EXHIBIT 10.17
NETWORK EVENT THEATER, INC.
STOCK PURCHASE AGREEMENT
January ____, 1998
Network Event Theater, Inc.
STOCK PURCHASE AGREEMENT
January , 1998
The parties to this agreement are ________________________ ("Purchaser"),
and Network Event Theater, Inc., a Delaware corporation (the "Company").
The Company desires to sell to Purchaser shares of the Company's Common
Stock, par value $.01 per share ("Shares"), and Purchaser desires to purchase
those Shares from the Company, on the terms and subject to the conditions set
forth in this agreement.
Accordingly, the parties agree as follows:
1. Purchase and Sale of Shares.
1.1 Issuance and Sale of Shares. At the closing provided for in
section 1.2 , the Company shall issue and sell to Purchaser, and Purchaser shall
purchase, an aggregate of ________ Shares, at a price of $4.50 per Share (the
"Purchase Price").
1.2 Closing. The closing shall take place on January __, 1998 at the
offices of the Company, 000 Xxxxx Xxxxxx, Xxx Xxxx, X.X. 00000 or at such other
time and such place as the Company and Purchaser mutually agree. The date of the
closing is referred to in this agreement as the "Closing Date". At the closing,
Purchaser shall deliver to the Company, by check or by wire transfer of
immediately available funds, the Purchase Price of the Shares purchased by
Purchaser and the Company shall deliver to Purchaser certificates for those
Shares duly registered in Purchaser's name.
2. Representations and Warranties of the Company.
The Company represents and warrants to Purchaser as follows:
2.1 Corporate Organization and Authority. The Company is a
corporation duly organized, validly existing, and in good standing under the law
of Delaware; has the full power and authority to own and operate its properties,
to carry on its business as now conducted and as proposed to be conducted, to
execute and deliver this agreement and to perform its obligations hereunder and
consummate the transactions contemplated hereby; and is qualified as a foreign
corporation in all jurisdictions in which qualification is required and in which
the failure to qualify would have a material adverse effect on the Company's
business, properties, or financial condition.
2.2 Capitalization. The Company is authorized to issue 17,000,000
Shares, of which 10,285,720 are duly and validly issued, fully-paid,
non-assessable and outstanding as of the date of this agreement, and 1,000,000
shares of preferred stock, par value $.01 per share, none of which is
outstanding. The Company has reserved (a) 400,000 Shares for issuance upon
exercise of outstanding options under the Company's 1996 stock option plan at
per share exercise prices ranging from $3 to $5 and having a weighted average
exercise price of $4.05
per share, (b) 450,000 Shares for issuance upon exercise of options available
for future grant under the Company's 1997 stock option plan (no options having
yet been granted under that plan), (c) 552,560 Shares for issuance upon exercise
of options granted to The Fields & Xxxxxxx Company at a per share exercise price
of $1.58, (d) up to 100,000 Shares for issuance upon exercise of contingent
options granted to American Passage Media Corporation at a per share exercise
price of $2.627, (e) 2,633,000 Shares for issuance upon exercise of outstanding
warrants at a per share exercise price of $5.00, (f) 230,000 Shares 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 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, (h) 150,000 Shares for issuance upon
exercise of outstanding warrants issued to Whale Securities Co., L.P. and its
designee at a per share exercise price of $4.50, and (i) 500,000 Shares (400,000
of which are contingent) for issuance upon exercise of outstanding warrants
issued to Sunrise Securities Corp. The Company is currently negotiating
transactions that could result in the issuance of additional Shares. Except as
set forth in this section 2.2 and as contemplated by this agreement, there are
no outstanding options, warrants, conversion privileges, preemptive rights, or
other rights or agreements to purchase or otherwise acquire or issue any equity
securities of the Company. The Company has no obligation to repurchase or redeem
any outstanding securities. The issuance of the Shares contemplated by this
agreement will not result in any adjustment to the exercise prices of any of the
Company's outstanding options or warrants. Except as provided in the
Underwriting Agreement dated April 2, 1996 between the Company and Whale
Securities Co., L.P. and the NET Portfolio Investors Agreement dated December
21, 1995 (and the Shareholders Agreement contemplated by that agreement), there
exist no agreements or understandings among the stockholders of the Company with
respect to their voting of securities of the Company or agreements pursuant to
which the Company is obligated to nominate persons for election or appointment
to the Company's board of directors. Except as provided by a registration rights
agreement dated June 24, 1997, the registration rights agreement referred to in
section 4.5 (the "Registration Rights Agreement"), the NET Portfolio Investors
Agreement dated December 21, 1995, and registration rights agreements covering
shares which have previously been registered by the Company, the Company is not
under any obligation to register any of its securities under the Securities Act
of 1933, as amended (the "Securities Act").
