EXECUTION COPY
MERGER AGREEMENT
July 13, 2000
The parties to this agreement are Youthstream Media Networks, Inc., a
Delaware corporation ("Youthstream"); W3T Acquisition, Inc., a Delaware
corporation and a wholly-owned subsidiary of Youthstream ("W3TCO"); X0X.xxx,
Inc., a Massachusetts corporation (the "Company"); and the other signatories to
this agreement (collectively, the "Stockholders"), who own all of the Company's
outstanding stock.
The Company is engaged in the business of owning and operating an Internet
website (the "Business"). The parties wish to provide for the acquisition of the
Company by Youthstream through the merger of W3TCO into the Company and the
conversion of the Company's outstanding shares into common stock of Youthstream
having an aggregate Market Price (as defined in section 2.1(c)) of $5,400,000
($6 million less $600,000 payable by the Company to its broker).
For U.S. Federal income tax purposes it is intended that the merger qualify
as a tax-free reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986 (the "Code") pursuant to which no gain or loss
will be recognized by the parties upon consummation of the merger.
It is therefore agreed as follows:
1. Merger; Provisions Relating to Surviving Corporation.
1.1 Certificate of Merger. Contemporaneously with the closing under this
agreement, a duly executed certificate of merger providing for the merger of
W3TCO into the Company shall be delivered for filing to the Secretary of State
of Delaware. The merger shall become effective upon the filing of the
certificate of merger in Delaware (the "Effective Time").
1.2 Merger. At the Effective Time, W3TCO shall be merged into the
Company pursuant to the Delaware General Corporation Law and the Massachusetts
General Laws, and the separate existence of W3TCO shall cease. The Company shall
be the surviving corporation (the "Surviving Corporation") and shall continue to
be governed by the Massachusetts General Laws.
1.3 Articles of Organization and By-Laws. The articles of organization
of the Company in effect at the Effective Time shall be the articles of
organization of the Surviving Corporation until amended. The by-laws of W3TCO in
effect at the Effective Time shall be the by-laws of the Surviving Corporation,
until amended.
1.4 Directors and Officers. Upon consummation of the merger, the
directors and officers of the Surviving Corporation shall be as set forth on
schedule 1.4, to serve in accordance with the by-laws.
1.5 Closing. The closing under this agreement shall take place at the
offices of Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or at
such other place as the parties may agree upon in writing) simultaneously with
the execution of this agreement. The date of the closing is referred to in this
agreement as the "Closing Date." At the closing, the parties shall execute and
deliver the documents referred to in section 6.
2. Conversion of Shares and Related Provisions.
2.1 Conversion of Shares.
(a) At the Effective Time, (i) each share of the Company's common stock
that is then issued and outstanding automatically shall cease to be outstanding
and shall be converted into 766,286 shares of Youthstream common stock (the
aggregate number of shares of Youthstream common stock into which the Company's
common stock shall be converted having been determined by dividing $4,628,367 by
the Market Price (as defined below) and (ii) each share of the Company's series
A convertible preferred stock that is then issued and outstanding automatically
shall cease to be outstanding and shall be converted into 127,754 shares of
Youthstream common stock (the aggregate number of shares of Youthstream common
stock into which the Company's common stock shall be converted having been
determined by dividing $771,633 by the Market Price). Any calculation of shares
that equates to a fractional number of shares shall be rounded to the nearest
whole number. After the Effective Time, the holders of the Company's shares
shall have no rights with respect to those shares except to receive, at the time
and in the manner provided in section 2.2, the shares of Youthstream common
stock into which they are converted. The number of shares of Youthstream common
stock to be issued to each common and preferred stockholder of the Company is
set forth on schedule 2.1.
(b) At the Effective Time, each share of common stock of W3TCO that is
then issued and outstanding automatically shall be converted into one issued and
outstanding share of common stock of the Surviving Corporation.
(c) As used in this agreement, the term "Market Price" means $6.04 a
share (the average closing price of Youthstream common stock on NASDAQ at the
close of business on each trading day during the thirty day period ended July
10, 2000).
2.2 Delivery of Youthstream Stock; Payment to Broadview International LLC.
(a) At the closing, Youthstream, the Stockholders, and American Stock
Transfer Trust Company, as escrow agent (the "Escrow Agent"), shall execute and
deliver an escrow agreement in the form of exhibit 2.2(a) (the "Escrow
Agreement"), and at the Effective Time, Youthstream shall issue, and shall
deliver to the Escrow Agent a certificate for, the total number of shares of
Youthstream common stock into which the Company's shares of common stock and
preferred stock have been converted, to be held by the Escrow Agent as security
for the Stockholders' indemnification obligations under section 7.2 of this
agreement.
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(b) At the Effective Time, subject to the receipt of a release from
Broadview International, LLC ("Broadview") in the form of exhibit 2.2(b),
Youthstream shall issue and deliver to Broadview shares of Youthstream common
stock having an aggregate Market Price of $300,000 and the Company shall pay to
Broadview, by certified or bank check or by wire transfer, the sum of $300,000.
2.3 Tax Consequences of the Merger. The merger is intended to qualify as
a reorganization under section 368 of the Code pursuant to which no gain or loss
will be recognized by the parties upon consummation of the merger. None of the
parties shall take any action that would cause the transaction to fail to
qualify as a reorganization under section 368 or report the merger for federal
and state income tax purposes in a manner inconsistent with that
characterization.
