U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
/x/ Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
/ / Transition report under Section 13 or 15(d) of the Exchange
Act
For the transition period from __________ to __________
33-80935
Commission file number __________________________________________
NETWORK EVENT THEATER, INC.
_________________________________________________________________
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3864111
_______________________________ ______________________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
149 Fifth Avenue, New York, New York 10010
_________________________________________________________________
(Address of Principal Executive Offices)
(212) 779-2740
_________________________________________________________________
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X
Yes _____ No _____
At November 14, 1996 there were 8,654,440 shares of the
Issuer's Common Stock outstanding.
Transitional Small Business Disclosure Format (check one):
X
Yes _____ No _____
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Network Event Theater, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
September 30, June 30,
1996 1996
_______________________________
Assets
Current assets:
Cash and cash equivalents $ 1,570,465 $ 266,806
Accounts receivable, net 662,116 236
Prepaid expenses 270,309 -
Investments 4,943,000 7,882,570
Deposits 17,019 26,169
_______________________________
Total current assets 7,462,909 8,175,781
_______________________________
Property and equipment, at cost,
less accumulated depreciation
of $726,518 at September 30,
1996 and $654,724 at June 30,
1996 3,282,503 3,081,620
Intangible assets, at cost, less
accumulated amortization of
$82,805 at September 30, 1996
and $58,633 at June 30, 1996 5,290,593 58,634
_______________________________
Total assets $16,036,005 $11,316,035
===============================
See notes to consolidated financial statements
Network Event Theater, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
September 30, June 30,
1996 1996
_______________________________
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and
accrued expenses $ 1,281,597 $ 462,634
_______________________________
Total current liabilities 1,281,597 462,634
Non-current liabilities:
Long-term debt 4,250,000 -
_______________________________
Total liabilities 5,531,597 462,634
Stockholders' equity:
Preferred stock, $.01 par
value, 1,000,000 shares
authorized, no shares
issued and outstanding - -
Common stock, $.01 par
value, 17,000,000 shares
authorized, 8,654,440
shares issued and out-
standing at September 30,
1996 and June 30, 1996 86,544 86,544
Additional paid-in capital 16,177,302 16,177,302
Deficit accumulated during
the development stage (5,703,633) (5,380,355)
Unrealized depreciation on
marketable equity securities (55,805) (30,090)
_______________________________
Total stockholders' equity 10,504,408 10,853,401
_______________________________
Total liabilities and stock-
holders' equity $16,036,005 $11,316,035
===============================
See notes to consolidated financial statements
Network Event Theater, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
Period from
Three months ended Inception to
September 30 September 30,
1996 1995 1996
________________________________________
Revenues $ 1,027,587 $ 110 $ 1,031,628
Expenses:
Selling, general
and administrative
expenses 1,261,758 416,675 6,200,016
Depreciation and
amortization 97,378 149,057 810,735
________________________________________
Total expenses 1,359,136 565,732 7,010,751
________________________________________
Loss from operations (331,549) (565,622) (5,979,123)
Interest and other
income, net 34,396 38,601 301,615
Loss before provision
for income taxes (297,153) (527,021) (5,677,508)
Provision for income
taxes 26,125 - 26,125
________________________________________
Net loss $ (323,278) $ (527,021) $(5,703,633)
========================================
Net loss per common
share $ (.04) $ (.06) $ (.66)
========================================
Weighted average common
shares outstanding 8,654,440 8,654,440 8,654,440
========================================
See notes to consolidated financial statements.
Network Event Theater, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
Period from
Three months ended Inception to
September 30 September 30,
1996 1995 1996
________________________________________
Cash flows from
operating activities:
Net loss $ (323,278) $ (527,021) $ (5,703,633)
Adjustments to
reconcile net loss
to net cash used
in operating
activities:
Depreciation and
amortization 97,378 149,057 810,735
Fair value of
common stock
issued for services - - 210,000
Changes in assets and
liabilities:
Decrease (increase)
in deposits 9,150 - (17,019)
Decrease in accounts
receivable 236 -
(Decrease) increase in
accounts payable and
accrued expenses (324,553) 370,389 138,081
________________________________________
Total adjustments (217,789) 519,446 1,141,797
________________________________________
Net cash used in
operating activities (541,067) (7,575) (4,561,836)
Cash flows from
investing activities:
Purchase of property
and equipment (274,089) (1,200,627) (4,010,433)
Expenditures for
organization costs - - (117,267)
Expenditures for
acquisition of business (5,045,040) - (5,045,040)
Sale (purchase) of
investments 2,939,570 - (5,930,100)
Proceeds from sale or
gain (loss) in value of
investments (25,715) - 931,295
________________________________________
Net cash used in by
investing activities (2,405,274) (1,200,627) (14,171,545)
Cash flows from
financing activities:
Net proceeds from
sale of common stock - - 15,823,846
Proceeds from issuance
of long-term debt 4,250,000 - 4,250,000
Proceeds from sale of
warrants - - 230,000
________________________________________
Net cash provided by
financing activities 4,250,000 - 20,303,846
________________________________________
Net increase (decrease)
in cash and cash
equivalents 1,303,659 (1,208,202) 1,570,465
Cash and cash
equivalents at
beginning of period 266,806 3,114,769 -
________________________________________
Cash and cash
equivalents at end
of period $ 1,570,465 $ 1,906,567 $ 1,570,465
========================================
Network Event Theater, Inc.
