NETWORK EVENT THEATER, INC.
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PLACEMENT MANAGER AGREEMENT
December 24, 1997
Sunrise Securities Corp.
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Gentlemen:
Network Event Theater Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement with you (the "Placement Manager" and together with the
Company, the "Parties") as follows:
1. Description of Transaction. The Company will make an offer in the United
States (the "Offering") to sell up to 1,333,333 shares of the Company's
common stock, par value $.01 per share (the "Common Stock", and the shares
of Common Stock to be offered or sold pursuant to the Offering, the
"Shares") at a price of $4.50 per Share (the "Sales Price"). The number of
Shares referred to in this Section 1 includes Shares to be offered to
Warburg Pincus and its affiliates and Far West Capital.
2. Appointment of the Placement Manager. The Company hereby appoints the
Placement Manager as its exclusive agent to offer and sell the Shares on a
"best efforts" basis. The Placement Manager may allocate a portion of the
Shares to selected dealers. The Placement Manager, on the basis of the
representations, warranties, covenants and agreements of the Company
herein, and subject to the completion of the Placement Manager's due
diligence examination of the documents and records of the Company, and
further subject to the conditions herein, accepts such appointment and
agrees that it will endeavor to sell the Shares on a best efforts basis.
3. Purchase, Sale and Delivery of Shares. Subject to the terms and conditions
set forth herein, the Company and the Placement Manager agree as follows:
(a) Regulation D Offering. Neither the Offering nor the sale
thereunder of the Shares has been or will be registered with the United
States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Securities Act"). The Shares will be offered and sold in the United
States only, in reliance upon and in compliance with the exemptions from
registration provided by Sections 3(b), 4(2) and 4(6) of the Securities
Act and Rule 506 of Regulation D thereunder ("Reg D"), and will only be
sold to Qualified Institutional Buyers ("QIB's") or "accredited investors"
as such terms are defined in Rule 144A promulgated under the Securities
Act and Reg D, respectively. The Shares will be offered for sale only in
those states of the United States in which they will have full compliance
with applicable state Blue Sky laws. The Company will provide the
Placement Manager, for delivery to all offerees and purchasers and their
representatives, any information, documents and instruments which the
Placement Manager deems necessary to comply with the statutes, rules,
regulations and judicial and administrative interpretations applicable to
the Offering.
b) Subscription for Shares. Subscriptions for, and purchases of,
Shares shall occur by execution and delivery by a subscriber (the
"Subscriber") of two copies of a Stock Purchase Agreement in the form
provided by the Company (the "Purchase Agreement"), together with payment
for such Shares and such other documents and instruments as the Company or
the Placement Manager shall deem appropriate. The Company may reject any
subscription in its sole discretion.
(c) Payment of Funds. Each Subscriber shall tender a check or money
order payable to "Network Event Theater, Inc.", or wire transfer funds, in
payment of the full purchase price of the Shares subscribed for to the
Company.
(d) Closing; Termination of Offering. The Offering will terminate on
January 15, 1998, unless it is extended by mutual agreement of the Company
and the Placement Manager. Any closing of the sale of Shares under the
Offering is hereinafter referred to as a "Closing". The Placement Manager
will use its best efforts to complete the initial Closing of the Offering
(the "Initial Closing") prior to December 31, 1997. After the Initial
Closing, the Offering may continua until the Placement Manager has
received and the Company has accepted Subscription Agreements for the
Maximum Offering or until January 15, 1998 or until the offering is
terminated by mutual consent of the parties hereto. The date on which the
Initial Closing occurs is hereinafter called the "Initial Closing Date",
the date on which a subsequent Closing occurs is hereinafter called an
"Additional Closing Date", and the date on which the last Closing occurs
shall be referred to herein as the "Final Closing Date." Each of the
Initial Closing Date and each Additional Closing Date is sometimes
hereinafter referred to generally as a "Closing Date". The Company shall
deliver to each Subscriber within two trading days of a Closing Date, the
certificates representing the Shares being purchased by such Subscribers.
If on or before January 15, 1998 the Company has not accepted any Purchase
Agreements pursuant to the Offering, the Offering shall be terminated. In
the event of such termination of the Offering, all terms of this Agreement
shall be automatically terminated
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and neither Party shall have any further obligation to the other Party
under this Agreement other than the Company's obligation to pay expenses
as set forth herein.
4. Compensation of Placement Manager. As compensation for its services
rendered as Placement Manager under this Agreement, the Placement Manager or its
designees shall receive the following:
(a) A sales commission (the "Sales Commission"), which will be
payable in shares of Common Stock valued at the Sales Price, equal to 10%
of the Gross Proceeds (as hereinafter defined) of the Offering, except
that the Placement Manager shall receive a Sales Commission on any sale of
Shares to Warburg Pincus and its affiliates or to Far West Capital only to
the extent that the gross proceeds of the sale of Shares to such persons
exceeds $2 million. "Gross Proceeds" is defined as the total price paid by
the Subscribers for the Shares. Shares of Common Stock payable as the
Placement Manager's commission (the "Commission Shares"), all be issued
within two trading days after each Closing. The Placement Manager
acknowledges that the Commission Shares will be "restricted securities"
within the meaning of Rule 144 under the Securities Act and agrees that
certificates evidencing such shares of Common Stock may bear an
appropriate restrictive legend until such shares of Common Stock are sold
pursuant to an effective registration statement under the Securities Act,
or until they may be resold without registration under Rule 144(k), or
until the Placement Manager or holder shall deliver to the Company an
opinion of counsel (which shall be reasonably acceptable to the Company
both as to form and counsel) that the appropriate Commission Shares may be
resold under the Securities Act in reliance upon a specified exemption
other than Rule 144(k).
