<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EDUCATIONAL VIDEO CONFERENCING, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8299 06-1488212AA9
(STATE OR JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
35 EAST GRASSY SPRAIN ROAD, SUITE 504, YONKERS, NY 10710
(914) 395-3501
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)
------------------------
DR. AROL I. BUNTZMAN
35 EAST GRASSY SPRAIN ROAD, YONKERS, NY 10710
(914) 395-3501
(ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
JOSEPH D. ALPERIN, ESQ. HENRY O. SMITH III, ESQ.
FISCHBEINoBADILLOoWAGNERoHARDING PROSKAUER ROSE LLP
909 THIRD AVENUE, NEW YORK, NY 10022 1585 BROADWAY, NEW YORK, NY 10036-8299
(212) 826-2000 (212) 969-3000
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /x/
If this form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.0001 par value....................................................... $15,000,000 $4,425.00
Representative's Warrants............................................................. 100 0.03
Common Stock, $0.0001 par value, underlying Representative's Warrants(2).............. 1,800,000 531.00
Total................................................................................. $16,800,100 $4,956.03
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 416, this Registration Statement also covers an
indeterminable number of additional shares of Common Stock issuable as a
result of any future anti-dilution adjustments in accordance with the terms
of the Representative's Warrants.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission becomes effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1998
PROSPECTUS
SHARES
EDUCATIONAL VIDEO CONFERENCING, INC.
COMMON STOCK
------------------------
Educational Video Conferencing, Inc. is offering shares of Common
Stock. This is our first public offering and no public market currently exists
for our shares. The public offering price will be between $ and
$ per share. The Company has applied to list the Common Stock on The
American Stock Exchange under the symbol " ."
------------------------
INVESTING IN THE COMMON STOCK INVOLVES SUBSTANTIAL RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
THE PUBLIC AND COMMISSIONS THE COMPANY
---------- ---------------------- ------------
<S> <C> <C> <C>
Per Share..................................................... $ $ $
Total......................................................... $ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We and certain of our principal stockholders have granted to the
Underwriters the right to purchase an aggregate of up to additional
shares of Common Stock to cover over-allotments. Up to shares may be
purchased from these principal stockholders. We will not receive any of the
proceeds from the sale of shares, if any, purchased by the Underwriters from
these principal stockholders. The Underwriters expect to deliver the shares of
Common Stock to purchasers on or about , 1998.
The Underwriters are offering the shares subject to various conditions and
may reject all or part of any order.
PRIME CHARTER LTD.
, 1998.
<PAGE>
PROSPECTUS SUMMARY
ABOUT OUR COMPANY
We deliver educational courses and programs to employees of major
corporations via interactive video conferencing systems. Interactive video
conferencing systems allow the instructor to see, hear and interact with
students as the students see, hear and interact with the instructor and other
students at multiple locations. We currently deliver these courses to video
conferencing locations of our corporate customers and, if requested, we can
deliver courses to the individual student's desktop computer at work or at home.
We provide corporate customers with access to education providers and the
marketing and administrative services necessary to recruit, enroll and deliver
courses and programs to a corporation's employees. We serve as a marketing and
technology bridge between accredited colleges, universities and training
organizations that want to increase enrollment and tuition revenue from student
populations they otherwise could not serve, and corporations that want to raise
the education and skill levels of their employees.
We currently offer courses to employees of Citibank, N.A. ("Citibank"),
American International Group, Inc. ("AIG"), Merrill Lynch, & Co., Inc. ("Merrill
Lynch"), Travelers Indemnity Company ("Travelers"), and Zurich Insurance Company
(U.S. Branch) ("Zurich"). In February 1998, we started offering courses to
Citibank employees in New York City and to AIG employees in Atlanta, Boston,
Chicago, Cleveland, Dallas, Livingston and Parsippany, New Jersey, Wilmington,
Delaware and New York City. In September 1998, we began delivering courses to
Merrill Lynch employees in Chicago and Jersey City and, in November 1998, we
expect to begin delivering courses to Travelers and Zurich employees at a number
of sites. In January 1999, we expect to begin offering courses in Europe to
employees of some of our corporate customers and to Reliance National
("Reliance") employees in the United States.
We currently deliver courses given by Adelphi University, The College of
Insurance and Mercy College. In December 1998, we expect to begin delivering
executive development courses from the University of Notre Dame. Our education
provider alliances enable us to offer accredited undergraduate and graduate
courses and degree programs, corporate training and executive development
programs, software applications programs and professional licensing programs.
Areas of study include insurance and risk management, banking, finance,
management, marketing, economics, accounting, computer science, leadership,
entrepreneurship, education and general studies. In addition, we offer national
exam preparation courses for the insurance industry.
We currently have co-marketing agreements with AT&T Corp. ("AT&T") and VSI
Enterprises, Inc. ("VSI") to co-market our courses and programs with AT&T's
telecommunications services and VSI's interactive video conferencing systems.
ABOUT THE MARKET
Working adults represent the fastest growing segment of the higher
education market. We believe that traditional on-campus programs do not
adequately address the needs and preferences of many working adults. Burdened by
the competing time demands of work and family, many working adults want to
attend courses that are convenient to their homes or places of work. The
emphasis on locational convenience, together with the availability of tuition
reimbursement incentives offered by employers, have contributed to an increase
in demand for higher education and training at off-campus locations. We believe
that our interactive video conferencing systems enable students to experience
more closely an actual classroom environment than any other distance learning
system currently available.
According to the U.S. Department of Education, education is the second
largest sector of the U.S. economy, accounting for approximately 8% of gross
domestic product in 1997, or over $600 billion. Post-secondary education
accounts for approximately one-third of the total sector. A number of national
economic, demographic and social trends are contributing to the growing demand
for career-oriented education.
2
<PAGE>
o Recognition of need for continuing education. We believe that employers
recognize the need for continuous enhancement of employee education and
skill levels and that employees recognize that higher education and
training are essential to maintaining and advancing their employment
position and, consequently, their standard of living. It is estimated
that corporations with over 100 employees budgeted approximately $58.6
billion for training in 1997, compared to approximately $45 billion in
1992.
o Growing demand for skilled labor. We believe that the continuing shift
from unskilled to skilled jobs in the U.S. results from, among other
things, the transformation of the U.S. economy from an industrial to a
knowledge-based economy and increased competition for such jobs. The U.S.
Department of Education predicts that by the year 2000, 85% of the jobs
in the U.S. will require education or training beyond high school. The
percentage of jobs requiring skilled labor is projected to grow
approximately 65% by the year 2000.
o Positive trends in higher education enrollment. The U.S. Department of
Education projects a 17% increase in annual high school graduates by the
year 2005 from 2.5 million in 1995 to 3 million in 2005. In 1996, 65% of
new high school graduates pursued post-secondary education, compared with
53% in 1986. In 1996-1997, approximately 45% of the students enrolled in
higher education were 25 years and older compared to approximately 28% in
1970 and there were nearly 7 million students enrolled part-time in U.S.
colleges and universities. Over 80% of these students were over 25.
o Economic value of post secondary education. We believe that
post-secondary education leads to significant and measurable improvements
in a person's financial prospects and that the public is increasingly
aware of the growing differential in income for persons with some type of
post secondary education versus those without.
o Colleges' need for additional sources of revenue. Colleges and
universities are seeking additional sources of revenue and recognize that
increasing adult student enrollment is an important element in their
economic growth.
OUR GOAL
Our goal is to become the leading provider of college, university and
training courses and programs that are offered at geographically dispersed sites
throughout the world using interactive video conferencing systems ("IVC
Systems"). We intend to achieve this goal by:
o targeting major corporations and other organizations with more than 5,000
employees and that encourage their employees to pursue higher education
and job related training and that also provide for the reimbursement of
at least 80% of tuition costs;
o making alliances with colleges, universities and training organizations
with higher education courses and programs fitting the needs, interests
and academic qualifications of a broad range of the employees of our
corporate customers;
o making alliances with video conferencing equipment vendors and
telecommunications providers in order to lower our equipment and
telecommunications costs and to co-market each other's services; and
o staging the rollout of courses and programs to the employees of our
corporate customers, thereby enabling us to use our resources more
effectively so that we can market to, and contract with, a larger number
of corporations.
We were organized in March 1997. Our principal executive offices are
located at 35 East Grassy Sprain Road, Suite 504, Yonkers, New York 10710, and
our telephone number is (914) 395-3501. We maintain a World Wide Web site at
www.evcinc.com. This reference to our World Wide Web site address does not
constitute incorporation by reference of the information contained therein. In
this Prospectus, the "Company," "EVC," "we," "us" and "our" refer to Educational
Video Conferencing, Inc.
3
<PAGE>
Unless otherwise indicated, all dollar amounts in this Prospectus have been
rounded to the nearest thousand, and the information in this Prospectus:
(i) gives effect to our reincorporation in Delaware in April 1998; (ii) assumes
no exercise of the Underwriters' over-allotment option, the Representative's
Warrants and outstanding options and warrants; and (iii) reflects a
20,052-for-one stock split of the Common Stock in October 1997.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered to Public............................... shares
Over-allotment Option.................................. Up to shares ( shares to be sold
by certain selling stockholders)
Total Shares Outstanding Prior to Offering............. 6,020,314 shares
Total Shares Outstanding after Offering................ shares
Total Shares Outstanding after Offering and exercise of shares (including over-allotment shares)
all Options and Warrants.............................
Price per Share to Public.............................. $ per share
Total Proceeds Raised by Offering...................... $
Underwriting Discounts and Commissions................. $ or 7% of the total proceeds plus a 3%
non-accountable expense allowance
Expenses of the Offering............................... $ (estimated)
Net Proceeds to Company................................ $ (estimated)
Use of Proceeds........................................ Purchase of equipment, marketing, hiring additional
personnel and working capital.
American Stock Exchange Symbol.........................
Dividend Policy........................................ No dividend expected
</TABLE>
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The financial data set forth below under the captions "Statement of Operations
Data" and "Balance Sheet Data" as of December 31, 1997 and for the period from
March 4, 1997 (date of inception) through December 31, 1997 and as of
September 30, 1998 and for the nine months ended September 30, 1998 are derived
from the audited financial statements of the Company, included elsewhere in this
Prospectus, by Goldstein Golub Kessler LLP, independent public accountants. The
financial data set forth below from March 4, 1997 (date of inception) through
September 30, 1997 have been derived from the unaudited financial statements of
the Company. In the opinion of the Company, its unaudited financial statements
have been prepared on the same basis as the audited financial statements and
include all adjustments (consisting of normal recurring entries), necessary for
a fair presentation of the financial position and results of operations as of
such date. The data set forth below should be read in conjunction with the
Financial Statements and notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
MARCH 4, 1997
(DATE OF MARCH 4, 1997 NINE-MONTHS
INCEPTION) TO (DATE OF ENDED
DECEMBER 31, INCEPTION) TO SEPTEMBER 30,
1997 SEPTEMBER 30, 1997 1998
------------- --------------------- -----------------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.......................................... $ -- $ -- $ 174
Interest income...................................... -- -- 40
----------- ----------- -----------
Total revenue........................................ -- -- 214
Operating expenses:
Cost of sales...................................... -- -- 148
Salaries and benefits.............................. 334 104 1,027
Marketing, brochure and student registration
costs............................................ 158 -- 315
Professional fees.................................. 61 7 53
Interest and financing costs....................... 59 8 108
Depreciation....................................... -- -- 159
Other.............................................. 110 46 264
----------- ----------- -----------
Operating expenses................................... 722 165 2,074
----------- ----------- -----------
Net loss............................................. $ (722) $ (165) $ (1,860)
----------- ----------- -----------
----------- ----------- -----------
Basic loss per share of common stock................. $ (0.19) $ (0.04) $ (0.37)
----------- ----------- -----------
----------- ----------- -----------
Weighted-average number of shares of common stock
outstanding(1)..................................... 3,845,901 3,690,000 5,043,169
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------
DECEMBER 31, 1997 ACTUAL AS ADJUSTED(2)
----------------- ------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets........................................................ $ 829 $2,424
Current liabilities................................................... 745 308
------- ------ ------
Working capital....................................................... 84 2,116
Total assets.......................................................... 2,115 3,792
------- ------ ------
Long-term liabilities................................................. 235 --
Total liabilities..................................................... 980 308
------- ------ ------
Stockholders' equity.................................................. $ 1,135 $3,484
------- ------ ------
</TABLE>
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(1) Based on the number of shares outstanding as of September 30, 1998. Excludes
680,000 shares of Common Stock reserved for issuance under the 1998
Incentive Plan and an aggregate of 1,100,500 shares of Common Stock issuable
upon the exercise of additional options and warrants. See "Capitalization,"
"Management-1998 Incentive Plan" and Note 7 of Notes to Financial
Statements.
(2) As adjusted to reflect the sale of Common Stock offered hereby at an assumed
initial public offering price of $ per share and the receipt of the
estimated proceeds therefrom. See "Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. Please also note that there are other risks and
uncertainties not presently known to us or that we currently deem immaterial. If
any of the following or such other risks actually occur, our business, financial
condition or results of operations could be materially and adversely affected.
In such case, the trading price of our Common Stock could decline and you may
lose all or part of your investment.
