SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
| | Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
YOUTHSTREAM MEDIA NETWORKS, INC.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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YOUTHSTREAM MEDIA NETWORKS, INC.
28 WEST 23RD STREET, 6TH FLOOR
NEW YORK, NEW YORK 10010
April 23, 2001
Dear Stockholder:
You are cordially invited to the 2001 Annual Meeting of Stockholders of
YouthStream Media Networks, Inc. ("YouthStream" or the "Company"), to be held on
May 18, 2001 at 10 a.m. Eastern Time at Proskauer Rose LLP, 1585 Broadway, Room
2300, New York, New York.
At the Annual Meeting, you will be asked to elect three directors to the
Board of Directors of the Company, ratify the appointment of Ernst & Young LLP
as independent auditors for the fiscal year ending June 30, 2001, approve an
amendment to the Company's 2000 Stock Incentive Plan (the "Plan") to allow the
Company to grant stock options to its independent directors under the Plan, and
conduct any other business that may properly arise at the Annual Meeting.
Our Annual Report on Form 10-KSB for the fiscal year ended June 30, 2000 is
enclosed. I hope you will read it carefully. Also enclosed with this letter is a
proxy authorizing officers of the Company to vote your shares for you if you do
not attend the Annual Meeting. Whether or not you are able to attend the Annual
Meeting, I urge you to complete your proxy and return it in the enclosed
addressed, postage-paid envelope, as a quorum of the stockholders must be
present at the Annual Meeting, either in person or by proxy, to conduct the
business described above.
I would appreciate your immediate attention to the mailing of this proxy.
Yours truly,
James G. Lucchesi
President and Chief Executive Officer
YOUTHSTREAM MEDIA NETWORKS, INC.
28 WEST 23RD STREET, 6TH FLOOR
NEW YORK, NEW YORK 10010
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2001
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Notice is hereby given that the 2001 Annual Meeting of Stockholders of
YouthStream Media Networks, Inc., a Delaware corporation, will be held on May
18, 2001 at 10 a.m. Eastern Time at Proskauer Rose LLP, 1585 Broadway, Room
2300, New York, New York for the following purposes:
1. to elect three members to our Board of Directors as Class II directors
to serve until the 2004 Annual Meeting of Stockholders or until their
successors are elected and qualified; and
2. to ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending June 30, 2001; and
3. to approve an amendment to the Company's 2000 Stock Incentive Plan to
allow the Company to grant stock options to its non-employee directors
under the Plan; and
4. to transact such other business as may properly come before the Annual
Meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on March 20, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any and all adjournments.
It is important that your shares be represented at the Annual Meeting
regardless of the size of your holdings. Whether or not you expect to attend the
Annual Meeting, please complete, date and sign the enclosed proxy and return it
in the envelope provided for that purpose, which does not require postage if
mailed in the United States. The proxy is revocable at any time prior to its
use.
By Order of the Board of Directors,
James G. Lucchesi
President and Chief Executive Officer
New York, New York
April 23, 2001
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YOUR VOTE IS IMPORTANT TO US. PLEASE COMLETE, SIGN, DATE AND RETURN YOUR PROXY.
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YOUTHSTREAM MEDIA NETWORKS, INC.
28 WEST 23RD STREET, 6TH FLOOR
NEW YORK, NEW YORK 10010
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2001
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PROXY STATEMENT
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ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
The accompanying proxy is solicited by the Board of Directors of
YouthStream Media Networks, Inc., a Delaware corporation ("YouthStream" or the
"Company"), for use at the 2001 Annual Meeting of Stockholders to be held at
Proskauer Rose LLP, 1585 Broadway, Room 2300, New York, New York, on May 18,
2001 at 10 a.m. Eastern Time, and at any and all adjournments thereof (the
"Annual Meeting"). If no contrary instruction is received, signed proxies
returned by stockholders will be voted in accordance with the Board of
Directors' recommendations.
This Proxy Statement and accompanying proxy were first sent to stockholders
on or about April 23, 2001.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Secretary) written notice of revocation on a duly executed proxy bearing a later
date, or by attending the Annual Meeting and voting in person.
Only stockholders of record at the close of business on March 20, 2001 are
entitled to vote at the Annual Meeting. Each outstanding share of common stock
of the Company, par value $.01 per share (the "Common Stock"), is entitled to
one vote. The holders of a majority of the votes entitled to be cast whether
present in person or by proxy shall constitute a quorum for purposes of the
Annual Meeting. The Company's executive officers and directors and their
affiliates, as a group, will be entitled to vote at the Annual Meeting 4,898,172
shares (approximately 16.60%) of the outstanding Common Stock.
At the Annual Meeting, stockholders will vote on the election of three
directors (Proposal 1), the ratification of the selection of independent
auditors (Proposal 2), and an amendment to the Company's 2000 Stock Incentive
Plan (Proposal 3).
Under the Delaware General Corporation Law ("DGCL"), any corporate action,
other than the election of directors, must be authorized by a majority of the
votes present in person or by proxy at the meeting and entitled to be cast on
the matter, except as otherwise required by the DGCL or the Company's
Certificate of Incorporation with respect to a specific proposal. With regard to
the election of directors, if a quorum is present, then the nominees receiving a
plurality of the votes cast at the Annual Meeting will be elected directors.
Votes may be cast in favor of or withheld from each nominee; votes that are
withheld will be excluded entirely from the vote and will have no effect.
Abstentions may be specified on all proposals except the elections of
directors and will be counted as present for the purposes of the proposal for
which the abstention is noted. For purposes of determining whether a proposal
has received a majority of the votes cast, where a stockholder abstains from
voting, those shares will be counted against the proposal.
The independent tabulator appointed for the Annual Meeting will tabulate
votes cast by proxy or in person at the Annual Meeting. For the purposes of
determining whether a proposal has received the
requisite vote in instances where brokers are prohibited from exercising or
choose not to exercise discretionary authority for beneficial owners who have
not provided voting instructions (so-called "broker non-votes"), those shares
will not be included in the vote totals and, therefore, will have no effect on
the vote. Pursuant to the NASD Rules of Fair Practice, brokers who hold shares
in street name have the authority, in limited circumstances, to vote on certain
items when they have not received instructions from beneficial owners. A broker
will have such authority only if (i) the broker holds the shares as executor,
administrator, guardian, trustee, or similar representative or fiduciary
capacity with authority to vote, or (ii) the broker is acting pursuant to the
rules of any national securities exchange to which the broker is also a member.
The Company will bear all costs of solicitation of proxies. We have engaged
Morrow & Co., Inc. ("Morrow") to assist with the solicitation of proxies. We
expect to pay Morrow approximately $4,000 for its services. In addition to
solicitations by mail, Morrow and our directors, officers and regular employees
may solicit proxies by telephone, facsimile and personal interviews without
additional remuneration. Brokers, custodians and fiduciaries will be requested
to forward proxy soliciting material to the owners of stock they hold in their
names. We will reimburse banks and brokers for their reasonable out-of-pocket
expenses incurred in connection with the distribution of the proxy materials.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of March 20, 2001, the Company had outstanding 29,510,257 shares of
Common Stock, which are the only outstanding voting securities of the Company.