(b) An accountable expense allowance not to exceed $10,000, payable
by deducting the accountable expense allowance from the Gross Proceeds.
Such accountable expense allowance may be paid, at the option of the
Placement Manager, in whole or in part, in Commission Shares in accordance
with the terms of Section 4(a).
(c) The Placement Manager and its designees shall have the same
rights of registration under the Securities Act, indemnification and
contribution, with respect to the Commission Shares, as a Purchaser of
Shares would have under the form of Registration Rights Agreement attached
as Exhibit B to this Agreement.
5. Representations and Warranties of the Company. The Company represents
and warrants to the Placement Manager as follows:
(a) Information Package. As of the date filed with the Securities &
Exchange Commission, the documents in the information package consisting
of the documents enumerated in paragraph (j)(i) herein (the "Information
Package"), did not contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which
they were made, not misleading.
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(b) Organization and Existence. The Company is a corporation duly
organized and validly existing under the laws of Delaware, with full power
and authority, corporate and other, to own or lease and operate its
properties and to conduct its business as currently conducted and
described in the Information Package. The Company is duly qualified to do
business as a foreign corporation in each jurisdiction in which the nature
of the Company's business would require such qualification except where
the failure so to qualify would not have a material adverse effect on the
financial condition, results of operations, businesses, properties or
prospects of the Company.
(c) Governmental Authority. Except for such approvals as may be
required under applicable state securities laws in the United States
("Blue Sky laws"), no authorization, approval consent, order,
registration, license or permit of any court or governmental agency or
body is required for the valid authorization, issuance, sale and delivery
of the Shares or the Commission Shares (collectively, the "Securities"),
and the consummation by the Company of all the transactions contemplated
by this Agreement, the Purchase Agreements (the form of which is provided
in Exhibit A to this Agreement) and the Registration Rights Agreement (the
form of which is provided in Exhibit B to this Agreement) (collectively,
the "Agreements").
(d) Corporate Authorization. The Company has full power and
authority, corporate and other, to execute, deliver and perform the
Agreements and to consummate the transactions contemplated thereby. The
execution, delivery and performance of the Agreements by the Company, the
consummation by the Company of the transactions therein contemplated, and
the compliance by the Company with the terms of the Agreements have been
duly authorized by all necessary corporate action on the part of the
Company. The Agreements will be duly executed and delivered by the Company
and, assuming that they have been or will be duly authorized, executed and
delivered by the parties thereto other than the Company, the Agreements
will be valid and binding obligations of the Company enforceable against
it in accordance with their respective terms, except insofar as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of
creditors generally and by the discretion of courts in granting equitable
remedies, and except that enforceability of the indemnification provisions
and the contribution provisions set forth herein may be limited by the
federal securities laws of the United States or state securities laws or
the public policy underlying such laws. The execution, delivery and
performance of the Agreements by the Company, the consummation by the
Company of the transactions therein contemplated, and the compliance by
the Company with the terms of the Agreements do not, and will not, with or
without the giving of notice or the lapse of time, or both, (i) result in
any violation of the Certificate of Incorporation and By-Laws of the
Company, (ii) result in a breach of or conflict with any of the terms or
provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or imposition of
any material lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company pursuant to, any indenture,
mortgage, note, contract, commitment or other agreement or instrument to
which the Company is a party or by which the Company or any of its
properties or assets are or may be bound or
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affected; (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
its business; or (iv) have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise
necessary for the Company to own or lease and operate any of its
properties and to conduct its business or the ability of t Company to make
use thereof.
(e) Capitalization. All the outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in the Information Package, there are
no outstanding securities convertible into Common Stock ("Convertible
Securities") or any options, warrants or other rights to purchase any
shares of Common Stock or Convertible Securities (collectively, the
"Options") except that the Company has reserved (a) 400,000 shares of
Common Stock for issuance upon exercise of outstanding options under the
Company's 1996 stock option plans at per share exercise prices ranging
from $3.00 to $5.00 and having a weighted average exercise price of $4.05
per share, (b) 450,000 shares of Common Stock for issuance upon exercise
of options available for future grant under the Company's 1997 stock
option plans (no options having yet been granted under that plan), (c)
552,560 shares of Common Stock for issuance upon exercise of options
granted to The Fields & ▇▇▇▇▇▇▇ Company at a per share exercise price of
$1.58, (d) up to 100,000 shares of Common Stock for issuance upon exercise
of contingent options granted to American Passage Media Corporation at a
per share exercise price of $2.627, (e) 2,645,000 shares of Common Stock
for issuance upon exercise of outstanding warrants at a per share exercise
price of $5.00, (1) 230,000 shares of Common Stock for issuance upon
exercise of outstanding Warrants issued to Whale Securities Co., L.P. at a
per share exercise price of $8.25, (g) 230,000 shares of Common Stock
reserved for issuance upon exercise of warrants underlying outstanding
warrants issued to Whale Securities Co., L.P. at a per share exercise
price of $8.25, and (h) 150,000 shares of Common Stock for issuance upon
exercise of outstanding warrants issued to Whale Securities Co., L.P., at
a per share exercise price of $4.50 and (i) 500,000 shares of Common Stock
(400,000 of which are contingent) for issuance upon exercise of
outstanding warrants issued to an affiliate of the Placement Manager. The
Company is currently negotiating a transaction that could result in the
issuance of additional Shares. All such outstanding Options constitute the
valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except insofar as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally, and by the discretion of courts in granting equitable remedies.
