March 13, 2000
Xxxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxx X. Xxxxx
Argus Capital
Arba, LLC
Xxxxx Xxxx
Xxxx Xxxxxxxx
Xxxxxx Xxxxxx
and to the persons named on the attached Schedule A
Re: Purchase of a minimum of 500,000 shares of eUniverse common stock by
eUniverse, Inc. ("eUniverse" or "Purchaser") from the Former
Shareholders of The Big Network, Inc. ("BNI")
Gentlemen:
This letter agreement (the "Agreement") sets forth the terms of
Purchaser's right to purchase a minimum of 500,000 shares of eUniverse common
stock (the "Shares"), on a pro rata basis, from all of the former shareholders
of BNI who, as of the Closing (defined below) are shareholders of eUniverse and
are counter-signatories to this Agreement (collectively, the "Sellers" and each
individually a "Seller"), including, without limitation, Xxxxxxx X. Xxxxxxx,
Xxxxxxx Xxxxxxx, Xxxx X. Xxxxx, Argus Capital, LLC, Arba, LLC, Xxxxx Xxxx, Xxxx
Xxxxxxxx, Xxxxxx Xxxxxx (collectively, the "Majority BNI Shareholders").
The consummation of the transactions set forth in this Agreement (the
"Closing") shall be effective as of 12:01 a.m. Stamford, Connecticut time on the
date that all of the Closing conditions are satisfied (the "Closing Date"),
provided, however, that the Closing will occur no later than April 24, 2000.
Subject to the terms and conditions herein, on the Closing Date the Sellers will
sell to the Purchaser, and the Purchaser will purchase from the Sellers, a
minimum of 500,000 Shares and, at the election of the Purchaser, up to all of
the Shares (except for the shares that are being held in escrow under that
certain Agreement and Plan of Reorganization and those certain Stock Exchange
Agreements by and among eUniverse and each of the Sellers (the "Escrowed
Shares"), all of which Escrowed Shares may be purchased by the Purchaser at the
sole election of each individual Seller) owned by the Sellers, on a pro rata
basis, at a purchase price of $6.00 per share. The Closing shall occur on or
before April 24, 2000. If eUniverse does not purchase 500,000 Shares by that
date, then the Closing shall not have occurred and eUniverse shall (1) register
all of the eUniverse shares owned by the Sellers the following day (except for
the Escrowed Shares) on an appropriate registration form of the Securities and
Exchange Commission; and (2) Xxxx Xxxxxxxxx ("Guarantor") or Purchaser shall
immediately issue 50,000 shares of common stock on a pro rata basis to the
Sellers, which shall be registered along with the shares as provided in this
paragraph.
Closing conditions: at the Closing, (1) the Purchaser shall deliver
payment of the purchase price for the Shares to the Sellers by check or by wire
transfer; (2) the Sellers shall sell, assign, convey and transfer the Shares to
Purchaser, and the Purchaser shall purchase and accept the Shares from the
Sellers; (3) each Seller shall endorse in blank and deliver to the Purchaser the
stock certificates representing the Shares. eUniverse shall be responsible for
ensuring that each Seller has received the stock certificate to allow him/her to
consummate this transaction, and shall take all steps necessary to consummate
this transaction in the absence of any such certificates.
Each Seller hereby represents and warrants to Purchaser, and its
assignee as permitted hereunder, that (1) this Agreement is a valid and binding
obligation of Seller enforceable in accordance with its terms; (2) this
Agreement does not violate or conflict with any other agreement to which Seller
is a party or require the consent of any third party; (3) the Seller is the sole
record and beneficial owner of the Shares; the Seller has good and
Letter Agreement
Page 2
merchantable title to the Shares free and clear of any and all liens, pledges,
security interests, charges, restrictions and other encumbrances; (4) Seller has
no material liabilities of any nature whatsoever which in any manner affect the
Shares; (5) Seller is not a party to any pending litigation, is not aware of any
threatened litigation with respect to the Shares and has not filed any voluntary
petition in bankruptcy, nor been served with or otherwise received notice of any
involuntary petition in bankruptcy having been filed against Seller; and (6)
Seller is not in default with respect to any material liabilities or material
obligations, which are related to the Shares.
Purchaser hereby represents and warrants to the Sellers that (1)
Purchaser is a corporation duly organized, legally existing and in good standing
under the laws of its state of incorporation; (2) the execution and delivery of
this Agreement by Purchaser has been duly authorized and this Agreement
constitutes the valid and binding obligation of Purchaser enforceable in
accordance with its terms; and (3) this Agreement does not violate or conflict
with any agreement to which Purchaser is a party.
