and Chief Financial
Officer of Revlon from 1991 to 1997.
Mr. Fox served as a director from
November 1995 of Revlon, Inc. and from
September 1994 of RCPC, until April
1999. He was Senior Vice President of
MacAndrews and Forbes Holding Inc., the
indirect majority shareholder of
Revlon, from August 1990 through
January 1999. Mr. Fox currently serves
as a director and Co-Chairman of the
board of Loehmann's Holdings, Inc.
Seymour Holtzman, 65 Mr. Holtzman is the President and sole
100 North Wilkes Barre Blvd. director of dot com Investment
4th Floor Corporation and the founder and Chief
Wilkes Barre, Pennsylvania 18702 Executive Officer of Jewelcor. Since
at least 1990, Mr. Holtzman has served
as Chairman and Chief Executive
Officer of each of Jewelcor Management
& Consulting, Inc., located in
Wilkes-Barre, Pennsylvania; C.D.
Peacock, Inc., a Chicago, Illinois
retail jewelry establishment; Central
European Capital Investors, Inc., an
investment company operating in
eastern Europe; and S.A. Peck &
Company, a retail and mail order
jewelry company based in Chicago,
Illinois.
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Mr. Holtzman is a member of
the board of directors of Ambanc
Holding Co. (NASDAQ: AHCI), the
Chairman of the Board for Designs Inc.
and Chairman of Little Switzerland,
Inc. (NASDAQ: LSVI).
Allan R. Lyons, 60 Mr. Lyons retired at the end of 1999
2521 Vestal Parkway East as Chairman of the Board and Chief
Vestal, New York 13851 Executive Officer of Piaker & Lyons,
PC., a 75-person CPA firm with four
offices in upstate New York. He was a
partner in the firm for 32 years
specializing in taxes, estate and
financial planning and working with
closely-held companies. Mr. Lyons
currently serves as senior adviser to P
& L Capital Management LLC, a
registered investment advisory firm
doing all phases of financial planning
and money management. In addition, he
serves as managing partner of two
venture capital partnerships with over
$15 million invested in a diverse array
of deals. In the past, Mr. Lyons served
as a member of the board of directors
of IEC Electronics, a $200 million
contract manufacturer and Scoreboard, a
$ 150 million memorabilia company. He
is a member of the board of directors
of Ambanc Holding Co., Eco Soil
Systems, Inc. (NASDAQ: ESSI) which
develops, markets and sells biological
products and their delivery systems for
the golf and agricultural industries;
and Franklin Credit Management, a
purchaser and servicer of primarily
first and second mortgages. He also is
a member of the board of directors of
two private companies, MD Labs in
Phoenix and AIS Re Ltd., based in
Bermuda. Mr. Lyons is a limited partner
of Barington Capital Group, L.P.
Michael J. McManus, Jr., 56 Mr. McManus is President and Chief
c/o Misonix, Inc. Executive Officer of Misonix, Inc., a
1938 New Highway public company based on Long Island,
Farmingdale, New York 11735 New York. Prior to joining Misonix,
from 1991 to 1998 Mr. McManus was
President and Chief Executive Officer
of New York Bancorp, Inc., a bank
holding company operating in Long
Island, New York. Prior thereto, he
was Vice President - Business Planning
and
13
<PAGE>
Development, Consumer Division, of
Pfizer, Inc. From 1985 to 1986, Mr.
McManus was an Executive Vice
President of Revlon Group (formerly
Pantry Pride) responsible for
day-to-day operations of the company's
Florida headquarters. He was actively
involved in several acquisitions,
including the $1 billion acquisition
of Revlon by Pantry Pride. From 1982
through 1985, he was an assistant to
the President of the United States
responsible for managing five White
House functions and special projects.
He was a member of all senior policy
and planning groups. From 1977 to
1982, he was corporate counsel at
Pfizer, Inc., responsible for
corporate acquisitions and financing
while also serving as General Counsel
to the Chemical Division. Mr. McManus
began his career as a lawyer at
Cadwalader, Wickersham and Taft.
Presently, Mr. McManus serves on the
board of directors of the United
States Olympic Committee, National
Wireless Holdings (NASDAQ: NWIR), New
York Community Bancorp, Inc. (NASDAQ:
NYCB), Novavax, Inc. (AMEX: NOX) and
DISC, Inc. (NASDAQ: DCSR).