None of the outstanding shares of Common Stock or Options have been issued
in violation of the preemptive rights of any securityholder of the
Company, and none of the holders of the outstanding shares of Common Stock
or Options is subject to personal liability solely by reason of being such
a holder. The offer and sales of the outstanding shares of Common Stock
and Options were at all relevant times either registered under the
Securities Act and the applicable Blue Sky laws or exempt from such
registration requirements, and were in full compliance with the laws of
Delaware.
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(f) Authorization of Securities. The issuance and sale of the Shares
and the Commission Shares have been duly authorized, and when they are
issued and paid for as contemplated by the Agreements, will be validly
issued, and all of the shares of Common Stock which are among the
Securities will be fully paid and nonassessable, and the holders thereof
will not be subject to personal liability solely by reason of being such
holders. The Securities will not be subject to preemptive rights of any
securityholder of the Company.
(g) No Anti-Dilution Adjustment. The issuance of the Shares and the
Commission Shares will not result in any adjustment in the number of
shares of Common Stock, or the exercise price or conversion ratio per
share, under any of the Company's outstanding Options.
(h) Violations and Defaults. The Company is not in violation of, or
in default under, any term or provision of (i) its Certificate of
Incorporation and By-Laws, (ii) any indenture, mortgage, contract,
commitment or other agreement or instrument to which it is a party or by
which it or any of its properties or business is or may be bound or
subject, except for such defaults, if any, that would not have a material
adverse effect on the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company, or (iii) any
existing applicable law, rule, regulation, judgment, order or decree of
any governmental agency or court, having jurisdiction over the Company or
of any of its respective properties or businesses. The Company owns,
possesses or has obtained all governmental and other licenses, permits,
certifications, registrations, approvals or consents and other
authorizations necessary to own or lease, as the case may be, and to
operate its properties and to conduct its business as currently conducted
and described in the Information Package, and all such licenses, permits,
certifications, registrations, approvals, consents and other
authorizations are outstanding and in good standing. There are no
proceedings pending or, to the best of the Company's knowledge,
threatened, nor is there any basis therefor, seeking to cancel, terminate
or limit such licenses, permits, certifications, registrations, approvals
or consents or authorizations.
(i) Litigation. Except as set forth in the Information Package,
there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any governmental agency, court or
tribunal, or before any private arbitration tribunal, pending or, to the
best of the Company's knowledge, threatened against the Company or
involving the properties or business of the Company which, if determined
adversely to the Company, would, individually or in the aggregate, result
in any material adverse change in the financial position, shareholders'
equity, results of operations, properties, business, management or
prospects of the Company, or which relate in any way to the validity of
the capital stock of the Company or the validity of the Agreements, or of
any action taken or to be taken by the Company pursuant to, or in
connection with, the Agreements nor, to the best of the Company's
knowledge, is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental agency
or other tribunal specifically naming the Company and enjoining the
Company from taking, or requiring the Company
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to take, any action, or to which the Company or its properties or business
is bound or subject.
(j) Additional Information. The Company his filed in a timely manner
all documents that the Company was required to file under the Securities
Exchange Act of 934 (the "Exchange Act") during the 12 months preceding
the date of this Agreement. The following documents complied in all
material respect with the requirements of the Exchange Act as of their
respective filing dates, and the information contained therein was true
and correct in all material respects as of the date of such documents, and
each of the following documents as of the date thereof did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading:
(i) The Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1997, Form 10-QSB for the period ended September
30, 1997, its Proxy Statement dated October 23, 1997; and its
preliminary prospectus dated November 10, 1997; and
(ii) all other documents, if any, filed by the Company with
the Commission since the filing of the Quarterly Report on Form
10-QSB for the fiscal quarter ended September 30, 1997, pursuant to
the reporting requirements of the Exchange Act.
(k) Financial Statements. Ernst & Young LLP the accountants who
have rendered an audited report with respect to certain of the audited
financial statements included in the Information Package, are independent
public accountants within the meaning of the Securities Act and
regulations promulgated under the Securities Act (the "Regulations"). The
financial statements and notes thereto included in the Information Package
present fairly the financial position of the Company as of the dates
thereof and the results of operations and changes in financial position of
the Company for the periods indicated therein, all in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(l) Liabilities. Except as and to the extent reflected or reserved
against in the financial statements of the Company included in the
Information Package, the Company as at September 30, 1997, had no material
liabilities, debts, obligations or claims asserted against it, whether
accrued, absolute, contingent or otherwise, and whether due or to become
due, including, but not limited to, liabilities on account of taxes, other
governmental charges or lawsuits brought subsequent to such date.