(A Development Stage Company)
Statments of Changes in Stockholders' Equity
Period from inception to September 30, 1996
(Unaudited)
Common Stock
Shares Amount
Inception - August 1993
($.02 per share) 2,755,743 $ 27,557
Net loss - -
Balance at December 31, 1993 2,755,743 27,557
Issuance of common stock -
January 1994 ($2.43 per share) 576,589 5,766
Fair value of stock issued for
consulting services - October
1994 ($2.65 per share)
56,713 567
Issuance of common stock -
December 1994 ($1.49 per share) 1,343,509 13,435
Net loss - -
Balance at December 31, 1994 4,732,554 47,325
Issuance of common stock -
January 1995 ($1.49 per share) 1,252,823 12,528
Fair value of stock issued as
severance - February 1995
($3.15 per share)
19,063 191
Issuance of common stock -
December 1995 ($2.86 per share) 350,000 3,500
Net loss - -
Balance at December 31, 1995 6,354,440 63,544
Issuance of common Stock upon the Initial
Public Offering - April 1996
($5.50 per share)
2,300,000 23,000
Issuance of warrants upon the Initial
Public Offering - April 1996
($.10 per share)
- -
Unrealized depreciation on
marketable equity securities - -
Net loss - -
Balance at June 30, 1996 8,654,440 86,544
Net loss - -
Unrealized depreciation on
marketable equity securities - -
Balance at September 30, 1996 8,654,440 $ 86,544
(Deficit)
Accumulated
Additional During the
Paid-in Development
Capital Stage
Inception - August 1993
($.02 per share) $ 22,453 $ -
Net loss - (50,000)
Balance at December 31, 1993 22,453 (50,000)
Issuance of common stock -
January 1994 ($2.43 per share) 1,394,234 -
Fair value of stock issued for
consulting services - October
1994 ($2.65 per share)
149,433 -
Issuance of common stock -
December 1994 ($1.49 per share) 1,986,565 -
Net loss - (1,270,789)
Balance at December 31, 1994 3,552,685 (1,320,789)
Issuance of common stock -
January 1995 ($1.49 per share) 1,852,472 -
Fair value of stock issued as
severance - February 1995
($3.15 per share)
59,809 -
Issuance of common stock -
December 1995 ($2.86 per share) 996,500 -
Net loss - (2,137,122)
Balance at December 31, 1995 6,461,466 (3,457,911)
Issuance of common Stock upon the Initial
Public Offering - April 1996
($5.50 per share)
9,485,836 -
Issuance of warrants upon the Initial
Public Offering - April 1996
($.10 per share)
230,000 -
Unrealized depreciation on
marketable equity securities - -
Net loss - (1,922,444)
Balance at June 30, 1996 16,177,302 (5,380,355)
Net loss - (323,278)
Unrealized depreciation on
marketable equity securities - -
Balance at September 30, 1996 16,177,302 $(5,703,633)
Unrealized
Depreciation
On Marketable
Equity
Securities Total
Inception - August 1993
($.02 per share) $ - $ 50,010
Net loss - (50,000)
Balance at December 31, 1993 10
Issuance of common stock -
January 1994 ($2.43 per share) - 1,400,000
Fair value of stock issued for
consulting services - October
1994 ($2.65 per share)
- 150,000
Issuance of common stock -
December 1994 ($1.49 per share) - 2,000,000
Net loss - (1,270,789)
Balance at December 31, 1994 - 2,279,221
Issuance of common stock -
January 1995 ($1.49 per share) - 1,865,000
Fair value of stock issued as
severance - February 1995
($3.15 per share)
- 60,000
Issuance of common stock -
December 1995 ($2.86 per share) - 1,000,000
Net loss - (2,137,122)
Balance at December 31, 1995 - 3,067,099
Issuance of common Stock upon the Initial
Public Offering - April 1996
($5.50 per share)
- 9,508,836
Issuance of warrants upon the Initial
Public Offering - April 1996
($.10 per share)
- 230,000
Unrealized depreciation on
marketable equity securites (30,090) (30,090)
Net loss - (1,922,444)
Balance at June 30, 1996 (30,090) 10,853,401
Net loss _ (323,278)
Unrealized depreciation on
marketable equity securities (25,715) (25,715)
Balance at September 30, 1996 $ (55,805) $10,504,408
See notes to consolidated financial statements.
Network Event Theater, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 1996
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and item 310 of regulation S-B.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period
ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended June 30, 1997.
For further information, refer to the financial statements and
footnotes thereto included in the Company's Form 10-KSB for
the transition period ended June 30, 1996 to be filed with the
Securities and Exchange Commission on or about November 20,
1996. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary.
2. Acquisition
On September 13, 1996, the Company through its newly created
wholly owned subsidiary American Passage Media, Inc.
("American Passage") acquired from American Passage Media
Corporation ("APMC") substantially all of APMC's assets
relating to its college and high school media, marketing, and
service businesses. The businesses acquired include APMC's
college newspaper placement operations, college campus
postering operations, high school focused gymboards operations
and various other advertiser and event sponsorship activities.