The following table sets forth, as of April 1, 2001 the beneficial
ownership of Common Stock with respect to (i) each person who was known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director and nominee for director, (iii) each executive
officer, and (iv) all directors and executive officers as a group.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OF CLASS
----------------------- ------------------------ --------
Harlan D. Peltz ......................................... 3,820,667(3) 12.95
James G. Lucchesi ....................................... 323,866(4) 1.10
Irwin Engelman .......................................... 120,000(5) *
Dennis Roche ............................................ 125,788(6) *
Thea Winarsky ........................................... 69,766(7) *
Metin Negrin ............................................ 65,251(8) *
Howard Klein ............................................ 147,834(9) *
Jonathan V. Diamond ..................................... 225,000 *
Sidney I. Lirtzman ...................................... -- *
Bruce Slovin ............................................ -- *
Benjamin Bassi .......................................... 2,317,708(10) 7.85
All executive officers and directors as a group
(10 persons) ...................................... 4,898,172 16.60
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* Less than one percent.
(1) Unless otherwise indicated, the address of each beneficial owner identified
is c/o YouthStream Media Networks, Inc., 28 West 23rd Street, 6th Floor,
New York, NY 10010.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares of Common Stock subject to
options or warrants exercisable within 60 days of April 1, 2001 are deemed
outstanding for computing the percentage beneficially owned by the person
or group holding such options or warrants, but are not deemed outstanding
for computing the percentage of any other person. Except as noted, each
stockholder has sole voting power and sole investment power with respect to
all shares beneficially owned by such stockholder.
2
(3) Includes 1,603,854 shares of the Company's Common Stock for which Mr. Peltz
acts as a voting trustee under a voting trust agreement dated February 28,
2000 among Mr. Peltz, Benjamin Bassi, William Townsend, and Mark Palmer
("Voting Trust Agreement"). Under the Voting Trust Agreement, Messrs.
Bassi, Townsend and Palmer transferred to Mr. Peltz, as voting trustee, 50%
of their shares of common stock of YouthStream. As voting trustee, Mr.
Peltz has full and exclusive power and authority to vote such shares during
the effective term of the Voting Trust Agreement.
(4) Includes 286,794 shares issuable upon exercise of options granted under the
Company's 2000 Stock Incentive Plan, 9,497 shares and warrants to purchase
4,731 shares issued in connection with the sixdegrees, inc. merger, and an
additional 1,898 shares and warrants to purchase 946 shares held by his
minor children.
(5) Includes 75,000 shares issuable upon exercise of options granted under the
Company's 2000 Stock Incentive Plan and 25,000 shares issuable upon
exercise of options granted pursuant to his employment agreement.
(6) Includes 103,788 shares issuable upon exercise of options granted under the
Company's 2000 Stock Incentive Plan and 5,332 shares issued in connection
with the merger of Beyond the Wall, Inc.
(7) Includes 69,766 shares issuable upon exercise of options granted under the
Company's 2000 Stock Incentive Plan.
(8) Includes 5,834 shares issuable upon exercise of options granted under the
Company's predecessor's 1997 Stock Incentive Plan which permitted stock
option grants to outside directors. The Company's 2000 Stock Incentive Plan
assumed such options effective February 28, 2000.
(9) Includes (1) 133,500 shares Mr. Klein owns jointly with his wife, (2) 8,500
shares held in a retirement plan with his partners, and (3) 5,834 shares
issuable upon exercise of options granted under the Company's predecessor's
1997 Stock Incentive Plan which permitted stock option grants to outside
directors. The Company's 2000 Stock Incentive Plan assumed such options
effective February 28, 2000.
(10) This includes 1,158,854 shares owned by Mr. Bassi for which Harlan Peltz
acts as voting trustee under the Voting Trust Agreement. Under the Voting
Trust Agreement, Mr. Bassi transferred to Mr. Peltz, as voting trustee, 50%
of his shares of Common Stock of YouthStream. As voting trustee,Mr. Peltz
has full and exclusive power and authority to vote those shares during the
effective term of the Voting Trust Agreement.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes, with one class being
elected each year and members of each class holding office for a three-year
term. Our Board of Directors currently consists of eight members, two of whom
are Class I directors (with terms expiring at the 2003 Annual Meeting), three of
whom are Class II directors (with terms expiring at the 2001 Annual Meeting),
and three of whom are Class III directors (with terms expiring at the 2002
Annual Meeting).
At our Annual Meeting, the stockholders will elect three directors to the
Board of Directors of the Company, each to serve until the 2004 Annual Meeting
of Stockholders or until their successors are elected and qualified. If a
nominee is unable or unwilling to serve, the shares to be voted for such nominee
that are represented by proxies will be voted for any substitute nominee
designated by the Board of Directors. The Company has no reason to believe that
any of the nominees will be unable or unwilling to serve if elected. All of the
nominees are currently directors of the Company.
The affirmative vote of a plurality of the shares of Common Stock present
in person or by proxy at the meeting and entitled to vote on the election of
directors is required to elect a nominee. The Board of Directors recommends a
vote IN FAVOR of the nominees for director listed below. Unless a proxy is voted
AGAINST a director nominee, proxies will be voted IN FAVOR of the nominees for
director listed below.
The following paragraphs provide information about each continuing member
of our Board of Directors and the nominees for Class II directors. The
information includes information they have each given us about their age, all
positions they hold with us, and their principal occupation and business
experience. Information about the number of shares of our common stock
beneficially owned by each director, directly or indirectly, as of April 1,
2001, appears under the heading "Voting Securities and Principal Holders."
NOMINEES FOR CLASS II DIRECTORS (TERMS TO EXPIRE AT THE 2001 ANNUAL MEETING;
NOMINATED FOR REELECTION WITH TERMS TO EXPIRE AT THE 2004 ANNUAL MEETING)
Metin Negrin, age 35, has been a director of the Company since December
1995. Since May 2000, he has been Chief Executive Officer of i-scraper inc.
i-scraper is an Internet real estate project management company. From August
1993 to May 2000, Mr. Negrin was the Chief Operating Officer and a Managing
Director of The Athena Group, a real estate investment firm. From July 1990 to
July 1993, Mr. Negrin was an associate in the New York office of LaSalle
Partners, a Chicago-based real estate investment firm. Mr. Negrin has an MBA in
finance and a BS in economics from New York University.
Howard Klein, age 43, has been a director of the Company since June 1998.
Mr. Klein is a founding partner of 3 Arts Entertainment, one of the leading
management/production firms in the entertainment industry, based in Beverly
Hills, California.
Sidney I. Lirtzman, age 70, has been a director of the Company since April
2001. He is the Emmanuel Saxe Professor of Management and Dean of the Zicklin
School of Business at Baruch College of The City University of New York. Dr.
Lirtzman is a public member of the Board of Directors of the Independent Budget
Office of the City of New York, as well as a member of the Boards of the
Baillie-Gifford and the Guardian domestic and international equity and bond
funds. Dr. Lirtzman earned a Bachelor of Artsdegree in economics from the City
College of New York, and a Master's and Ph.D. in psychology from Columbia
University.