James A. Mitarotonda, 46 Since 1992, Mr. Mitarotonda has been
c/o Barington Capital Group, L.P. Chairman of the Board, President and
888 Seventh Avenue Chief Executive Officer of Barington
17th Floor Capital Group, L.P.. In May 1988, Mr.
New York, New York 10019 Mitarotonda co-founded Commonwealth
Associates, an investment banking,
brokerage and securities trading
firm. From December 1984 to May 1988,
Mr. Mitarotonda was employed by D.H.
Blair & Co., an investment banking
firm which focused on emerging growth
companies, as Senior Vice
President/Investments. From July 1981
to November 1984, Mr. Mitarotonda was
employed by Citibank, N.A. in an
executive capacity having management
responsibility for two of Citibank's
business banking branches and became
Regional Director of Citibank's Home
Equity Financing and Credit Services
in September 1984. Mr. Mitarotonda
received a B.A. in Economics from
Queens College in 1977 and an M.B.A.
from New York University Graduate
School of Business
14
<PAGE>
Administration in 1979.
Joseph R. Wright, Jr., 62 Since May 2000, Mr. Wright has been
c/o Terremark Worldwide, Inc. Vice Chairman and Director of
405 Lexington Avenue Terremark Worldwide, Inc., a public
36th Floor company providing infrastructure and
New York, New York 10174 value-added telecommunications
services. From 1995 to May 2000, Mr.
Wright was Chairman, CEO and Director
of AmTec, Inc., a public company
providing telecommunications and
Internet services to and from the U.S
and the Far East, which merged with
Terremark Holdings, Inc. From 1996 to
May 2000, Mr. Wright was Chairman and
Director of GRC International, Inc., a
public information technology
company. AT&T acquired GRC in March
2000 and Mr. Wright joined the AT&T
Government Markets Advisory Board. He
is also Vice Chairman and Director of
Jefferson Consulting Group, and
Co-Chairman and Director of Baker &
Taylor Holdings, Inc., From 1989 to
1994, Mr. Wright was Vice Chairman,
EVP and Director of W. R. Grace &
Company, Chairman and Director of
Grace Energy Company, and President of
Grace Environmental Company. Prior to
his tenure at Grace, he was Deputy
Director then Director of the Federal
Office of Management and Budget (OMB)
under President Reagan, serving in the
Cabinet and the Executive Office of
the President from 1982 to 1989. He
was Deputy Secretary of the Department
of Commerce, with oversight of the
International Trade Administration,
from 1981 to 1982 and later was on the
President's Export Council as Chairman
of the Export Control Subcommittee.
Prior to the 1980s, Mr. Wright was
President of Citicorp Retail Services
and Retail Consumer Services, credit
card subsidiaries of Citibank, N.A.,
following positions in the Departments
of Commerce and Agriculture in various
management and economic roles,
including acting Assistant Secretary
for Economic Affairs. He began his
career at Booz, Allen and Hamilton,
Inc. Mr. Wright currently serves on
the board of directors of PanAmSat,
Inc., Titan
15
<PAGE>
Corporation, Fusion Telecommunications
International, Inc., RealMed, Inc. and
Verso Technologies, Inc. He is a member
of the Council on Foreign Relations,
Chief Executives Organization, and the
New York Economic Club.
The number of shares of common stock beneficially owned and percentage
beneficial ownership of each of the BCG Nominees as of the date of this Consent
Statement are as follows:
Number of Shares Percentage
BCG Nominee Beneficially Owned (1) Ownership
(2) (3)
------------------------- ------------------------- -------------
Barry J. Booth 0 0%
Jesse H. Choper 0 0%
William J. Fox 0 0%
Seymour Holtzman 1,236,066(4) 37.3%
Allan R. Lyons 0 0%
Michael J. McManus, Jr. 0 0%
James A. Mitarotonda 1,245,266(5) 37.6%
Joseph R. Wright, Jr. 0 0%
------------------------- -------------
Total 1,271,466 (6) 38.36%
--------------------
(1) Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Shares of common stock subject to stock options and
warrants currently exercisable or exercisable within 60 days are deemed
outstanding for purposes of computing the percentage ownership of any
group of which the holder is a member, but are not deemed outstanding
for computing the percentage ownership of any other person. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Under the rules of the SEC, the BCG Nominees may be deemed to be
members of a group and, as a result, each BCG Nominee may be deemed to
beneficially own shares of common stock beneficially owned by each of
the other BCG Nominees. Each of the BCG Nominees disclaims beneficial
ownership of the shares of common stock beneficially owned by any of
the other BGC Nominees.