RECENTLY FORMED COMPANY; LOSSES
Our company was formed in March 1997 and, accordingly, has a limited
operating history. From our inception through December 31, 1997, we had no
revenues and incurred losses of $722,000. Our tuition revenue for the nine
months ended September 30, 1998 was $174,000 and our accumulated losses at
September 30, 1998 were $2,582,000. Our company may experience many of the
difficulties encountered by a new business, some of which are beyond our
control. There can be no assurance that our company will ever generate
sufficient revenues to achieve or sustain profitability and positive cash flow.
SIGNIFICANT CASH REQUIREMENTS
We require substantial capital to fund the continued development, operation
and expansion of our business. From our inception through September 30, 1998, we
have received net proceeds from offerings of our debt and equity securities of
$6,065,000. As of September 30, 1998, we had working capital of $2,116,000. We
anticipate, based on current plans and assumptions relating to our operations,
that the proceeds of this offering, together with projected cash flow from
operations, will be sufficient to satisfy our contemplated cash requirements for
at least the next 12 months. If, however, we are underestimating our cash
requirements, we will require additional debt or equity financing. Our ability
to obtain the necessary financing, and its cost to us, are uncertain.
Accordingly, we may be forced to curtail our planned business expansion and may
also be unable to fund our ongoing operations. To the extent we raise additional
capital by issuing securities, dilution may result to the investors in this
offering.
NEGATIVE CASH FLOW
Marketing and other costs we incur are expensed when incurred or over the
duration of the course to which they relate. Our revenues from the courses we
offer are recognized ratably over the term of each course, but we do not receive
payment of revenue until the tuition for a course is collected by the education
provider.
Our education providers generally permit tuition payments to be deferred
until after a course is completed, and they control the billing and collection
process. The ability of the education provider to collect tuition, and the
timing of such collection, is subject to the billing practices of the education
provider and the tuition reimbursement and payment policies and practices of the
student's employer. In general, our corporate customers reimburse their
employees or pay directly at least 80% of their tuition costs. If a student does
not successfully complete a course, most employers will not reimburse their
employees or pay for their tuition costs. To the extent tuition is not paid by
the employer, the ability to collect tuition is subject to the risk of
non-collection from the student, who is ultimately responsible for payment.
In most cases, we have been receiving our share of tuition payments more
than 90 days after completion of courses and, in some cases, more than nine
months after completion of courses. We believe that the tuition billing and
collection process has been protracted as a result of delays by education
providers in implementing billing procedures and delays by corporations in
processing requests for payment from their employees. Since we recently
commenced business and our receivables collection experience is limited, we
cannot accurately determine the typical collection cycle for our receivables or
whether other events will substantially delay or otherwise negatively affect our
receipt of payment.
As a consequence of this protracted collection cycle, we will continue to
experience negative cash flow for the foreseeable future. Our negative cash flow
may materially adversely impact our ability to implement our business strategy
and our operations and financial results.
6
<PAGE>
DEPENDENCE ON CORPORATE CUSTOMERS
Our success depends upon our ability to establish and maintain
relationships with employers that will provide us with sufficient numbers of
students for our course offerings. We have found that it is often difficult to
enter into agreements with corporations because of the number of corporate
personnel involved in the decision-making process. Corporations that do not have
policies that actively support and encourage the higher and continuing education
and training of their employees will not fit our profile of potential customers.
We target corporations that have a policy of paying or reimbursing at least
80% of the tuition costs of our course offerings, usually upon successful
completion of a course. However, we have no control over changes in corporate
tuition reimbursement policies or shifts in attitudes toward higher education
opportunities for employees. During economic downturns in a particular industry
sector or the economy in general, tuition reimbursement could be materially
curtailed and our student enrollment would materially decline. Our student
recruiting efforts also could be adversely affected by, among other factors,
(1) limitations imposed by the corporation on the number and kind of courses
students can take, (2) the corporation's acceptance and endorsement of our
programs and (3) competition from courses given by the corporation or others.
None of our current agreements with corporate customers gives us an
exclusive right to deliver courses to their employees. There are no restrictions
in our agreements with corporate customers, and none are contemplated, that
prohibit them from competing with us or from using products or services that
compete with us.
DEPENDENCE ON EDUCATION PROVIDERS
Our success depends upon our ability to establish and maintain
relationships with colleges, universities and training organizations that can
provide the courses and degree and other programs desired by corporations and
their employees. We have found that it is often difficult to enter into
agreements with colleges and universities because of the number of
administrative personnel involved in the decision-making process. We have
entered into multi-year agreements with, and are currently delivering courses
given by, Adelphi University, The College of Insurance and Mercy College. There
can be no assurance that such education providers will offer the courses or
programs desired by our corporate customers and their employees.
Our agreements with education providers do not restrict the education
provider from competing with us except, in most cases, as long as it does not
offer courses via competing IVC Systems to our corporate customers and their
employees during the term of the agreement and for one year after its
termination.
CONCEPTUAL AND OPERATIONAL RISKS
Education via video conferencing is a relatively new alternative to
traditional classroom instruction. Many colleges, universities and students may
be unwilling to accept our delivery concept as an appropriate way to provide
quality education. Our experience has been that some instructors are unwilling
to teach by means of IVC Systems or to adopt our method of teaching. We have
also encountered resistance to our education delivery method from some students.
The extent to which education using video conferencing is accepted will
materially affect our ability to achieve our objectives.
SEASONALITY
We expect our revenues for our third quarter to be substantially lower than
other quarters because our student enrollment is much lower during June, July
and August. Since a substantial portion of our selling, general and
administrative expenses are incurred evenly throughout the year, we expect that
our third quarter results will be adversely impacted by the seasonality of our
revenues.
DEPENDENCE ON MANAGEMENT AND OTHER QUALIFIED PERSONNEL
Our operations depend on the efforts of our executive officers and other
senior members of management, including Dr. Arol I. Buntzman, our Chairman and
Chief Executive Officer, and Dr. John J. McGrath, our President.
7
<PAGE>
Our ability to operate and grow also requires the services of skilled
administrators to manage student recruitment and enrollment, develop strategies
to increase student retention, train instructors and deal generally with college
and corporate administrators. We also require technicians to effectively operate
our IVC Systems. The competition for skilled administrators and technicians in
the distance learning industry is intense. If we cannot attract new employees or
retain and motivate our existing employees, our business could be adversely
affected.
COMPETITION
We face substantial competition from other providers of higher education.
Two and four year colleges offering traditional classroom instruction are our
most significant competition. In addition, alternative methods of delivering
courses are proliferating rapidly. Since there are no significant barriers to
entry into our market, we face increasing competition from other distance
learning companies that offer a variety of other products and delivery services,
including one-way and limited two-way satellite video conferencing, self-paced
correspondence courses, videos, audio cassettes, CD-roms and Internet-based
instruction. If our IVC Systems educational delivery method is successful, we
expect a significant increase in direct competition from colleges and
universities and from large corporations in businesses such as publishing and
telecommunications. Most of our competitors and potential competitors are much
larger and have greater development, marketing and financial resources, making
it more difficult for us to establish name recognition in the marketplace and
compete effectively.
CHANGES IN TECHNOLOGY
The telecommunications and video conferencing industries are characterized
by rapid technological change. Our success will depend on our ability to adapt
to technological advances. We anticipate that if IVC Systems are accepted as an
effective means of providing educational and training programs, the video
conferencing equipment and telecommunications industries will evolve rapidly. To
remain competitive, we must respond quickly to technological advances in IVC
Systems. This could require us to make substantial capital investments in new
equipment that has made our existing equipment obsolete. In addition, other
technologies developed by competitors may significantly reduce demand for our
services or render our services obsolete.
REGULATION OF EDUCATION
Most of the states where we operate and intend to operate require licensing
of education providers. Our agreements with our education providers require them
to obtain the accreditation and licenses necessary to offer their courses,
certificates and degrees in our programs. Certain states accept accreditation
from other states as evidence of meeting minimum state licensing requirements
and others apply separate standards. Since education using IVC Systems is a
relatively new concept, we cannot predict whether licenses and accreditation of
courses and programs will be difficult, or impossible, to obtain from state
licensing authorities and accreditation organizations. Licensing and
accreditation may be required for each program offered to students in a
particular state. To keep licenses and accreditations in good standing, periodic
monitoring by licensing authorities and accreditations organizations may be
required. If our education providers cannot obtain or maintain the necessary
licenses or accreditations or if licenses or accreditations are delayed or
revoked, our business and growth could be materially adversely affected.
Congress is expected to consider reauthorization of the Higher Education
Act of 1965, as amended (the "HEA"). The regulation of distance learning is
expected to be a major topic in the reauthorization process, which could result
in the imposition of further regulation. The HEA could be amended to impose
stricter or additional requirements affecting our business. In addition,
regulation and accreditation of distance learning programs are undergoing
significant review by the USDE, state regulators and accreditation
organizations. We cannot predict the scope or the outcome of this review.
Additional regulation, if any, resulting from this review, may adversely affect
us.
8
<PAGE>
CONTROL BY EXISTING STOCKHOLDERS
After the offering, (1) our executive officers and directors will, as a
group, beneficially own approximately % of the Common Stock ( % if the
Underwriters fully exercise their over-allotment option) and (2) all of our
current stockholders will, as a group, beneficially own approximately % of the
Common Stock ( % if the Underwriters fully exercise their over-allotment
option). If our current stockholders choose to act together, they will be able
to elect a majority of the directors and exercise control over our business,
policies and affairs.
DISCRETIONARY USE OF PROCEEDS
Although we anticipate utilizing the proceeds of this offering as stated
herein, management will have broad discretion as to the actual uses of such
proceeds. Future events may cause us to reallocate our resources, including
cash, for uses not presently contemplated by us.
OUTSTANDING SHARES ELIGIBLE FOR FUTURE SALE
After this offering, we will have outstanding shares of Common Stock
( shares if the Underwriters fully exercise their over-allotment option)
and we will have an additional shares of Common Stock reserved for
issuance pursuant to our stock incentive plan and outstanding warrants. We
intend to register for resale the shares of Common Stock reserved for issuance
under our stock incentive plan approximately 180 days after the date of this
Prospectus. Holders of shares of Common Stock will have the right to sell
their shares from time to time under Rule 144 of the Securities Act of 1933
starting days after the date of this Prospectus, subject to agreements with
the Company prohibiting the sale of their shares for a period of 12 months
following the consummation of this offering without the prior written consent of
the Representative of the Underwriters. Sales of substantial amounts of Common
Stock, or the belief that such sales may occur, could adversely affect the
market price of the Common Stock.
ABSENCE OF PRIOR MARKET FOR THE SHARES; POSSIBLE VOLATILITY OF SHARE PRICE
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price was determined through negotiations
between us and the Underwriters. You should read the "Underwriting" section for
a more complete discussion of the factors considered in determining the initial
public offering price. You may not be able to resell your shares at or above the
initial public offering price due to a number of factors, including:
o actual or anticipated fluctuations in our operating results;
o changes in expectations as to our future financial performance or changes
in financial estimates of securities analysts;
o increased competition from major corporations or well-known colleges and
universities;
o announcements of technological innovations;
o the operating and stock price performance of other comparable companies;
and
o general stock market or economic conditions.
In addition, the stock market in general has experienced volatility that
often has been unrelated to the operating performance of particular companies.
These broad market and industry fluctuations may adversely affect the trading
price of the Common Stock, regardless of our actual operating performance.
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
The initial public offering price is substantially higher than the net
tangible book value per share of our outstanding Common Stock immediately after
this offering. Accordingly, if you purchase Common Stock in this offering, you
will incur immediate dilution of approximately $ in the net tangible book
value per share of Common Stock from the price you pay for the Common Stock.
9
<PAGE>
DIVIDENDS UNLIKELY
We do not anticipate that we will pay cash dividends on the Common Stock in
the foreseeable future because we will require earnings, if any, to finance our
operations.
ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law, our Certificate of Incorporation and
Bylaws and an agreement with our Chief Executive Officer could make it more
difficult for a third party to acquire, or discourage a third party from
attempting to acquire, control of our Company. Such provisions, which are
summarized below under "Management--Employment Agreements" and "Description of
Capital Stock," could limit the price that investors might be willing to pay in
the future for the Common Stock.
BOARD COMPOSITION
In September 1998, we adopted a classified Board of Directors, effective
upon the completion of this offering. The directors are divided into three
classes. After the completion of this offering the term of office of each class
of directors will expire as follows: Class 1, at the first annual meeting of
stockholders; Class 2, at the second annual meeting of stockholders; and
Class 3, at the third annual meeting of stockholders. Thereafter, the term of
office of each director will expire at the third annual meeting of stockholders
following his or her election. The existence of a classified Board of Directors
may inhibit a change of control of the Company.
INDEMNIFICATION AND LIMITATION OF LIABILITY
Our Certificate of Incorporation and By-Laws include provisions whereby our
officers and directors are to be indemnified against liabilities to the fullest
extent permissible under the Delaware Law. Our Certificate of Incorporation and
By-Laws also limits, to the fullest extent permitted by Delaware law, a
director's liability for monetary damages for breach of fiduciary duty,
including gross negligence, except in certain circumstances. In addition, we
have agreed to advance the legal expenses of our officers and directors who are
required to defend against claims, subject to their agreement to refund such
advances in the event it is ultimately determined that indemnification is not
legally permitted. The foregoing provisions and agreements may have the effect
of reducing the likelihood of suits against directors and officers even though
such suits, if successful, might benefit us and our stockholders. Furthermore, a
stockholder's investment in our Company may be adversely affected to the extent
that we pay the cost of settlement and damage awards against directors and
officers.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The words "anticipate," "believe," "estimate," "expect," "will,"
"could," "may" and similar words are intended to identify forward-looking
statements. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including the
risks described above and elsewhere in this Prospectus.