APMC is a Washington Corporation which has been involved in
the young adult marketing business since 1976.
As consideration for the assets, the Company: 1) paid APMC
approximately $3.5 million in cash, 2) issued to APMC a two-
year subordinated promissory note for $750,000, 3) issued to
APMC a contingent option to purchase up to 100,000 shares of
the Company's common stock pursuant to an option agreement, 4)
entered into a two-year consulting agreement with APMC for
$273,600 and 5) assumed certain of the contractual obligations
of APMC.
The acquisition has been accounted for using the purchase
method of accounting. Accordingly, the purchase price of the
acquisition has been allocated to the assets based on their
fair values at the date of acquisition. Intangible assets
representing the excess of cost over the assets acquired and
liabilities assumed of approximately $5.3 million is being
amortized over a period of fifteen years. The results of
operations of the property acquired is included in the
Company's consolidated results of operations from it's date of
acquisition.
The following unaudited supplemental pro forma information for
the three months ended September 30, 1996 and 1995 is
presented as if the Company had completed the acquisition as
of the beginning of each respective period.
Three Months Three Months
Ended September Ended September
30, 1996 30, 1995
Net revenue $1,427,335 $408,947
Net loss applicable
to common stock (384,052) (748,029)
Net loss per common share (.04) (.09)
Common shares outstanding 8,654,440 8,654,440
The pro forma information is not necessarily indicative
either of the results of operations that would have
occurred had this transaction been made at the beginning
of the period or of future results of operations.
3. Debt
On September 13, 1996, in conjunction with the
acquisition of certain assets of APMC (see Note 2),
American Passage entered into a five year $3.5 million
term loan with Signet Bank (the Term Loan). The Term
Loan is secured by all of American Passage's assets and
is guaranteed by the Company. The Term Loan is payable
in one installment due on September 30, 2001. Interest
is payable monthly at a variable rate of interest set
each ninety days based either on 300 basis points above
LIBOR for U.S. Dollar deposits of ninety day maturity or
100 basis points above the prime rate of Signet Bank.
The current rate of interest is 8.679% per annum.
Additionally, on September 13, 1996, American Passage
delivered a two-year subordinated promissory note to APMC
in the principal amount of $750,000 which provides for
payment in eight quarterly installments commencing 90
days after September 13, 1996 together with interest
thereon at the rate of 8% per year.
Item 2. Plan of Operation.
Network Event Theater, Inc. (the "Company") was organized
in December 1995 as the successor to the business of Universal
Access Network, L.P. and is in the development stage. The Company
is engaged principally in organizational activities relating to the
development of its college campus theater network (the "Network")
and in developing or acquiring marketing or marketing services
businesses that are complementary with the Network that focus on
the college and young adult market. The Company believes that the
college market is an important one that will grow over time because
a higher percentage of young adults are attending college after
completing high school, because the children of baby boomers are
reaching college age and beginning to attend college and because
more adults are returning to college for advanced degrees.
According to the 1995 Digest of Education Statistics prepared by
the United States Department of Education, there are approximately
3,600 colleges and universities in the United States with
enrollments of approximately 14 million students. This represents
a large, yet fragmented and geographically dispersed target market
representing significant personal spending power.
On September 13, 1996, American Passage Media, Inc.
("American Passage"), a newly organized wholly owned subsidiary of
the Company, acquired from American Passage Media Corporation
("APMC") substantially all of APMC's assets relating to its college
and high school media and marketing business. APMC has been
involved in the young adult marketing business since 1976. The
acquired businesses included APMC's college newspaper placement
operations, college campus postering operations, high school
focused GymBoardTM operations and various other advertiser and
event sponsorship related activities.
The Company believes that the acquisition of these
businesses will allow it to provide an integrated and comprehensive
program of marketing opportunities for a broad array of content
providers, sponsors and advertisers who are targeting the young
adult market. For example, a motion picture studio which is
previewing a major motion picture through the Network could launch
a simultaneous and comprehensive marketing program (including
college newspapers, on-campus postering and other marketing
vehicles and tools in the Company's portfolio) at campuses
nationwide and which extends far beyond the Company's installed
network of theaters. The Company believes that this significant
added reach will enable it to build more lucrative long term
relationships with these companies. The Company also anticipates
that American Passage's full-time marketing force could assist the
Network in selling such integrated programs to sponsors and
advertisers and that its extensive field force of independent
representatives can be used to place posters on college campuses
and otherwise augment the Network's own field force to publicize
events being shown on the Network's screens.
The Company has not generated any material operating
revenues from its Network. However, the Company has begun to
generate meaningful operating revenues on a consolidated basis as
a result of the acquisition of APMC's businesses by American
Passage. Because of expenses required to install equipment at
colleges for the Network and to obtain programming for these
theaters, the Company is still generating operating losses on a
consolidated basis. These losses may continue and may remain
significant unless the Network begins to generate significant
sponsorship, advertising and ticket sales revenues sufficient to
offset the Network's development costs. For the period August 27,
1993 (inception) to September 30, 1996, the Company incurred a
cumulative net loss of approximately $5.9 million.