(3) Calculated based on 3,314,042 shares of common stock outstanding as of
November 6, 2000 as reported in the Company's September 30, 2000 Form
10-Q.
(4) Consists of 1,209,866 shares of common stock owned by BCG and 26,200
shares of common stock owned by dot com Investment Corporation. Mr.
Holtzman is a manager of BCG and has shared voting and dispositive
power with respect to the 1,209,866 shares of common stock owned by
BCG. Mr. Holtzman is the President and sole director of dot com
Investment Corporation and has sole voting and dispositive power with
respect to the 26,200 shares of
16
<PAGE>
common stock owned by dot com Investment Corporation. Mr. Holtzman
disclaims beneficial ownership of the shares of common stock owned by
BCG.
(5) Consists of 1,209,866 shares of common stock owned by BCG, 18,500
shares of common stock owned by Barington Capital Group, L.P. and
16,900 shares of common stock owned by Barington Companies Equity
Partners, L.P. Mr. Mitarotonda is a Manager of BCG and has shared
voting and dispositive power with respect to the 1,209,866 shares of
common stock owned by BCG. Mr. Mitarotonda is the Chairman,
President and Chief Executive Officer of the general partner of
Barington Capital Group, L.P. and sole voting and dispositive power
with respect to the 18,500 shares of common stock owned by Barington
Capital Group, L.P. Mr. Mitarotonda is the Managing Member of the
general partner of Barington Companies Equity Partners, L.P. and has
sole voting and dispositive power with respect to the 16,900 shares
of common stock owned by Barington Companies Equity Partners, L.P.
Mr. Mitarotonda disclaims beneficial ownership of the shares of
common stock owned by BCG.
(6) Consists of 1,209,866 shares of common stock owned by BCG, 18,500
shares of common stock owned by Barington Capital Group, L.P., 16,900
shares of common stock owned by Barington Companies Equity Partners,
L.P. and 26, 200 shares of common stock owned by dot com Investment
Corporation.
Except as set forth in this Consent Statement or in the Annexes hereto, to
the best knowledge of BCG, none of the BCG Nominees is employed by BCG. All of
the Nominees are citizens of the United States.
Except as set forth in this Consent Statement or in the Annexes hereto, to
the best knowledge of BCG, none of BCG, any of the persons participating in this
Consent Solicitation on behalf of BCG, the BCG Nominees and, with respect to
items (i), (vii) and (viii) of this paragraph, any associate (within the meaning
of Rule 14a-1 of the Securities Exchange Act of 1934) of the foregoing persons
(i) owns beneficially, directly or indirectly, any securities of the Company,
(ii) owns beneficially, directly or indirectly, any securities of any parent or
subsidiary of the Company, (iii) owns any securities of the Company of record
but not beneficially, (iv) has purchased or sold any securities of the Company
within the past two years, (v) has incurred indebtedness for the purpose of
acquiring or holding securities of the Company, (vi) is or has within the past
year been a party to any contract, arrangement or understanding with respect to
any securities of the Company, (vii) since the beginning of the Company's last
fiscal year has been indebted to the Company or any of its subsidiaries in
excess of $60,000 or (viii) has any arrangement or understanding with respect to
future employment by the Company or with respect to any future transactions to
which the Company or any of its affiliates will or may be a party. In addition,
except as set forth in this Consent Statement or in the Annexes hereto, to the
best knowledge of BCG, none of BCG, any of the persons participating in this
Consent Solicitation on behalf of BCG, the BCG Nominees and any associates of
the foregoing persons, has had or is to have a direct or indirect material
interest in any transaction or proposed transaction with the Company in which
the amount involved exceeds $60,000, since the beginning of the Company's last
fiscal year.