3. Representations and Warranties by the Company and the Stockholders.
Subject to the provisions of section 7.3, the Company and the Stockholders
represent and warrant to Youthstream and W3TCO as follows:
3.1 Organization and Authority of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the law
of Massachusetts and has the full corporate power and authority to own, lease
and operate its properties as it now does and to carry on its business as it is
presently being conducted. The Company is duly qualified and in good standing in
each jurisdiction in which the property owned or leased by it or the nature of
the activities conducted by it requires qualification, except where the failure
to so qualify would not have a material adverse effect on the Company's assets
or financial condition. The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
3.2 Authorization of Agreement. The execution, delivery and performance
of this agreement by the Company have been duly authorized by all requisite
corporate action of the Company. Each of the Stockholders has the full right to
enter into and perform his or her obligations under this agreement and under the
Escrow Agreement. This agreement constitutes a valid and binding obligation of
the Company, and this agreement and the Escrow Agreement constitute valid and
binding obligations of each of the Stockholders, in each case enforceable
against each of them in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.3 Consents of Third Parties. The execution, delivery and performance
of this agreement by the Company and the Stockholders and the execution,
delivery and performance of this agreement and the Escrow Agreement by the
Stockholders do not and will not (i) conflict with the certificate of
incorporation or by-laws of the Company or conflict with, result in the breach
or termination of, constitute a default under, or increase or accelerate any
obligation under, any lease, agreement, commitment or other instrument
(including, but not limited to, any option plan), or any order, judgment or
decree, to which the Company or any of the Stockholders is a party or
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by which the Company, the Business, any of the assets of the Company or any of
the Stockholders is bound; (ii) constitute a violation by the Company or any of
the Stockholders of any law, regulation, order, writ, judgment, injunction or
decree applicable to any of them; (iii) result in the creation of any claim,
lien, security interest, charge or encumbrance ("Liens") upon any of the assets
of the Company; or (iv) adversely affect the operation of the Business in any
material respect. Except as set forth on schedule 3.3, no consent, approval or
authorization of, or designation, declaration or filing with, any court or
governmental authority or any other person or entity is required on the part of
the Company or any of the Stockholders in connection with the execution,
delivery and performance of this agreement by the Company or of this agreement
or the Escrow Agreement by the Stockholders.
3.4 Capitalization; Ownership of the Company's Stock.
(a) The Company's authorized capitalization consists of 2,000,000
shares of common stock, no par value, of which 1,225,225 shares are issued and
outstanding as of the date of this agreement, and 91,230 shares of series A
preferred stock, no par value, of which 91,230 shares are issued and outstanding
as of the date of this agreement. All the Company's outstanding shares were duly
authorized for issuance, were validly issued, and are fully paid and
nonassessable. There are no outstanding options, warrants or rights of any kind
to acquire any shares of the Company of any class (all of the Company's
previously outstanding stock options having been cancelled without cost and
without the Company incurring any liability or obligation) and there are no
outstanding securities convertible into any shares of the Company of any class,
and there are no obligations to issue any such options, rights or securities.
There is no existing arrangement that requires or permits any shares of the
Company to be voted by or at the discretion of anyone other than the record
owner and there are no restrictions of any kind on the transfer of any of the
Company's outstanding shares, except restrictions under the stockholders
agreement referred to in section 5.7 (which is being terminated as provided in
that section) and those imposed by applicable United States federal and state
securities laws.
(b) Each of the Stockholders is the record and beneficial owner of the
number of shares of the Company's outstanding common and preferred stock set
forth on schedule 3.4, in each case free and clear of any Liens.
3.5 Financial Statements. Schedule 3.5 contains unaudited balance
sheets of the Company as of December 31, 1999 and May 31, 2000, together with
the related statements of operations and statements of cash flows and of
shareholders equity for the year and the five month periods then ended. All of
the financial statements contained in schedule 3.5 conform to the books and
records of the Company as prepared in the ordinary course of business, and
present fairly the Company's financial position and the results of its
operations as of the dates and for the periods indicated in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis.
All such financial statements show, to the extent required by GAAP, all of the
Company's income and expenses during the periods covered. All of the Company's
books of account have been exhibited or made available to Youthstream and those
books of account have been maintained in accordance with good business
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practice on a consistent basis and accurately record all transactions of the
Company during the periods covered by them. All of the Company's accounts
receivable outstanding as of the date of this agreement arose from bona fide
transactions in the ordinary course of the business and none of them is subject
to any defense, counterclaim or setoff, and none of the Stockholders has any
reason to believe that any of them will not be collected in full when due.
3.6 Absence of Undisclosed Liabilities. The Company does not have any
liability or obligation of any kind, whether accrued, absolute, contingent or
otherwise, other than (a) liabilities and obligations under leases, commitments
and other agreements entered into in the ordinary course of business (which, to
the extent required by section 3.13, are listed on schedule3.13), (b) the trade
accounts payable and accrued expenses as of May 31, 2000 listed on schedule 3.6,
each of which was incurred in the ordinary course of business, and (c) other
trade accounts payable and accrued expenses incurred in the ordinary course of
business after May 31, 2000 which in the aggregate do not exceed $300,000. None
of the Stockholders knows of any basis for the assertion against the Company of
any liability as of the date of this agreement that is not listed on schedule
3.6 (other than the liabilities referred to in clauses (a) and (c) of the
immediately preceding sentence).