The Company's three nominees for Class II directors were nominated for
election to the Board by the Company's Chairman Harlan Peltz.
CLASS I DIRECTORS (TERMS TO EXPIRE AT THE 2003 ANNUAL MEETING)
Irwin Engelman, age 66, is Executive Vice President and Chief Financial
Officer of YouthStream, and has been a director of the Company since January
2001. He joined YouthStream from MacAndrews &
4
Forbes Holdings, Inc., in New York, where he was most recently Vice Chairman and
Chief Administrative Officer of Revlon, Inc., after acting as Executive Vice
President and Chief Financial Officer of MacAndrews & Forbes Holdings, Inc. for
more than six years. Prior to that, Mr. Engelman was Executive Vice President
and Chief Financial Officer of GAF Corporation (1990-92), and served tenures as
President and Chief Operating Officer of Citytrust Bancorporation (1988-90);
Executive Vice President, The Blackstone Group (1987-88); Executive Vice
President, Chief Financial Officer and Board member of General Foods
Corporations (1981-87); and Vice President and Chief Financial Officer of The
Singer Company (1978-81). Before joining Singer, Mr. Engelman spent 12 years in
increasingly senior financial and executive management positions with Xerox
Corporation, culminating in the position of Vice President and General Manager
of the Reprographics Business Area. He earned his Juris Doctor from Brooklyn Law
School and his Bachelor of Business Administration and Doctor of Letters & Laws
(Hon.) from Baruch College.
Bruce Slovin, age 65, has been a director of the Company since April 2001.
He currently serves on the Board of Directors of Cantel Industries, a
health-care related company. From 1980 to 2000, he was with MacAndrews & Forbes
Holdings, Inc., where he served as its President and Director, Revlon Group
President and Director, and Revlon Holdings Director. Mr. Slovin received a
Juris Doctor in Corporate Law and Taxation from Harvard Law School and a
Bachelor of Arts degree in economics from Cornell University.
The Company's three nominees for Class II directors were nominated for
election to the Board by the Company's Chairman Harlan Peltz.
CLASS III DIRECTORS (TERMS TO EXPIRE AT THE 2002 ANNUAL MEETING)
Harlan D. Peltz, age 36, is the Company's Chief Corporate Strategist and
Chairman of the Board. From the initial public offering of the Company's
predecessor Network Event Theater, Inc. ("NET") in 1996 until June 2000, Mr.
Peltz served as the Company's Chairman and Chief Executive Officer. From 1993 to
1995, he was president of Universal Access Network, the predecessor of NET.
Prior to that, he served as an associate at Veronis, Suhler & Associates, Inc.,
an investment banking firm specializing in the media industry, and with Home Box
Office in the area of international business development. Mr. Peltz holds an MBA
from the Stern School of Business at New York University, and a BA from
Haverford College.
James G. Lucchesi, age 45, joined YouthStream as Executive Vice President
in January 2000 and was promoted to his current position as President, Chief
Executive Officer and director in June of 2000. Prior to that, he spent three
years as Chief Financial Officer of sixdegrees, inc., until its acquisition by
the Company in January 2000. Mr. Lucchesi has more than 20 years of executive
management experience, including service as CEO of two early stage consumer
packaged goods firms, and as COO and CFO of Fuel Tech, Inc., a pollution-control
technology firm. He holds a BA from Georgetown University, and an MBA from
Harvard University.
Jonathan V. Diamond, age 42, has been a director of the Company since April
2001. Mr. Diamond was the co-founder of N2K, Inc. and served as its Vice
Chairman and Chief Executive Officer through its 1999 merger with CDNOW, a
leading e-commerce company. He continued to serve as Chairman of the combined
company until its sale to BMG. Mr. Diamond is a former partner in GRP Records, a
leading independent music label acquired by MCA in 1990. Mr. Diamond holds a BA
in economics and music from the University of Michigan and an MBA from the
Columbia School of Business.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ending June 30, 2000, the Board of Directors met and
took action by unanimous written consent on six occasions. Each member of the
Board attended at least 75% of the meetings of the Board and meetings of any
committees of the Board on which he served that were held during the time he
served.
5
Audit Committee
The Company has a standing Audit Committee of the Board of Directors, which
is responsible for providing independent, objective oversight of the Company's
accounting functions and internal controls. Among other things, the Audit
Committee considers and recommends the selection of our independent auditors,
reviews the performance of the independent auditors in the annual audit and in
assignments unrelated to the audit, and reviews the independent auditors' fees.
The Audit Committee operates under a written charter adopted by the Board of
Directors that is attached as Appendix A to this Proxy Statement.
During fiscal year 2000, the Audit Committee was composed of Messrs. Klein
and Negrin, each of whom is an "independent director" under NASDAQ rules
governing the qualifications of the members of the Audit Committee. The Company
expects Mr. Lirtzman to join the Audit Committee as its Chairman in April 2001.
The Audit Committee did not hold any meetings in the fiscal year ended June 30,
2000 and held three meetings in the current fiscal year, which will end June 30,
2001.
Audit Committee Report
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of the audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of our accounting principles and such
other matters as are required to be discussed with the committee under generally
accepted auditing standards. In addition, the Audit Committee has discussed with
the independent auditors the auditors' independence from YouthStream and its
management, including the matters in the written disclosures we received from
the auditors as required by the Independent Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and considered the
compatibility of non-audit services with the auditors' independence. Based on
this review, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-KSB for fiscal year 2000, filed on September 27, 2000.
The Audit Committee and Board of Directors also have recommended, subject
to ratification by the stockholders, the selection of Ernst & Young LLP as our
independent auditors for the fiscal year ending June 30, 2001.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings made by the Company under those
statutes, in whole or in part, this report shall not be deemed to be
incorporated by reference into any such filings, nor will this report be
incorporated by reference into any future filings made by the Company under
those statutes.
Howard Klein and Metin Negrin
Members, Audit Committee
Stock Option Committee
The Company has a standing Stock Option Committee of the Board of
Directors, which has the responsibility for reviewing and approving stock option
grants recommended by management for the Company's employees and consultants as
permitted under the Company's 2000 Stock Incentive Plan. During the fiscal year
ended June 30, 2000, Messrs. Negrin and Klein were on the Stock Option
Committee. The Stock Option Committee held three meetings in the fiscal year
ending June 30, 2000.
Other Committees
The Board of Directors does not have a Nominating Committee. On April 13,
2001, the Board established a Compensation Committee, consisting of Messrs.
Klein, Lucchesi, Peltz and Slovin.
DIRECTORS' COMPENSATION
Under the Company's by-laws, directors shall receive such compensation as
the Board determines, together with reimbursement of their reasonable expenses
in connection with the performance of their duties. A director also may be paid
for serving the corporation or its affiliates or subsidiaries in other
capacities.