Except as set forth in this Consent Statement or in the Annexes hereto, to
the best knowledge of BCG, none of the BCG Nominees, since the beginning of the
Company's last fiscal year, has been affiliated with (i) any entity that made or
received, or during the Company's
17
<PAGE>
current fiscal year proposes to make or receive, payments to or from the Company
or its subsidiaries for property or services in excess of five percent of either
the Company's or such entity's consolidated gross revenues for its last full
fiscal year, or (ii) any entity to which the Company or its subsidiaries were
indebted at the end of the Company's last full fiscal year in an aggregate
amount exceeding five percent of the Company's total consolidated assets at the
end of such year. None of the Nominees is or during the Company's last fiscal
year has been affiliated with any law or investment banking firm that has
performed or proposes to perform services for the Company.
To the best knowledge of BCG, none of the corporations or organizations in
which the BCG Nominees have conducted their principal occupation or employment
was a parent, subsidiary or other affiliate of the Company, and the BCG Nominees
do not hold any position or office with the Company or have any family
relationship with any executive officer or director of the Company or have been
involved in any proceedings, legal or otherwise, of the type required to be
disclosed by the rules governing this solicitation.
BCG has agreed to indemnify each of the BCG Nominees against certain
liabilities, including liabilities under the federal securities laws, in
connection with this Consent Solicitation and such person's involvement in the
operation of the Company and to reimburse such BCG Nominee for his out-of-pocket
expenses.
Certain additional information about BCG, the BCG group and the BCG
Nominees is set forth in Annex A.
THE PROPOSALS
BCG is seeking written consents from the holders of shares of common stock
to take the following actions by written consent, without a stockholders
meeting, as permitted by the Delaware corporation law and the Company's By-laws.
The effectiveness of each of the Proposals is subject to, and conditioned
upon, the adoption of each of the other Proposals by the holders of record, as
of the close of business on the record date, of a majority of the shares of the
common stock then outstanding.
BCG recommends that you consent to each of the proposals by signing,
dating and returning the enclosed WHITE consent card.
Set forth below is a description of each of the Proposals for which
consents are being solicited.
Proposal No. 1 -- Modification of Provision Regarding the Size of the board
of directors
Proposal No. 1 provides for the amendment of Article III Section 1 of the
By-laws to set the number of members of the board of directors at fifteen. The
By-laws currently provide that the board of directors shall consist of not less
than one (1) nor more than seven (7) members, with the number to be determined
from time to time by the board of directors. In particular, the amendment would
delete the first sentence of Article III Section 1 and substitute in its place
the sentence "The board of directors shall consist of fifteen members."
18
<PAGE>
Proposal No. 2 -- Modification of Provision for Filling Board Vacancies
Proposal No. 2 provides for the amendment of Article III Section 3 of the
By-laws to provide that any vacancies on the board of directors resulting from
an increase in the number of directors as a result of an amendment to the
By-laws by stockholder action pursuant to a written consent solicitation shall
be filled only by stockholders holding a majority of the outstanding shares of
the Company then entitled to vote for the election of directors, with or without
a meeting. In particular, the amendment would insert the following sentence
after the final sentence of Article III Section 3 "Vacancies resulting from an
increase in the number of directors as a result of an amendment to the By-laws
by stockholder action pursuant to written consent solicitation may be filled by
the holders of a majority of shares then entitled to vote at an election of
directors, with or without a stockholder meeting."
Proposal No. 3 -- Election of BCG Nominees
Proposal No. 3 provides for the election of Messrs. Holtzman, Mitarotonda
and Wright to serve as Class A directors until the 2003 annual meeting of
stockholders, Messrs. Booth and McManus to serve as Class B directors until the
2001 annual meeting of stockholders and Messrs. Choper, Fox and Lyons to serve
as Class C directors until the 2002 annual meeting of stockholders. See "Certain
Other Information Regarding BCG and the BCG Nominees" for information concerning
the background and experience of the BCG Nominees.
BCG's primary purpose in seeking to elect the BCG Nominees to the board of
directors is for the BCG Nominees to implement the measures proposed by BCG
described in "Background of and Reasons for the Consent Solicitation." If
elected, the BCG Nominees would be responsible for managing the business and
affairs of the Company. The BCG Nominees understand that, as directors of the
Company, each of them has an obligation under Delaware law to the scrupulous
observance of his duty of care and duty of loyalty to the Company and its
stockholders. Accordingly, the BCG Nominees may determine that their fiduciary
duties as directors require them to delay, modify or determine not to implement
certain of the measures proposed by BCG.