All representations and warranties of the parties contained herein
shall be true in all material respects at and as of the Closing Date with the
same effect as though such representations and warranties were made at and as of
such time; and each party shall have performed and complied with all
obligations, covenants, and conditions required by this Agreement to have been
performed or complied with by it prior to or on the Closing Date. All
representations, warranties, agreements and covenants made and given herein
shall survive the execution and delivery of this Agreement and the Closing.
Each Seller shall indemnify, defend and save Purchaser harmless from
any actions, claims, losses, damages, demands or expense (including without
limitation all court costs and reasonable attorney's fees on account thereof)
suffered or incurred by Purchaser, its successors or assigns, arising from (i)
any untruthfulness of any representation made by the Seller in this Agreement or
in any document delivered to Purchaser by or on behalf of Seller pursuant to
this Agreement, or (ii) breach of any covenant or warranty of the Seller
contained in this Agreement or in any document delivered to Purchaser by or on
behalf of Seller pursuant to this Agreement: provided, however, that the
aggregate liability of each Seller hereunder shall not exceed the aggregate
value, as of the date hereof, of all Shares sold by such Shareholder hereunder.
Purchaser shall indemnify, defend and save each Seller harmless from
any actions, claims, losses, damages, demands or expense (including without
limitation all court costs and reasonable attorney's fees on account thereof)
suffered or incurred by any Seller, his or her successors or assigns, arising
from (i) any untruthfulness of any representation made by the Purchaser in this
Agreement or in any document delivered to a Seller by or on behalf of Purchaser
pursuant to this Agreement, or (ii) breach of any covenant or warranty of the
Purchaser contained in this Agreement or in any document delivered to a Seller
by or on behalf of Purchaser pursuant to this Agreement.
Upon the Closing of this Agreement, Purchaser, Gurantor and each of the
Sellers agrees as follows,:
(1) all of the parties to this Agreement agree that each and all
of the Registration Rights Agreements executed in connection
with that certain Agreement and Plan of Reorganization and
Stock Exchange Agreements by and among eUniverse, BNI and the
shareholders of BNI (collectively, the "Registration Rights
Agreements") shall be terminated, rescinded and cancelled; no
party to any of the Registration Rights Agreements shall have
any further rights, duties or obligations thereunder.
(2) the Sellers, collectively, shall grant eUniverse the right to
purchase the remainder of eUniverse common stock (excluding
the Escrowed Shares) owned by the Sellers from the Sellers on
a pro rata basis at a price of $10.00 per share at any time
between April 24, 2000 and July 7, 2000;
(3) each of the Sellers agrees that he or she will not sell more
than a total of twenty-five percent (25%) of the shares of
eUniverse common stock (excluding the Escrowed Shares) held by
each Seller that remains unsold after the 120-day period
specified in (2), above, during each of the calendar months
beginning September 1, 2000; October 1, 2000; November 1,
2000; and December 1, 2000 (individually, a "Period"), except
as otherwise provided herein;
Letter Agreement
Page 3
and
(4) If eUniverse does not purchase the remainder of eUniverse
common stock (except for the Escrowed Shares) owned by the
Sellers from the Sellers at a price of $10.00 per share, then
Guarantor shall transfer into an escrow account on terms
acceptable to the Sellers (the "Escrow Account") a number of
shares of Common Stock held by Guarantor as shall be
determined pursuant to the provisions of Schedule B hereto, to
be distributed pro rata to and for the benefit of each
applicable Seller.
Counsel to Purchaser shall have received all documents, certificates
and other papers reasonably requested by it in connection herewith. If any
proceeding shall be commenced to enforce this Agreement or any right arising in
connection with this Agreement, the prevailing party in such action or
proceeding shall be entitled to recover from the other party the reasonable
attorneys' fees, costs and expenses incurred by such prevailing party in
connection with such action or proceeding or negotiation to avoid such action or
proceeding.
This Agreement shall be governed by and construed in accordance with
the laws of the state of Connecticut, without giving effect to any principles of
conflicts of law. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original and all of which taken together shall
constitute one and the same Agreement. This Agreement may not be assigned by any
Seller and any attempt to do so shall be null and void. Purchaser may assign
this Agreement at any time to any party. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective heirs,
distributees, legal representatives, successors and assigns. The enforceability
of this Agreement against eUniverse shall be contingent upon (i) the approval of
the terms hereof by eUniverse Board of Directors within 5 days of the date of
execution of this Agreement; and (ii) the parties executing this Agreement as
Sellers held greater than 50% of the shares of capital of BNI.