3.7 Absence of Certain Changes. Since January 1, 2000, the Company has
operated its business in the ordinary course and consistent with past practice,
and, except as set forth on schedule 3.7:
(a) the Company has not entered into any transaction or incurred any
liability or obligation other than in the ordinary course of business;
(b) there has been no material adverse change in the condition
(financial or otherwise), business, operations or assets of the Company;
(c) the Company has not sold or transferred any assets other than in
the ordinary course of business and other than assets that have been replaced
with other assets of equal or greater value;
(d) the Company has not incurred any liability that was unusual in
nature or amount or any indebtedness other than indebtedness to trade creditors
incurred in the ordinary course of business;
(e) the Company has not made any distribution on or acquired any of
its stock or, directly or indirectly, made any other payment of any kind or any
loan to or on behalf of the Stockholders, any member of the Stockholders'
families, or any entity controlled by the Stockholders or any member of their
families;
(f) the Company has not granted or agreed to grant any general
increase in any rate or rates of salaries or compensation or in benefits of any
kind to its employees or any specific increase in the salary of or compensation
to any employee whose total salary and compensation after such increase would be
at an annual rate in excess of $35,000;
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(g) the Company has not made any change in its accounting methods or
principles (or the application of those methods or principles) or introduced any
material new method of management, operations or accounting;
(h) the Company has not established any new employee benefit plan
(as defined in section 3.24), amended or modified any existing employee benefit
plan, or incurred any obligation or liability under any employee benefit plan
materially different in nature or amount from obligations or liabilities
incurred during similar periods in prior years; and
(i) the Company has not entered into any employment, bonus or
deferred compensation agreement with any of its directors, officers or other
employees.
3.8 Taxes.
(a) The Company has timely filed all foreign, federal, state and local
income, gross receipts, personal property, commercial rent, sales and use and
other tax returns, reports and information returns (including any related or
supporting information) required by law to be filed by it and each of those tax
returns is correct and complete in all material respects. All taxes owed by the
Company (whether or not shown on any tax return) have been paid. The Company has
paid, or made provisions in its financial statements referred to in section 3.5
for payment of, all taxes accrued through the date of its most recent financial
statement referred to in section 3.5. All taxes that are or were required by law
to be withheld or collected by the Company have been duly withheld or collected
and paid to the proper tax authority. The Company does not have any tax
liability of any kind that is reasonably likely to result in a Lien on any of
its assets.
(b) No claim has ever been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that it is or may be subject to
taxation by that jurisdiction. None of the Company's tax returns has been
audited by any tax authority. There exist no pending or, to the best of the
knowledge of the Company or any of the Stockholders, proposed tax assessments,
suits, actions, claims, audits, investigations or inquiries by any tax authority
with respect to the business or assets of the Company or against the Company or,
with respect to the Company, any of its directors, officers, employees or
independent contractors. There are no tax liens on any of the Company's assets.
The Company (including any person acting on behalf of the Company) has not given
nor been requested to give waivers or extensions of any statute of limitations
relating to payment of taxes of the Company or for which the Company may be
liable and no other party has given or been requested to give such waivers or
extensions with respect to taxes for which the Company may be liable.
(c) As used in this agreement, the terms "tax" and "taxes" mean any
federal, state, local, foreign or other governmental income, profits, franchise,
sales, use, payroll, withholding, occupation, property, excise, transfer or
other taxes, including any related interest, penalties and statutory additions.
3.9 Title to Assets. Except as set forth on schedule 3.9 and except for the
lien, if any, of current taxes not yet due and payable, the Company has
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valid title, free and clear of any Liens, to all the assets, tangible and
intangible, used in or needed to conduct the Business, and those assets will be
sufficient to enable the Surviving Corporation to continue after the Effective
Time to operate all aspects of the Business in the manner in which it has been
operated by the Company. The Company does not owe any amount to, or have any
contract with or commitment to, or use any property (real or personal) in its
business owned or leased by, any of the Stockholders or any director, officer,
employee, agent or representative of the Company, or any of their respective
affiliates.
3.10 Personal Property. Schedule 3.10 lists all of the equipment,
machinery, computers, furniture, leasehold improvements, vehicles and other
personal property having an individual value greater than $2,500 owned or leased
by the Company and all interests therein. All equipment and other tangible
assets owned or used by the Company are in good operating condition and in good
condition of maintenance and repair, ordinary wear and tear excepted, are
suitable for their present uses and purposes, and conform in all material
respects with all applicable ordinances, rules and regulations and all building,
zoning and other laws.
3.11 Real Property. The Company does not own any real property. Schedule
3.11 contains a list and brief description of all real properties used or leased
by the Company. To the best of the knowledge of the Company and the
Stockholders, all improvements on the real properties used by the Company are in
compliance in all material respects with all applicable laws, ordinances,
regulations and orders, including, but not limited to, those applicable to
zoning, environment and the establishment and maintenance of working conditions
for labor, and all of the buildings and structures on those properties are in
good condition of maintenance and repair and are adequate, sufficient and
suitable for their present uses and purposes. The transactions contemplated by
this agreement will not adversely affect the Surviving Corporation's right to
use those properties for the same purpose and to the same extent as they were
being used by the Company prior to the date of this agreement.
3.12 Litigation; Compliance with Laws. There is no claim, litigation,
proceeding or governmental investigation pending or, to the best of the
knowledge of the Company and the Stockholders, threatened, or any order,
injunction or decree outstanding, against the Company or any of its properties
or assets. Neither the Company nor any of the Stockholders knows of any basis
for future claims, litigations, proceedings or investigations against the
Company or any of its properties or assets. The Company is not in violation of
any law, regulation or ordinance, or any other requirement of any governmental
body or court, and no notice has been received by the Company or any of its
officers or directors alleging any such violation. The Company is not engaged in
any dispute with any of its advertisers, customers, suppliers, or anyone else
with which the Company has a significant business relationship, and the Company
has good relationships with all of them.