Each of the BCG Nominees has consented to being named herein as a nominee
for director of the Company and has agreed to stand for election as a director.
Although BCG has no reason to believe that any of the BCG Nominees will be
unable to serve as a director, if any BCG Nominee is not available to serve, BCG
expects that the remaining BCG Nominees, upon taking office, will fill the
vacancy with an individual willing to consider and implement BCG's proposals to
maximize stockholder value.
Proposal No. 4 -- Repeal of By-Laws Adopted Subsequent to February 17, 1999
Proposal No. 4 provides for the repeal of any amendments of the By-laws
(whether effected by supplement to, deletion from or revision of the By-laws)
adopted subsequent to February 17, 1999 (the effective date of the By-laws most
recently filed by the Company with the SEC) prior to the effectiveness of the
Proposals (other than the amendments adopted as a result of the adoption of
Proposal Nos. 1 and 2 above).
19
<PAGE>
BCG does not believe that any amendments to the By-laws have been made
since February 17, 1999 through the date this Consent Statement was first filed
with the SEC. Because the Amended and Restated Certificate of Incorporation of
the Company, as amended, on file with the SEC does not specifically authorize
the board of directors to adopt, amend or repeal the By-laws, BCG believes that
any amendments to the By-laws made after such date will have been adopted by the
current board of directors and management in violation of the Delaware
corporation law and, therefore, would by null and void.
Appraisal Rights
Stockholders of the Company are not entitled to appraisal rights in
connection with the adoption of the Proposals.
SOLICITATION OF CONSENTS
BCG has retained D.F. King to acts as an advisor in connection with this
Consent Solicitation. In connection with its retention by BCG, D.F. King has
agreed to provide consulting and analytic services and solicitation services
with respect to banks, brokers, institutional investors and individual
stockholders. BCG has agreed to pay D.F. King a fee for its services estimated
to be not more than $10,000 and to reimburse D.F. King for its reasonable
out-of-pocket expenses. BCG has also agreed to indemnify D.F. King against
certain liabilities and expenses in connection with this Consent Solicitation,
including liabilities under the federal securities laws. Approximately 25
employees of D.F. King will engage in the solicitation. Consents may be
solicited by mail, advertisement, telephone, facsmile or in person.
Solicitations may be made by persons employed by or affiliated with the members
of the BCG group. However, no person will receive additional compensation for
such solicitation other than D.F. King.
Banks, brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward the solicitation materials to the beneficial owners
of shares of common stock for which they hold of record and BCG will reimburse
them for their reasonable out-of-pocket expenses.
The expenses related directly to this Consent Solicitation are expected to
aggregate approximately $125,000 and will be borne by BCG. These expenses
include fees and expenses for attorneys, consent solicitors, printing, postage,
filing expenses and other costs incidental to the solicitation. Of this
estimated amount, approximately $30,000 has been spent to date. The actual costs
and expenses could be materially different than the estimated amounts and, in
particular, could be substantially higher if for any reason litigation is
instituted in connection with the matters related to this Consent Statement.
The purpose of the Proposals in this Consent Statement is to advance the
interests of all the Company's stockholders. Therefore, BCG believes that its
expenses related to this Consent Solicitation should be borne by the Company and
it intends to seek reimbursement of such expenses from the Company whether or
not this Consent Solicitation is successful. The question of reimbursement of
BCG's expenses by the Company will not be submitted to a stockholder vote.
20
<PAGE>
If you have any questions about this Consent Solicitation or executing
your consent or require assistance, please contact:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, New York 10005
Toll Free: (800) 431-9643
Banks and Brokers call collect: (212) 269-5550
INFORMATION REGARDING THE COMPANY
The information concerning the Company contained in this Consent Statement has
been taken from or is based upon documents and records on file with the SEC and
other publicly available information. BCG has no knowledge that would indicate
that statements relating to the Company contained in this Consent Statement in
reliance upon publicly available information are inaccurate or incomplete. BCG,
however, has not been given access to the books and records of the Company, was
not involved in the preparation of such information and statements, and is not
in a position to verify, or make any representation with respect to the accuracy
or completeness of, any such information or statements.