The Company's proposed plan of operations for its Network
will be largely dependent upon the Company's ability to enter into
agreements with a significant number of colleges and universities,
establish and maintain satisfactory relationships with college
administrators and student organizations, successfully obtain and
install satellite transmission projection and audio equipment on a
timely and cost effective basis and successfully expand its Network
to attract programmers who can provide currently popular
programming suitable for college student audiences on commercially
reasonable terms. The Company currently has three full-time
employees engaged in marketing the Company's Network to colleges
and universities and is focusing its initial marketing efforts on
installing its equipment at 100 of the largest colleges and
universities. As of September 30, 1996, the Company had installed
Network equipment at 30 campus theaters. The Company will seek to
install equipment at approximately 25 additional campus theaters in
the next twelve months. The number of installations will be
dependent upon the number of school contracts the Company is able
to enter into.
Since January 1996, the Company has entered into a number
of licensing agreements with content providers such as Miramax, Don
King Productions, Mercury Records, Warner Brothers and ABC for
individual productions. In August 1996, the Company entered into
an agreement with HBO to show one program a month during the 1996-
1997 academic year on its Network. During the next twelve months,
the Company intends to develop further relationships with these and
other content providers to acquire rights to special events.
However, there can be no assurance that the Company will attract
and retain a sufficient number of schools and obtain the
programming necessary to generate meaningful revenues or achieve
profitable operations from its Network.
Over the next twelve months the Company will continue to
make significant capital investments as it continues to install
theaters on college campuses. The Company has no current plans to
increase staff significantly with regard to either the
Network or any of American Passage's operations other
than incremental increases in sales and administrative staff to
generate and accommodate increased business.
Liquidity and Capital Resources
The Company consummated an initial public offering of its
common stock and warrants on April 9, 1996 (the "Offering"),
pursuant to which it raised net proceeds of approximately $10.275
million, of which $0.5 million was used to repay previously
existing Company indebtedness. As of September 30, 1996, the
Company had cash (and cash equivalents) and investments in the
amount of approximately $1.1 million and $5.4 million,
respectively, on a consolidated basis. Since the Offering, the
Company has purchased approximately $1.0 million of Network theater
equipment and invested approximately $0.5 million in the
acquisition of American Passage. The balance of the proceeds have
otherwise been used to fund Company operations.
The Company's primary capital requirement with respect to
its Network has been to fund the purchase and installation of
theater equipment on college campuses. Based on current plans, the
Company anticipates that it has sufficient resources to enable it
to install theater equipment in 25 additional campus theaters (at
an estimated cost of $90,000 per theater) and to otherwise satisfy
its contemplated cash requirements for the next twelve months. In
order to reduce the Company's up-front capital requirements
associated with the expansion of its Network, the Company may seek
to lease rather than purchase a portion of its Network equipment.
There can be no assurance that the Company will be able to obtain
satisfactory equipment leasing arrangements.
In connection with its acquisition of certain assets of
APMC's young adult marketing business, (i) American Passage paid
APMC approximately $3.5 million in cash (representing a $4.0
million base price adjusted in accordance with the terms of the
purchase agreement), (ii) American Passage issued to APMC a two-
year subordinated promissory note for $750,000, (iii) the Company
issued to APMC a contingent option to purchase up to 100,000 shares
of the Company's common stock pursuant to an option agreement, (iv)
American Passage entered a two-year consulting agreement with APMC
for $273,600 and (v) American Passage assumed certain of APMC's
contractual liabilities. The cash portion of the purchase price
and related transaction costs were funded by a $500,000 equity
contribution from the Company to American Passage and a five year
$3,500,000 term loan to American Passage from Signet Bank. The
term loan is secured by all of America Passage's assets and is
guaranteed by the Company. American Passage is anticipated to be
able to fund its cash and debt service requirements out of its own
operations.
Any implementation of the Company's business plan beyond
the next twelve months may require financial resources
substantially greater than the proceeds of the Offering or
otherwise currently available to the Company. In the event that
the Company's plans and assumptions with respect to the Network
change or prove to be inaccurate or if the proceeds of the Offering
otherwise prove to be insufficient to implement its business plan
with respect to the Network (due to unanticipated expenses or
technical or other problems), or if its assumptions with respect to
American Passage being able to fund its operations and make
required debt service payments prove to be inaccurate, then the
Company could be required to seek additional financing. The
inability to obtain additional financing will have a material
adverse effect on the Company, including possibly requiring the
Company to significantly curtail or cease its operations. The
Company may also determine, depending upon the opportunities
available to it, to seek additional debt or equity financing to
fund the cost of additional expansion of its Network or to develop
or acquire college marketing businesses complementary to the
Network. To the extent that the Company finances its requirements
through the issuance of additional equity securities, any such
issuance would result in dilution to the interests of the Company's
stockholders. Additionally, to the extent that the Company incurs
indebtedness or issues debt securities in connection with financing
activities, the Company will be subject to all of the risks
associated with incurring substantial indebtedness including the
risk that interest rates may fluctuate and cash flow may be
insufficient to pay principal and interest on any such
indebtedness. The Company has no current arrangements with respect
to, or sources of, additional financing. There can be no assurance
that any additional financing will be available to the Company on
acceptable terms, if at all.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 1 - Employment Agreement with Steven Flanders
Exhibit 2 - Employment Agreement with Bruce Resnik
(b) Reports on Form 8-K.