3.13 Lists of Agreements, etc. Schedule 3.13 contains a true and complete
list of complete list of: (a) all of the Company's commitments and other
agreements for the purchase or manufacture of any products, materials, supplies
or equipment, other than commitments and other agreements that were entered into
in the ordinary course of
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business and involve an expenditure of less than $5,000 for any one commitment
or two or more related commitments; (b) all notes and agreements relating to any
indebtedness of the Company, any guaranties by the Company of the indebtedness
of other persons, and any off-balance sheet financing or interest rate or
currency swaps, caps, collars or other derivative agreements of the Company; (c)
all leases or other rental agreements under which the Company is either lessor
or lessee that call for annual lease payments in excess of $5,000 individually
or are otherwise material to the Company's operations or business; (d) all the
Company's employment and consulting agreements that provide for compensation in
excess of $35,000 a year; (e) all commitments and other agreements limiting the
Company's freedom to engage in any line of business or to compete with any other
person; (f) all agreements for the sale, lease, license or rental by or to the
Company of any copyright (including agreements pursuant to which rights are
reserved by authors or creators of works), patent or trademark and all
agreements requiring the payment by the Company of any royalty; and (g) all
other agreements, commitments and understandings (written or oral) that require
payment by or to the Company of more than $5,000 or cannot be terminated by the
Company on less than 30 days notice without liability. True and complete copies
of all of the leases, commitments and other agreements referred to on schedule
3.13 have been delivered to Youthstream.
3.14 Status of Agreements. All of the Company's leases, agreements and
commitments were entered into in the ordinary course of business of the Company.
Each of the leases, agreements and commitments referred to in section 3.13 is
presently in full force and effect in accordance with its terms and the Company
is not in default, and, to the best of the knowledge of the Company and each of
the Stockholders, no other party is in default under any of the provisions of
any of those agreements and no condition exists that, with notice or lapse of
time or both, would constitute a default by the Company or, to the best of the
knowledge of the Company and each of the Stockholders, any other party to any of
those agreements. Each of the leases, agreements, and commitments referred to in
section 3.13 is valid and binding upon and enforceable against the Company, and
to the best of the knowledge of the Company's and each of the Stockholders, each
of the other parties thereto in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general. No party to any of
the leases, agreements or commitments referred to in section 3.13 has made or
asserted to the Company or, to the best of the knowledge of the Company and each
of the Stockholders, has any defense, setoff or counterclaim under any of those
agreements, commitments or orders or has exercised any option granted to it to
cancel or terminate its agreement, to shorten the term of its agreement, or to
renew or extend the term of its agreement and neither the Company nor any of its
officers or directors has received any notice to that effect.
3.15 Employees.
(a) Schedule 3.9(a) contains a true and complete list of the
names, positions, hire dates and annual or hourly compensation of all employees
of the Company and a description of vacation policies, sick leave policies, and
bonus, incentive compensation and group insurance plans for the benefit of those
employees. Except as set forth on Schedule 3.9(a), no employee of the Company is
owed any wages, benefits or other compensation for past services, other than
wages and benefits accrued in
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the ordinary course of business during the current pay period and accrued
vacation. Except as set forth on schedule 3.9(a), the Company does not have any
severance policy and no employee of the Company is entitled to any severance
payment, either by law or by agreement, upon the termination of his or her
employment. To the best of the knowledge of the Company and the Stockholders,
the transactions provided for in this agreement will not give rise to any
liability of the Company or the Surviving Corporation for severance pay or
termination pay to any employee of the Company or trigger any payments of any
kind to any employee of the Company in his capacity as an employee. No employee
of the Company is represented by any union or other collective bargaining agent
and there are no collective bargaining or other labor agreements with respect to
those employees.
(b) Schedule 3.9(a) contains a true and complete list of the names
the annual, weekly or hourly compensation, and the job descriptions, of all
persons that the Company currently engages as independent contractors. All such
persons are properly characterized as independent contractors and neither the
Internal Revenue Service nor any other governmental agency has asserted any
claim to the contrary and, to the best of the knowledge of the Company or the
Stockholders, there is no pending investigation by any governmental agency
relating to the Company's practice of engaging independent contractors.
3.16 Labor Disagreements. Except as set forth on schedule 3.16, (a) to
the best of the knowledge of the Company and each of the Stockholders, the
Company is in compliance with all applicable laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice; (b) there is
no (and has never been any) unfair labor practice charge or complaint against
the Company pending before the National Labor Relations Board, any state labor
relations board or any court or tribunal and, to the best of the knowledge of
the Company and each of the Stockholders, none is or has been threatened; and
(c) there is no labor strike, dispute, request for representation, slowdown or
stoppage actually pending against or affecting the Company and, to the best of
the knowledge of the Company and each of the Stockholders, none is or has been
threatened.
3.17 Restrictive Documents, etc. The Company is not subject to, or a
party to, any lease, license, permit, agreement or other commitment, instrument,
order, judgment or decree, or any other restriction of any kind, that materially
and adversely affects its business practices or operations or any of the assets
of the Company or that would prevent its compliance with the terms, conditions
and provisions of this agreement or the continued operation of the Business by
the Surviving Corporation after the Effective Time on substantially the same
basis as it has been operated since January 1, 2000.
3.18 Environmental Matters. The Company is not in violation of any
federal, state or local law, regulation, rule, order, decree, ordinance or
common law relating to pollution, the protection of human health or the
environment.
3.19 Permits and Licenses. The Company has all permits, licenses,
franchises and other authorizations ("Licenses") necessary for the conduct of
the Business and all such Licenses are valid and in full force and effect. All
Licenses held by
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the Company that are material to the Company or the Business are listed on
schedule 3.19.