Directors were not compensated other than for reimbursement of reasonable
expenses during fiscal year 2000. Subject to the stockholders' approval of the
amendment to the Company's 2000 Stock Incentive Plan, the Company, pursuant to
the amended 2000 Stock Incentive Plan, will grant each non-employee director
prior to the end of the current fiscal year options with a fair market value
equal to $40,000 on the date of grant. One quarter of such options will vest
immediately upon grant, with the remainder to vest quarterly over the following
three quarters. In future years, the Company expects to grant each non-employee
director options with a value to be determined annually, at the discretion of
the Board of Directors, with such options to vest quarterly over a one-year
period. In addition, the Chairman of the Audit Committee will receive $10,000
per annum for serving in that capacity.
7
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our Board of Directors, on the recommendation of our Audit Committee, has
selected the firm of Ernst & Young LLP as the Company's independent public
accountants to audit the Company's financial statements for the fiscal year
ending June 30, 2001. Ernst & Young LLP performed various audit and other
services for the Company during fiscal 2000. Such services included an audit of
the Company's annual financial statements, review and consultation in connection
with certain filings with the Securities and Exchange Commission, consultation
on tax, financial accounting and reporting matters, and meetings with the Audit
Committee of the Board of Directors.
AUDIT FEES
The Company paid fees of approximately $172,000 to Ernst & Young LLP for
the fiscal 2000 annual audit, including the audit of the financial statements
and timely quarterly reviews.
AUDIT-RELATED FEES
The aggregate fees for other audit-related services paid to Ernst & Young
LLP during fiscal 2000 were $11,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not pay any financial information systems design and
implementation fees to Ernst & Young LLP during fiscal 2000.
ALL OTHER FEES
All other fees paid to Ernst & Young LLP, which principally were
acquisition related, equaled $186,000 during fiscal 2000.
Representatives of Ernst & Young LLP are expected to be present at the 2001
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
A resolution will be presented at the Annual Meeting to ratify the
appointment by the Board of Directors of the firm of Ernst & Young LLP as
independent auditors, to examine the financial statements of the Company for the
year ending June 30, 2001, and to perform other appropriate accounting services.
Although stockholder approval of the Board of Directors' selection of Ernst &
Young LLP is not required by law, the Board of Directors believes that it is
advisable to give stockholders an opportunity to ratify this selection. If this
proposal is not approved at the 2001 Annual Meeting, the Board of Directors will
reconsider its selection of Ernst & Young LLP.
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the meeting and entitled to vote is required to ratify the
appointment of Ernst & Young LLP. The Board of Directors recommends a vote IN
FAVOR of the ratification of its appointment of Ernst & Young LLP as independent
accountants. If not otherwise specified, proxies will be voted IN FAVOR of this
proposal.
8
PROPOSAL NO. 3
AMENDMENT OF YOUTHSTREAM MEDIA NETWORKS, INC.'S 2000 STOCK INCENTIVE PLAN
On February 28, 2000, the Company's stockholders approved the YouthStream
Media Networks, Inc. 2000 Stock Incentive Plan. The 2000 Stock Incentive Plan
provides for the grant of various types of awards, including stock options,
stock appreciation rights, restricted stock, performance shares, performance
units and other stock-based awards, to employees and consultants of the Company
and its affiliates. As of March 30, 2001, approximately 234 employees of the
Company and its affiliates were eligible to participate in the 2000 Stock
Incentive Plan.
A committee of the Board of Directors, appointed from time to time by the
Board of Directors, administers the 2000 Stock Incentive Plan. The committee has
full authority to, among other things,(i) select the employees and consultants
to whom awards may from time to time be granted, (ii) determine whether and to
what extent awards, including any combination of two or more awards, are to be
granted to one or more employees or consultants, (iii) determine, in accordance
with the terms of the 2000 Stock Incentive Plan, the number of shares of common
stock to be covered by each award, and (iv) determine the terms and conditions,
not inconsistent with the terms of the 2000 Stock Incentive Plan, of any award
(including, but not limited to, the exercise or purchase price, if any, any
restriction or limitation, any vesting schedule or acceleration thereof and any
forfeiture restrictions or waiver thereof, regarding any award and the shares of
Common Stock relating thereto, based on such factors, if any, as the committee
shall determine, in its sole discretion).
An aggregate of 5,000,000 shares of Common Stock of the Company are
reserved for issuance under the 2000 Stock Incentive Plan and as of March 30,
2001 approximately 910,000 shares of Common Stock were available for future
grants under the Plan. The maximum number of shares of Common Stock that may be
granted during each fiscal year of the Company to any participant is 300,000 per
type of award (other than performance units, which may be granted during any
fiscal year to any participant in an amount not exceeding $300,000), provided
that the maximum number of shares of Common Stock for all types of awards does
not exceed 300,000 shares during any fiscal year. The exercise price of the
options granted under the 2000 Stock Incentive Plan will not be less than 100%
of the fair market value of the shares of Common Stock on the date of grant of
these options. In general, options granted under the 2000 Stock Incentive Plan
will have a term of ten years.
During fiscal 2000, all executive officers as a group received options
under the 2000 Stock Incentive Plan to purchase approximately 630,000 shares of
Common Stock of the Company. See page 13 for information with regard to options
granted in 2000 to the Named Executive Officers. During fiscal 2000, all
employees as a group received options under the 2000 Stock Incentive Plan to
purchase approximately 3,985,255 shares of Common Stock.
On April 4, 2001, the Board of Directors approved an amendment to the 2000
Stock Incentive Plan to permit non-employee directors of the Company to receive
discretionary stock option grants under this plan (the "Amendment"). Under the
2000 Stock Incentive Plan, as amended, during fiscal 2001 the Company plans to
grant each non-employee director non-qualified stock options, with a fair market
value of $40,000 on the date of grant. In future years, the Company plans to
grant each independent director stock options in similar amounts. At the current
time, it is anticipated that the annual grant will be made each year at the time
of the Company's annual meeting of stockholders.
The Board of Directors believes that the Amendment will enhance the
Company's ability to attract and retain directors of exceptional quality and is
in the best interest of stockholders.
Attached as Appendix B is Amendment Number One to the 2000 Stock Incentive
Plan.
Federal Tax Consequences of the 2000 Stock Incentive Plan
The following is intended only as a general summary of the federal income
tax consequences in connection with options granted under the 2000 Stock
Incentive Plan. All tax matters discussed in this Proxy Statement should be
verified with a tax consultant.
9
The grant of an incentive stock option will have no immediate tax
consequences to the optionee or to the Company. The exercise of an incentive
stock option by the payment of cash to the Company will generally have no
immediate tax consequences to the optionee (except to the extent it is an
adjustment in computing alternative minimum taxable income) or to the Company.
If an optionee holds the shares acquired pursuant to the exercise of an
incentive stock option for the required holding period, the optionee generally
will realize long-term capital gain or long-term capital loss upon a subsequent
sale of the shares in the amount of the difference between the amount realized
upon the sale and the purchase price of the shares (i.e., the exercise price).
In such case, no deduction will be allowable to the Company in connection with
the grant or exercise of the incentive stock option or the sale of shares of
Common Stock acquired pursuant to such exercise.