On September 28, 1996, the registrant filed a report on
Form 8-K reporting its acquisition of certain assets of American
Passage Media Corporation and including audited financial
statements of the acquired businesses for the years ended June 30,
1996 and 1995. The registrant will file the required pro forma
financial information as an amendment to that report within 60 days
after the date on which the report was filed.
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
November 14, 1996
By:/s/ Harlan D. Peltz
Harlan D. Peltz
Chairman of the Board
and Chief Executive Officer
By:/s/ Bruce Resnik
Bruce Resnik
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
EMPLOYMENT AGREEMENT
September 26, 1996
The parties to this agreement are Bruce Resnik, residing
at 4 Maryland Road, Maplewood, New Jersey 07040 (the "Executive"),
and Network Event Theater, Inc., a Delaware corporation with its
principal office at 149 Fifth Avenue, New York, N.Y. 10010 (the
"Company").
The parties have agreed upon the employment of the
Executive by the Company on the terms set forth below.
It is agreed as follows:
1. Employment.
During the term of the Executive's employment under
this agreement, the Company shall employ the Executive, and the
Executive shall serve the Company, as the Company's Executive Vice
President - Chief Financial Officer. The Executive shall report to
the Company's chief executive officer and president and shall have
such duties, responsibilities and powers as either of them shall
from time to time determine. The Executive shall devote his full
business time to the performance of his duties under this
agreement.
2. Term of Employment.
The term of the Executive's employment under this
agreement shall commence on or before October 7, 1996 (the date his
employment commences being referred to as the "Commencement Date")
and, subject to earlier termination upon the Executive's death or
disability (as provided in section 5.1) or pursuant to section 6 or
7, shall continue thereafter for three years.
3. Compensation and Stock Options.
3.1 Basic Compensation. As basic compensation for his
services under this agreement, the Executive shall be entitled to
a salary (subject to applicable withholding of income taxes, social
security taxes, etc.) at the annual rate of $175,000, payable in
equal installments in accordance with the Company's customary
payroll practices for its executives.
3.2 Increases in Basic Compensation and Bonuses.
Following the end of each fiscal year during the term of this
agreement, the Company's board of directors may, in its sole
discretion, grant the Executive a bonus based on the Executive's
performance during that year or increase the Executive's basic
compensation for the following year.
3.3 Stock Options. Upon the Commencement Date, the
Company shall grant to the Executive, pursuant to the Company's
1996 Employee Stock Option Plan, the option (which shall not be an
incentive stock option) to purchase an aggregate of 50,000 shares
of the Company's Common Stock at an exercise price equal to the
fair market value of the Company's Common Stock on the Commencement
Date. The terms of the option shall be set forth in an agreement,
in the form of exhibit A to this agreement, which shall be executed
by the Company and the Executive on the Commencement Date.
4. Reimbursement of Expenses; Fringe Benefits.
4.1 Reimbursement of Expenses. The Company shall
reimburse the Executive for all reasonable expenses incurred by the
Executive in connection with the performance of his duties, upon
presentation of appropriate vouchers covering the expenses.
4.2 Fringe Benefits. The Executive and his immediate
family shall be entitled to participate in all medical, dental,
disability, life insurance, deferred compensation, savings and
401(k) plans, retirement plans, profit sharing plans, stock
purchase plans, and other fringe benefits and executive perquisites
generally provided to senior executives of the Company and their
immediate families. The Executive shall be entitled to three weeks
paid vacation during each twelve-month period during the term of
this agreement.
5. Termination of Employment Due to Disability or
Death.
5.1 Termination of Employment. If, as the result of any
physical or mental disability, the Executive shall fail or be
unable to perform his duties for a total of 120 days in any 12-
month period, the Company may, by notice to the Executive,
terminate his employment under this agreement as of the date of the
notice. The Executive's employment under this agreement shall be
terminated upon his death.
5.2 Payments on Death or Disability. If the
Executive's employment is terminated pursuant to section 5.1, the
Executive (or his estate) shall be entitled to receive, in full
discharge of all of the Company's obligations to the Executive, (a)
the Executive's full salary (at the rate in effect on the date of
termination) payable under section 3.1 for six months following the
date of termination (or, if a shorter period, for the remainder of
the three-year term), less the amount of any disability payments
received by him under any disability insurance coverage provided to
him by the Company, (b) any accrued and unpaid bonus previously
awarded to the Executive by the Company's board of directors, and
(c) the amount of all expense reimbursements due to the executive
under section 4.1 for periods prior to the date of termination.
6 Termination of Employment for Cause.
6.1 Definition. The Company may terminate the
Executive's employment under this agreement for cause. For
purposes of this agreement, the term "cause" shall mean: (a) the
Executive's conviction of a felony, (b) the Executive's conviction
of a crime involving any financial impropriety or which would
materially interfere with the Executive's ability to perform his
services required under this agreement or otherwise be materially
injurious to the Company, (c) a material breach by the Executive of
the duty of loyalty, good faith and fair dealing owed by the
Executive to the Company as an employee, or (d) the Executive's
willful failure to perform in a material respect his obligations
under this agreement.
6.2 Payments upon Termination for Cause. If the
Executive's employment under this agreement is terminated for cause
pursuant to section 6.1, the Company shall pay to the Executive, in
full discharge of all of the Company's obligations to the
Executive, the accrued amount of salary due to him through the date
of termination and the amount of all expense reimbursements due to
him under section 4.1 for periods prior to the date of termination.