10
<PAGE>
USE OF PROCEEDS
The estimated net proceeds of this offering will be approximately
$ (or approximately $ if the Underwriters' over-allotment
option is exercised in full) after deducting the Underwriters' discounts and
commissions and estimated other expenses. The Company intends to apply the net
proceeds approximately as follows:
<TABLE>
<CAPTION>
APPROXIMATE
ANTICIPATED APPLICATION AMOUNT PERCENT
- --------------------------------------------------------------------------------- ----------- -------
<S> <C> <C>
Purchase and installation of video conferencing equipment........................ $5,400,000 %
Marketing........................................................................ 2,300,000
Hire additional personnel........................................................ 1,000,000
Working capital..................................................................
-----------
$ %
----------- -----
----------- -----
</TABLE>
If the Underwriters' over-allotment option is exercised in full, additional
net proceeds to the Company of $ will be added to working capital. The
Company will not receive any of the proceeds from the sale of shares being sold
by certain principal stockholders if the over-allotment option is exercised.
Pending the use of the net proceeds, the Company intends to invest such funds in
short-term, interest-bearing, investment grade obligations.
The Company anticipates, based on currently proposed plans and assumptions
relating to the Company's operations, that the proceeds of this offering,
together with projected cash flow from operations, will be sufficient to satisfy
its contemplated cash requirements for at least the next 12 months.
The Company reserves the right to change the actual use of proceeds if
unanticipated events cause the Company to change its priorities or its plan of
operations described below under "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DIVIDEND POLICY
To date, the Company has neither declared nor paid any cash dividends on
shares of Common Stock. The Company currently intends to retain its earnings to
finance its operations and future growth and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. The payment of cash
dividends in the future will be at the discretion of the Board of Directors and
will depend upon the Company's earning levels, capital requirements, restrictive
loan covenants, if any, and other factors which the Board of Directors may deem
relevant.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1998 and as adjusted, to give effect to the sale of shares of
Common Stock offered hereby at an assumed initial offering price of $ per
share and the application of the net proceeds therefrom. This table should be
read with the other financial information presented elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
------------------------------------------
ACTUAL AS ADJUSTED(1)
------------------------ --------------
<S> <C> <C>
Current portion of notes payable.................................................... $ 50,000 $ 50,000
---------- ----------
Stockholders' equity:
Preferred stock--$.0001 par value; authorized 1,000,000 shares, none issued
Common stock--$.0001 par value; authorized 10,000,000 shares, issued and
outstanding 6,020,314 shares and shares after this offering.......... 602
Additional paid-in capital........................................................ 6,064,619
Accumulated deficit............................................................... (2,581,719)
---------- ----------
Stockholders' equity.............................................................. $3,483,502
---------- ----------
Total capitalization.............................................................. $3,533,502
---------- ----------
---------- ----------
</TABLE>
- ------------------
(1) Based on the number of shares outstanding as of September 30, 1998. Excludes
680,000 shares of common stock reserved for issuance under the 1998
Incentive Plan and an aggregate of 1,100,500 shares of Common Stock issuable
upon the exercise of additional options and warrants.
(2) As adjusted to reflect the sale of Common Stock offered hereby at an assumed
initial public offering price of $ per share and the receipt of the
estimated proceeds therefrom. See "Use of Proceeds."
12
<PAGE>
DILUTION
The net tangible book value (total assets less total liabilities and net
intangible assets) of the Common Stock at September 30, 1998 was $3,328,000, or
$.55 per share. Net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of shares of the
Common Stock in this offering and the net tangible book value per share of the
Common Stock immediately after consummation of this offering. After giving
effect to the sale of shares of Common Stock in this offering at an
assumed public offering price of $ per share and the application of the
estimated net proceeds therefrom, the net tangible book value of the Company as
of September 30, 1998 would have been $ , or $ per share. This
represents an immediate increase in net tangible book value to existing
stockholders of $ per share and an immediate dilution of $ per share to
purchasers of the Common Stock in this offering. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share of Common Stock................. $
Net tangible book value per share before giving effect to this
offering.............................................................. $ .55
Increase in net tangible book value per share attributable to new
investors............................................................. $
Net tangible book value per share after giving effect to this
offering..............................................................
-------
Dilution per share to new investors (1)(2).............................. $
-------
-------
</TABLE>
- ------------------
(1) Dilution is determined by subtracting net tangible book value per share
after this offering from the initial public offering price per share.
(2) Dilution to new investors would be $ assuming the Underwriters'
over-allotment option is exercised in full.
The following table summarizes, as of September 30, 1998, after giving
effect to this offering, the number of shares of Common Stock purchased from the
Company, the total consideration paid (or to be paid) and the average price per
share paid (or to be paid) by the existing stockholders and by new investors
purchasing Common Stock in this offering, at an assumed public offering price of
$ per share, before deducting underwriting discounts and estimated
expenses of this offering payable by the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------ -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 6,020,314 % $6,767,700 % $ .89
New investors..........................
--------- --- ---------- ----
Total............................. 100% $ 100%
--------- --- ---------- ----
--------- --- ---------- ----
</TABLE>
13
<PAGE>
SELECTED FINANCIAL INFORMATION
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
The financial data set forth below under the captions "Statement of
Operations Data" and "Balance Sheet Data" as of December 31, 1997 and for the
period from March 4, 1997 (date of inception) through December 31, 1997 and as
of September 30, 1998 and for the nine months ended September 30, 1998 are
derived from the financial statements of the Company, included elsewhere in the
Prospectus, audited by Goldstein Golub Kessler LLP, independent public
accountants. The financial data set forth below from March 4, 1997 (date of
inception) through September 30, 1997 have been derived from the unaudited
financial statements of the Company. In the opinion of the Company, its
unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments (consisting of normal
recurring entries), necessary for a fair presentation of the financial position
and results of operations as of such date. The data set forth below should be
read in conjunction with the Financial Statements and notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
MARCH 4, 1997 MARCH 4, 1997
(DATE OF (DATE OF NINE-MONTHS
INCEPTION) TO INCEPTION) TO ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
----------------- ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.......................................... $ -- $ -- $ 174
Interest income...................................... -- -- 40
----------- ---------- ----------
Total revenue.......................................... -- -- 214
----------- ---------- ----------
Operating expenses:
Cost of sales...................................... -- -- 148
Salaries and benefits.............................. 334 104 1,027
Marketing, brochure and student registration
costs............................................ 158 -- 315
Professional fees.................................. 61 7 53
Interest and financing costs....................... 59 8 108
Depreciation....................................... -- -- 159
Other.............................................. 110 46 264
----------- ---------- ----------
Operating expenses................................... 722 165 2,074
----------- ---------- ----------
----------- ---------- ----------
Net loss............................................. $ (722) $ (165) $ (1,860)
----------- ---------- ----------
----------- ---------- ----------
Basic loss per share of common stock................... $ (0.19) $ (0.04) $ (0.37)
----------- ---------- ----------
----------- ---------- ----------
Weighted-average number of shares of Common Stock
outstanding(1)....................................... 3,845,901 3,690,000 5,043,16
----------- ---------- ----------
----------- ---------- ----------
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------
DECEMBER 31, 1997 ACTUAL AS ADJUSTED(2)
----------------- ------------------ ------------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets....................................... $ 829 $ 2,424
Current liabilities.................................. 745 308
----------- ---------- ----------
Working capital...................................... 84 2,116
----------- ---------- ----------
Total assets......................................... 2,115 3,792
----------- ---------- ----------
Long-term liabilities................................ 235 --
Total liabilities.................................... 980 308
----------- ---------- ----------
Stockholders' equity................................. $ 1,135 $ 3,484
----------- ---------- ----------
</TABLE>
- ------------------
(1) Based on the number of shares outstanding as of September 30, 1998. Excludes
680,000 shares of Common Stock reserved for issuance under the 1998
Incentive Plan and an aggregate of 1,100,500 shares of Common Stock issuable
upon the exercise of additional options and warrants. See "Capitalization,"
"Management-1998 Incentive Plan" and Note 7 of Notes to Financial
Statements.
(2) As adjusted to reflect the sale of Common Stock offered hereby at an assumed
initial public offering price of $ per share and the receipt of the
estimated proceeds therefrom. See "Use of Proceeds" and "Capitalization."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements of EVC and the notes thereto appearing elsewhere in this Prospectus.
OPERATIONAL OVERVIEW
General. Since EVC's organization on March 4, 1997, EVC has been engaged
primarily in developmental activities that include: (1) developing and
implementing business strategies; (2) entering into multi-year contracts with
major corporations and education providers; (3) recruiting and hiring management
and other personnel; (4) acquiring and installing video conferencing equipment;
(5) entering into co-marketing alliances; (6) training instructors and education
providers to teach effectively using IVC Systems; (7) recruiting and enrolling
students; (8) delivering courses from education providers to multiple locations;
and (9) raising capital to support its operations.
In May 1997, EVC entered into multi-year agreements with each of Citibank
and AIG to deliver courses and programs to their employees. In February 1998,
EVC began delivering courses and programs provided by Adelphi University and The
College of Insurance to Citibank and AIG employees. EVC entered into multi-year
agreements with Merrill Lynch, Travelers and Zurich in June, July and August
1998, respectively. EVC is currently offering courses given by Adelphi
University, The College of Insurance and Mercy College to Citibank, AIG,
Travelers, Zurich and Merrill Lynch employees. In November 1998, EVC expects to
begin offering executive development courses given by the University of Notre
Dame. In October 1998, EVC entered into a multi-year agreement with Reliance
National to offer courses to its employees starting in January 1999.
Revenue and Accounts Receivable. EVC's revenue is derived from sharing
tuition payments received by education providers based on a contractually agreed
upon formula. Revenue attributable to a course is recognized ratably over the
duration of the course and, as this occurs, EVC establishes a related accounts
receivable. EVC's education providers generally permit tuition payments to be
deferred until after a course is completed and they control the billing and
collection process. The ability of the education provider to collect tuition,
and the timing of such collection, is subject to the billing practices of the
education provider and the tuition reimbursement and payment policies and
practices of the student's employer. To the extent tuition is not paid by the
employer, the ability to collect tuition is subject to the risk of
non-collection from the student, who is ultimately responsible for payment. If a
student does not successfully complete a course, the employer will generally not
pay the tuition.
In most cases, EVC has been receiving its share of tuition payments more
than 90 days after completion of courses and, in some cases, more than nine
months after completion of courses. EVC believes that the tuition billing and
collection process has been protracted as a result of delays by education
providers in implementing billing procedures and delays by corporations in
processing requests for payment from their employees. EVC is working with its
education providers and corporate customers to simplify and accelerate tuition
billing and collection procedures but cannot predict the outcome of its efforts.
Furthermore, since EVC recently commenced business and its receivables
collection experience is limited, EVC cannot accurately determine the typical
collection cycle for its receivables or whether other events will substantially
delay or otherwise negatively affect its receipt of payments.
As a consequence of this protracted collection cycle, EVC expects to
continue to experience negative cash flow for the foreseeable future. EVC's
negative cash flow may materially adversely impact its ability to implement
EVC's business strategy and its operations and financial results.
Operating Expenses. Cost of sales consists primarily of costs relating to
operating EVC's video conferencing equipment and to certain telecommunications
costs. These costs will increase as EVC delivers more courses to more locations.
In June 1998, EVC entered into an agreement with AT&T that substantially lowers
EVC's long distance usage costs.
Since EVC's inception, selling general and administrative expenses have
consisted primarily of (1) salaries and benefits, (2) marketing expenses,
(3) depreciation, (4) interest and financing costs related to debt private
placements and (5) professional fees. Generally, marketing costs are expensed as
incurred. However, costs of course and related material are expensed over the
duration of the course to which they relate.
15
<PAGE>
Seasonality. EVC expects that revenues for its third quarter will be
substantially lower than other quarters because it anticipates substantially
lower student enrollment during June, July and August.
RESULTS OF OPERATIONS
Net revenue for the nine months ended September 30, 1998 was $174,000.
Tuition payments received or receivable from Adelphi and the College of
Insurance constituted 78% and 22%, respectively, of such net revenue. Such
revenues relate to tuition payments from corporate customers, 53% of which was
attributable to employees of AIG and 47% of which was attributable to employees
of Citibank. EVC did not deliver any courses or generate revenue in 1997. EVC
has incurred losses from inception through September 30, 1998 of $2,582,000.
These losses have resulted primarily from salaries and related benefits and
expenses of $1,361,000, cost of sales of $148,000, marketing costs of $473,000,
professional fees of $114,000, interest and financing fees of $166,000,
depreciation of $159,000 and other expenses of $374,000. Losses are expected to
continue for at least the next 12 months.