If, however, an optionee disposes of the shares prior to the expiration of
the required holding period (a "disqualifying disposition"), the optionee will
recognize ordinary income (and the Company will generally be entitled to a
deduction) equal to the excess of the fair market value of the shares of Common
Stock on the date of exercise (or the proceeds of the disposition, if less) over
the exercise price. Special rules apply in the event all or a portion of the
exercise price is paid in the form of stock.
The grant of a stock option other than an incentive stock option (a
"non-qualified stock option") will have no immediate tax consequences to the
optionee or to the Company. Upon the exercise of a non-qualified stock option,
the optionee will generally recognize ordinary income (and the Company will
generally be entitled to a deduction) in an amount equal to the excess of the
fair market value of the shares of common stock on the date of the exercise of
the option over the exercise price. The optionee's tax basis in the shares will
be the exercise price plus the amount of ordinary income recognized by the
optionee, and the optionee's holding period will commence on the date the shares
are exercised. Special rules apply in the event all or a portion of the exercise
price is paid in the form of stock.
Upon a subsequent sale of shares of Common Stock acquired pursuant to the
exercise of a non-qualified stock option, any difference between the optionee's
tax basis in the shares and the amount realized on the sale may in some
circumstances be treated as long-term capital gain or loss, depending on the
holding period of the shares.
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the meeting and entitled to vote is required to approve
the Amendment to the 2000 Stock Incentive Plan, which will permit the Company to
grant stock options to the Company's outside directors. The Board of Directors
recommends a vote IN FAVOR of the amendment of the 2000 Stock Incentive Plan. If
not otherwise specified, proxies will be voted IN FAVOR of this proposal.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid or accrued by
the Company for services rendered during the year ended June 30, 2000 to the
Company's Chief Executive Officer, the former President of the Company, and to
four of the other most highly compensated executive officers whose total cash
compensation exceeded $100,000 for the year ended June 30, 2000 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- -------------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS COMPENSATION($)
- --------------------------- ---- --------- -------- ------------ ---------------
Harlan Peltz ..................... 2000 246,923 -- -- --
Chief Corporate Strategist 1999 150,000 180,000 -- 162(a)
and Chairman of the Board 1998 112,500 50,000 -- --
James G. Lucchesi ................ 2000 78,750(b) 50,000(c) 600,000 --
Chief Executive Officer and 1999 -- -- -- --
President; Director 1998 -- -- -- --
Bruce L. Resnik .................. 2000 268,614 -- 190,000 --
Executive Vice President 1999 210,000 180,000 -- 5,482(a)
and Chief Financial Officer(d) 1998 175,000 50,000(e) 100,000 7,371(a)
Dennis Roche ..................... 2000 163,615 30,000 120,000 --
Chief Operating Officer 1999 -- -- -- --
1998 -- -- -- --
Thea Winarsky .................... 2000 51,928(b) 25,000(c) 20,000 --
Vice President and General 1999 -- -- -- --
Counsel 1998 -- -- -- --
Benjamin Bassi ................... 2000 86,538(f) -- -- --
Former President 1999 -- -- -- --
1998 -- -- -- --
- --------------
(a) Additional disability insurance and annual life insurance premiums.
(b) James Lucchesi and Thea Winarsky were hired by the Company effective
January 18, 2000 following the acquisition of sixdegrees, inc. Each
executive's salary for fiscal 2000 represents the executive's salary for
the period from the date such executive was hired through June 30, 2000.
(c) Signing bonuses paid pursuant to each executive officer's employment
agreement with the Company and approved by the Board of Directors.
(d) Effective November 1, 2000, Mr. Resnik's employment with the Company
terminated and Mr. Engelman joined YouthStream as Executive Vice President
and Chief Financial Officer.
(e) Discretionary bonuses paid pursuant to Mr. Resnik's employment agreement
with the Company and approved by the Board of Directors.
(f) Mr. Bassi was hired by the Company effective February 28, 2000 following
the acquisition of CommonPlaces, LLC. His employment with the Company
terminated effective June 16, 2000. His salary for fiscal 2000 represents
his salary during that period.
None of the Named Executive Officers received any restricted stock awards,
long-term compensation awards or payouts during the Company's last three fiscal
years.
11
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock options granted
by the Company during the year ended June 30, 2000 to each of the Named
Executive Officers.
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS/SARS ANNUAL RATES
NUMBER OF GRANTED TO OF STOCK PRICE
SECURITIES EMPLOYEES IN APPRECIATION FOR
UNDERLYING YEAR ENDED EXERCISE OR OPTION TERM(3)
OPTIONS/SARS JUNE 30, BASE EXPIRATION -------------------------
NAME GRANTED 2000(1) PRICE($/SH)(2) DATE 5% 10%
---------- ------------ ------------ -------------- ---------- ---------- ----------
Harlan D. Peltz ........ -- -- -- -- -- --
James G. Lucchesi ...... 300,000 7.5 $ 5.75 6/19/10 1,084,843 2,749,206
Bruce L. Resnick ....... 150,000 3.8 $ 28.75 2/27/10 2,712,108 6,873,015
40,000 1.0 $6.3125 4/24/10 158,796 402,420
Dennis Roche ........... 80,000 2.0 $ 28.75 12/10/09 1,446,458 3,665,608
40,000 1.0 $6.3125 4/24/10 158,796 402,420
Thea Winarsky .......... 7,500 0.2 $19.688 2/27/10 92,863 235,332
12,500 0.3 $6.3125 4/24/10 49,622 125,756
Benjamin Bassi ......... -- -- -- -- -- --
- ----------
(1) Calculated based on an aggregate of the 3,985,255 options granted under the
Company's 2000 Stock Incentive Plan to employees during fiscal year ending
June 30, 2000. Because the Company's 2000 Stock Incentive Plan was approved
by stockholders and implemented on February 28, 2000, this figure includes
option grants carried over from the Company's and its acquired companies'
prior stock option plans.
(2) The exercise price is equal to the fair market value of our Common Stock on
the date of grant.
(3) These amounts represent hypothetical gains that could be achieved for the
options if they are exercised at the end of their terms. Potential
realizable value is based on an assumption that the market price of the
stock will appreciate at the stated rate, compounded annually, from the
date of grant until the end of the 10-year term. The assumed 5% and 10%
rates of stock price appreciation are mandated by rules of the Securities
and Exchange Commission. They do not represent the Company's estimate or
projection of future prices of the Common Stock. Actual gains, if any, on
stock option exercises will depend on the future performance of the price
of our Common Stock and the time of exercises.