7. Termination of Employment for Other Reasons.
At any time after the first anniversary of the
Commencement Date the Company may terminate the Executive's
employment under this agreement for any reason upon thirty days
notice to the Executive. If the Executive's employment under this
agreement is terminated by the Company pursuant to this provision
(i.e., other than for cause or by reason of the Executive's death
or disability), the Company shall pay to the Executive, in full
discharge of all of the Company's obligations to the Executive, (a)
the Executive's full salary under section 3.1 (at the rate in
effect on the date of notice of termination) until the effective
date of termination and for a period of two months thereafter, (b)
any accrued and unpaid bonus previously awarded to the Executive by
the Company's board of directors, and (c) the amount of all expense
reimbursements due to the executive under section 4.1 for periods
prior to the date of termination.
8. Confidential Information.
The Executive shall not, directly or indirectly,
either during his employment by the Company or at any time
thereafter, disclose to anyone or use (except as authorized in the
regular course of the Company's business) any information acquired
by him during his employment with respect to any of the Company's
trade secrets or other confidential information. For this purpose,
information generally known to the public shall not be considered
a trade secret or confidential information.
9. Non-Solicitation of Employees; Non-Competition.
9.1 Non-Solicitation. The Executive shall not, for a
period of three years after termination of his employment
(regardless of the reason for termination), directly or indirectly
employ or retain, solicit the employment or retention of, or be
associated with any entity that employs or retains or solicits the
employment or retention of, any person who was an employee of the
Company at any time during the twelve months preceding the
termination of the Executive's employment.
9.2 Non-Competition. For a period of one year after the
termination of the Executive's employment under this agreement, the
Executive shall not directly or indirectly engage or be interested
in any business or entity that engages, anywhere in the world, in
any business competitive with any business in which the Company is
engaged at the time of termination of the Executive's employment or
with any business activity that the Company then has under active
consideration. For the purpose of this section 9.2, the Executive
shall be deemed to be directly or indirectly interested in a
business or entity if he is engaged or interested in that business
or entity as a stockholder, director, officer, employee, salesman,
sales representative, agent, broker, partner, individual
proprietor, lender, consultant or otherwise, but not if his
interest is limited solely to the ownership of 5% or less of any
class of the equity or debt securities of a corporation whose
shares are publicly traded.
9.3 Injunctive Relief. Since a breach by the Executive
of the provisions of section 8 or of section 9.1 or 9.2 would
injure the Company in a way that could not be adequately
compensated for by damages, in addition to any other remedies
available to the Company it may obtain an injunction restraining
any such breach, without the necessity of showing actual damage and
without any bond or other security being required.
10. Merger or Sale of Assets.
If the Company shall merge or consolidate with
another corporation or shall transfer all or substantially all of
its assets this agreement shall be assigned to the successor in the
merger or consolidation or the transferee of the assets, the
Company shall cause the successor or transferee to assume all of
the Company's obligations under this agreement, and the Executive
shall thereafter be employed by the successor or transferee in
accordance with the terms of this agreement.
11. Miscellaneous.
11.1 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.
11.2 Notices. All notices and other communications under
this agreement shall be in writing and shall be deemed given when
delivered personally or mailed by registered mail, return receipt
requested, to the parties at their respective addresses set forth
above (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision). Any
notice to the Company shall be directed to the attention of its
chief executive officer.
11.3 Separability. The invalidity or unenforceability of
any provision of this agreement shall not affect the validity or
enforceability of any other provision of this agreement, which
shall remain in full force and effect.
11.4 Waiver. Either party may waive compliance by the
other party with any provision of this agreement. The failure of
a party to insist on strict adherence to any term of this agreement
on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this agreement. No waiver of any
provision shall be construed as a waiver of any other provision.
Any waiver must be in writing.
11.5 Assignment. Neither party may assign any of its
rights or delegate any of its duties under this agreement (other
than as contemplated by section 11 of this agreement) without the
prior consent of the other and any assignment or delegation in
violation of this prohibition shall be void.
11.6 Governing Law. This agreement shall be governed by
and in accordance with the substantive law of the state of New York
applicable to agreements made and to be performed in New York.
11.7 Entire Agreement. This agreement contains, and is
intended as, a complete statement of all the terms of the
arrangements between the parties with respect to the matters
provided for, supersedes any previous agreements and understandings
between the parties with respect to those matters, and cannot be
changed or terminated orally.
NETWORK EVENT THEATER, INC.
By: /s/ Harlan D. Peltz
/s/ Bruce Resnik
Bruce Resnik
EMPLOYMENT AGREEMENT
August 30, 1996
The parties to this agreement are Steven Flanders,
residing at 350 E. 79th St. #3A, New York, New York 10021 (the
"Executive"), and Network Event Theater, Inc., a Delaware
corporation with its principal office at 149 Fifth Avenue, New
York, New York 10010 (the "Company").
The parties have agreed upon the employment of the
Executive by the Company on the terms set forth below.