3.20 Banks; Powers of Attorney. Schedule 3.20 sets forth (a) the names
and locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintains safe deposit boxes
or accounts of any nature and the names of all persons authorized to draw
thereon, make withdrawals therefrom or have access thereto and (b) the names of
all persons to whom the Company has granted a power of attorney, together with a
description thereof. The Company has provided Youthstream with true and complete
copies of all bank statements received by it during the twenty-four months prior
to the date of this agreement.
3.21 Intangible Property. Schedule 3.21 contains a complete list of the
trademarks, trade names, copyrights and logos used by the Company. The Company
owns, free and clear of any Liens, or otherwise has valid rights to use, each of
the trademarks, trade names, copyrights and logos (including registrations and
applications for registration of any of them) listed on schedule 3.21, and they
constitute all of the trademarks, copyrights, trade names and logos necessary
for the continued operation of the Business in a manner consistent with past
practices. The Company is not infringing upon any trademark, trade name,
copyright or other rights of any third party and no proceedings are pending or
threatened and no claim has been received by the Company alleging any such
violation. To the best of the knowledge of the Company and the Stockholders,
there is no violation by others of any right of the Company with respect to any
trademark, trade name or copyright.
3.22 Software and Databases. The Company owns or possesses adequate
licenses or other rights to use all computer software used by it. Schedule 3.22
contains a list of all such software. Any license of the Company to use any
software is valid and does not infringe on the property rights of any third
party. The Company has not granted to any person or entity any interest, as
licensee or otherwise, in any of its owned software or databases or in any of
its mailing lists, advertiser lists or member lists.
3.23 Insurance. The Company maintains policies of fire and extended
coverage and casualty, liability and other forms of insurance in such amounts
and against such risks and losses as are customary in the industry. Schedule
3.23 contains a complete list of all of the insurance policies held by the
Company, specifying with respect to each policy the policy limit, type of
coverage, location of the property covered, annual premium, premium payment date
and expiration date. True and complete copies of all of those policies have been
delivered to Youthstream.
3.24 ERISA. Except as set forth on schedule 3.15, the Company is not a
party to or bound by or liable with respect to any "employee benefit plan,"
within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, or any other employee benefit plan, program or policy.
3.25 Expenses Related to this Agreement. Except as set forth in section
8.1, the Company has not paid any expenses related to the negotiation or
preparation of this agreement or the transactions contemplated by this agreement
or any broker's, finder's or similar fee relating to the transactions
contemplated by this agreement.
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3.26 Transactions with Affiliates. Except as set forth on schedule
3.26, during the twelve months preceding the date of this agreement the Company
has not engaged in any transaction with any of the Stockholders or any of their
respective affiliates.
3.27 Website Statistics. Schedule 3.27 contains true and complete
information with respect to the number of unique users, of the Company's web
site, and the number of visits, visit lengths and documents requested for May
2000.
3.28 No Misrepresentation. No representation or warranty by the Company
or the Stockholders in this agreement (including the schedules and exhibits to
this agreement) contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained in this
agreement (including the schedules and exhibits to this agreement) not
misleading. All of the representations and warranties of the Company and the
Stockholders shall be true as of the Effective Time.
4. Representations and Warranties by W3TCO and Youthstream. W3TCO and
Youthstream jointly and severally represent and warrant to the Company and the
Stockholders as follows:
4.1 Organization. Each of W3TCO and Youthstream is a corporation
duly organized, validly existing and in good standing under the law of the State
of Delaware and has the full corporate power to enter into and to perform this
agreement.
4.2 Authorization of Agreement. The execution, delivery and
performance of this agreement by W3TCO and Youthstream have been duly authorized
by all requisite corporate action of each of them. This agreement constitutes a
valid and binding obligation of W3TCO and Youthstream, enforceable against each
of them in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The authorized capital stock of W3TCO consists of 1000 shares
of common stock, $.01 par value per share, 100 of which are issued and
outstanding and owned by Youthstream.
4.3 Consents of Third Parties. The execution, delivery and
performance of this agreement by each of W3TCO and Youthstream will not (a)
conflict with W3TCO's or Youthstream's certificate of incorporation or by-laws
and will not conflict with, result in the breach or termination of, or
constitute a default under, any lease, agreement, commitment or other
instrument, or any order, judgment or decree to which either of them is a party
or by which either of them is bound, or (b) constitute a violation by it of any
law, regulation, order, writ, judgment, injunction or decree applicable to it.
No consent, approval or authorization of, or designation, declaration or filing
with, any court or governmental authority is required on the part of W3TCO or
Youthstream in connection with the execution, delivery and performance of this
agreement.
11
4.4 Validity of Shares. The shares of Youthstream common stock to be
issued and delivered to the Stockholders as provided in section 2 will be duly
authorized, validly issued, fully paid and non-assessable.
4.5 SEC Reports.
(a) Youthstream has filed all forms, reports, statements and
other documents required to be filed with the Commission as of the date hereof
(collectively, the "SEC Reports"). The SEC Reports (i) were prepared in all
material respects in accordance with the requirements of the Securities Act and
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were or
will be made, not misleading.
(b) Except as disclosed in the SEC Reports or in Company press
releases, since March 31, 2000, there has been no material adverse change in the
business of Youthstream and its subsidiaries taken as a whole.
4.6 No Misrepresentation. No representation or warranty by W3TCO or
Youthstream in this agreement (including the schedules and exhibits to this
agreement) contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in this agreement
(including the schedules and exhibits to this agreement) not misleading. All of
the representations and warranties of W3TCO and Youthstream shall be true as of
the Effective Time.