12
STOCK OPTIONS/SARS EXERCISED DURING FISCAL 2000
The following table reports certain information regarding stock option
exercises during fiscal 2000 and outstanding stock options/SARs held at the end
of fiscal 2000 by the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS/SARS AT 6/30/00 OPTIONS/SARS AT 6/30/00
NAME EXERCISE REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------ ----------- -------------- ------------------------- -------------------------
Harlan Peltz ........... -- -- -- -- / --
James G. Lucchesi ...... -- -- 61,794 / 300,000 $23,311 / $56,250
Bruce L. Resnick ....... 116,667 $2,662,095 25,000 / 238,333 $10,412 / $31,238
Dennis Roche ........... -- -- 40,417 / 150,583 $37,338 / $20,154
Thea Winarsky .......... -- -- 4,611 / 23,689 -- / --
Benjamin Bassi ......... -- -- -- -- / --
- ----------
(1) Amounts shown in this column do not represent the actual value realized
from the sale of the shares acquired upon the exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.
EMPLOYMENT AND OTHER ARRANGEMENTS
Mr. Peltz entered into his currently effective employment agreement with
YouthStream on February 28, 2000 (as amended on June 20, 2000). As amended, the
agreement provides that Mr. Peltz will serve as Chief Corporate Strategist of
the Company until the close of business on February 28, 2003, unless sooner
terminated in accordance with the terms of the employment agreement. Mr. Peltz
will receive a salary of $250,000 a year. He may also earn an increase in basic
compensation and an annual bonus of up to $40,000 following the end of each
fiscal year at the discretion of the Board of Directors, based on his
performance during the previous fiscal year.
Mr. Lucchesi entered into his currently effective employment agreement with
YouthStream on June 20, 2000. The agreement provides that Mr. Lucchesi will
serve as President and Chief Executive Officer until the close of business on
June 30, 2002, unless sooner terminated in accordance with the terms of the
employment agreement. Mr. Lucchesi will report to the Board of Directors and
will serve on the Board. Mr. Lucchesi will receive a salary of $350,000
annually. In addition, Mr. Lucchesi received a one-time signing bonus in the
amount of $50,000. He may also earn an annual bonus and an increase in basic
compensation, at the sole discretion of the Board of Directors, based upon his
performance during the previous fiscal year.
Mr. Engelman entered into his currently effective employment agreement with
YouthStream on November 1, 2000. The employment agreement provides that Mr.
Engelman will serve as Executive Vice President and Chief Financial Officer
until the close of business on October 31, 2002, unless sooner terminated in
accordance with the terms of the employment agreement. Mr. Engelman will report
to the Company's Chief Executive Officer. Mr. Engelman will receive a salary of
$250,000 annually, and may earn an annual bonus at the sole discretion of the
Company, based on his performance and the Company's financial results during the
previous fiscal year.
Ms. Winarsky entered into her currently effective employment agreement with
YouthStream on July 1, 2000. The agreement provides that Ms. Winarsky will serve
as Vice President and General Counsel until the close of business on June 30,
2002, unless sooner terminated in accordance with the terms of the employment
agreement. She will report directly to the Company's President and Chief
13
Executive Officer. Ms. Winarsky will receive a salary of $200,000 a year through
June 30, 2001 and a salary of $240,000 a year from July 1, 2001 through June 30,
2002. In addition, Ms. Winarsky received a one-time signing bonus in the amount
of $25,000. She may also earn an annual bonus, at the sole discretion of the
Company, based upon her performance during the previous fiscal year.
The Company entered into a separation agreement with Mr. Resnik after the
close of fiscal 2000. Mr. Resnik's agreement provides that his employment
terminated after the close of business on October 31, 2000 and that he shall be
entitled to salary continuation for a period of eight months, from November 1,
2000 through June 30, 2001, as well as reimbursement for health benefits and
life and disability insurance premiums paid by Mr. Resnik during that period.
The Company expects to pay Mr. Resnik approximately $179,229 pursuant to this
agreement.
The Company also entered into an arrangement with Mr. Bassi after the close
of fiscal 2000. Mr. Bassi is being provided with salary continuation and health
benefits from June 17, 2000 through February 28, 2003, which is the expiration
date of his February 28, 2000 employment agreement with the Company. The Company
expects to pay Mr. Bassi a total of approximately $696,668 pursuant to this
arrangement.
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Common Stock of the Company with the cumulative total return of the Russell 3000
Index and the NASDAQ Composite Index. The graph assumes the investment of $100
on April 3, 1996 (the effective date of the Company's predecessor's initial
public offering) through April 2, 2001. It should be noted that the Company has
not paid any dividends on its common stock, and no dividends are included in the
representation of its performance. Measurement points are at April 3 for each
respective year, unless otherwise unavailable. The Company's stock price on the
graph below is not necessarily indicative of future price performance.
3-Apr-96 3-Apr-97 3-Apr-98 5-Apr-99 3-Apr-00 2-Apr-01
-------- -------- -------- -------- -------- --------
YouthStream Media $100.00 $100.00 $ 87.50 $251.25 $241.25 $ 15.63
Russell 3000 $100.00 $111.45 $166.20 $187.32 $219.70 $167.20
Nasdaq Composite $100.00 $108.77 $166.28 $229.43 $378.52 $159.79
On April 3, 1996, the Company's predecessor Network Event Theater, Inc.
("NET") completed its initial public offering. Effective February 28, 2000, NET
merged with a subsidiary of the Company and each share of NET common stock and
NET convertible preferred stock was converted into one share of the Company's
Common Stock. Simultaneously, NET's partially-owned subsidiary, CommonPlaces,
LLC merged with the Company and each outstanding unit of CommonPlaces was
converted into 0.89 shares of the Company's Common Stock.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
Pursuant to a Stockholders Agreement dated February 28, 2000, as amended
("Stockholders Agreement") among Harlan Peltz, Benjamin Bassi, William Townsend
and Mark Palmer (collectively, the "Stockholders") and the Company, Messrs.
Bassi, Townsend and Palmer are required to vote all shares of Common Stock of
the Company owned by them in favor of the election of Mr. Peltz's nominees to
the Board of Directors, including all of the Company's Class II directors. In
addition, none of Messrs. Bassi, Townsend and Palmer, without the cooperation
and prior written consent of Mr. Peltz, may seek to place or remove members of
YouthStream's Board of Directors, or participate in any election contest, except
in accordance with the terms of the Stockholders Agreement, or may make, or
announce an intent to make, any tender offer or exchange offer for any equity
securities of YouthStream or any assets of YouthStream or any of its
subsidiaries or try to effect any sale, business combination or other similar
transaction involving YouthStream or any of its subsidiaries.
During the period from February 28, 2000 through February 28, 2003, the
Stockholders may not, directly or indirectly, sell, assign transfer, pledge or
otherwise encumber or dispose of any of their shares of Common Stock, except as
permitted by the Stockholders Agreement. Pursuant to the Stockholders Agreement,
any Stockholder may at any time transfer his shares of Common Stock to his
spouse, to any of his children or grandchildren, to a trust for the benefit of
any one or more of them, or to his estate or other legal representative,
provided that the proposed transferee agrees to be bound by the Stockholders
Agreement and the Voting Trust Agreement (other than the transferees of Mr.