It is agreed as follows:
1. Employment.
During the term of the Executive's employment under
this agreement, the Company shall employ the Executive, and the
Executive shall serve the Company, as the Company's Senior Vice
President-Strategic Alliances. The Executive shall have such
duties, responsibilities and powers as the Company's chief
executive officer or president shall from time to time determine
and shall be a member of the Company's senior management team. The
Executive shall devote his full business time to the performance of
his duties under this agreement, but he may continue to manage the
career of Laurie Sargent so long as that activity does not
interfere with the performance of his duties on behalf of the
Company.
2. Term of Employment.
The term of the Executive's employment under this
agreement shall commence on or before September 17, 1996 (the date
his employment commences being referred to as the "Commencement
Date") and, subject to earlier termination upon the Executive's
death or disability (as provided in section 5.1) or pursuant to
section 6 or 7, shall continue thereafter for three years.
3. Compensation and Stock Options.
3.1 Basic Compensation. As basic compensation for his
services under this agreement, the Executive shall be entitled to
a salary (subject to applicable withholding of income taxes, social
security taxes, etc.) at the annual rate of $120,000, payable in
equal installments in accordance with the Company's customary
payroll practices for its executives.
3.2 Increases in Basic Compensation and Bonuses.
Following the end of each fiscal year during the term of this
agreement, the Company's board of directors may, in its sole
discretion, grant the Executive a bonus based on the Executive's
performance during that year or increase the Executive's basic
compensation for the following year. If adopted by the Company's
board of directors, the Executive shall be entitled to participate
in a management incentive plan for the Company's senior executives;
the Executive recognizes that the Company is not obligated to adopt
any such plan.
3.3 Stock Options. Upon the Commencement Date, the
Company shall grant to the Executive, pursuant to the Company's
1996 Employee Stock Option Plan, the option (which shall not be an
incentive stock option) to purchase an aggregate of 40,000 shares
of the Company's Common Stock at an exercise price equal to the
fair market value of the Company's Common Stock on the Commencement
Date. The terms of the option shall be set forth in an agreement,
in the form of exhibit A to this agreement, which shall be executed
by the Company and the Executive on the Commencement Date.
4. Reimbursement of Expenses; Fringe Benefits.
4.1 Reimbursement of Expenses. The Company shall
reimburse the Executive for all reasonable expenses incurred by the
Executive in connection with the performance of his duties, upon
presentation of appropriate vouchers covering the expenses.
4.2 Fringe Benefits; Vacation. The Executive and his
immediate family shall be entitled to participate in all medical,
dental, disability, life insurance, deferred compensation, savings
and 401(k) plans, retirement plans, profit sharing plans, stock
purchase plans, and other fringe benefits and executive perquisites
generally provided to senior executives of the Company and their
immediate families. The Executive shall be entitled to three weeks
paid vacation during each twelve-month period during the term of
this agreement.
5. Termination of Employment Due to Disability or
Death.
5.1 Termination of Employment. If, as the result of any
physical or mental disability, the Executive shall fail or be
unable to perform his duties for a total of 120 days in any 12-
month period, the Company may, by notice to the Executive,
terminate his employment under this agreement as of the date of the
notice. The Executive's employment under this agreement shall be
terminated upon his death.
5.2 Payments on Death or Disability. If the Executive's
employment is terminated pursuant to section 5.1, the Executive (or
his estate) shall be entitled to receive, in full discharge of all
of the Company's obligations to the Executive, (a) the Executive's
full salary (at the rate in effect on the date of termination)
payable under section 3.1 for six months following the date of
termination (or, if a shorter period, for the remainder of the
three-year term), less the amount of any disability payments
received by him under any disability insurance coverage provided to
him by the Company, (b) any accrued and unpaid bonus previously
awarded to the Executive by the Company's board of directors, and
(c) the amount of all expense reimbursements due to the Executive
under section 4.1 for periods prior to the date of termination.
6. Termination of Employment for Cause.
6.1 Definition. The Company's board of directors may
terminate the Executive's employment under this agreement for
cause. For purposes of this agreement, the term "cause" shall
mean: (a) the Executive's conviction of a felony, (b) the
Executive's conviction of a crime involving any financial
impropriety or which would materially interfere with the
Executive's ability to perform his services required under this
agreement or otherwise be materially injurious to the Company, (c)
a material breach by the Executive of the duty of loyalty, good
faith and fair dealing owed by the Executive to the Company as an
employee, or (d) the Executive's willful failure to perform in a
material respect his obligations under this agreement. Any
termination of the Executive's employment under section 6.1(c) or
(d) shall be effective only if the Company delivers a notice of
default to the Executive and, if the event or condition giving rise
to the right of termination is subject to cure, the Executive shall
have failed to cure that event or condition within thirty days of
the giving of such notice.
6.2 Payments upon Termination for Cause. If the
Executive's employment under this agreement is terminated for cause
pursuant to section 6.1, the Company shall pay to the Executive, in
full discharge of all of the Company's obligations to the
Executive, (a) the accrued amount of salary due to him through the
date of termination, (b) any accrued and unpaid bonus previously
awarded to the Executive by the Company's board of directors, and
(c) the amount of all expense reimbursements due to the Executive
under section 4.1 for periods prior to the date of termination.