(m) Taxes. The Company has filed all tax returns required to be
filed with the appropriate taxing authorities, including all federal,
state, municipal and other local authorities (whether relating to income,
sales, franchise, withholding or real or personal property taxes, or other
types of taxes) or hag duly obtained extensions of time for the
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filing thereof, and has paid in full all taxes which have become due
pursuant to such returns or claimed to be due by any such taxing authority
or otherwise due and owing; and the provisions for income taxes payable,
if any, shown on the consolidated financial statements contained in the
Information Package are sufficient for all accrued and unpaid taxes,
whether or not disputed, and for all periods to and including the dates of
such consolidated financial statements. The Company believes that each of
the tax returns heretofore filed by the Company correctly and accurately
reflects the amount of its tax liability thereunder. The Company has
withheld, collected and paid all other levies, assessments, license fees
and taxes to the extent required and, with respect to payments, to the
extent that the same have become due and payable. Except as disclosed in
writing to the Placement Manager, the Company has not executed or filed
with any taxing authority, any agreement extending the period for
assessment or collection of any income taxes and is not a party to any
pending action or proceeding by any foreign or domestic governmental
agency for assessment or collection of taxes, and no claims for assessment
or collection of taxes have been asserted against the Company.
(n) Conduct of Business. Since the respective dates as of which
information is given in the Information Package, the Company has not (i)
canceled, without payment in full, any notes, or other obligations
receivable or other debts or claims held by it other than in the ordinary
course of business; (ii) sold, assigned, transferred, abandoned,
mortgaged, pledged or subjected to lien any of its properties, tangible or
intangible, or rights under any contract, permit, license, franchise or
other agreement other than sales or other dispositions of goods or
services in the ordinary course of business at customary terms and prices
(but financing transactions are presently being negotiated that will
require the pledge of assets of the Company and its subsidiaries); (iii)
increased the compensation payable to any of its officers, directors or
other employees (including salaries, fringe benefits, pensions, profit
participation and payments or benefits of any kind whatsoever); (iv)
entered into any line of business other than that conducted by it on due
date or entered into any transaction not in the ordinary course of its
business; (v) conducted any line of business in any manner except by
transactions customary in the operation of its business as conducted on
such date; or (vi) declared, made or paid or set aside for payment any
cash or non-cash distribution on any shares of its capital stock.
(o) Properties. The Company has good and marketable title in fee
simple to all real property, and good title to all personal property
(tangible and intangible), owned by it, free and clear of all security
interests, charges, mortgages, liens, encumbrances and defects, except
such as are described in the Information Package or such as do not
materially affect the value or transferability of such property and do not
interfere with the use of such property made or proposed to be made by the
Company, but as noted in paragraph (n), this will change as a result of
financing transactions currently being negotiated. The leases, licenses or
other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not
interfere with the use of such property made or proposed to be made, by
the Company, and all rentals, royalties or other payments accruing
thereunder which became due prior to the
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date of this Agreement have been duly paid, and neither the Company nor,
to the best of the Company's knowledge, any other party is in default
thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the passage of time or the giving of notice, or both,
would constitute a default thereunder. The Company has not received notice
of any violation of any applicable law, ordinance, regulation, order or
requirement relating to its owned or leased properties.
(p) Insurance. The Company has adequately insured its properties
against loss or damage by fire or other casualty and maintains, in
adequate amounts, such other insurance, including but not limited to,
liability insurance, as is usually maintained by companies engaged in the
businesses similar to the Company's businesses.
(q) Contracts. Except as described in the Information Package: (i)
each contract or other instrument (however characterized or described) to
which the Company is a party, or to which its properties or businesses are
or may be subject, has been duly and validly executed, is in full force
and effect in all material respects and is enforceable against the parties
thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company, except to subsidiaries of
the Company; (ii) to the best of the Company's knowledge, no party to any
such contract or instrument other than the Company is in default
thereunder; and (iii) to the best of the Company's knowledge, no event has
occurred which, with the lapse of time or the giving of notice, or both,
would constitute such a default thereunder. None of the material
provisions of such contracts or instruments violates any existing
applicable law, rule, regulation, judgment/order or decree of any
governmental agency or court having jurisdiction over the Company or any
of its assets or businesses.
(r) Benefit Plans. Except for the Company's 1996 Stock Option Plan
and 1997 Stock Plan, (the "Stock Plans") and the Company's 401(k) Plan
and various employee health, life and disability insurance plans as
disclosed in the Information Package, the Company has no employee benefit
plan (including, without limitation, profit sharing and welfare benefit
plans) or deferred compensation arrangements.
(s) Contributions. The Company has not, directly or indirectly, at
any time made any contributions to any candidate for political office In
the United States, or failed to disclose fully any such contribution in
violation of law. The Company's internal accounting controls and
procedures are sufficient to comply in all material respects with Section
l3(b)(2) of the United States Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(t) Reg D Qualification. Subject to the warranties and covenants of
the Placement Manager in Sections 7(a) and (b) of this Agreement, the
offer and sale of the Shares by the Company on each Closing Date will have
satisfied all of the requirements of Rule 506 of Reg D, and the Company is
not disqualified from any exemption wider Reg D by virtue of Rule 507.
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(u) Finder's Fee. The Company has not incurred any liability for,
and is unaware of any claim for, any finder's or broker's fees or similar
payments in connection with the Offering. This paragraph does not apply
with respect to Shares offered or sold to Warburg Pincus and its
affiliates and Far West Capital.