LIQUIDITY AND CAPITAL RESOURCES
Private Placements. To date, EVC's capital needs have been funded through
a series of debt and equity private placements in which EVC received net
proceeds of approximately $6,065,000.
In June 1997, EVC received gross proceeds of $115,000 from the issuance of
18% promissory notes and warrants, expiring in 2002, to purchase 23,000 shares
of Common Stock at $1.00 per share. In April 1998, $100,000 principal amount of
these notes was converted into 40,000 shares of Common Stock and warrants,
expiring in 2002, to purchase 16,000 shares of Common Stock at $3.00 per share.
The remaining $15,000 principal amount of these notes was paid in June and July
1998. The transaction costs were approximately $45,000.
Between August and December 1997, EVC received gross proceeds of $235,000
from the issuance of $235,000 principal amount of 18% convertible promissory
notes and warrants, expiring 2002, to purchase 47,000 shares of Common Stock at
$2.00 per share. In June and July 1998, $185,000 principal amount of these notes
were converted into 92,500 shares of Common Stock. The transaction costs were
approximately $110,000 and EVC's issuance of 16,500 shares of Common Stock.
In October 1997, EVC received gross proceeds of $1,000,000 from the
issuance of 500,000 shares of Common Stock and warrants, expiring in 2002, to
purchase 300,000 shares of Common Stock. Of these warrants, 200,000 are
exercisable at $2.00 per share and 100,000 are exercisable at $10.00 per share.
The transaction costs were approximately $155,000 and EVC's issuance of 100,000
shares of Common Stock.
In October 1997, EVC issued 117,647 shares of Common Stock for $400,000
and a $95,000 note to a video conferencing equipment vendor and applied the
$400,000 to the purchase of $1,000,000 of equipment from such vendor.
Between January and April 1998, EVC received gross proceeds of $1,072,500
from the issuance of 390,000 shares of Common Stock and warrants, expiring in
2003, to purchase 156,000 shares of Common Stock at $3.00 per share. The
transaction costs were approximately $99,000 and EVC's issuance of warrants,
expiring in 2003, to purchase 103,591 shares of Common Stock at $3.00 per share.
Between May and August of 1998, EVC received gross proceeds of $4,000,000
for the issuance of 1,066,667 shares of Common Stock. The transaction costs were
approximately $400,000 and EVC's issuance of warrants, expiring in 2003, to
purchase 50,000 shares of Common Stock at $6.00 per share.
EVC anticipates, based on currently proposed plans and assumptions relating
to its operations, that the proceeds from this offering, together with projected
cash flow from operations, will be sufficient to satisfy its contemplated cash
requirements for at least the next 12 months. If, however, EVC is
underestimating its cash requirements, EVC will require additional debt or
equity financing. There can be no assurance that any such required debt or
equity financing will be available on acceptable terms.
16
<PAGE>
PLAN OF OPERATIONS
During the 12 months following completion of this offering, EVC intends to
focus its efforts on the following:
o Contracting with Corporate Customers and Other Organizations. EVC will
expand its current marketing efforts to insurance, banking, financial,
automotive, utility, oil and defense corporations, college and graduate
school entrance exam preparation services, government agencies and
religious organizations. EVC also has plans to target hospitals and other
health care companies, unions and public school districts. Three
full-time employees and six independent consultants/sales representatives
work with EVC's President and Chairman to obtain agreements with
additional corporate customers. EVC currently plans to hire up to five
additional sales personnel.
o Contracting with Education Providers. One full-time employee and two
independent consultants work with EVC's President to obtain contracts
with education providers as needed to meet the needs and demands of EVC's
corporate customers and their employees. In addition to colleges and
universities, EVC will seek to obtain contracts with corporate training
institutions that offer programs such as management training, job skills
and basic skills training, continuing education for professionals,
remediation programs for grant-eligible members of low-income households,
and test preparation courses for students planning to take college or
graduate school entrance exams. EVC will hire additional personnel to
augment its education provider sales team as the need arises.
o Hiring and Training Additional Personnel. EVC expects to hire up to 15
recruiting advisors to recruit students and assist them with the
enrollment process, a marketing manager with relevant direct marketing
experience, five equipment administrators, database management and data
entry personnel and three general office personnel.
o Purchasing and Installing IVC Systems. Up to $5,400,000 of the proceeds
of this offering will be used for equipment purchases and installations
as needed to meet demand.
o Pursuing Reseller and Co-marketing Alliances. EVC will continue to seek
alliances with video conferencing equipment vendors and
telecommunications carriers that will market EVC's programs to their
corporate customers and will allow EVC to lower its video
teleconferencing equipment and telecommunications costs.
o Pursuing Pilot Programs. EVC is conducting a pilot outreach program at
two churches to deliver courses to economically disadvantaged students
who are eligible for governmental tuition grants. If the pilot program is
successful, EVC expects that three full-time employees will be devoted to
expanding this outreach program.
YEAR 2000 COMPLIANCE
Computer software applications which EVC relies upon for accounting,
management and operating information are recent releases of, or are readily
upgraded to, Year 2000 compliant, commercially available applications. EVC has
initiated discussions with its education providers and corporate customers to
determine what steps are being taken by them to ensure that computer software
applications used by them for enrollment, billing and collection are Year 2000
compliant. EVC has not as yet detected any problems relating to such compliance.
If any of EVC's education providers or corporate customers have problems with
year 2000 compliance, EVC's ability to provide and get paid for its services to
them could be materially adversely affected.
17
<PAGE>
BUSINESS
GENERAL
EVC delivers educational courses and programs to employees of major
corporations via IVC Systems. IVC Systems allow the instructor to see, hear and
interact with students as the students see, hear and interact with their
instructor and other students at multiple locations. EVC currently delivers
these courses to video conferencing locations of our corporate customers and, if
requested, EVC can deliver courses to the individual student's desktop computer
at work or at home. EVC provides its corporate customers with access to
education providers and the marketing and administrative services necessary to
recruit, enroll and deliver courses and programs to a corporation's employees.
EVC serves as a marketing and technology bridge between accredited colleges,
universities and training organizations that want to increase enrollment and
tuition revenue from student populations they otherwise could not serve, and
corporations that want to raise the education and skill levels of their
employees.
EVC currently offers courses to employees of Citibank, AIG, Merrill Lynch,
Travelers and Zurich. In February 1998, EVC started offering college courses to
Citibank employees in New York City and to AIG employees in Atlanta, Boston,
Chicago, Cleveland, Dallas, Livingston and Parsippany, New Jersey, Wilmington,
Delaware and New York City. In September 1998, EVC began delivering courses to
Merrill Lynch employees in Chicago and Jersey City and in November 1998 EVC
expects to begin delivering courses to Travelers employees and Zurich employees
at a number of sites. In January 1999, EVC expects to begin offering courses in
Europe to employees of some of its corporate customers and to Reliance employees
in the United States.
EVC currently delivers courses given by at Adelphi University, The College
of Insurance and Mercy College. In December 1998, EVC expects to begin
delivering executive development courses from the University of Notre Dame.
EVC's education provider alliances enable it to offer accredited undergraduate
and graduate courses and degree programs, corporate training and executive
development programs, software application programs and professional licensing
programs. Areas of study include insurance and risk management, banking,
finance, management, marketing, economics, accounting, computer science,
leadership, entrepreneurship, education and general studies. In addition, EVC
delivers national exam preparation courses for the insurance industry.
EVC currently has co-marketing agreements with AT&T and VSI to co-market
EVC's courses and programs with AT&T's telecommunications services and VSI's
video conferencing systems.
INDUSTRY OVERVIEW
Working adults represent the fastest growing segment of the higher
education market. EVC believes that traditional on-campus programs do not
adequately address the needs and preferences of many working adults. Burdened by
the competing time demands of work and family, many adults want to attend
courses that are convenient to their homes or places of work. The emphasis on
locational convenience, together with the availability of tuition reimbursement
incentives offered by employers, have contributed to an increase in demand for
higher education and training at off-campus locations. EVC believes that its IVC
Systems enable students to experience more closely the actual classroom
environment than any other distance learning system currently available.
According to the U.S. Department of Education (the "USDE"), education is
the second largest sector of the U.S. economy, accounting for approximately 8%
of gross domestic product in 1997, or over $600 billion. Post-secondary
education accounts for approximately one-third of the total sector. A number of
national economic, demographic and social trends are contributing to the growing
demand for career oriented education.
o Recognition of need for continuing education. EVC believes that
employers recognize the need for continuous enhancement of employee
education and skill levels and that employees recognize that higher
education and training are essential to maintaining and advancing their
employment position and, consequently, their standard of living. It is
estimated that corporations with over 100 employees budgeted
approximately $58.6 billion for training in 1997, compared to
approximately $45 billion in 1992.
18
<PAGE>
o Growing demand for skilled labor. EVC believes that the continuing shift
from unskilled to skilled jobs in the U.S. results from, among other
things, the transformation of the U.S. economy from an industrial to a
knowledge-based economy and increased competition for such jobs. The USDE
predicts that by the year 2000, 85% of the jobs in the U.S. will require
education or training beyond high school. The percentage of jobs
requiring skilled labor is projected to grow to approximately 65% by the
year 2000.
o Positive trends in higher education enrollment. The USDE projects a 17%
increase in annual high school graduates by the year 2005 from
2.5 million in 1995 to 3 million in 2005. In 1996, 65% of new high school
graduates pursued post-secondary education, compared with 53% in 1986. In
1996-1997, approximately 45% of the students enrolled in higher education
were 25 years and older compared to approximately 28% in 1970 and there
were nearly 7 million students enrolled part-time in U.S. colleges and
universities. Over 80% of these students were over 25.
o Economic value of post secondary education. EVC believes that
post-secondary education leads to significant and measurable improvements
in a person's financial prospects and that the public is increasingly
aware of the growing differential in income for persons with some type of
post secondary education versus those without.
o Colleges' need for additional sources of revenue. Colleges and
universities are seeking additional sources of revenue and recognize that
increasing adult student enrollment is an important element in their
economic growth.
Other Educational Delivery Programs. Most education providers deliver
courses through on-campus classroom instruction. Colleges and universities
prefer the classroom environment because of its live, interactive nature. Many
colleges and universities also believe this traditional learning method is
needed to maintain consistent, high quality instruction and academic standards.
Additionally, most colleges and universities are unable or unwilling to expand
existing campuses to accommodate more students or build satellite campuses to
serve students at distant locations. The Company believes that colleges and
universities that are interested in providing distance learning have not offered
these programs because of program development and equipment costs and limited
technological infrastructure.
Colleges and universities generally target their course content toward
traditional, full-time students and, therefore, do not adequately meet the
career-oriented learning needs of working adults or the corporations that pay
for their employees' education. Typically, the alternatives for working adults
have been correspondence courses, videotaped presentations, the Internet,
one-way broadcast instruction and, more recently, video conferencing that is not
fully interactive and requires students to travel to sites that are not located
at their workplace or home. Although these methods may address the problems of
time and location, the Company believes that they do not provide the same
benefits of traditional classroom learning that fully interactive video
conferencing does.
Tuition Reimbursement. Increasingly, corporations are recognizing the need
for continuous upgrading and enhancement of their employees' education and skill
levels. Many corporations pay for their employees' higher education through
tuition reimbursement or direct payment plans. Typically, these plans reimburse
employees or pay for courses at any accredited academic institution as long as
the course has some relevance to the employee's job and the employee achieves a
specified grade.
BUSINESS STRATEGY
EVC's goal is to become the leading provider of college, university and
training courses and programs that are offered at geographically dispersed sites
throughout the world using IVC Systems. EVC intends to achieve its goal by:
o Targeting Major Corporations and other Organizations. EVC is primarily
targeting corporations with more than 5,000 employees and that reimburse
or pay at least 80% of tuition costs, have policies to encourage their
employees to pursue higher education and job related training and agree
to actively promote EVC's programs to their employees.
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EVC is currently targeting the financial services industry and the
insurance industry because of the numerous major corporations in these
sectors that fit EVC's criteria. An important part of EVC's strategy is
to contract with a well known, highly regarded corporation in a specific
market sector and leverage that relationship to generate interest from
other corporations in the same industry. EVC is also targeting
automotive, utility, oil and defense corporations, college and graduate
school entrance exam preparation services, government agencies and
religious organizations and has plans to target hospitals and other
health care companies, unions and public school districts.
o Making Alliances with Colleges and Universities. EVC seeks alliances
with colleges and universities with experience in providing higher
education for working adults and that offer courses fitting the needs,
interests and academic qualifications of a broad cross-section of the
employees of EVC's corporate customers.
EVC expects to expand its course offerings to include management
training, job skills and basic skills training, continuing education for
professionals, remediation programs for grant-eligible members of low-
income households, and test preparation courses for students planning to
take college or graduate school entrance exams.
o Making Alliances with Equipment Vendors and Telecommunications Services
Providers. EVC is pursuing alliances with several vendors of video
conferencing technologies so that EVC can have access to the latest
technologies that are capable of providing quality, cost-effective IVC
Systems. EVC is also pursuing alliances with telecommunications providers
in order to lower the cost of its telecommunications usage. In addition,
EVC seeks alliances with vendors, telecommunications providers and others
that will enable it to market EVC's services to their customers.
o Staging the Rollout of Courses and Programs. Staging the rollout of
courses to employees of our corporate customers enables EVC to use its
resources more effectively to market to, and contract with, a larger
number of corporations. As EVC gains more corporate clients, it intends
to increase both its course offerings and their availability to larger
numbers of the employees of its existing corporate customers. EVC is
investigating the prospects for delivering educational content over fiber
networks, the broadband Internet, cellular satellite services and other
wireless digital telecommunications technologies.