7. Termination of Employment for Other Reasons.
At any time after the expiration of nine months from
the Commencement Date the Company may terminate the Executive's
employment under this agreement for any reason upon ninety days
notice to the Executive. If the Executive's employment under this
agreement is terminated by the Company pursuant to this provision
(i.e., other than for cause or by reason of the Executive's death
or disability), the Company shall pay to the Executive, in full
discharge of all of the Company's obligations to the Executive, (a)
the Executive's full salary under section 3.1 (at the rate in
effect on the date of notice of termination) until the effective
date of termination or, if the Company's board determines that the
termination under this provision was for a reason other than
dissatisfaction with the Executive's performance (such as
discontinuance by the Company of the activity in which the
Executive was principally engaged), until the effective date of
termination and for a period of three months thereafter, (b) any
accrued and unpaid bonus previously awarded to the Executive by the
Company's board of directors, and (c) the amount of all expense
reimbursements due to the executive under section 4.1 for periods
prior to the date of termination.
8. Confidential Information.
The Executive shall not, directly or indirectly,
either during his employment by the Company or at any time
thereafter, disclose to anyone or use (except as authorized in the
regular course of the Company's business) any information acquired
by him during his employment with respect to any of the Company's
trade secrets or other confidential information. For this purpose,
information generally known to the public shall not be considered
a trade secret or confidential information.
9. Non-Solicitation of Employees; Non-Competition.
9.1 Non-Solicitation. The Executive shall not, for a
period of 18 months after termination of his employment (regardless
of the reason for termination), directly or indirectly employ or
retain, solicit the employment or retention of, or be associated
with any entity that employs or retains or solicits the employment
or retention of, any person who was an employee of the Company at
any time during the six months preceding the termination of the
Executive's employment.
9.2 Non-Competition. For a period of one year after the
termination of the Executive's employment under this agreement, the
Executive shall not directly or indirectly engage or be interested
in any business or entity that engages, anywhere in the United
States or in any other country in which the Company conducted any
business during the twelve months immediately preceding
termination, in any business activity that derives revenue from
sponsorship or advertising, ticket sales, or retail relationships
in connection with (a) events, programs or other activities that
principally target the high school or college-age markets, other
than those with respect to which the revenue is principally derived
from live entertainment and does not involve significant revenue
from transmission rights or related sponsorship and advertising,
(b) any other educational, informational or entertainment programs
projected onto large screens in high school or college campus
theaters for students or residents of adjacent communities, or (c)
seminars or other events or programs, wherever conducted, that
principally focus on personal or professional self-improvement or
that provide professional education. For the purpose of this
section 9.2, the Executive shall be deemed to be directly or
indirectly interested in a business or entity if he is engaged or
interested in that business or entity as a stockholder, director,
officer, employee, salesman, sales representative, agent, broker,
partner, individual proprietor, lender, consultant or otherwise,
but not if his interest is limited solely to the ownership of 5% or
less of any class of the equity or debt securities of a corporation
whose shares are publicly traded.
9.3 Injunctive Relief. Since a breach by the Executive
of the provisions of section 8 or of section 9.1 or 9.2 would
injure the Company in a way that could not be adequately
compensated for by damages, in addition to any other remedies
available to the Company it may obtain an injunction restraining
any such breach, without the necessity of showing actual damage and
without any bond or other security being required.
10. Merger or Sale of Assets.
If the Company shall merge or consolidate with
another corporation or shall transfer all or substantially all of
its assets this agreement shall be assigned to the successor in the
merger or consolidation or the transferee of the assets, the
Company shall cause the successor or transferee to assume all of
the Company's obligations under this agreement, and the Executive
shall thereafter be employed by the successor or transferee in
accordance with the terms of this agreement.
11. Miscellaneous.
11.1 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.
11.2 Notices. All notices and other communications under
this agreement shall be in writing and shall be deemed given when
delivered personally or mailed by registered mail, return receipt
requested, to the parties at their respective addresses set forth
above (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision). Any
notice to the Company shall be directed to the attention of its
chief executive officer. A copy of any notice to the Executive
shall be given to Michael N. Sheetz, Esq., Gadsby & Hannah LLP, 125
Summer Street, Boston, Massachusetts 02110.
11.3 Separability. The invalidity or unenforceability of
any provision of this agreement shall not affect the validity or
enforceability of any other provision of this agreement, which
shall remain in full force and effect.
11.4 Waiver. Either party may waive compliance by the
other party with any provision of this agreement. The failure of
a party to insist on strict adherence to any term of this agreement
on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this agreement. No waiver of any
provision shall be construed as a waiver of any other provision.
Any waiver must be in writing.
11.5 Assignment. Neither party may assign any of its
rights or delegate any of its duties under this agreement (other
than as contemplated by section 11 of this agreement) without the
prior consent of the other and any assignment or delegation in
violation of this prohibition shall be void.
11.6 Governing Law. This agreement shall be governed by
and in accordance with the substantive law of the state of New York
applicable to agreements made and to be performed in New York.
11.7 Entire Agreement. This agreement contains, and is
intended as, a complete statement of all the terms of the
arrangements between the parties with respect to the matters
provided for, supersedes any previous agreements and understandings
between the parties with respect to those matters, and cannot be
changed or terminated orally.
NETWORK EVENT THEATER, INC.
By: /s/ Don Leeds
/s/ Steven Flanders
Steven Flanders