(v) Intangibles. The Company owns or possesses adequate rights to
use all patents, patent applications, trademarks, service marks,
copyrights, rights, trade secrets, confidential information, processes and
formulations used or proposed to be used in the conduct of its business as
currently conducted and described in the Information Package
(collectively, the "Intangibles"). To the best of the Company's knowledge,
the Company has not infringed upon, and is not infringed upon, the rights
of others with respect to the Intangibles, and the Company has not
received (i) any notice that it has or may have infringed or is infringing
upon the rights of others with respect to the Intangibles, or (ii) any
notice of conflict with the asserted rights of others with respect to the
Intangibles which could, singly or in the aggregate, materially and
adversely affect its business as presently conducted or its prospects,
financial condition or results of operations, and the Company does not
know of any basis therefor. To the best of the Company's knowledge, no
others have infringed upon the Intangibles.
(w) Labor Relations. No general labor problem exists with the
Company's employees or, to its knowledge, is imminent.
(x) No Adverse Change. Since September 30, 1997, except as otherwise
stated in the Information Package, the Company has not (i) incurred any
material liability or obligation, direct or contingent (other than a
subordination agreement with Signet Bank), or entered into any material
transaction, whether or not in the ordinary course of business, or
sustained any material loss or interference with its business from fire,
storm, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, and (ii) there have not been any changes in the capital
stock or any material increases in the long-term debt of the Company or
any material adverse change in or affecting the general affairs,
management, financial condition, shareholders' equity, results of
operations or prospects of the Company, otherwise than as set forth or
contemplated in the Information Package or in this Agreement.
(y) Listing. The Company shall use its best efforts to comply with
all requirements of the National Association of Securities Dealers, Inc.
(the "NASD") with respect to the issuance of the Shares and the issuance
of the Shares on the Nasdaq SmallCap Market.
(z) Registration Rights. The registration rights provided in Exhibit
B to this Agreement are not inconsistent with, and will in no way be
limited by, registration rights previously granted by the Company to its
securityholders.
In addition, any certificate signed by an officer of the Company and
delivered to the Placement Manager, or to counsel for the Placement Manager,
shall be deemed to be a
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representation and warranty by the Company to the Placement Manager as to the
matters covered thereby.
6. Covenants of the Company.
(a) Information Package. The Company will furnish the Placement
Manager, without charge, during he Offering with as many copies of the
Information Package as the Placement Manager may reasonably request. If
during the Offering period any event occurs as the result of which the
Information Package, as then amended or supplemented, would include an
untrue statement of a material fact, or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances in which they were made, not misleading, or if it shall be
necessary to amend or supplement the Information Package to comply with
applicable law, the Company will forthwith notify the Placement Manager
thereof and furnish to the Placement Manager, in such quantities as the
Placement Manager may reasonably request, an amendment or supplement to
the Information Package which corrects such statements or omissions or
causes the Information Package to comply with applicable law. Without the
prior written consent of the Placement Manager, no copies of the
Information Package or any other material prepared by the Company in
connection with the Offering will be given by the Company or its counsel,
or by any employee, director or agent of the Company, to any person not a
party to this Agreement, unless such person is a director, Employee or
principal shareholder of the Company.
(b) Additional Information. The Company has provided and shall
provide the Placement Manager with such other information, documents and
instruments as may be required for an offer made solely to accredited
investors or QIB's under Section 3(b), 4(2) or 4(6) of the Securities Act
and Rule 144A and Reg D thereunder.
(c) State Securities Qualification. The Company will provide its
counsel with all information which such counsel determines to be necessary
and otherwise cooperate with such counsel, to permit such counsel to take
all necessary or appropriate action under the Blue Sky laws of the states
of the United States in which the Placement Manager determines, in
consultation with Company management, that offers or sales will be made.
The Company will promptly advise the Placement Manager:
(i) Of any order, request or suggestion by a securities
regulator of any state for any filed materials, or for additional
information; and
(ii) Of any action by a securities regulator of any state
suspending the registration or qualification of the Securities for
offer or sale in such state or denying an exemption from such
registration or qualification, or of the initiation or threat of any
proceeding for such purpose, and the Company will use its best
efforts to prevent such action, or if such action shall be taken, to
obtain the withdrawal thereof at the earliest practicable date.
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The Company will provide the Placement Manager any additional information,
documents and instruments necessary to comply with the rules, regulations
and judicial and administrative interpretations in those states and
jurisdictions where the Shares are to be offered for sale or sold. The
Company will file all post-Offering forms, documents or materials and take
all other post-Offering actions required by the Blue Sky laws of the
states in which the Shares have been offered or sold.
(d) Use of Proceeds. The Company will use the net proceeds of the
Offering for corporate purposes, including working capital.
(e) Restriction on Issuance of Securities. During the period
commencing on the date hereof and terminating on the final Closing Date or
(if no Closing occurs) on the termination date of the Offering, the
Company will not, without the prior written consent of the Placement
Manager, issue shares of equity securities, other than Shares and
Commision Shares, or issue or grant Options other than shares of Common
Stock issuable pursuant to currently outstanding convertible securities,
or Stock Plans, and further, the Company shall not, for a period of nine
months following the Final Closing Date, or, if no Closing occurs, the
termination date of the Offering, without the consent of the Placement
Manager, sell shares of Common Stock (other than pursuant to options,
warrants or other rights, outstanding as of the date of this Agreement) at
a price per share less than the lesser of (i) the Sales Price, or (ii) the
30-day average closing price on the date proceeding such sale as quoted by
Nasdaq; provided, however, that the Company may enter into and consummate
an arrangement pursuant to which Sirrom Capital Corporation will convert a
note of the Company held by it into shares of Common Stock and extend a
loan in the principal amount of approximately $1 million to a subsidiary
of the Company (which may be guaranteed by the Company and secured by a
pledge of the equity of such subsidiary) (the "Sirrom Arrangement").