2.3 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders, necessary for the authorization,
execution and delivery of this agreement and the Registration Rights Agreement,
the performance of all obligations of the Company under this agreement and the
Registration Rights Agreement, and the authorization, sale, issuance and
delivery of the Shares, has been taken, and assuming due execution and delivery
by each Purchaser, this agreement and the Registration Rights Agreement
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms.
2.4 Validity of Shares. Upon receipt by the Company of the Purchase
Price and issuance and delivery of the Shares, the Shares will be duly and
validly issued (including, without limitation, issued in compliance with
applicable federal and state securities laws), fully-paid and non-assessable.
2
2.5 No Conflict with Other Instruments. The execution and delivery
of this agreement and the Registration Rights Agreement and the performance of
all obligations of the Company under this agreement and the Registration Rights
Agreement will not result in any violation of, be in conflict with, or
constitute a default under, with or without the passage of time or the giving of
notice: (a) any provision of the Company's certificate of incorporation or
by-laws; (b) any material contract, obligation or commitment to which the
Company is a party or by which it is bound; or (c) any statute, rule or
governmental regulation or order applicable to the Company.
2.6 SEC Reports. The Company has provided Purchaser with a copy of
its Quarterly Report on Form 10-QSB for the fiscal quarter ended September 30,
1997, its Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997,
and its proxy statement dated October 23, 1997 (the "SEC Reports"), as filed
with the Securities and Exchange Commission. On the date of its filing, none of
the SEC Reports contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they, were made, not misleading. The Company has
filed all reports, registrations statements and other documents required to be
filed by it under applicable federal and state securities laws.
2.7 Changes in Condition. Since September 30, 1997 there has not
been (a) any change in the business, assets, properties, financial condition or
operating results of the Company from that reflected in the Form 10-QSB for the
fiscal quarter ended that date, except changes in the ordinary course of
business which individually, or in the aggregate, have not had a material
adverse effect on the Company, or (b) any other event or condition, of which the
Company has knowledge, of any character which might have a material adverse
effect on the business, assets, properties, financial condition or operating
results of the Company. The Company is presently negotiating financing
transactions that are expected to result in a secured borrowing by a subsidiary
guaranteed by the Company and a separate secured borrowing by the Company; it is
contemplated that those transactions will be concluded prior to January 15,
1998.
2.8 Financial Statements. The financial statements contained in the
SEC Reports fairly present the financial position and results of operations of
the Company as of their respective dates and for the respective periods then
ended, in accordance with generally accepted accounting principles consistently
applied.
2.9 Consents. No consent, approval, order or authorization of any
federal, state or local governmental authority or other person or entity with
respect to the Company is required in connection with the sale and purchase of
Shares as contemplated by this agreement.
2.10 Litigation. There is no action, proceeding or investigation
pending or threatened against the Company that, either individually or in the
aggregate, would have a material adverse effect on the business, assets,
properties, financial condition or operating results of the Company or that
seeks to prohibit or restrain the transactions contemplated hereby. There is no
judgment, decree or order of any court in effect against the Company and the
Company is not in default with respect to any order of any governmental
authority to which the Company is
3
a party or by which it is bound. There is currently pending no action, suit,
proceeding or investigation initiated by the Company.
3. Representations and Warranties of Purchaser. Purchaser represents
and warrants to the Company that:
3.1 Authorization. All action on the part of Purchaser, and its
officers, directors and stockholders, necessary for the authorization, execution
and delivery of this agreement and the Registration Rights Agreement and the
performance of all of its obligations under this agreement and the Registration
Rights Agreement has been taken, and assuming due execution and delivery by the
Company, this agreement and the Registration Rights Agreement constitute valid
and binding obligations of Purchaser enforceable against it in accordance with
their terms.
3.2 Absence of Defaults. The execution and delivery of this
agreement by Purchaser and the performance of all obligations of Purchaser under
this agreement will not result in any violation of, be in conflict with, or
constitute a default under, with or without the passage of time or the giving of
notice: (i) if Purchaser is not a natural person, any provision of Purchaser's
charter documents; (ii) any material contract, obligation or commitment to which
Purchaser is a party or by which it is bound; or (iii) any statute, rule or
governmental regulation or order applicable to Purchaser.