EVC'S SERVICES
EVC differentiates itself from other distance learning companies by
functioning as a telecommunications, technology and marketing bridge between
corporate employers and education providers. EVC's comprehensive services
encompass the technical, marketing and administrative services necessary to (1)
offer courses and degree programs from multiple education providers; (2)
determine corporate employer and employee course and degree program preferences;
(3) recruit and enroll students; (4) provide and install video conferencing
equipment at education providers; (5) install or enhance the video conferencing
systems of its corporate customers when required; (6) train teachers how to
teach effectively using IVC systems; (7) arrange for high speed data lines for
signal transmission; (8) provide the multi-conferencing units required to permit
live, interactive multimedia communications between multiple parties; and
(9) coordinate the delivery of courses from the educational providers to the
students.
Corporate Customers. Generally, EVC's agreements with its corporate
customers have terms of three to five years and are subject to automatic
extensions. These agreements typically include the following terms.
o EVC delivers courses over its corporate customers' existing installed
base of video conferencing room systems. To the extent required, if
surveys of the corporation's employees indicate there is a sufficient
demand for courses, EVC will install or enhance equipment at the
customer's site.
o The corporation reimburses its eligible employees or pays directly for
the tuition cost of completed courses for which a specified grade is
received. EVC generally will not accept a corporation as a customer
unless its policy is to reimburse or pay at least 80% of the tuition
cost, although changes in the policy are within the corporation's sole
discretion. The student is responsible for any portion of the tuition
that is not reimbursed.
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o EVC and the corporation jointly market the available courses and programs
to the corporation's employees using material prepared and paid for by
EVC.
Education Providers. EVC's agreements with its education providers
generally have terms of three to five years and are subject to automatic
extensions. These agreements typically include the following terms.
o EVC provides all video conferencing hardware, software and
telecommunications equipment for each teaching station at the college or
university.
o EVC markets the courses offered by the education provider using EVC's
marketing materials that incorporate information from the brochures,
catalogues, class schedules and other materials provided by the college
or university.
o EVC assists in the enrollment process by providing students with
enrollment forms and assistance in determining available courses and
programs.
o EVC trains the course instructors and professors how to teach adult
students using interactive video conferencing. EVC encourages the
instructors and professors to use charts, graphs, pictures, videotapes
and presentation software using scanners, document cameras and other
equipment provided by EVC. In order to maximize teacher participation and
student enrollment, EVC believes that the learning experience through
interactive video conferencing should replicate as closely as possible a
student-centered active learning environment by allowing a high level of
interactivity among the instructor and the students. Accordingly, EVC
trains instructors and professors in how to maximize the effectiveness of
their teaching styles and their presentation of materials using IVC
Systems. EVC also limits the number of student sites and students per
site to maintain academic integrity.
o EVC facilitates the recruiting and enrollment process by means of surveys
designed to determine which courses employees need and want and those
that employers are willing to pay for. In addition, EVC's educational
counsellors advise students in the admission and enrollment process. To
date, substantially all of the students using EVC's services have taken
accredited courses on a non-matriculating basis. Full admissions
procedures of the education provider must be followed if a student wants
to take more than 12 credits and matriculate (become a candidate for a
degree).
o The education provider is responsible for providing all administration
and academic personnel and facilities required for teaching the courses
offered. However, a portion of the cost of an admissions coordinator
hired by the education provider is paid by EVC.
o The education provider obtains the necessary licenses and accreditation
for course and program offerings.
o Generally, the education provider is required to schedule courses between
8:00 A.M. and 11:00 P.M. Monday through Friday and 9:00 A.M. to
3:00 P.M. on Saturdays. The courses to be delivered by EVC and their time
slots are determined each semester by EVC and the education provider.
o For its services, EVC receives a fee based on tuition payments actually
received by the education provider.
o Most of EVC's education providers have agreed not to offer courses via
competing IVC Systems to EVC's corporate customers and their employees
during the term of the education provider's agreement with EVC and for
one year after its termination.
MARKETING AND SALES
EVC's President directs overall marketing and sales activities and he and
EVC's Chairman develop EVC's marketing strategies. In addition, EVC's sales
force currently consists of three full-time employees and six independent sales
representatives.
Long-term relationships with major corporations and with education
providers are pursued by EVC's senior management by means of referrals and
introductions by independent consultants, vendors, board of trustee members and
others, direct mail, telemarketing and trade shows or other demonstrations of
EVC's video conferencing delivery method.
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In September 1998, EVC entered into an agreement with AT&T to co-market
AT&T's telecommunications services and EVC's courses and programs to AT&T's
corporate and residential customers. EVC has an agreement with VSI, an IVC
Systems vendor, to co-market VSI systems and EVC's courses and programs.
EVC assumes primary responsibility for marketing education providers'
courses and programs to EVC's corporate customers and their employees. EVC
produces promotional brochures and videotapes that include or are accompanied by
endorsements by management of the corporation. Other marketing tools include
using demand analysis surveys to collect demographic and preference data from
employees to determine the courses and programs to be offered and using
professional admissions counselors from EVC or educational providers to assist
potential students.
VIDEO CONFERENCING SYSTEMS
EVC can deliver educational content from education providers to video
conferencing locations at the corporate customer or to the individual student's
desktop computer at work or at home. To date, substantially all courses have
been delivered by EVC to classrooms at the corporate customers' sites. EVC
targets major corporations which have one or more existing video conferencing
room systems that EVC can use and, if required, enhance.
The teacher station consists of two 35-inch video monitors and a video
camera. One monitor shows the distant sites and the other is a preview monitor
for the instructor. Video conferencing can be voice activated or manually
controlled by the instructor. The instructor can display visual presentations to
the class using a separate document video camera. A VCR unit can be installed
and used for pre-taped instructional material. A caller add-on feature can be
used to invite a subject matter expert to interact verbally with the class
without having to be physically present. The instructor can also use other
multimedia presentation devices.
Room Video Conferencing. Generally, a student room station is a single
monitor and camera system. Video conferencing by students is also voice
activated, unless manually controlled by the instructor. Normally, there are
between two and eight student room stations per teacher station. EVC's current
policy is to limit class size to from 10 to 40 students to maintain academic
integrity, depending on the type of course given and student demand for a
particular course.
Computer Video Conferencing. If, in the future, corporations and students
desire delivery of courses via the student's desktop computer as EVC
anticipates, EVC can deliver courses on personal computers that have been
video-enabled. Students will see and hear the instructor or another student live
in a small window on the computer screen and have access to the course materials
directly on their computer. EVC plans to limit delivery of courses using
video-enabled desktop computers to 24 students per class.
The teacher and student stations are connected to each other over high
speed data lines (T-1 or ISDN lines) using EVC's multi-point conferencing unit
("MCU"). The MCU is a central switching hub, which enables live, interactive
multimedia communications between three or more endpoints. It performs the
important functions of conference management, video switching, audio mixing and
data routing and is the key component in providing multimedia communication
between multiple parties. EVC's MCU is housed at a secure location with on-site
technical support. The location has an uninterruptible power supply system which
provides a steady source of electrical power to the MCU. There are battery and
diesel fired generator back-up systems in case of an electric utility power
outage.
GOVERNMENT REGULATION
State Licensing. Many of the states require that any entity providing
educational programs obtain a license to operate. These requirements apply to
EVC's education providers, but not to EVC. Some states accept accreditation as
evidence of meeting minimum state standards for licensing. Other states impose
their own standards, including, in some instances, standards for distance
learning. The state in which a college or university is primarily located may
require it to obtain approval to offer distance education programs through video
conferencing systems, even if delivered to another state. Moreover, the state
receiving the distance education program may require that the college or
university obtain a license to deliver those programs in that state. Some of
these standards may limit the number of courses that may be offered through
distance education, require
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specified levels of student support services, set minimum graduation
requirements and otherwise restrict distance education programs. Since most of
the education providers with which EVC currently has or will have alliances
typically have campuses in only one state, they may not have considered whether
delivering their courses in other states will subject them to the educational
licensing requirements of those states.
Some jurisdictions may require EVC to obtain one or more educational
licenses, depending on the number of students enrolled in its programs in that
jurisdiction, in addition to, or instead of, the licensing requirements for the
college and university content providers even though EVC only provides the
delivery system for a licensed education provider's course content. State
regulators may be reluctant to grant licenses to EVC because it is not a
traditional education provider.
State requirements for distance education are rapidly evolving and EVC
cannot predict whether new requirements could adversely effect the way EVC
delivers courses. EVC believes that state and local universities and colleges
may attempt, and be successful, in persuading state legislatures to enact laws
making it more difficult for EVC to operate. EVC or its education providers may
be unable to obtain licenses to deliver courses as planned or required licensing
may be unduly delayed or revoked.
Accreditation. EVC contracts with education providers accredited by
recognized accreditation organizations. In some instances, specific programs
offered by those education providers may be accredited by specialized
accreditation organizations. Some accreditation organizations have developed
guidelines for distance education programs, which address such aspects of
distance education as curriculum and instruction, evaluation and assessment,
library and learning resources, student services and facilities and finances. As
required by federal law, the institutional accreditation organization may view
the offering of distance education as a substantive change to the education
provider's operations, requiring prior written approval by the accreditation
organization. There can be no assurance that accreditation requirements will not
become more detailed or onerous in the future. If education providers are
required to seek approval for, and undergo monitoring of, distance education by
accreditation organization, EVC may be unable to offer courses when or as
planned.
Federal Student Financial Aid. The HEA authorizes various federal student
financial aid programs. Programs that do not result in the granting of a degree
are not eligible for federal student financial aid. The HEA imposes numerous
restrictions on institutions participating in federal student financial aid
programs, including limitations on the number of courses that an institution of
higher education may offer through telecommunications and on the number of
students that may be enrolled in these courses. If EVC's education providers
exceed those limitations, they could lose their eligibility to participate in
federal student financial aid programs.
Failure of an otherwise eligible institution to comply with state licensing
requirements render an education provider ineligible to participate in federal
financial aid programs. If an education provider fails to obtain necessary state
approval for distance education, it could be liable to the USDE for student
financial aid to students in the program or other penalties. Furthermore, the
HEA restricts the ability of institutions to contract with third parties for
educational programming. The Company believes that these restrictions will not
apply to its arrangements with education providers, but there can be no
assurance that USDE will not reach a different conclusion.
Congress is expected to consider reauthorization of the HEA, and distance
education may be considered in the reauthorization process. There can be no
assurance that the HEA will not be amended to impose stricter or additional
requirements which would affect EVC. In addition, state and federal regulation
of distance education programs, as well as private accreditation of such
programs, are undergoing significant review by the USDE, state regulators and
accreditation organizations. EVC cannot predict the scope or the outcome of this
review or its effect on EVC.
Student Affairs. Individuals enrolled in college and university programs
offered by EVC will be students of the education provider offering the program.
As such, the students will generally have the same rights and responsibilities
as other students enrolled at that education provider. Among other legal
obligations to students, the education providers with which EVC contracts are
subject to federal and state laws protecting the privacy of student records and
are likely to require the Company also to abide by those laws. These laws will
limit EVC's ability to obtain and/or use student information or images for
marketing other purposes. If EVC were found to
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have misused student records, it could be barred under federal law from access
to such records for five years. In addition, an education provider may be
required, and may require EVC, to make reasonable accommodations for otherwise
qualified disabled students to take courses delivered by EVC.
COMPETITION
EVC believes the distance learning systems market is fragmented and highly
competitive. EVC faces substantial competition from distance learning companies
and other providers of higher education. Traditional live classroom instruction
by two and four year colleges is EVC's most significant competition. Some
colleges and universities have extension centers that attempt to address the
issue of locational and scheduling convenience. As education providers recognize
the value of using video conferencing to increase enrollment, EVC anticipates
more direct competition from them and other competitors. Columbia University,
New York Institute of Technology and Cornell University, among others, are
offering a limited number of courses via video conferencing.
In addition, alternative methods of delivering course materials are
proliferating rapidly. EVC is, therefore, facing increasing competition from
other distance learning companies that offer, among other products and services,
one way satellite video conferencing, self-paced correspondence courses, videos,
audio cassettes, CD-roms and Internet-based instruction. Westcott Communications
Inc. services students through one-way satellite video conferencing. Apollo
Group Inc.'s University of Phoenix offers text-based computer distance learning
using e-mail or server-based bulletin boards. EVC also competes with Caliber
Learning Network, Inc. which is creating geographically dispersed campuses to
receive courses using satellite transmission and that permit limited two-way
interactivity using video conferencing, wide-area network computing and Internet
technologies.
There are no significant barriers to entry into the distance learning
market. EVC believes competition is primarily based on locational and scheduling
convenience, cost, relevance and quality of course content, quality and
reliability of content delivery and customer support.