(f) Investment Banking Activity. Until January 15, 1998, the Company
will not seek, accept or consider any offer or proposal, other than from
the Placement Manager, relating to any corporate finance or investment
banking activity involving the sale of the Company's shares.
(g) Registration Rights. The Company will register the Shares and
the Commission Shares under the Securities Act for the public resale
thereof in the United States in accordance with and will be bound by the
provisions of, Exhibit B of this Agreement.
7. Representations, Warranties and Covenants of the Placement Manager. The
Placement Manager represents, warrants and covenants that (a) it is registered
broker/dealer under the Securities Exchange Act of 1934, (b) it will comply in
all respects with the terms and conditions of Rule 506 of Reg D and applicable
Blue Sky laws with respect to the offering and the sale of the shares only to
"accredited investors" or "QIB's", and not by any form of general solicitation
or general advertising, and (c) it will not make offers or sales of the Shares
in any
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other jurisdiction in which the Shares have not been qualified or registered for
offer and sale, or are not exempt from such qualification or registration.
8(a). Conditions to Placement Manager Obligations. The sale of Shares and
the other obligations of the Placement Manager hereunder on any Closing Date
will he subject to the performance by the Company of all its obligations
hereunder and to the following additional condition:
(i) Representations and Warranties Accurate. The representations and
warranties of the Company set forth in Section 5 of this Agreement shall
be in all material respects true and in full force and effect as of such
Closing Date, provided, however, that (A) if the Company prior to the
losing Date enters into a secured term loan facility with First Union Bank
in the principal amount of approximately $4 million (the "First Union
Facility") then the representations and warranties of the Company set
forth in Section 5 of this Agreement shall be deemed to include such
exceptions to subsections (n), (o) and (x) of Section 5 as shall be
appropriate to reflect the terms of such facility; and (B) if the Company
prior to the Closing Date enters into the Sirrom Arrangement, then the
representations and warranties of the Company set forth in Section 5 of
this Agreement shall be deemed to include such exceptions to subsections
(e), (o) and (x) of Section 5 as shall be appropriate to reflect the terms
of the Sirrom Arrangement. The Company shall not have any liability to
Sunrise or to any prospective purchaser of shares if any of the conditions
in Section 8(a) is not satisfied or as a result of the occurrence of any
event or circumstance after the date of this agreement that results in any
of the representations and warranties of the Company not being true as of
any date subsequent to the date of this agreement.
(ii) Absence of Government Action. No order suspending the offer or
sale of the Securities will have been issued by the Commission or any
other governmental authority, and no proceeding for that purpose will have
been initiated or threatened;
(iii) No Material Misstatements. The Placement Manager will not have
notified the Company that any Blue Sky law filing, the Information Package
or any amendment or supplement thereto contains an untrue statement of a
fact which in the Placement Manager's opinion is material, or omits to
state a fact which in its opinion is material and is required to be stated
therein or is necessary to make the statements therein not misleading;
(iv) President Certificate. The Company will have delivered to the
Placement Manager a certificate of the Company's CEO or President, dated
as of such Closing Date, to the effect that all the representations and
warranties of the Company set forth in Section 5 of this Agreement are
true and in all material respects as of such Closing Date; provided,
however, that (A) if the Company prior to the Closing Date enter into the
First Union Facility, then such certificate
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may include such exceptions to subsection (n), (o) and (x) of Section 5 as
shall be appropriate to reflect the terms of such facility; and (B) if the
Company prior to the Closing Date enters into the Sirrom Agreement, then
such certificate may include such exceptions to subsections (e), (n) and
(x) of Section 5 as shall be appropriate to reflect the terms of the
Sirrom Arrangement.
(v) Opinion of Counsel. The Placement Manager will have received
from Proskauer Rose LLP, counsel to the Company, a signed opinion, dated
as of such Closing Date, substantially in the form agreed to by the
parties hereto;
(vi) Compliance with Agreement. The Company will have complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(vii) Corporate Action. The Company will have taken all necessary
corporate action, including, without limitation obtaining the approval of
the Company's board of directors for the execution and delivery of this
Agreement, the performance by the Company of its obligations hereunder and
the commencement of the offering contemplated hereby;
(viii) Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇. The Placement Manager shall have
received an enforceable agreement executed by ▇▇▇▇▇▇ ▇▇▇▇▇, stating that
without the written consent of the Placement Manager he will not sell any
securities of the Company for a period of eighteen months from the
Effective Date of the Registration Statement covering the resale of the
Shares and the Commission Shares.
(ix) Agreement of ▇▇▇▇▇▇ Low. The Company shall have received an
enforceable agreement executed by ▇▇▇▇▇▇ Low, stating that without the
written consent of the Company he will not sell any securities of the
Company acquired by him in connection with the proposed private placement
for a period of nine months from the Effective Date of the Registration
Statement covering the resale of the Shares and the Commission Shares.
(b) Conditions of the Company's Obligations. The obligations of the
Company hereunder on any Closing Date will be subject to the accuracy of the
representations and warranties of the Placement Manager contained herein as of
the date hereof and as of such Closing Date, to the performance by the Placement
Manager of its obligations hereunder and to the following additional conditions:
(i) Absence of Government Action. No order suspending the offer or
sale of the Shares and Commission Shares will have been issued by the
Commission or any other governmental authority, and no proceeding for that
purpose will have been initiated or threatened; and
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(ii) No Material Misstatements. The Company will not have notified
the Placement Manager that any Blue Sky law filing, the Information
Package or any supplement thereto contains an untrue statement of a fact
which in the Company's opinion is material, or omits to state a fact which
in its opinion is material and is required to be stated therein or is
necessary to make the statements therein not misleading, in each case only
with respect to information contained therein concerning the Placement
Manager.