4. Securities Act Matters.
4.1 Purchase for Investment. This agreement is made with each
Purchaser in reliance upon Purchaser's representation to the Company, which by
Purchaser's execution of this agreement Purchaser hereby confirms, that the
Shares to be purchased by Purchaser will be acquired for investment for
Purchaser's own account, not as a nominee or agent, and, other than as
contemplated by the Registration Rights Agreement or otherwise in accordance
with applicable securities laws, not with a view to the sale or distribution of
any part thereof, and without present intention of selling, granting any
participation in, or otherwise distributing any of the Shares. By executing this
agreement, Purchaser further represents that it has no contract, undertaking,
agreement or arrangement with any person to sell or transfer any of the Shares.
4.2 Exemption. Purchaser acknowledges that it understands that the
offering and sale of the Shares to Purchaser pursuant to this agreement will not
be registered under the Securities Act on the ground that the offering and sale
are exempt from registration pursuant to Section 4(2) of the Securities Act, and
that the Company's reliance upon such exemption is predicated, in part, upon
Purchaser's representations set forth in this agreement. The Company represents
that it has not engaged in any "general solicitation" (as that term is used in
Regulation D under the Securities Act) in connection with the sale of the Shares
to Purchaser.
4.3 Additional Securities Act Representations. Purchaser represents
that: (a) it has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of its prospective
investment in the Shares; (b) it has received all the information it has
requested from the Company and considers necessary or appropriate for deciding
whether to purchase the Shares; (c) it has the ability to bear the economic
risks of its
4
investment; (d) it is able, without materially impairing its financial
condition, to hold the Shares for an indefinite period of time and to suffer
complete loss on its investment; and (e) it is an "accredited investor" within
the meaning of Rule 501 under the Securities Act. Accordingly, Purchaser
represents that (a) it is a natural person who had individual income in excess
of $200,000 in each of the last two years or joint income with his or her spouse
in excess of $300,000 in each of the last two years and reasonably expects to
reach that same income level for the current year; (b) is a natural person whose
individual net worth, or joint net worth with his or her spouse, is in excess of
$1,000,000; (c) is a corporation or partnership, not formed for the specific
purpose of acquiring the Shares, that has total assets in excess of $5,000,000;
(d) is a trust, with total assets in excess of $5,000,000, that was not formed
for the specific purpose of acquiring the Shares and whose purchase is directed
by a person who has such knowledge and experience in financial and business
matters that such person is capable of evaluating the merits and risks of the
prospective investment; or (e) is an entity in which all of the equity owners
meet the requirements of at least one of the above subparagraphs (A) and (B).
For this purpose, (x) "individual income" means adjusted gross income, as
reported for federal income tax purposes, less any income attributable to a
spouse or to property owned by a spouse, increased by the individual's share
(and not a spouse's share) of: (1) the amount of any tax exempt interest income
received, (2) the amount of losses claimed as a limited partner in a
partnership, (3) amounts contributed to an XXX or Xxxxxx retirement plan, (4)
alimony paid, and (5) the excluded portion of any long-term capital gains, and
(y) "net worth" means the excess of total assets at fair market value, including
home and personal property, over total liabilities, provided that for the
purpose of determining net worth, the principal residence owned by an individual
shall be valued either at cost, including the cost of improvements, net of
current encumbrances upon the property, or on the basis of a written appraisal
used by an institutional lender making a loan secured by the property.
4.4 Legends. The certificates for the Shares sold to Purchaser shall
bear the following legend:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933 ("Act") and may not be transferred unless
a Registration Statement under the Act is in effect as to that transfer
or, in the opinion of counsel reasonably satisfactory to the Company,
registration under the Act is unnecessary for that transfer to comply with
the Act."
4.5 Registration Rights. At the closing, the Company and Purchaser
shall execute and deliver the Registration Rights Agreement in the form attached
as exhibit 4.5 to this agreement, which provides for registration under the
Securities Act of the Shares to be issued to Purchaser pursuant to this
agreement.
5. Conditions to Purchaser' Obligations. The obligations of Purchaser
to purchase Shares under Section 1 of this agreement is subject to the
fulfillment at or before the closing of each of the following conditions (any of
which may be waived in writing by Purchaser):
5
5.1 Representations and Warranties. The representations and
warranties of the Company contained in section 2 shall be true in all material
respects on and as of the Closing Date with the same effect as though those
representations and warranties had been made on and as of the Closing Date.