EVC believes its principal competitive strengths are (1) its business
strategy, (2) its employees with experience in higher education and distance
learning, (3) the breadth of EVC's services, (4) the similarity of the learning
experience using IVC Systems to the traditional classroom experience, as a
result of the level of interactivity, (5) the quality and reliability of EVC's
delivery of educational content over video conferencing systems and (6) the
relevance and range of the courses EVC can deliver.
EMPLOYEES
As of September 30, 1998, the Company had 17 full-time employees. The
Company also engages part time personnel during recruiting periods and, as of
September 30, 1998, had two temporary recruiters. None of the Company's
employees is covered by a collective bargaining agreement. The Company believes
that its relationship with its employees is satisfactory.
PROPERTIES
EVC currently utilizes approximately 3,400 square feet of space in Yonkers,
New York for its corporate and administrative offices. The lease for this space
expires on August 31, 2002. EVC also leases space in Bohemia, New York for its
MCU under a lease expiring in 2000. Video conferencing equipment is delivered to
the installation sites by the manufacturers. EVC believes its current facilities
will satisfy its requirements for at least the next 12 months.
ADDITIONAL INFORMATION
EVC has filed with the Securities and Exchange Commission (the "SEC"), a
registration statement on Form SB-2 under the Securities Act of 1933 and the
rules and regulations promulgated thereunder with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Descriptions contained in this
Prospectus relating to any contract or other document are not necessarily
complete, and each such description is qualified in all respects by reference to
the full text of such contract or document.
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As a result of this offering, EVC will be subject to the informational
requirements of the Securities Exchange Act of 1934 and will be required to file
reports and other information with the SEC. For further information with respect
to EVC and this offering, reference is made to the Registration Statement and
the exhibits and schedules thereto, which may be inspected and copied at the
principal office of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the SEC at Seven World Trade Center, Suite 1300, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any part thereof may be obtained at prescribed
rates from the SEC's Public Reference Section at 450 Fifth Street, N.W.
Washington D.C. 20545 or by calling the SEC at 1-800 SEC-0330. The SEC also
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information regarding the executive
officers, directors and key employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Dr. Arol I. Buntzman(1)......................... 55 Chairman of the Board and Chief Executive
Officer
Dr. John J. McGrath(1).......................... 45 President and Director
Richard Goldenberg(1)........................... 52 Chief Financial Officer, Secretary, and Director
Dr. Norman E. Puffett........................... 55 Vice President of Enrollment Management
Wallace J. Caven................................ 48 Vice President/Director of Distance Learning
James H. Mollitor............................... 53 Vice President of Operations
William R. Coda(2).............................. 41 Director designee
Arthur H. Goldberg(2)........................... 56 Director designee
</TABLE>
- ------------------
(1) Executive Officer
(2) The Board of directors has elected Messrs. Coda and Goldberg to, and they
have agreed to become members of, the Board of Directors effective upon
consummation of this offering.
Dr. Arol I. Buntzman has served as Chairman and Chief Executive Officer of
EVC since its inception in March 1997. From October 1996 until he founded EVC
with Dr. McGrath, Dr. Buntzman worked with Dr. McGrath on the development of
EVC's business plan. From August 1995 until October 1996, Dr. Buntzman was the
Chairman of the Board, the Chief Executive Officer and a principal stockholder
of Educational Televideo Communications, Inc. ("Ed Tel"), a provider of distance
learning delivery services. From July 1995 through June 1996, Dr. Buntzman
served as Director of Interactive Video Conferencing Distance Learning of
Fordham University. From September 1992 through July 1995, Dr. Buntzman
was an adjunct professor and the Director of the Weekend Program, a college
program for working adults, at Mercy College, Dobbs Ferry, New York.
Dr. Buntzman received a Doctorate in Education through the Executive
Leadership Program of Fordham University Graduate School of Education in May
1995, a Professional Diploma in Educational Administration from Fordham
University Graduate School of Education in May 1993 and a Masters of Business
Administration from Arizona State University in Finance and Management in
September 1970. Dr. Buntzman's doctoral dissertation focused on the use of live
interactive video conferencing as an educational delivery method and its use for
graduate education programs.
Dr. John J. McGrath has served as President of EVC since its inception in
March 1997. From October 1996 until he founded EVC with Dr. Buntzman,
Dr. McGrath worked with Dr. Buntzman on the development of EVC's business plan.
From August 1995 to October 1996, Dr. McGrath was President, a director and a
principal stockholder of Ed Tel. From January 1995 to February 1997,
Dr. McGrath served as a Special Assistant to the President of Mercy College,
Dobbs Ferry, New York. From September 1992 through December 1994, he also served
as Assistant Vice-President for Extension Centers of Mercy College and as the
Dean of its White Plains campus from 1990 through 1993. Dr. McGrath's experience
includes establishing and managing college extension centers and identifying and
developing new student markets, academic programs and strategies for
non-traditional students. Dr. McGrath holds a Ph.D. in Sociology from Fordham
University with a specialization in Law and Criminal Justice.
Richard Goldenberg has served as EVC's Chief Financial Officer since its
inception. From October 1996 until October 1997, Mr. Goldenberg served as Chief
Financial Officer, Treasurer and Secretary of RDX Acquisition Corp., a company
that provides proprietary electronic messaging and automation software. From
1986 through September 1996, he served as Vice President, Treasurer and
Secretary of Celadon Group, Inc., a transportation company. Mr. Goldenberg holds
a B.B.A. in accounting from Baruch College, C.U.N.Y.
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Dr. Norman E. Puffett has served as Vice President for Enrollment
Management of EVC since January 1998. From September 1995 through December 1997,
Dr. Puffett was Dean of Admissions for Graduate and Adult Baccalaureate Programs
at Lesley College in Cambridge, Massachusetts. From January 1986 through
September 1995, he served as Dean of Graduate Studies and Enrollment Management
at Western Connecticut State University. He has also served as a faculty member
and administrator at New York University, The University of Connecticut, Mercy
College and Long Island University. At Mercy College, Dr. Puffett created the
first branch campus in New York State intended exclusively for adults.
Dr. Puffett is a founder of the National Association of Graduate Admissions
Professionals and lectures on strategies for the future of America's colleges
and universities. He holds a Ed.D. in Higher and Adult Education from Columbia
University Teachers College.
Wallace J. Caven has served as the Company's Vice President/Director of
Distance Learning since May 1997. From 1970 until May 1997, Mr. Caven was
employed by NYNEX Corporation and, from 1992 to April 1997, he served as Staff
Director/Producer of Distance Learning of NYNEX Corporation.
James H. Mollitor has served as the Company's Vice President of Operations
since July 1998. From May 1997 to May 1998, Mr. Mollitor served as Director of
the Manhattan Data Center of Lockheed Martin Corporation, a defense contractor.
From June 1976 to March 1997, Mr. Mollitor served as Chief Information Officer
of Loral Electronics Systems, Inc., a military electronics manufacturer.
William R. Coda has served as Vice President of Global Operations Training
& Development for Merrill Lynch since June 1997. From March 1996 to June 1997,
he was Vice President--Consumer Bank Training at Citibank, N.A. and, from
February 1992 to March 1996, he was Vice President--Global Private Bank Training
at Chase Manhattan Bank, N.A. Mr. Coda holds a B.S. degree in accounting from
the University of Scranton and an M.B.A. in Industrial/Organizational Psychology
from Baruch College, C.U.N.Y.
Arthur H. Goldberg has served as President of Manhattan Associates, L.L.C.,
an investment and merchant banking firm, since 1994. From 1990 through 1993, he
served as Chairman of Reich & Co., a New York Stock Exchange member firm that
specialized in investment banking and corporate finance for small-cap companies.
Mr. Goldberg holds a B.S. degree from New York University Stern School of
Business and a J.D. degree from New York University School of Law.
Executive officers of the Company are appointed by the Board of Directors
and serve at the discretion of the Board. There are no family relationships
among any of the directors or executive officers of the Company.
As set forth above, each of Drs. Buntzman and McGrath was an executive
officer, director and principal stockholder of Ed Tel. From February 1995
through July 1996, Ed Tel had delivered courses to one customer, using video
conferencing equipment and dedicated phone lines. Drs. Buntzman and McGrath
terminated their affiliation with Ed Tel in October 1996 when it became apparent
to them that anticipated financing needed to resume Ed Tel's business would not
be provided. Ed Tel had ceased business operations in September 1996. Drs.
Buntzman and McGrath believe that, when they resigned, Ed Tel's remaining
liabilities consisted solely of approximately $300,000 of accounts payable to
vendors, primarily for equipment and supplies.
BOARD COMPOSITION
In September 1998, the Company adopted a classified Board of Directors
effective as of the consummation of this offering. The directors will be divided
into three classes. The term of office of each class of directors will expire as
follows: Class 1, at the first annual meeting of stockholders following the
closing of this offering; Class 2, at the second annual meeting of stockholders
following the closing of this offering; and Class 3, at the third annual meeting
of stockholders following the closing of this offering. Thereafter, the term of
office of each director will expire at the third annual meeting of stockholders
following his or her election. The initial directors in each class will be as
follows: Class 1: Arol I. Buntzman; Class 2, John J. McGrath and William R.
Coda; and Class 3, Richard Goldenberg and Arthur H. Goldberg.
The Underwriting Agreement provides that the Representative of the
Underwriters has the right to designate a representative to observe meetings of
the Company's Board of Directors or require the Company to use its best efforts
to elect the Representative's nominee to the Company's Board of Directors.
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BOARD COMMITTEES
The Company's Board of Directors currently has no committees. Upon
completion of this offering, the Board of Directors intends to create an Audit
Committee and a Compensation Committee.
Initially, the Audit Committee will be comprised of William R. Coda and
Arthur H. Goldberg. The Audit Committee will review and, as it deems
appropriate, recommend to the Board of Directors the internal accounting and
financial controls for the Company and accounting principles and auditing
practices and procedures to be employed in preparation and review of the
Company's financial statements. The Audit Committee will also make
recommendations to the Board concerning engagement of independent public
auditors and the scope of the audits to be undertaken.
Initially, the Compensation Committee will be comprised of Dr. Buntzman and
Arthur H. Goldberg. The Compensation Committee will review and, as it deems
appropriate, recommend to the Board of Directors policies, practices and
procedures relating to the compensation of officers and other managerial
employees and the establishment and administration of employee benefit plans.
The Compensation Committee will also administer the Company's 1998 Incentive
Plan.
DIRECTOR COMPENSATION
Upon consummation of this offering, those directors who are not officers or
employees of the Company will be paid $1,000 for attendance at each meeting of
the Board of Directors or any committee thereof and travel expenses. The Company
has recently established the 1998 Incentive Plan which authorizes the granting
of options to non-employee directors commencing upon consummation of this
offering. See "--1998 Incentive Plan."
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Section 102 of the Delaware General Corporation Law ("Delaware Law")
authorizes a Delaware corporation to include a provision in its certificate of
incorporation limiting or eliminating the personal liability of its directors to
the corporation or its stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably available to
them. In the absence of the limitations authorized by such provision, directors
are accountable to the corporation and its stockholders for monetary damages for
conduct constituting gross negligence in the exercise of the directors' duty of
care. Although Section 102 of Delaware Law does not change a director's duty of
care, it enables corporations to limit available relief to equitable remedies
such as injunction or rescission. The Company's Certificate of Incorporation and
By-Laws include provisions which limit or eliminate the personal liability of
its directors to the fullest extent permitted by such Section. Consequently, a
director or officer will not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for:
o any breach of the director's duty of loyalty to the Company or its
stockholders;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o unlawful payments of dividends or unlawful stock purchases, redemptions
or other distributions; and
o any transaction from which the director derived an improper personal
benefit.
The Company's Certificate of Incorporation and By-Laws provide that the
Company will indemnify to the fullest extent permitted by law any person made or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person or such person's testator or intestate is or was a director, officer or
employee of the Company or serves or served at the request of the Company as a
director, officer or employee of another corporation or entity.
The Company intends to enter into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Certificate of Incorporation and By-Laws. These agreements, among other things,
will indemnify the Company's directors and officers for certain expenses
(including advancing expenses for attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in
28
<PAGE>
any action or proceedings, including any action by or in the right of the
Company, arising out of such person's services as a director or officer of the
Company, any subsidiary of the Company or any other company or enterprise to
which the person provides services at the request of the Company. In addition,
the Company intends to obtain directors' and officers' insurance providing
indemnification for the Company's directors and officers for certain
liabilities. The Company believes that these indemnification provisions and
agreements and related insurance are necessary to attract and retain qualified
directors and officers.
The limited liability and indemnification provisions in the Company's
Certificate of Incorporation and By-Laws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty
(including breaches resulting from grossly negligent conduct) and may have the
effect of reducing the likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might otherwise benefit the
Company and its stockholders. A stockholder's investment in the Company,
furthermore, may be adversely affected to the extent that the Company pays the
costs of settlement and damage awards against directors and officers pursuant to
the indemnification agreements and the indemnification provisions in the
Company's Certificate of Incorporation and By-Laws.
There is no currently pending litigation or proceeding involving any
director, officer or employee of the Company, and the Company is not aware of
any threatened litigation or proceeding that might result in a claim by a
director, officer or employee for indemnification.