9. Expenses of Sale. In addition to those items referred to in Sections 4
hereof, the Company will pay or cause to be paid all costs and expenses incident
to the Offering, whether or not it is consummated, including, without
limitation, all taxes, if any, payable as a result of the issuance of the Shares
and Commission Shares and the fees, disbursements and expenses of (a) the
Company's counsel and accountants, (b) the preparation, printing or other
reproduction and the mailing of the Information Package and other documents (all
in such quantities as the Placement Manager may require), and (c) all required
Blue Sky law filings as provided in Section 6(c), including, but not limited to,
the fees, expenses and disbursements, if any, of the Placement Manager's counsel
in connection with such filings.
10. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless the Placement Manager and each person, if any, who
controls the Placement Manager within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several
(including any reasonable investigation, legal or other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit
or proceeding or any claim asserted) to which the Placement Manager or any
such controlling person may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in
the Information Package and SEC Filings, or (B) in any Blue Sky law filing
to the extent such statement was based on information furnished by the
Company, or (ii) the omission or alleged omission to state in the
Information Package, the SEC Filings or in any Blue Sky law filing a
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and will reimburse the Placement Manager and
each such controlling person for any legal or other expenses reasonably
incurred by the Placement Manager or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in the Information Package in reliance upon and
in conformity with written information furnished to the Company by the
Placement Manager specifically for use in the Information Package.
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(b) Indemnification by the Placement Manager. The Placement Manager
agrees to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of the Securities Act against
any losses, claims, damages or liabilities, joint or several, to which the
Company or such controlling person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Information Package, or (B) in any Blue Sky filing to
the extent such statement relates solely to the Placement Manager, or (ii)
the omission or alleged omission to state a material fact required to be
stated in the Information Package or (to the extent such omission was of a
material fact relating solely to the Placement Manager) in any Blue Sky
law filing, or necessary in order to make the statement therein, in the
light of the circumstances under which they were made, not misleading;
provided that the Placement Manager will be liable in any such case based
on the Information Package only to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission in the
Information Package was made in reliance upon and in conformity with
written information furnish to the Company by the Placement Manager
specifically for use in the Information Package.
(c) Procedure. Promptly after receipt by an indemnified party under
this Section 10 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 10, notify in writing
the indemnifying party of the commencement thereof; and the omission to
notify the indemnifying party will relieve it from any liability under
this Section 10 as to the particular item for which indemnification is
then being sought, but not from any other liability which it may have to
any indemnified party. In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may wish, jointly with any
other indemnifying party, similarly notified, to assume the defense
thereof, with counsel who shall be to the reasonable satisfaction of such
indemnifying party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 10 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided that if, in the reasonable
judgment of the indemnified party, it is advisable for the indemnified
party to be represented by separate counsel, the indemnified party shall
have the to employ a single counsel in each jurisdiction to represent the
indemnified parties who may be subject to liability arising out of any
clause in respect of which indemnity may be sought by the indemnified
parties thereof against the indemnifying party, in which event the fees
and expenses of such separate counsel shall be borne by the indemnifying
party. Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party, which consent
shall not be unreasonably withheld.
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(d) Contribution. If the indemnification provided for in this
Section 10 is unavailable to any indemnified party in respect to any
losses, claims, damages, liabilities or expenses referred to therein, then
the indemnifying party, in lieu of indemnifying such indemnifying party,
will contribute to the amount paid or payable by such indemnified party,
as a result of such losses, claims, damages, liabilities or expenses (i)
in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand, and the Placement Manager on the
other hand, from the Offering, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative result of the Company on the one
hand, and of the Placement Manager on the other hand, in connection with
the statements or omissions which resulted in such losses, claims,
damages, liabilities or expenses as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand, and the Placement Manager on the other hand, shall be deemed to be
in the same proportion as the total proceeds from the Offering (before
deducting expenses) received by the Company, bear to the initial value of
the Sales Commission and Commission Shares as established pursuant to
paragraphs 4(a) and 4(b) of this Agreement. The relative fault of the
Company on the one hand, and the Placement Manager on the other hand, will
be determined with reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company, and its
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount payable by a
party as a result of the losses, claims, damages, liabilities or expenses
referred to above will be deemed to include any reasonable legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The Company and the
Placement Manager agree that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in this paragraph 10(d).
11. Representations and Covenants to Survive Delivery. All representation,
warranties and covenants of the Company and of the Placement Manager herein will
survive the delivery and execution hereof and shall remain operative and in full
force and effect until after the Final Closing, regardless of any investigation
made by or on behalf of the Placement Manager or any person who controls the
Placement Manager within the meaning of the Securities Act, or by the Company or
any person who controls the Company within the meaning of the Securities Act.
12. Termination by Placement Manager. The Placement Manager will have the
to terminate this Agreement by giving written notice as herein specified, at any
time:
(a) If the Company shall have failed, refused, or been unable to
perform any of its obligations hereunder;
(b) If any other condition of the Placement Manager's obligations
hereunder is not fulfilled, or
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(c) If there has occurred an event materially or adversely affecting
the value of the Shares.