Peltz, which are not required to be bound by the Voting Trust Agreement). In
addition, any Stockholder may transfer his shares (i) in a sale pursuant to Rule
144 under the Securities Act of 1933, (ii) to any purchaser who owns fewer than
1% of the outstanding shares of Common Stock of the Company immediately prior to
the transfer and (iii) pursuant to a tender offer, merger or other transaction
that has been approved by the Board of Directors. Notwithstanding the foregoing,
none of the Stockholders, other than Mr. Bassi or Mr. Peltz may make any
transfer unless the number of shares that would be transferred, when aggregated
with the number of shares previously transferred by that Stockholder and all
persons to whom he has transferred shares during the six-month period ending on
the date of the proposed transfer, does not exceed 10% of the number of shares
beneficially owned by that Stockholder on February 28, 2000 (5% in the case of
Messrs. Bassi and Peltz). After January 31, 2002, this restriction on the
transfer of shares shall cease to apply to Messrs. Bassi and Peltz.
During the period from February 28, 2000 through February 28, 2003, except
as otherwise agreed by Messrs. Peltz and Bassi, none of the Stockholders shall,
directly or indirectly, purchase or otherwise acquire any of the Company's
shares of Common Stock and none of the Stockholders shall permit any of his
affiliates or associates to do so.
VOTING TRUST AGREEMENT
Harlan Peltz, Benjamin Bassi, William Townsend, and Mark Palmer entered
into a voting trust agreement on February 28, 2000 (the "Voting Trust
Agreement"). Under the Voting Trust Agreement, Messrs. Bassi, Townsend and
Palmer transferred to Mr. Peltz, as voting trustee, 50% of their shares of
Common Stock. As voting trustee, Mr. Peltz has full and exclusive power and
authority to vote those shares during the effective term of the Voting Trust
Agreement. Each of the parties to the Voting Trust Agreement may, by notice
given to Mr. Peltz, as voting trustee, direct Mr. Peltz to transfer that party's
shares of Common Stock in accordance with and to the extent permitted by the
Stockholders Agreement. The Voting Trust Agreement will terminate upon the
earliest of (i) a merger, consolidation or combination of the Company with
another business, if, as a result of that transaction, Mr. Peltz does not hold
the position of chairman of the board, president, chief executive officer or
chief operating officer of the combined entity, (ii) the date Mr. Peltz ceases
to own of record or beneficially at least 10% of the number of shares of Common
Stock of YouthStream he owned on the date of the Voting Trust Agreement, (iii)
the death of Mr. Peltz or (iv) Mr. Peltz ceasing to serve as chairman of the
board, president, chief executive officer or chief operating officer of the
Company.
15
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended requires a
company's directors and executive officers, and beneficial owners of more than
10% of the common stock of such company to file with the Securities and Exchange
Commission initial reports of ownership and periodic reports of changes in
ownership of the company's securities. Based solely on a review of Forms 3, 4
and 5 and amendments thereto furnished to us, all of the Company's directors and
officers timely furnished reports on Forms 3, 4 and 5, except that James G.
Lucchesi, Irwin Engelman, Dennis Roche, Thea Winarsky and Peter Labruna failed
to timely file Form 3's upon being elected officers of the Company.
PROPOSALS OF STOCKHOLDERS
Stockholders wishing to include proposals in the proxy material in relation
to the Company's Annual Meeting for fiscal year 2002, currently scheduled to be
held in November 2001, must submit the proposals in writing so as to be received
by the Secretary at the principal executive offices of the Company at 28 West
23rd Street, 6th Floor, New York, NY 10010, no later than the close of business
on July 9, 2001. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to Stockholders'
proposals. If the Company is not timely notified of an intent to present a
proposal at the Company's annual meeting for fiscal 2002, the Company will have
the right to exercise its discretionary voting authority with respect to such
proposal, if presented at the meeting, without including information regarding
such proposal in its proxy materials. To be timely, the Stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not fewer than 50 days or more than 80 days prior to the
scheduled date of the annual meeting for fiscal 2002, regardless of any
postponement, deferral or adjournment of that meeting to a later date; provided,
however, that if fewer than 60 days' notice or prior public disclosure of the
date of the annual meeting for fiscal 2002 is given or made to Stockholders,
notice by the Stockholder to be timely must be so delivered or mailed and
received not later than the close of business on the tenth day following the
earlier of (i) the day on which such notice of the date of the meeting was
mailed or (ii) the day on which such public disclosure was made.
By order of the Board of Directors,
James G. Lucchesi
President and Chief Executive Officer
April 23, 2001
16
APPENDIX A
YOUTHSTREAM MEDIA NETWORKS, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the Audit Committee. The Committee shall
review and reassess the charter at least annually and obtain the approval of the
Board of Directors for any changes in the charter. The Committee shall be
appointed by the Board of Directors and shall comprise at least two directors(at
least three directors after the Company leaves small business issuer status),
each of whom are independent of management and the Company. Members of the
Committee shall be considered independent if they have no relationship that may
interfere with the exercise of their independence from management and the
Company. All Committee members shall be financially literate, or shall become
financially literate within a reasonable period of time after appointment to the
Committee, and at least one member shall have accounting or related financial
management expertise.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function (if and
when formally constituted), the annual independent audit of the Company's
financial statements, and the legal compliance and ethics programs as
established by management and the board. In so doing, it is the responsibility
of the Committee to maintain free and open communication between the Committee,
independent auditors, the internal auditors (if and when hired) and management
of the Company. In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company and the power to retain
outside counsel, or other experts for this purpose.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
their activities to the Board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The Committee in carrying out its
responsibilities believes its policies and procedures should remain flexible, in
order to best react to changing conditions and circumstances. The Committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices, and ethical
behavior.
The following shall be the principal recurring processes of the Audit Committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives
of the Company's shareholders. The Committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate,
replace the independent auditors. The Committee shall discuss with the
auditors their independence from management and the Company and the
matters included in the written disclosures required by the
Independence Standards Board. Annually, the Committee shall review and
recommend to the Board the selection of the Company's independent
auditors, subject to shareholders' approval.
o The Committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation.
A-1
Also, the Committee shall discuss with management, the internal
auditors (if and when hired), and the independent auditors the
adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk,
and legal and ethical compliance programs. Further, the Committee
shall meet separately with the internal auditors (if and when hired)
and the independent auditors, with and without management present, to
discuss the results of their examinations.
o The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the Committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent
auditors under generally accepted auditing standards. The chair of the
Committee may represent the entire Committee for the purposes of this
review.
The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-KSB (or the annual report to shareholders if distributed prior to the filing
of Form 10-KSB), including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements. Also,
the Committee shall discuss the results of the annual audit and any other
matters required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards.
A-2
APPENDIX B
AMENDMENT NUMBER ONE TO THE
YOUTHSTREAM MEDIA NETWORKS, INC.
2000 STOCK INCENTIVE PLAN
WHEREAS, YouthStream Media Networks, Inc. (the "Company") maintains the
YouthStream Media Networks, Inc. 2000 Stock Incentive Plan (the "Plan");
WHEREAS, pursuant to Article XIV of the Plan, the Board of Directors of the
Company (the "Board") may at any time amend the Plan, subject to stockholder
approval to the extent required by applicable law; and
WHEREAS, the Board desires to amend the Plan, effective May 18, 2001.