Any provision of this Agreement held or determined by a court (or other
legal authority) of competent jurisdiction to be illegal, invalid, or
unenforceable in any jurisdiction shall be deemed separate, distinct and
independent, and shall be ineffective to the extent of such holding or
determination without (i) invalidating the remaining provisions of this
Agreement in that jurisdiction or (ii) affecting the legality, validity or
enforceability of such provision in any other jurisdiction.
Please acknowledge receipt of the foregoing and your agreement and
consent to same by executing a copy of this letter where indicated below and
returning a copy to us by facsimile and a fully executed original to us by
overnight mail courier.
Very truly yours,
eUniverse, Inc.
By: /s/ Xxxx X. Xxxxxxxxx
----------------------------------
Xxxx X. Xxxxxxxxx, Chairman
AGREED AND ACCEPTED THIS
___ DAY OF MARCH 2000.
SELLERS:
/s/ Xxxxxxx X. Xxxxxxx
------------------------
Xxxxxxx X. Xxxxxxx
Letter Agreement
Page 4
/s/ Xxxxxxx Xxxxxxx
------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxx X. Xxxxx
------------------------
Xxxx X. Xxxxx
Argus Capital, LLC.
By: /s/ Illegible
------------------------
Its: Manager
Arba, LLC.
By: /s/ Xxxx Xxxx
------------------------
Its: Managing Partner
/s/ Xxxxx Xxxx
-------------------------
Xxxxx Xxxx
/s/ Xxxx Xxxxxxxx
-------------------------
Xxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxx
-------------------------
Xxxxxx Xxxxxx
GUARANTOR:
/s/ Xxxx X. Xxxxxxxxx
--------------------------------------------------------------------------------
Xxxx X. Xxxxxxxxx
Letter Agreement
Page 5
SCHEDULE A
Purchase of a minimum of 500,000 shares of eUniverse common stock by eUniverse,
Inc. ("eUniverse" or "Purchaser") from the Former Shareholders of The Big
Network, Inc. ("BNI").
The following former shareholders of BNI who are current shareholders of
eUniverse hereby agree to the terms of this letter agreement and are counter
signatories hereto. In addition, any former BNI shareholders signing this
agreement may elect to have their Escrowed Shares purchased on a best-efforts
basis on the following schedule:
Until April 24, 2000 at $6.00 per share and between April 24, 2000 and
July 7, 2000 at $10.00 per share. If the Purchaser is unable to buy or find a
buyer for such shares, then the shares will remain in escrow until December 1,
2000
Indicate if shareholder wants Purchaser
to attempt purchase of Escrowed Shares
Yes No
------------------------
Name:
------------------------
Name:
------------------------
Name:
------------------------
Name:
Letter Agreement
Page 6
SCHEDULE B
Those shares not sold pursuant to this Agreement, excluding the
Escrowed Shares (hereinafter the "Remaining Shares") shall be subject
to price protection from the Purchaser, according to the terms and
schedule that follow.
For the purposes of this Agreement, the "Average Price" of the
eUniverse stock on a given date is determined by adding the sum of the
daily high trading price of eUniverse common stock (as published in the
Wall Street Journal) for the 20 trading days immediately prior to such
date to the sum of the daily low trading price of eUniverse common
stock (as published in the Wall Street Journal) for the 20 trading days
immediately prior to such date. The sum thereof shall be divided by 40.
The Average Price as determined on September 1, 2000; October 1, 2000;
November 1, 2000; December 1, 2000 shall be used to determine the
number of shares Guarantor shall deposit into the Escrow Account on
September 1, 2000; October 1, 2000; November 1, 2000; December 1, 2000,
(for the benefit of and to be distributed to the Sellers, pro rata),
according to the following schedule:
AVERAGE PRICE PRICE TO WHICH SHARES WILL BE PROTECTED ("PROTECTION PRICE")
$8.01 - $12.00 $12.00
$7.01 - $ 8.00 $11.00
$6.01 - $ 7.00 $10.00
$5.01 - $ 6.00 $ 9.00
$3.20 - $ 5.00 $ 8.00
On September 1, 2000 Guarantor shall deposit into the Escrow Account
additional shares ("Protection Shares") for each of the Remaining
Shares, in an amount equal to Twenty-Five Percent (25%) of the number
of Shares determined in accordance with the following schedule:
If the Average Price on September 1, 2000 is above $12.00, Guarantor
will deposit no additional shares.
If the Average Price on September 1, 2000 is between $8.01 and
$12.00, Guarantor will deposit into the Escrow Account for each
Remaining Share the number of shares that is equal to Protection
Price of $12.00 less the Average Price divided by the Average Price.