If the Placement Manager elects to terminate this Agreement pursuant to
this Section 12, the Company will be notified promptly in accordance with
Section 13 hereof. If this Agreement is terminated prior to a Final Closing, as
provided in Section 4(b), the Company will reimburse the Placement Manager for
up to $10,000 of the out-of-pocket disbursements (including fees and
disbursements of the Placement Manager's counsel) actually incurred by the
Placement Manager in connection with the Offering. In the event of termination
pursuant to this Section 12, Section 6(e) shall be null and void.
Notwithstanding the foregoing, nothing contained in this Section 12 shall
imply that the Placement Manager has undertaken any commitment to sell the
Shares other than to use its best efforts.
13. Termination by the Company. The Company may, at any time during the
Offering, terminate this Agreement, provided, however, that if the Company
terminates the Offering prior to its termination by the Placement Manager in
accordance with the terms of Section 14 of this Agreement and prior to January
15, 1998, and, within six months after termination by the Company in accordance
with the terms of this Section 13, the Company sells, offers for sale or enters
into an agreement with a third party for the sale or offer for sale of any
equity securities of the Company (the "Actions"), the Company shall pay the
Placement Manager 10% of the Gross Proceeds of the sale resulting from the
Actions. Notwithstanding the foregoing, the restrictions of this Section 13
shall not apply to any issuances of equity securities of the Company in
conjunction with any joint venture, strategic corporate alliance or similar
arrangement that the Company may undertake, or to any issuances of equity
securities by the Company in connection with any Stock Plans or warrants
currently outstanding or contemplated.
14. Notices. Any notice hereunder shall be in writing and shall be
effective when delivered in person or by facsimile transmission, or seven
business days after being mailed by certified or registered mail, postage
prepaid, return receipt requested, to the appropriate party or parties, at the
following addresses: if to the Placement Manager, to Sunrise Securities Corp.,
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (facsimile
212-421-5924), Attention: ▇▇. ▇▇▇▇▇▇ Low, President, with a copy to ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & Milburm, ▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq. (facsimile 212-732-3232); if to the Company, to Network Event
Theater, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Chairman
(facsimile 212-779-9190), with a copy to Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (facsimile 212-969-2900) Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(Facsimile 212-969-2900); or, in each case, to such other address as the parties
may hereinafter designate by like notice.
15. Parties. This Agreement will inure to the benefit of and be binding
upon the Placement Manager, the Company and their respective successors and
assigns. This Agreement (including, but not limited to, the representations and
warranties) is intended to be, and is for the sole and exclusive benefit of the
Parties hereto and the other indemnified parties described in
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subsections 10(a) and 10(b) hereof, and their respective successors and assigns,
and for the benefit of no other person, and no other person will have any legal
or equitable, remedy or claim under, or in respect of this Agreement. No
purchaser of any of the Shares will be construed as successor or assign merely
by reason of such purchase.
16. Amendment and/or Modification. Neither this Agreement, nor any term or
provision hereof, may be changed, waived, discharged, amended, modified or
terminated or in any manner other than by an instrument in writing signed by
each of the Parties hereto.
17. Further Assurances. Each Party to this Agreement will perform any and
all acts and execute any and all documents as may be necessary and proper under
the circumstances in order to accomplish the intent and purposes of this
Agreement and to carry out its provisions.
18. Validity. In case any term of this Agreement will be held invalid,
illegal or unenforceable, in whole or in part, the validity of any of the other
term of this Agreement will not in any way be affected thereby.
19. Waiver of Breach. The failure of any Party hereto to insist upon
strict performance of any of the covenants and agreements herein contained, or
to exercise any option or herein conferred in any one or more instances, will
not be construed to be a waiver or relinquishment of any such option or, or of
any other covenants or agreements, and the same will be and remain in full force
and effect.
20. Entire Agreement. This Agreement contains the entire agreement and
understanding of the Parties with respect to the entire subject matter hereof,
and there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein. Any and all prior discussions, negotiations,
commitments and understanding relating thereto, including without limitation,
that certain letter of intent dated May 14, 1997, between the Company and the
Placement Manager, are superseded hereby. There are no conditions precedent to
the effectiveness of this Agreement other than as stated herein, and there are
no related collateral agreements existing between the Parties that are not
referred to herein.
21. Counterparts. This Agreement may be executed in counterparts and each
of such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.
22. Law. This Agreement will be deemed to have been made and delivered in
New York City and will be governed as to validity, interpretation, construction,
effect and in all other respects by the internal laws of the State of New York.
The Company (a) agrees that any legal suit, action or proceeding arising out of
or relating to this letter will be instituted exclusively in the Supreme Court
of the State of New York, County of New York, or in the United States District
Court for the Southern District of New York, (b) waives any objection which the
Company may have now or hereafter to the venue of any such suit, action or
proceeding, and (c) irrevocably consents to the jurisdiction of the Supreme
Court of the State of New York, County of New York, and the United States
District Court for the Southern District of New York in any
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such suit, action or proceeding.
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
will constitute a binding agreement between us.
NETWORK EVENT THEATER, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and CEO
CONFIRMED AND ACCEPTED:
SUNRISE SECURITIES CORP.
By: /s/ ▇▇▇▇▇▇ LOW
--------------------------------
Name: ▇▇▇▇▇▇ LOW
Title: President
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