5.2 Performance of Obligations. The Company shall have performed in
all material respects all agreements and obligations that are required to be
performed by it under this agreement on or before the Closing Date.
5.3 Registration Rights Agreement. The Company shall have executed
and delivered the Registration Rights Agreement.
5.4 Opinion of Counsel. There shall have been delivered to Purchaser
an opinion of counsel to the Company in substantially the form of Exhibit 5.4.
5.5 Due Diligence. Each of Purchaser and its counsel shall have had
an opportunity to review all information regarding the Company and all material
agreements to which the Company or its stockholders are a party which they have
reasonably requested.
5.6 Proceedings Satisfactory. All corporate and legal proceedings
taken by the Company in connection with the transactions contemplated by this
agreement shall be reasonably satisfactory to Purchaser.
6. Conditions to Company's Obligations. The obligations of the Company
to issue and sell Shares to Purchaser are subject to the fulfillment at or
before the Closing of each of the following conditions (any of which may be
waived in writing by the Company):
6.1 Representations and Warranties. The representations and
warranties of Purchaser contained in section 3 and 4 shall be true in all
material respects on and as of the Closing Date with the same effect as though
those representations and warranties had been made on and as of the Closing
Date.
6.2 Performance of Obligations. Purchaser shall have performed in
all material respects all agreements and obligations that are required to be
performed by it under this agreement on or before the Closing Date.
6.3 Registration Rights Agreement. The Registration Rights Agreement
shall have been executed and delivered by Purchaser.
7. Additional Agreements of the Company. The Company further agrees as
follows:
7.1 Information Provided to Stockholders. The Company shall provide
Purchaser, for so long as Purchaser holds Shares, with copies of all reports,
proxy statements and other financial information the Company provides to its
stockholders, including, without limitation, any information provided to any
stockholder or group of stockholders by agreement.
7.2 Stockholders' Meetings. The Company shall hold annual meetings
of its stockholders.
6
7.3 Publicity. The Company shall not use or make reference to the
name of Purchaser or any of its affiliates in any press release or other
document without Purchaser's prior approval unless the use or reference to
Purchaser is required by law, in which event the Company will consult with
Purchaser prior to such publication; provided, however, that no approval of or
consultation with Purchaser shall be required to file this agreement and the
Registration Rights Agreement as an exhibit to any report required to be filed
by the Company with the SEC pursuant to the Securities Exchange Act of 1934.
7.4 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Shares contemplated hereby for working capital and general corporate
purposes, the growth of its existing businesses, and the possible acquisition of
other businesses related to its existing businesses.
8. Survival of Representations and Warranties; Indemnification.
8.1 Survival. The representations and warranties of the parties
contained in this agreement (other than the representations and warranties of
the Company set forth in sections 2.2, 2.3, 2.4 and 2.5, which shall survive
without limitation as to time) shall survive the execution and delivery of this
agreement and the closing for a period of two years; provided, however, that no
claim may be made with respect to any representation or warranty that is
accurate as of the date of such execution and delivery and as of the Closing
Date.
8.2 Indemnification By the Company. Subject to section 8.4, after
the closing the Company shall indemnify and hold harmless each Purchaser and
each of its officers, directors, employees, agents and legal counsel and each
person controlling Purchaser, from all losses, damages, expenses, liabilities,
claims, assessments and judgments (including reasonable costs and attorneys'
fees and other expenses arising out of any claim, or the defense or
investigation thereof, made with respect to any of the foregoing) incurred or
suffered by any of them arising out of, based upon or resulting from any breach
by the Company of the Company's representations, warranties, or covenants made
to Purchaser in this agreement.
8.3 Indemnification By Purchaser. Subject to section 8.4, after the
closing Purchaser, severally and not jointly, shall indemnify and hold harmless
the Company and each of its officers, directors, employees, agents and legal
counsel and each person controlling the Company, from all losses, damages,
expenses, liabilities, claims, assessments and judgments (including reasonable
costs and attorneys' fees and other expenses arising out of any claim, or the
defense or investigation thereof, made with respect to any of the foregoing)
incurred or suffered by any of them arising out of, based upon or resulting from
any breach by Purchaser of the representations, warranties, or covenants made by
Purchaser in this agreement.