If the Average Price on September 1, 2000 is between $7.01 and $8.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$11.00 less the Average Price divided by the Average Price.
If the Average Price on September 1, 2000 is between $6.01 and $7.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$10.00 less the Average Price divided by the Average Price.
If the Average Price on September 1, 2000 is between $5.01 and $6.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $9.00
less the Average Price divided by the Average Price.
If the Average Price on September 1, 2000 is between $3.20 and $5.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $8.00
less the Average Price divided by the Average Price.
If the Average Price on September 1, 2000 is below $3.20, Guarantor
will deposit into the Escrow Account 1.5 shares for each Remaining
Share.
Letter Agreement
Page 7
On October 1, 2000 Guarantor shall deposit into the Escrow Account
additional shares ("Protection Shares") for each of the Remaining
Shares in an amount equal to Twenty-Five Percent (25%) of the number of
Shares determined in accordance with the following schedule:
If the Average Price on October 1, 2000 is above $12.00, Guarantor
will deposit no additional shares.
If the Average Price on October 1, 2000 is between $8.01 and $12.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$12.00 less the Average Price divided by the Average Price.
If the Average Price on October 1, 2000 is between $7.01 and $8.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$11.00 less the Average Price divided by the Average Price.
If the Average Price on October 1, 2000 is between $6.01 and $7.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$10.00 less the Average Price divided by the Average Price.
If the Average Price on October 1, 2000 is between $5.01 and $6.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $9.00
less the Average Price divided by the Average Price.
If the Average Price on October 1, 2000 is between $3.20 and $5.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $8.00
less the Average Price divided by the Average Price.
If the Average Price on October 1, 2000 is below $3.20, Guarantor
will deposit into the Escrow Account 1.5 shares for each Remaining
Share.
On November 1, 2000 Guarantor shall deposit into the Escrow Account
additional shares ("Protection Shares") for each of the Remaining
Shares in an amount equal to Twenty-Five Percent (25%) of the number of
Shares determined in accordance with the following schedule:
If the Average Price on November 1, 2000 is above $12.00, Guarantor
will deposit no additional shares.
If the Average Price on November 1, 2000 is between $8.01 and $12.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$12.00 less the Average Price divided by the Average Price.
If the Average Price on November 1, 2000 is between $7.01 and $8.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$11.00 less the Average Price divided by the Average Price.
If the Average Price on November 1, 2000 is between $6.01 and $7.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$10.00 less the Average Price divided by the Average Price.
If the Average Price on November 1, 2000 is between $5.01 and $6.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $9.00
less the Average Price divided by the Average Price.
Letter Agreement
Page 8
If the Average Price on November 1, 2000 is between $3.20 and $5.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $8.00
less the Average Price divided by the Average Price.
If the Average Price on November 1, 2000 is below $3.20, Guarantor
will deposit into the Escrow Account 1.5 shares for each Remaining
Share.
On December 1, 2000 Guarantor shall deposit into the Escrow Account
additional shares ("Protection Shares") for each of the Remaining
Shares in an amount equal to Twenty-Five Percent (25%) of the number of
Shares determined in accordance with the following schedule:
If the Average Price on December 1, 2000 is above $12.00, Guarantor
will deposit no additional shares.
If the Average Price on December 1, 2000 is between $8.01 and $12.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$12.00 less the Average Price divided by the Average Price.
If the Average Price on December 1, 2000 is between $7.01 and $8.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$11.00 less the Average Price divided by the Average Price.
If the Average Price on December 1, 2000 is between $6.01 and $7.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of
$10.00 less the Average Price divided by the Average Price.
If the Average Price on December 1, 2000 is between $5.01 and $6.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $9.00
less the Average Price divided by the Average Price.
If the Average Price on December 1, 2000 is between $3.20 and $5.00,
Guarantor will deposit into the Escrow Account for each Remaining
Share the number of shares that is equal to Protection Price of $8.00
less the Average Price divided by the Average Price.
If the Average Price on December 1, 2000 is below $3.20, Guarantor
will deposit into the Escrow Account 1.5 shares for each Remaining
Share.
All shares will be deposited into the Escrow Account and shall be held
in such account until January 1, 2001. On January 1, 2001, the Escrow
Account will be opened and all the shares contained therein shall
immediately be distributed to the Sellers on a pro rata basis, based on
their original percentage ownership of the Shares. The Shares in the
Escrow Account will not be held back for any reason or subject to
offset for any claim arising for any reason pursuant to this Agreement
or otherwise. eUniverse shall file a registration statement by November
1, 2000 for the shares to be released (including the total number that
could be released on December 1, 2000) from the Escrow Account to the
Sellers.