--------------------------------------
Your consent is important. No matter how many or how few shares you own, please
consent to the amendment of the by-laws to set the number of directors at
fifteen and to authorize stockholders to fill vacancies on the board of
directors in specified circumstances, the election of the BCG Nominees and the
repeal of any By-laws adopted since February 17, 1999 (other than the By-laws
adopted by this consent) by marking, signing, dating and mailing the enclosed
WHITE consent card promptly.
BCG STRATEGIC INVESTORS, LLC
January ___, 2001
21
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ANNEX A
TRANSACTIONS IN COMMON STOCK
The following table sets forth information with respect to all purchases
of common stock of the Company by the BCG group during the past two years.
Except as set forth below, to the knowledge of BCG, no participant in this
solicitation or BCG Nominee has purchased or sold securities of the Company
within the past two years.
Transaction Number Price Per
Name Date Type of Shares Share
----------------------------- --------- ---------- ---------- ----------
BCG Strategic Investors, LLC 12/6/00 Purchase 1,209,866 $2.50
Barington Capital Group, L.P. 11/28/00 Purchase 1,500 $2.50*
Barington Capital Group, L.P. 12/1/00 Purchase 2,500 $2.50*
Barington Capital Group, L.P. 12/5/00 Purchase 5,000 $2.50*
Barington Capital Group, L.P. 12/7/00 Purchase 9,500 $2.50*
Barington Companies Equity 11/28/00 Purchase 1,500 $2.50*
Partners, L.P.
Barington Companies Equity 11/30/00 Purchase 6,000 $2.50*
Partners, L.P.
Barington Companies Equity 12/1/00 Purchase 2,500 $2.50*
Partners, L.P
.
Barington Companies Equity 12/4/00 Purchase 5,000 $2.50*
Partners, L.P.
Barington Companies Equity 12/6/00 Purchase 1,900 $2.50*
Partners, L.P
dot com Investment Corporation 11/24/00 Purchase 2,000 $2.56*
dot com Investment Corporation 11/27/00 Purchase 3,700 $2.50*
dot com Investment Corporation 11/28/00 Purchase 3,000 $2.50*
dot com Investment Corporation 12/1/00 Purchase 4,500 $2.50*
dot com Investment Corporation 12/4/00 Purchase 8,000 $2.50*
dot com Investment Corporation 12/7/00 Purchase 5,000 $2.56*
* Excludes commissions and execution related costs
22
<PAGE>
ANNEX B
OWNERSHIP OF COMMON STOCK
Each share of common stock is entitled to one vote on each of the
Proposals and the common stock is the only class of securities of the Company
entitled to vote on the Proposals. According to the Company's September 30, 2000
Form 10-Q, as of November 6, 2000 there were 3,314,042 shares of common stock
outstanding.
The following table sets forth the share ownership of all persons who, to
the knowledge of BCG, beneficially own more than 5% of the outstanding shares of
common stock as of the date of this Consent Statement. The information with
respect to each stockholder other than BCG is derived from the Schedule 14A
filed by the Company with the SEC on August 15, 2000.
Number of Shares Percentage
Stockholder Beneficially Owned (1) Ownership
----------------------------- --------------------- ---------------
BCG Strategic Investors, LLC 1,209,866 36.51%
Rho Management Trust I 281,432(2) (3) 8.49%
Robert P. Bernardi 244,309(2) (4) 7.37%
Zomba Record Holdings, B.V. 199,700(2) 6.02%
----------------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock subject to stock options and warrants
currently exercisable or exercisable within 60 days are deemed outstanding
for purposes of computing the percentage ownership of the person holding
the options and the percentage ownership of any group of which the holder
is a member, but are not deemed outstanding for computing the percentage
ownership of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, to the knowledge of
BCG, the persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by
them.
(2) 4Gives effect to a one-for-ten reverse stock split (the "Stock Split")
effected by the Company in September 2000.
(3) According to the Schedule 14A filed by the Company with the SEC on August
15, 2000, such amount includes 78,790 shares of common stock issuable upon
the exercise of Series B warrants and 43,280 shares of common stock
issuable upon the exercise of Series C warrants, in each case after giving
effect to the Stock Split. Rho Management Partners, L.P., a Delaware
limited liability 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.