8.4 Notice of Claims; Participation in Suits. Any claim pursuant to
this section 8 with respect to a breach of a representation or warranty (other
than a representation or warranty of the Company set forth in Section 2.2, 2.3,
2.4 and 2.5, which shall survive without limitation as to time) must be made
within two years after the Closing Date. If a party ("Indemnified Party") makes
any claim against the other party ("Indemnifying Party") for indemnification,
the claim shall be in writing and shall state in general terms the facts upon
which the claim is based. If any claim or demand is asserted against an
Indemnified Party by a third
7
party, the Indemnified Party shall give the Indemnifying Party written notice of
the claim or demand within 30 days after receipt, and the Indemnifying Party
shall have the right to assume the defense of the claim with counsel selected by
the Indemnifying Party and reasonably satisfactory to the Indemnified Party, but
the Indemnifying Party shall not settle the claim without the consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, a failure to so notify an Indemnifying Party
shall not relieve such Indemnifying Party from its indemnification obligations
unless such Indemnifying Party is materially prejudiced by such failure. The
Indemnified Party shall have the right to select separate counsel for the
defense of the claim, at the expense of the Indemnifying Party, if the
Indemnifying Party and the Indemnified Party have conflicting interests with
respect to the claim.
9. Miscellaneous.
9.1 Finders. The parties represent and warrant that they have not
employed or utilized the services of any broker or finder in connection with
this agreement or the transactions contemplated by it, except that the Company
has used the services of Sunrise Securities Corp. and shall be solely
responsible for its fees.
9.2 Expenses. The Company and Purchaser will each bear their
respective legal and other fees and expenses in connection with the negotiation,
documentation and consummation of the transactions contemplated in this
agreement.
9.3 Headings. The section headings of this agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this agreement.
9.4 Notices. Any notice required or permitted under this agreement
shall be given in writing and shall be conclusively deemed effectively given
upon personal delivery, 24 hours after facsimile transmission (receipt
acknowledged), one day after deposit with a nationally recognized overnight
courier, or five days after deposit in the United States mail, by registered or
certified mail, postage prepaid, addressed to the parties at the following
addresses (or to such other address as a party may have specified by notice
given to the other party pursuant to this provision), (a) addressed to the
Company at 000 Xxxxx Xxxxxx, Xxx Xxxx, X.X. 00000, Attention: Chairman (fax:
000-000-0000); with a copy to Xxxxxxx X. Xxxxxx, Esq., Proskauer Rose LLP, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (fax: 000-000-0000); and (b) addressed to
Purchaser at its address set forth below.
9.5 Waiver. Any party may waive compliance by another with any of
the provisions of this agreement. No waiver of any provision shall be construed
as a waiver of any other provision. Any waiver must be in writing and must be
signed by the party waiving any provision hereof.
9.6 Entire Agreement. This agreement and the Registration Rights
Agreement contain a complete statement of all of the terms of the arrangements
among the parties with respect to their subject matter, supersede any previous
agreements and understandings between the parties with respect to those matters,
and cannot be changed or terminated orally. Except as specifically set forth in
this agreement, there are no representations or warranties by any party in
connection with the transactions contemplated by this agreement.
8
9.7 Governing Law. Except to the extent that the General Corporation
Law of Delaware applies to matters related to the internal governance of the
Company, this agreement shall be governed by and construed in accordance with
the law of the State of New York applicable to agreements made and to be
performed in New York.
9.8 Jurisdiction. The courts of the State of New York in New York
County and the United States District Court for the Southern District of New
York shall have jurisdiction over the parties with respect to any dispute or
controversy among them arising under or in connection with this agreement and,
by execution and delivery of this agreement, each of the parties to this
agreement submits to the jurisdiction of those courts, including, but not
limited to, the in personam and subject matter jurisdiction of those courts,
waives any objection to such jurisdiction on the grounds of venue or forum non
conveniens, the absence of in personam or subject matter jurisdiction and any
similar grounds, consents to service of process by mail (in accordance with
section 9.4) or any other manner permitted by law, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this agreement. These
consents to jurisdiction shall not be deemed to confer rights on any person
other than the parties to this agreement.
Purchaser:
Network Event Theater, Inc. ______________________________
By:__________________________ By:___________________________
Xxxxxx Xxxxx Name:
Chairman of the Board and Title:
Chief Executive Officer
Address of Purchaser:_________________
_________________
9