5. Further Agreements of the Parties.
5.1 Covenants Against Competition, Solicitation and Disclosure.
(a) To accord to Youthstream the full value of its purchase, for
a period of five years after the Effective Time neither Xxxxxx Xxxxxxx nor
Xxxxxx Xxxxxxxx (the "Restricted Stockholders") may directly or indirectly
engage, or be interested in (as owner, shareholder, partner, member, individual
proprietor, director, officer, employee, manager, lender, agent consultant or
otherwise) any business or entity that engages, anywhere in the world, in the
business of developing or operating an Internet website or portal targeted
primarily to individuals between the ages of 13 and 18; provided that this
restriction shall not prevent the Restricted Stockholders from owning as a
passive investor less than 5% of a publicly traded company.
(b) For a period of five years after the date of this agreement,
none of the Restricted Stockholders may directly or indirectly employ or solicit
for employment or consulting, on his own behalf or on behalf of any other person
or entity, or otherwise encourage the resignation of, any employee of
Youthstream, the Company or any of Youthstream's other subsidiaries; provided
that any advertisement in a newspaper of a general publication shall not be a
breach of this agreement.
(c) None of the Stockholders may at any time hereafter disclose
to anyone, or use in competition with the Company or Youthstream or any of
Youthstream's other subsidiaries, any information with respect to any
confidential or
12
secret aspect of the business or affairs of the Company, Youthstream or any of
Youthstream's other subsidiaries, except information that: (i) becomes available
to that Stockholder on a non-confidential basis from a source other than the
Company or Youthstream (or their respective officers, directors, agents or
employees), provided that such source is not known by the Stockholder to be
bound by a confidentiality agreement with or other obligation of secrecy to the
Company or Youthstream; (ii) is now in the Stockholder's possession and is not
known by the Stockholder to be subject to any confidentiality agreement with or
other obligation of secrecy to the Company or Youthstream; (iii) becomes
generally available to the public other than as a result of a disclosure by any
of the Stockholders (or their agents or advisors) or (iv) is required to be
disclosed by applicable law or court order, provided that, prior to any such
disclosure Youthstream shall have been notified and that any such disclosure
shall be limited to only the information necessary to satisfy the requirements
of the applicable law or court order.
(d) The Stockholders acknowledge that the remedy at law for any
breach of the provisions of this section 5.1 will be inadequate and that, in
addition to any other remedy Youthstream and the Company may have, they shall be
entitled to an injunction restraining any breach or threatened breach, without
the necessity of showing actual damages and without any bond or other security
being required. If any court construes any covenant in this section 5.1 to be
unenforceable in whole or in part, the court may reduce the duration or area to
the extent necessary so that the provision is enforceable, and the provision, as
reduced, shall then be enforceable.
5.2 Expenses. Except as expressly provided in this agreement, the
Stockholders and Youthstream shall each bear their own expenses incurred in
connection with the negotiation and preparation of this agreement and in
connection with the transactions contemplated by this agreement. None of the
expenses related to the negotiation and preparation of this agreement and in
connection with the transactions contemplated by this agreement shall be borne
by the Company, except as provided in section 2.2(b) and except that, if the
merger provided for in this agreement is consummated, Youthstream shall bear the
Company's legal fees and other expenses related to the transaction up to
$50,000.
5.3 Securities Act Matters.
(a) The Company and the Stockholders recognize that the issuance
of shares of Youthstream common stock under section 2 is intended to be exempt
from registration under the Securities Act of 1933 (the "Securities Act"), by
virtue of section 4(2) of the Securities Act. In that connection, each of the
Stockholders represents and warrants to Youthstream that he or she is acquiring
the Youthstream shares for his or her own account, for investment purposes only,
and not with a view to the resale or distribution of those shares in whole or in
part. Each of the Stockholders acknowledges that he or she understands that
sales or transfers of the shares are restricted by the Securities Act and by
certain state securities laws and that a legend referring to that restriction
will be placed on the certificates representing the shares.
(b) None of the Stockholders may sell or otherwise transfer the
shares acquired by them pursuant to this agreement unless the transaction is
registered under the Securities Act and applicable state securities laws or an
exemption
13
from registration is available. The Stockholders confirm that they understand
that Youthstream is under no obligation to register the shares on their behalf
or to assist them in complying with any exemption from registration (other than
removing restrictive legends after the holding period under Rule 144 of the
Securities Act has expired).
5.4 Further Assurances. At any time and from time to time after the
date of this agreement, each party shall, without further consideration, execute
and deliver to the other parties such other instruments and take such other
action as the others may reasonably request to carry out the transactions
contemplated by this agreement.
5.5 Post-Closing Payments. After the closing, each of the Stockholders
shall, as promptly as practical, forward to the Company any amount received by
him or her to which the Company is entitled and shall refer to the Company any
telephone calls, letters and other communications that he or she may receive
relating to the Business.
5.6 Equipment Leases. As soon as practicable after the closing,
Youthstream shall use reasonable efforts to arrange for the removal of Xxxxxx
Xxxxxxx as personal guarantor under the equipment leases listed as items IIIb-f
(inclusive) on schedule 3.13; Youthstream's efforts shall include offering to
serve as guarantor of the leases.
5.7 Termination of Stockholders Agreement. Each of the Stockholders
party to that certain Amended and Restated Stockholders Agreement dated January
19, 2000 among the Company and each of the Stockholders, by signature to this
agreement, hereby terminates that Stockholders' Agreement and confirms that all
rights and obligations under that agreement (including, but not limited to,
rights of first refusal or other right to purchase the Company's stock) are
discharged.
5.8 Release. At the closing, each of the Stockholders shall deliver to
Youthstream and the Company a release, in the form of Exhibit 5.8, that
unconditionally and irrevocably releases the Company and Youthstream from any
claim, liability or obligation arising prior to the closing (including, but not
limited to, in respect of any shares of the Company's preferred stock).