EXECUTIVE COMPENSATION
The following table shows compensation paid for the year ended
December 31, 1997 and the nine months ended September 30, 1998 to the Company's
Chief Executive Officer (the "Named Executive Officer"). None of the Company's
other most highly compensated individuals who were serving as officers of the
Company on December 31, 1997 or September 30, 1998 had aggregate compensation of
$100,000 or more for the period ended December 31, 1997 or the nine months ended
September 30, 1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------ ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION
- ----------------------------------------------------------------- -------- -------- ------- ------------
<S> <C> <C> <C> <C>
Arol I. Buntzman,
Chairman of the Board and Chief Executive Officer.............. 1997 $136,250 $35,600 $7,020(1)
1998(2) 150,000 60,000 3,927(1)
</TABLE>
- ------------------
(1) Represents automobile allowance.
(2) Nine months ended September 30, 1998.
EMPLOYMENT AGREEMENTS
Each of Dr. Buntzman, Dr. McGrath and Messrs. Goldenberg, Caven and
Mollitor has entered into an employment agreement with the Company.
The employment agreement with Dr. Buntzman provides for his employment as
Chairman and Chief Executive Officer at an annual salary of $240,000.
The employment agreement with Dr. McGrath provides for his employment as
President at an annual salary of $138,000.
The employment agreement with Mr. Goldenberg provides for his employment as
Chief Financial Officer at an annual salary of $114,000.
The employment agreement with Mr. Caven provides for his employment as Vice
President / Director of Distance Learning at an annual salary of $70,000.
The employment agreement with Mr. Mollitor provides for his employment as
Vice President of Operations at an annual salary of $120,000.
Each of the employment agreements expires December 31, 2001. The employment
agreements entitle the officers to participate in the health, insurance, pension
and other benefits, if any, generally provided to employees
29
<PAGE>
of the Company and Dr. Buntzman's and Dr. McGrath's agreements entitle them to
additional life insurance equal to three times their respective salaries. The
employment agreements also provide that, with certain exceptions, until
18 months after the termination of employment with the Company, the officer may
not induce employees to leave the employ of the Company or participate in any
capacity in any business activities that compete with the business conducted by
the Company during the term of the employment agreement.
The Company may terminate the employment of the officers upon death or
extended disability or for cause (as defined in each respective agreement). If
employment is terminated by the Company without cause, the agreements generally
provide the Company must pay the officer's salary and health and insurance
benefits until the earlier of a specified date or the scheduled termination date
of the employment agreement or, in the case of Drs. Buntzman and McGrath, until
36 months after termination of their employment.
On October 1, 1998, the Company entered into an agreement with Dr. Arol I.
Buntzman providing for payments to him, in the event his employment with the
Company is terminated after a change in control of the Company (as defined)
during the term of the agreement. The agreement expires September 30, 2001, but
is subject to automatic extension to December 31, 2001, and, thereafter, for
successive one-year terms, unless otherwise terminated by either party. The
agreement requires severance payments to Dr. Buntzman of 2.99 times the sum of
his base salary and the highest annual bonus paid to him during the three
previous years and the continuation of his medical and dental insurance
benefits. The agreement requires these payments to be made in equal installments
over a 36 month period and for the insurance benefits to continue for
36 months.
1998 INCENTIVE PLAN
The 1998 Incentive Plan (the "1998 Plan"), which was adopted by the Board
of Directors in October 1998 and subsequently approved by EVC's stockholders and
is intended to benefit the Company by (i) assisting it in recruiting and
retaining employees and non-employee directors, advisors and independent
consultants with ability and initiative, (ii) providing greater incentive for
employees and consultants of the Company and (iii) associating the interest of
employees and consultants with those of the Company and its stockholders through
opportunities for increased stock ownership.
The Company's Board of Directors or the Compensation Committee can
administer the 1998 Plan. Upon completion of this offering, the administration
of the 1998 Plan will be delegated by the Board of Directors to the Compensation
Committee (the "Administrator").
The Company's employees, advisors, independent consultants, and directors
are eligible to participate in the 1998 Plan. The Administrator will select the
individuals who will participate in the 1998 Plan ("Participants"). The
Administrator may, from time to time, grant stock options or stock awards.
Options granted under the 1998 Plan may be qualified incentive stock
options ("ISOs") or non-qualified stock options. The option price will be fixed
by the Administrator at the time the option is granted, but the price cannot be
less than the fair market value of the stock on the date of grant in the case of
an ISO. The option price must be paid in cash or, if permitted by the
Administrator, may be paid with shares of Common Stock or with a combination of
cash and Common Stock or in installments. Options are non-transferable except
upon death. The Administrator will also determine the vesting and exercisability
of options, except that ISO's cannot be exercised more than 10 years after being
granted.
Participants may also be awarded shares of Common Stock pursuant to a stock
award. The Administrator, in its discretion, may prescribe that a Participant's
right in a stock award shall be nontransferable, forfeitable or otherwise
restricted.
The 1998 Plan provides that in most circumstances outstanding options will
become exercisable and outstanding stock awards will be earned in full and
nonforfeitable in the event of a "change in control" of the Company (as defined
in the 1998 Plan).
All stock options and stock awards granted under the 1998 Plan will be
evidenced by written agreements between the Company and the Participant. The
maximum aggregate number of shares of Common Stock which may be issued under the
1998 Plan is 680,000.
30
<PAGE>
No option or stock award may be granted under the 1998 Plan after
September 30, 2008. The Board may terminate the 1998 Plan sooner without further
action by stockholders. The Board also may amend the 1998 Plan, except that no
amendment may adversely affect the rights of a Participant without the
Participant's consent.
Generally, unless the applicable stock option agreement provides otherwise,
a stock option may be exercised only while the Participant remains employed by
the Company or within 90 days thereafter, or up to six months after his or her
death or total permanent disability. Also a stock option will terminate
immediately if the Participant's employment is terminated for cause or he or she
leaves the Company voluntarily without the consent of the Company. In general,
stock options may not be transferred, assigned, pledged or otherwise
transferred.
CERTAIN TRANSACTIONS
In connection with the Company's organization in March 1997, Messrs.
Buntzman, McGrath and Goldenberg, all of whom are executive officers and
directors of the Company, purchased 2,000,000, 1,000,000 and 200,000 shares of
Common Stock, respectively, for $.0001 per share. The Company subsequently
issued an additional 3,000 shares of Common Stock to Mr. Goldenberg for
financial consulting services rendered March 1997 to October 1997 when he
changed his status from part-time to full-time Chief Financial Officer of the
Company. In September 1998 Dr. McGrath sold 136,000 shares of Common Stock to
B&H Investments Limited, a principal stockholder of the Company, at $4.00 per
share. Drs. Buntzman and McGrath may be deemed promoters of the Company.
In January and February 1998, the Company issued warrants to Tayside
Trading Ltd., a principal stockholder of the Company, to purchase 72,000 shares
of Common Stock at $3.00 per share as a finder's fee in connection with the
Company's receipt of gross proceeds of $1,072,500 from the issuance in a private
placement of 390,000 shares of Common and warrants to purchase 156,000 shares of
Common Stock at $3.00 per share.
As of March 1998, the Company entered into a three year consulting
agreement with Arthur H. Goldberg, who will become a director of the Company
upon the consummation of this offering. The agreement provides that
Mr. Goldberg will help the Company to obtain financing and agreements with
corporate customers and education providers and in strategic planning and
corporate development. The agreement entitles Mr. Goldberg to 5% of revenues
received by the Company from activities, if any, with one education provider
with which the Company does not currently have an agreement. The agreement also
grants Mr. Goldberg seven year options to purchase (i) 50,000 shares of Common
Stock at $3.50 per share, of which options to purchase 25,000 shares vested
immediately and options to purchase an additional 25,000 shares vested in
September 1998 and (ii) an additional 150,000 shares of Common Stock at $3.50
per share, of which options to purchase 50,000 shares vest on each anniversary
of the agreement while the agreement remains in effect.
As of May 1998, the Company entered into a five year consulting agreement
with William Coda, who will become a director of the Company upon the
consummation of this offering. The agreement provides that Mr. Coda will assist
the Company in obtaining agreements with additional corporate customers. The
agreement entitles Mr. Coda to 2.5% of payments actually collected by the
Company for services provided by it to corporate customers with which the
Company contracts as a result of Mr. Coda's direct involvement. The agreement
also provides for the payment to Mr. Coda of $5,000 per month for his services,
in addition to such percentage compensation. The agreement is terminable by the
Company upon 30 days notice to Mr. Coda.
31
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of September 30, 1998, the beneficial
ownership of Common Stock by each person (or group of affiliated persons) known
by the Company to own beneficially more than five percent of the outstanding
shares of Common Stock, each director and director designee and the Named
Executive Officer of the Company, and all directors, director designees and
executive officers as a group. Except as indicated in the footnotes to the
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF TOTAL SHARES
COMMON STOCK ---------------------------------
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- -------------------------------------------------------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Arol I. Buntzman.............................................. 2,000,000(2) % %(3)
John J. McGrath............................................... 864,000(2) (3)
Richard Goldenberg............................................ 173,000(4) (3)
Tayside Trading Ltd .......................................... 772,000(5)
125/5 Sanhebria Murchevet
Jerusalem, Israel
DEWI Investments Limited ..................................... 1,066,667
37 Bar Ilan Street
Jerusalem, Israel
B&H Investments Limited ...................................... 536,817(6)
50 Town Range
Gibraltar
William R. Coda*.............................................. --
Arthur H. Goldberg*........................................... 78,000(7)
All directors, director designees and executive officers as a
group (5 persons)........................................... 3,115,000(4)(7)
</TABLE>
- ------------------
<TABLE>
<S> <C>
* Director designee
(1) Unless otherwise indicated, the address for each stockholder is c/o Educational Video Conferencing, Inc., 35
East Grassy Sprain Road, Suite 504, Yonkers, New York 10710.
(2) Pursuant to an agreement between Drs. Buntzman and McGrath, Dr. Buntzman has the right to vote the shares of
Common Stock owned by Dr. McGrath until March 1, 2000. This agreement also grants Dr. Buntzman a right of
first refusal to purchase Dr. McGrath's shares if Dr. McGrath elects to sell all or any part of his shares or
leaves the Company's employ for any reason prior to March 1, 2000, other than as a result of his death,
permanent disability or termination of his employment by the Company without cause. The agreement provides
that the price to be paid by Dr. Buntzman for such shares will be the lower of $2.00 per share or the average
trading price of the Common Stock during the 30-day period prior to the date of the termination of
Dr. McGrath's employment. See "Certain Transactions."
(3) If the Underwriters elect to exercise in full their overallotment option, Dr. Buntzman will beneficially own
shares of Common Stock, representing % of the outstanding shares, Dr. McGrath will own
shares of Common Stock, representing % of the outstanding shares and Mr. Goldenberg will own shares
of Common Stock, representing % of the outstanding shares. See "Certain Transactions" and "Underwriting."
(4) Excludes 30,000 shares of Common Stock owned by Mr. Goldenberg's adult children, as to which shares
Mr. Goldenberg disclaims beneficial ownership.
(5) Includes currently exercisable warrants to purchase 272,000 shares of Common Stock. Excludes warrants to
purchase 100,000 shares of Common Stock which are not exercisable prior to October 27, 1999. See "Certain
Transactions" and "Shares Eligible for Future Sale."
(6) Includes currently exercisable warrants to purchase 93,090 shares of Common Stock. See "Shares Eligible for
Future Sale."
(7) Includes currently exercisable warrants and options to purchase 58,000 shares of Common Stock. See "Certain
Transactions" and "Shares Eligible for Future Sale."
</TABLE>
32
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of the material terms of the Common Stock does not
purpont to be complete and is subject in all respects to applicable Delaware law
and to the provisions of the Company's Certificate of Incorporation and By-Laws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part.
GENERAL
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, par value $0.0001 per share, and 1,000,000 shares of preferred
stock, par value $0.0001 per share (the "Preferred Stock"). Upon consummation of
this offering, shares of Common Stock and no shares of Preferred
Stock will be issued and outstanding. An additional shares of Common
Stock will be outstanding if the Underwriters' over-allotment option is
exercised in full, and an additional shares of Common Stock will be
issuable upon exercise of the Representative's Warrants.
COMMON STOCK
Voting Rights. Each holder of Common Stock outstanding is entitled to one
vote per share on all matters submitted to a vote of the Company's stockholders,
including the election of directors. Holders will not have cumulative voting
rights in connection with the election of directors or any other matter.
Any action that may be taken at a meeting of the stockholders may be taken
by written consent in lieu of a meeting if the Company receives consents signed
by stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit Drs. Buntzman and McGrath and
certain other principal stockholders to take action regarding certain matters
without providing other stockholders the opportunity to voice dissenting views
or raise other matters. See "Risk Factors--Control by Existing Stockholders."
Liquidation. In the event of any dissolution, liquidation or winding up of
the affairs of the Company, whether voluntary or involuntary, holders of the
Common Stock are entitled to share ratably in all assets remaining after payment
of the debts and other liabilities of the Company and after satisfaction of the
liquidation preference of any shares of Preferred Stock then outstanding.
Dividends, Distributions and Stock Splits. Subject to the preferential
rights of any Preferred Stock that may at the time be outstanding, each share of
Common Stock will have an equal and ratable right to receive dividends when, if
and as declared from time to time by the Board of Directors out of funds legally
available therefor. The Company does not anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy."