NOW, THEREFORE, the Plan is amended as follows:
1. Article I of the Plan is amended by adding the phrase "and
Non-Employee Directors of the Company," after the word "Affiliates" and is
further amended by deleting the second reference to the words "and
Consultants", and substituting the words "Consultants and Non-Employee
Directors" in lieu thereof.
2. Section II.5 of the Plan is amended by the addition of the
following at the end thereof:
"With respect to a Non-Employee Director's Termination of Directorship,
`cause' shall mean an act or failure to act that constitutes cause for
removal of a director under applicable Delaware law."
3. Section II.8 of the Plan is amended by adding the following at the
end thereof:
"With respect to the application of this Plan to Non-Employee Directors,
the Committee shall be the Board."
4. Sections II.12 and II.24 of the Plan are amended by adding the
following after the words "Eligible Employee":
", Non-Employee Director"
5. The Plan is amended by adding the following new section after
existing Section II.19, which shall cause the remaining sections to be
redesignated:
"II.20 `Non-Employee Director' means a director of the Company who is not
an active employee of the Company or an Affiliate."
6. Existing Section II.35 of the Plan is amended by adding the
following at the end thereof:
"With respect to a Termination of Directorship, Retirement shall mean the
failure to stand for reelection or the failure to be reelected on or after
a Non-Employee Director has attained age 65 or, with the consent of the
Board, before age 65 but after age 50."
7. Existing Section II.40 of the Plan is amended by the addition of
the following after the words "Eligible Employees":
", Non-Employee Directors"
8. The Plan is amended by the adding of the following new section
after existing Section II.43, which shall cause the remaining sections to
be redesignated:
"`Termination' means a Termination of Consultancy, Termination of
Directorship or Termination of Employment, as applicable."
9. The Plan is amended by adding the following new Section II.45 after
the existing Section II.44, which shall cause the remaining sections to be
redesignated:
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"`Termination of Directorship' means, with respect to a Non-Employee
Director, that the Non-Employee Director has ceased to be a director of the
Company; except that if a Non-Employee Director becomes employed by, or
consults for, the Company, the date he ceased to be a director of the
Company and becomes an employee or Consultant shall not be treated as a
Termination of Directorship unless and until the Participant has a
Termination of Employment or Termination of Consultancy."
10. Section III.2 of the Plan is amended by adding the following after
the first sentence thereof:
"The Committee shall also have the authority to grant Stock Options to
Non-Employee Directors."
11. Section III.2 of the Plan is further amended by deleting all
references to "Eligible Employees or Consultants" and "Eligible Employees
and Consultants" and substituting "Participants" or "a Participant" in lieu
thereof, as the case may be.
12. Section V.1 of the Plan is amended by adding the following at the
end thereof:
"Non-Employee Directors are eligible to be granted Non-Qualified Stock
Options under this Plan, provided that, eligibility for the grant of a
Non-Qualified Stock Option and actual participation in this Plan shall be
determined by the Board."
13. Section VI.2 of the Plan is amended by adding the following at the
end thereof:
"The Committee shall have the authority to grant any Non-Employee Director
one or more Non-Qualified Stock Options, and notwithstanding any other
provision of this Plan to the contrary or any provision in an agreement
evidencing the grant of a Stock Option to the contrary, any Stock Option
granted to a Non-Employee Director shall be a Non-Qualified Stock Option."
14. Article XII of the Plan is amended by renaming it as follows:
"NON-TRANSFERABILITY AND TERMINATION OF EMPLOYMENT/CONSULTANCY/DIRECTORSHIP"
15. The first paragraph of Section XII.2 of the Plan is amended in its
entirety to read as follows:
"XII.2 Termination. The following rules apply with regard to the
Termination of Employment, Termination of Directorship or Termination of
Consultancy of a Participant:"
16. Section XII(a) of the Plan is amended by deleting all references
to the phrase "Termination of Employment or Termination of Consultancy" and
the substitution of "Termination" in lieu thereof.
17. Section XVI.3 of the Plan is amended in its entirety to read as
follows:
"No Right to Employment/Consultancy/Directorship. Neither this Plan
nor the grant of any Award hereunder shall give any Participant or other
employee, Consultant or director any right with respect to continuance of
employment, consultancy or directorship by the Company or any Affiliate,
nor shall there be a limitation in any way on the right of the Company or
any Affiliate by which an employee is employed or a Consultant or director
is retained to terminate his employment, consultancy or directorship at any
time."
IN WITNESS WHEREOF, this amendment has been executed on the 12th day of
April, 2001.
YOUTHSTREAM MEDIA NETWORKS, INC.
By: James G. Lucchesi
Title: President and Chief Executive Officer
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PLEASE COMPLETE, DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE.
ANNUAL MEETING OF STOCKHOLDERS
YOUTHSTREAM MEDIA NETWORKS, INC.
MAY 18, 2001
Please Detach and Mail in the Envelope Provided
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|----|Please mark your
A | X |vote as in this
|----|example
WITHHOLD
FOR AUTHORITY
the three nominee(s) to vote for the nominee(s) Nominees: Howard Klein
listed at right listed at right Sidney I. Lirtzman
1. To elect three |----| |----| Metin Negrin
members to our | | | |
Board of |----| |----| FOR AGAINST ABSTAIN
Directors as Class II directors to serve until the 2. To ratify the appointment of Ernst & Young LLP |----| |----| |----|
2004 Annual Meeting of Stockholders or until their as independent auditors of the Company for the | | | | | |
successors are elected and qualified. fiscal year ending June 30, 2001. |----| |----| |----|
(INSTRUCTION: To withhold authority to vote 3. To approve an amendment to the Company's |----| |----| |----|
for any individual nominee, strike a line 2000 Stock Incentive Plan to allow the Company | | | | | |
through the nominee's name in the list at right to grant stock options to its independent direc- |----| |----| |----|
tors under the Plan.
4. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting and any
adjournments thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
USING THE ENCLOSED ENVELOPE. No postage required if mailed in the
United State of America.
Signatures of Stockholder(s) __________________________________ _______________________________ Dated ________________, 2001
NOTE: Please sign exactly as your name appears on this proxy. If shares are registered in more than one name, the signatures of
all such persons are required. A corporation should sign in its full corporate name by a duly authorized officer, stating
such officer's title. Trustees, guardians, executors, administrators and attorneys should sign in their official capacity
giving their full title as such. A partnership should sign in the partnership name by an authorized person, stating such
person's title and relationship to the partnership.
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PROXY
YOUTHSTREAM MEDIA NETWORKS, INC.
28 West 23rd Street, 6th Floor
New York, NY 10010
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2001
The undersigned hereby appoints James G. Lucchesi, Irwin Engelman, or any
of them, with the power of substitution as proxies and hereby authorizes them to
represent and to vote, as designated on the reverse side, all shares of Common
Stock of Youthstream Media Networks, Inc. (the "Company") held of record by the
undersigned at the close of business on March 20, 2001 at the Annual Meeting of
Stockholders to be held on May 18, 2001.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
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