6. Documents to be Delivered at Closing.
6.1 Documents to Be Delivered by the Company and the Stockholders. At
the closing, the Company and the Stockholders shall deliver to Youthstream and
W3TCO the following:
(a) certificates representing all the issued and outstanding
shares of the Company's common stock and preferred stock, registered in the
names of the respective Stockholders and duly endorsed by the Stockholders in
blank for transfer or accompanied by appropriate stock powers in blank duly
signed by the Stockholders;
(b) a copy of resolutions of the board of directors and the
stockholders of the Company authorizing the execution, delivery and performance
of this agreement by the Company, and a certificate of its secretary or
assistant secretary,
14
dated the Closing Date, that such resolutions were duly adopted and are in full
force and effect;
(c) the release referred to in section 5.8; and
(d) an opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx, counsel to the
Company and the Stockholders, in the form of exhibit 6.1(d).
6.2 Documents To Be Delivered by W3TCO and Youthstream. At the
closing, W3TCO and Youthstream shall deliver to the Stockholders the following:
(a) a copy of resolutions of the boards of directors of
Youthstream and W3TCO authorizing the execution, delivery and performance of
this agreement by each of Youthstream and W3TCO, and a certificate of the
secretary or assistant secretary of Youthstream and of W3TCO, dated the Closing
Date, that such resolutions were duly adopted and are in full force and effect;
and
(b) an opinion of Proskauer Rose LLP, counsel to Youthstream and
W3TCO, in the form of exhibit 6.2(b).
6.3 Additional Transactions at or following the Closing.
(a) In addition to delivery of the documents referred to above,
at the closing (i) the parties shall execute and deliver the Escrow Agreement
and (ii) Youthstream shall deliver to the Escrow Agent the stock certificate
referred to in section 2.2(a) and, upon receipt of the release referred to in
section 2.2(b), shall issue and deliver the Youthstream stock and cause payment
to be made as provided in section2.2(b).
(b) Promptly after the closing, the Company shall pay the
remaining balance of the Citizens Bank, Non-Negotiable Consumer Note Retail
Installment Contract in the amount of approximately $17,700 relating to the 1998
Mercedes Benz E Class E320 Sedan currently used by Xxxxxx Xxxxxxx, Xx., and
promptly thereafter the Company shall transfer to Xx. Xxxxxxx title to that
automobile for a purchase price of $33,975 (the trade-in value of the car).
(c) Promptly following the closing, the Company shall pay to
Xxxxxx Xxxxxxx, in cash, deferred compensation currently owed to him in the
amount of $71,067, less the purchase price of the automobile being purchased by
him pursuant to paragraph (b) above. Appropriate withholding and social security
taxes shall be deducted from the cash amount payable to Xx. Xxxxxxx. Xx. Xxxxxxx
acknowledges that, upon payment of the amount provided for in this section, the
Company will have fully discharged its obligation to Mr. Croteu for all
compensation and expense reimbursements accrued prior to the date of this
agreement.
7. Survival of Representations and Warranties; Indemnification.
7.1 Survival. All representations, warranties and agreements by the
Company and the Stockholders shall survive the closing under this agreement
notwithstanding any investigation at any time by or on behalf of W3TCO or
Youthstream, and shall not be considered waived (unless waived in writing) by
W3TCO's or Youthstream's consummation of the transactions contemplated by this
15
agreement with knowledge of any breach or misrepresentation by the Company or
the Stockholders. All representations, warranties and agreements by W3TCO and
Youthstream shall survive the closing under this agreement notwithstanding any
investigation at any time by or on behalf of the Company or the Stockholders,
and shall not be considered waived (unless waived in writing) by the Company's
or the Stockholders' consummation of the transactions contemplated by this
agreement with knowledge of any breach or misrepresentation by W3TCO or
Youthstream.
7.2 Indemnification.
(a) Subject to the provisions of section 7.3, the Stockholders
shall indemnify and hold harmless the Surviving Corporation and Youthstream
against all loss, liability, damage or expense (including reasonable fees and
expenses of counsel, whether incurred in connection with any matter involving a
third party or between the parties to this agreement) the Surviving Corporation
or Youthstream may suffer, sustain or become subject to as a result of any
breach of any representation, warranty, covenant or other agreement of the
Company or the Stockholders contained in this agreement, or any
misrepresentation by the Company or the Stockholders, or any claim by a third
party which, without regard to the merits of the claim, would constitute such a
breach or misrepresentation.
(b) Youthstream shall indemnify and hold harmless the
Stockholders against all loss, liability, damage or expense (including
reasonable fees and expenses of counsel, whether incurred in connection with any
matter involving a third party or between the parties to this agreement) the
Stockholders may suffer, sustain or become subject to as a result of any breach
of any representation, warranty, covenant or other agreement of W3TCO or
Youthstream contained in this agreement, or any misrepresentation by W3TCO or
Youthstream, or any claim by a third party which, without regard to the merits
of the claim, would constitute such a breach or misrepresentation.