(4) According to the Schedule 14A filed by the Company with the SEC on August
15, 2000, such amount includes 27,282 shares of common stock issuable upon
exercise of Series B warrants, 6,060 shares of common stock issuable upon
exercise of Series C warrants and 45,028 shares of common stock issuable
in connection with vested options with exercise prices ranging from $20.60
to $59.40 per share, in each case after giving effect to the Stock Split.
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ANNEX C
FORM OF CONSENT SOLICITED ON BEHALF OF
BCG STRATEGIC INVESTORS, LLC
The undersigned, a holder of shares of common stock, par value $0.01 per
share (the "common stock"), of musicmaker.com, Inc., a Delaware corporation (the
"Company"), on January 5, 2001 (the "record date"), hereby consents pursuant to
Section 228 of the Delaware General Corporation Law, with respect to all of the
shares of common stock which the undersigned is entitled to vote, to each of the
following actions without a meeting of the stockholders of the Company:
IF YOU SIGN, DATE AND RETURN THIS CARD WITHOUT INDICATING YOUR VOTE ON ONE
OR MORE OF THE FOLLOWING PROPOSALS, YOU WILL BE DEEMED TO HAVE CONSENTED WITH
RESPECT TO SUCH PROPOSALS. IF YOU CONSENT OR ABSTAIN WITH RESPECT TO ONE OR MORE
OF THE FOLLOWING PROPOSALS, THIS CONSENT CARD WILL REVOKE ANY PREVIOUSLY
EXECUTED REVOCATION OF CONSENT WITH RESPECT TO SUCH PROPOSALS.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
BCG STRATEGIC INVESTORS, LLC STRONGLY RECOMMENDS THAT STOCKHOLDERS CONSENT
TO ALL OF THE FOLLOWING PROPOSALS:
Proposal No. 1 -- Increase Size of Board to Fifteen
CONSENTS [ ] WITHHOLDS CONSENT [ ] ABSTAINS [ ]
Proposal No. 2 -- Authorize Stockholders to Fill Certain Board Vacancies
CONSENTS [ ] WITHHOLDS CONSENT [ ] ABSTAINS [ ]
Proposal No. 3 -- Election of BCG Nominees to board of directors:
Seymour Holtzman, James A. Mitarotonda and Joseph R. Wright, Jr. as Class A
directors, Barry J. Booth and Michael A. McManus, Jr. as Class B directors
and Jesse H. Choper, William J. Fox and Allan R. Lyons as Class C directors.
CONSENTS [ ] WITHHOLDS CONSENT [ ] ABSTAINS [ ]
(Instruction: If you wish to consent to the election of certain of the
BCG Nominees, but not all of them, check the "CONSENTS" box above and write the
name of each such person you do not wish elected in the following
space:________________________________________. If no box is marked above with
respect to this Proposal, the undersigned will be deemed to consent to such
Proposal, except that the undersigned will not be deemed to consent to the
election of any candidate whose name is written in the space provided above.)
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Proposal No. 4 -- Repeal of By-laws Adopted Subsequent to February 17,
1999 and prior to the effectiveness of all of the foregoing Proposals
CONSENTS [ ] WITHHOLDS CONSENT [ ] ABSTAINS [ ]
Note: The effectiveness of each of the Proposals is conditioned upon
the approval of all of the Proposals.
IMPORTANT: THIS CONSENT MUST BE SIGNED AND DATED TO BE VALID.
Dated:
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Signature:
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Signature (if held jointly):
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Title or Authority
Please sign exactly as name appears hereon. If shares are registered in more
than one name, the signature of all such persons should be provided. A
corporation should sign in its full corporate name by a duly authorized officer,
stating his or her title. Trustees, guardians, executors and administrators
should sign in their official capacity, giving their full title as such. If a
partnership, please sign in the partnership name by an authorized person. The
consent card votes all shares in all capacities.
PLEASE MARK, SIGN AND DATE THIS CONSENT BEFORE MAILING THE CONSENT IN THE
ENCLOSED ENVELOPE.
If you have any questions or need assistance in voting your shares,
please contact D.F. King & Co., Inc. toll-free at 1-800-431-9643 or if you
are a bank or broker please call collect at 1-212-269-5550.