7.3 Limitations of Liability. Notwithstanding anything to the
contrary in this agreement:
(a) no party shall be liable for misrepresentation or breach of
warranty except to the extent that notice of a claim is asserted in writing and
delivered by October 31, 2001, except that there shall be no time limitation
with respect to notices of claims under sections 3.2, 3.4(b) and the first
sentence of section 3.9;
(b) except with respect to the representations and warranties of
the Stockholders contained in sections 3.2, 3.4(b) and the first sentence of
section 3.9, the only recourse of Youthstream and the Surviving Corporation for
indemnification for misrepresentation or breach of warranty under this agreement
shall be to the shares of Youthstream common stock and cash held by the Escrow
Agent (or any successor escrow agent) pursuant to the Escrow Agreement; and
(c) with respect to the representations and warranties of the
Stockholders contained in sections 3.2, 3.4(b) and the first sentence of section
3.9, each of the Stockholders shall be liable solely for his or her
proportionate share (based on the percentages shown on schedule 2.1) of any
amount for which Youthstream is entitled
16
to be indemnified under section 7.2(a) as a result of misrepresentation or
breach of warranty under those sections, but the indemnification obligations of
the Stockholders shall not be limited to the shares of Youthstream common stock
and cash held by the Escrow Agent (or any successor escrow agent) pursuant to
the Escrow Agreement.
7.4 Defense of Claims. If any third-party claim is made against any
party that, if sustained, would give rise to a liability of the other party, the
party against whom the claim is made shall promptly cause notice of the claim to
be delivered to the other party and shall afford the other party and its
counsel, at the other party's sole expense, the opportunity to join in defending
or compromising the claim.
8. Miscellaneous.
8.1 Finders. The parties represent and warrant that they have not
employed or utilized the services of any broker or finder in connection with
this agreement or the transactions contemplated by it, except for Broadview, who
was engaged by the Company. The Stockholders represent and warrant to
Youthstream that the aggregate amount of fees and expenses payable to Broadview
upon consummation of the transactions contemplated by this agreement is
$600,000.
8.2 Entire Agreement. This agreement contains a complete statement
of all of the terms of the arrangements among the parties, supersedes any
previous agreements and understandings among the parties (including, but not
limited to, the letter of intent dated May 16, 2000), and cannot be changed or
terminated orally.
8.3 Governing Law. This agreement shall be governed by and construed
in accordance with the law of the State of New York applicable to agreements
made and to be performed entirely in New York, except that the provisions
relating to the merger of W3TCO into the Company shall be governed by Delaware
law and Massachusetts law to the extent appropriate.
8.4 Headings. The section headings of this agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this agreement.
8.5 Notices. All notices and other communications under this
agreement shall be in writing and shall be deemed given when delivered
personally, one day after being sent by recognized overnight courier or four
days after being mailed by registered mail, return receipt requested, to the
parties at the following addresses (or to such other address as a party may
specify by notice given to the other pursuant to this provision):
(a) If to the Company or the Stockholders, addressed to any or
all of them:
c/o X0X.xxx, Inc.
000 Xxxxx Xxxx
Xxxxx, Xxxxxxxxxxxxx 00000
with a copy to:
00
Xxxxx Xxxxxx, Xxx.
Xxxxxxxx, Xxxxxxx & Xxxxxxx,
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
(b) If to W3TCO or Youthstream, addressed to either or both of
them at:
Youthstream Media Networks, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Executive Vice
President
and Chief Financial Officer
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
8.6 Waiver. Any party may waive compliance by another with any of the
provisions of this agreement. No waiver of any provision shall be construed as a
waiver of any other provision. Any waiver must be in writing and must be signed
by the party waiving the provision.
8.7 Separability. If any provision of this agreement is invalid or
unenforceable, the balance of this agreement shall remain in effect unless such
invalidity or unenforceability shall materially impair the purpose or objectives
of this agreement.
8.8 Assignment. No party may assign any of its or his rights or
delegate any of its or his duties under this agreement without the consent of
the other parties.
8.9 Publicity. No party shall issue any press release or other public
statement regarding the transactions contemplated by this agreement without the
consent of Youthstream and the Company, except that Youthstream may make such
public disclosures as it may determine necessary to fulfill its legal
obligations.
8.10 Definitions. As used in this agreement, (a) the term "affiliate"
means any person or entity directly or indirectly controlled by, controlling, or
under common control with, any other person or entity, and (b) the term
"subsidiary" of a person means any corporation or other legal entity of which
that person (either alone or through or together with any other subsidiary)
owns, directly or indirectly, more than 50% of the stock or other equity
interests that are ordinarily and generally, in the absence of contingencies and
understandings, entitled to vote for the election of the board of directors or
other governing body of such entity.
18
8.11 No Third Party Beneficiaries. This agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this agreement.
[End of Text; Signature Pages to Follow]
19
X0X.XXX, INC.
By: /s/ XXXXXX XXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
/s/ XXXXXX XXXXXXX
----------------------------------
Xxxxxx Xxxxxxx, individually
/s/ XXXXXX XXXXXXXX
----------------------------------
Xxxxxx Xxxxxxxx, individually
/s/ XXXXXX XXXX
----------------------------------
Xxxxxx Xxxx, individually
/s/ XXXXXXX XXXX
----------------------------------
Xxxxxxx Xxxx, individually
/s/ XXXXX XXXXXX
----------------------------------
Xxxxx Xxxxxx, individually
/s/ XXXX XXXXX
----------------------------------
Xxxx Xxxxx, individually
/s/ XXXXXXX X. XXXXXXXXX
----------------------------------
Xxxxxxx X. Xxxxxxxxx, individually
/s/ XXXX XXXXXX
----------------------------------
Xxxx Xxxxxx, individually
20
W3T ACQUISITION, INC.
By: /s/ XXXXX XXXXXX
-----------------------------------------------------------
Name: Xxxxx Xxxxxx
Title: Executive Vice President and Treasurer
YOUTHSTREAM MEDIA NETWORKS, INC.
By: /s/ XXXXX XXXXXX
-----------------------------------------------------------
Name: Xxxxx Xxxxxx
Title: Executive Vice President and Chief Financial Officer
21