Other Provisions. The holders of Common Stock are not entitled to
preemptive rights. There are no redemption or sinking fund provisions applicable
to the Common Stock.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 1,000,000 shares of
Preferred Stock in one or more series, to fix the rights, preferences,
privileges and restrictions granted to or imposed upon any unissued shares of
Preferred Stock and to fix the number of shares constituting any series and the
designations of such series, without any further vote or action by the
stockholders. The Board of Directors, without stockholder approval, will be able
to issue Preferred Stock with voting and conversion rights which could adversely
affect the voting power of the holders of Common Stock. The Company has no
present plans to issue any Preferred Stock.
CERTAIN ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
Following consummation of the offering, the Company will be subject to the
"business combination" provisions of Section 203 of Delaware Law. In general,
such provisions prohibit a publicly held Delaware corporation from engaging in
various "business combination" transactions with any "interested stockholder"
33
<PAGE>
(in general, a stockholder owning 15% of a company's outstanding voting
securities) for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
o the transaction is approved by the corporation's board of directors prior
to the date the stockholder became an interested stockholder;
o upon consummation of the transaction which resulted in the stockholder's
becoming an interested stockholder, the stockholder owned at least 85% of
the shares of stock entitled to vote generally in the election of
directors (the "voting stock") of the corporation outstanding at the time
the transaction commenced, excluding, for purposes of determining the
number of shares outstanding, those shares owned by (i) persons who are
directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
o on or after such date, the business combination is approved by the board
of directors and authorized by the affirmative vote of at least 66 2/3%
of the outstanding voting stock not owned by the interested stockholder.
CERTAIN OTHER PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND
BY-LAWS
The Company's By-Laws require that a stockholder intending to present a
proposal or nominate any directors at an annual or special meeting give advance
written notice of such proposal or nomination. No business other than that
stated in the notice may be transacted at any special meeting of stockholders.
In September 1998, the Company adopted a classified Board of Directors
effective upon the completion of this offering. The directors will be divided
into three classes, two consisting of two directors and one consisting of one
director. The existence of a classified Board of Directors may inhibit a change
of control of the Company. See "Management--Board Composition."
TRANSFER AGENT AND REGISTRAR
has been appointed as transfer agent and registrar
for the Common Stock.
LISTING
The Company has applied for listing of the Common Stock on The American
Stock Exchange under the symbol, " ."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock. The Company cannot predict the effect, if any, that sales of shares of
the Common Stock to the public or the availability of shares for sale to the
public will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of a significant number of shares of Common Stock in
the public market, or the perception that such sales may occur, could adversely
affect the prevailing market price of the Common Stock.
Upon consummation of this offering, the Company will have
shares of Common Stock outstanding ( shares if the Underwriters'
over-allotment option is exercised in full). Of the shares outstanding after
this offering, the shares of Common Stock sold in this offering will
be freely tradeable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), except for any such shares which may be acquired
by an "affiliate" of the Company, which shares will be subject to the volume
limitations of Rule 144 under the Securities Act. As defined in Rule 144, an
"affiliate" of an issuer is a person who, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, such issuer. The remaining shares of Common Stock will be
"restricted securities" (as that phrase is defined in Rule 144) and may not be
resold in the absence of registration under the Securities Act or pursuant to an
exemption from such registration, including the exemption provided by Rule 144
under the Securities Act. Holders of shares of the Common Stock and
shares of Common Stock subject to warrants have piggyback
registration rights following this offering. Such holders include Tayside
34
<PAGE>
Trading Limited, Dewi Investments Limited, and B & H Investments Limited, as to
a total of shares of Common Stock and shares of Common
Stock and Arthur H. Goldberg as to 20,000 shares of Common Stock and 8,000
shares of Common Stock subject to warrants.
Subject to the foregoing and to the lock-up agreements described below,
under Rule 144 as currently in effect, a stockholder, including an affiliate,
who has beneficially owned his or her restricted shares for at least one year
from the date they were acquired from the Company or an affiliate of the Company
may sell, within any three-month period, a number of such shares that does not
exceed certain volume restrictions, provided that certain requirements
concerning availability of public information, manner of sale and notice of sale
are satisfied. In addition, under Rule 144(k), if a period of at least two years
has elapsed from the date any restricted shares were acquired from the Company
or an affiliate, a stockholder that is not an affiliate of the Company at the
time of sale and that has not been an affiliate for at least three months prior
to the sale is entitled to sell those shares without compliance with the
requirements of Rule 144 set forth above. An affiliate of the Company, however,
must comply with the volume restrictions and the other requirements referred to
above.
Immediately after this offering, there will be options and warrants to
purchase approximately shares of Common Stock outstanding. Subject
to the provisions of existing lock-up agreements, holders of options to purchase
shares may rely on the resale provisions of Rule 701 under the
Securities Act, which permits nonaffiliates to sell their shares without having
to comply with the current public information, holding period, volume limitation
or notice provisions of Rule 144 and permits affiliates to sell their shares
without having to comply with the holding period requirement of Rule 144, in
each case beginning 90 days after the consummation of this offering. In
addition, immediately after this offering, the Company intends to file a
registration statement on Form S-8 covering all options granted under the 1998
Plan. Shares of Common Stock registered under such registration statement will,
subject to Rule 144 volume limitations applicable to affiliates, be available
for sale in the open market, unless such shares are subject to vesting
restrictions with the Company or existing lock-up agreements. See
"Management--1998 Incentive Plan."
For information regarding the lock-up agreements restricting transfer of
securities owned by the Company's existing stockholders, without the consent of
the Representative, see "Underwriting."
35
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part (the "Underwriting Agreement"),
the Underwriters named below, acting through Prime Charter Ltd., as
Representative, have severally agreed to purchase from the Company, and the
Company has agreed to sell to the Underwriters, an aggregate of
shares of Common Stock. The Underwriting Agreement provides that the
Underwriters' obligations to pay for and accept delivery of those shares of
Common Stock are subject to certain conditions precedent, and that the
Underwriters are committed to purchase all of those shares of Common Stock if
any shares are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased as set forth in the Underwriting
Agreement.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- -------------------------------------------------------------------------------- ----------
<S> <C>
Prime Charter Ltd...............................................................
----------
Total......................................................................
----------
----------
</TABLE>
The Underwriters propose to offer the shares of Common Stock offered hereby
to the public at the public offering price set forth on the cover page of this
prospectus and to certain dealers, who are members of the National Association
of Securities Dealers, Inc. (the "NASD"), at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $
per share to other dealers that are members of the NASD. After the commencement
of this offering, the public offering price, the concession and the reallowance
may be changed.
The Company has agreed to pay the Representative a non-accountable expense
allowance of 3% of the aggregate offering price of the shares of Common Stock in
this offering (including any shares of Common Stock purchased pursuant to the
over-allotment option), of which $100,000 has been paid by the Company to cover
some of the due diligence expenses and underwriting costs related to this
offering. The Company has also agreed to pay the fees and expenses of counsel to
the Underwriters up to a maximum of $200,000.
The Company has agreed to indemnify the Underwriters against certain
liabilities in connection with the offering, including liabilities under the
Securities Act.
The Underwriting Agreement provides that Representative has the right to
designate a representative to observe meetings of the Company's Board of
Directors or require the Company to use its best efforts to elect the
Representative's nominee to the Company's Board of Directors. See "Management."
The Company has agreed to sell to the Representative or its designees, for
nominal consideration, the Representative's Warrants to purchase an aggregate of
shares of Common Stock. The shares of Common Stock subject to the
Representative's Warrants will be identical to the shares of Common Stock
offered to the public hereby in all respects. The Representative's Warrants will
be exercisable for a four-year period commencing one year after the effective
date of the Registration Statement of which this Prospectus is a part (the
"Effective Date") at a per share exercise price equal to 120% of the initial
public offering price of the Common Stock. The Representative's Warrants will be
restricted from sale, transfer, assignment or hypothecation for a period of one
year from the Effective Date, except to officers or partners of the
Representative or those of the Underwriters. During the period beginning one
year from the Effective Date and ending five years thereafter, the holder of the
Representative's Warrants may require the Company to register for resale to the
public the shares of Common Stock issued or issuable upon exercise of the
Representative's Warrants. Such demand registration right may be exercised once
during such period. In addition, during the period ending seven years from the
Effective Date, the Company has agreed to include such shares of Common Stock in
any appropriate registration statement which is filed by the Company. The
Representative's Warrants will contain anti-dilution provisions providing for
appropriate adjustment of the exercise price and number of shares that may be
purchased upon the occurrence of certain events. The Representative's Warrants
may be exercised by paying the exercise price in cash, through the surrender of
shares of Common Stock, through a reduction in the number of shares covered
thereby, or by using a combination of such methods.
36
<PAGE>
The Underwriting Agreement provides that the Company and its affiliates,
other than individual stockholders, shall grant the Representative a right of
first refusal with respect to any sale of securities to be made by the Company
or such affiliates at any time during the three-year period commencing on the
Effective Date.
The Company and Drs. Buntzman and McGrath and Mr. Goldenberg have granted
to the Underwriters options, exercisable during the 45-day period after the
Effective Date, to purchase up to additional shares of Common Stock at
the public offering price, less the underwriting discounts and commissions and a
pro rata portion of the non-accountable expense allowance. Of this amount, the
first shares will be sold by the Company and the remaining shares
will be sold by such selling stockholders. See "Certain Transactions." The
Underwriters may exercise these options solely to cover over-allotments, if any,
made in the sale of the shares of Common Stock offered hereby. To the extent
that these options are exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
such additional shares of Common Stock as the percentage of shares of Common
Stock it was originally obligated to purchase pursuant to the Underwriting
Agreement.
Prior to this offering, there has been no public market for the Common
Stock. Accordingly, the public offering price for the Common Stock was
determined by negotiation between the Company and the Representative. Among the
factors considered in determining the public offering price were the services,
the experience of management, the economic conditions of the Company's industry
in general, the general condition of the equity securities market and the demand
for similar securities of companies considered comparable to the Company and
other relevant factors. There can be no assurance, however, that the prices at
which the Common Stock will sell in the public market after this offering will
not be lower than the price at which the shares of Common Stock are sold by the
Underwriters.
Until the distribution of Common Stock in this offering is completed, rules
of the SEC may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the Representative is permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock. If the Underwriters create a short position in the Common Stock in
connection with this offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representative may
reduce the short position by purchasing Common Stock in the open market. The
Representative may also elect to reduce any short position by exercising all or
part of the over-allotment option described above. In addition, the
Representative may impose a penalty bid on certain Underwriters and selling
group members. This means that if the Representative purchases shares of Common
Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, it may reclaim the amount of the
selling concession from the Underwriters and selling group members that sold
those shares as part of this offering. In general, purchases of a security for
the purpose of stabilization or to reduce a short position could cause the price
of the security to be higher than it might be in the absence of such purchases.
The imposition of a penalty bid might also have an effect on the price of a
security to the extent that it discouraged resales of that security. Neither the
Company nor any of the Underwriters makes any representation or predictions as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the Common Stock. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Representative will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Company and its existing security holders have agreed that they will
not, directly or indirectly, without the prior written consent of the
Representative, for a period of 12 months after the date of this Prospectus
sell, offer to sell, solicit an offer to buy, contract to sell, pledge, grant
any option for the sale of, or otherwise transfer or dispose of or cause the
transfer or disposition of, any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for any shares of Common Stock
or exercise any registration rights with respect to any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for any shares
of Common Stock. The foregoing restrictions do not apply to grants or awards
under the 1998 Plan or to shares sold to the Underwriters to cover
over-allotment.
37
<PAGE>
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by FischbeinoBadillooWagneroHarding, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Proskauer Rose LLP, New
York, New York.
EXPERTS
The financial statements of the Company for the periods ended December 31,
1997 and September 30, 1998 included in this Prospectus and Registration
Statement have been so included in reliance upon the report of Goldstein Golub
Kessler LLP, independent certified public accountants, given upon the authority
of such firm as experts in accounting and auditing.
38
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report........................................................................ F-2
Financial Statements:
Balance Sheet as of December 31, 1997 and September 30, 1998........................................ F-3
Statement of Operations for the Period from March 4, 1997 (date of inception) to December 31, 1997
and for the Period from March 4, 1997 (date of inception) to September 30, 1997 (unaudited) and
for the Nine-Month Period Ended September 30, 1998 ............................................... F-4
Statement of Stockholders' Equity for the Period from March 4, 1997 (date of inception) to
December 31, 1997 and for the Nine-Month Period Ended September 30, 1998.......................... F-5
Statement of Cash Flows for the Period from March 4, 1997 (date of inception) to
December 31, 1997 and for the Period from March 4, 1997 (date of inception) to
September 30, 1997 (unaudited) and for the Nine-Month Period Ended
September 30, 1998................................................................................ F-6
Notes to Financial Statements....................................................................... F-7--F-14
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Educational Video Conferencing, Inc.
We have audited the accompanying balance sheets of Educational Video
Conferencing, Inc. as of December 31, 1997 and September 30, 1998, and the
related statements of operations, stockholders' equity, and cash flows for the
period from March 4, 1997 (date of inception) to December 31, 1997 and for the
nine-month period ended September 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Educational Video Conferencing,
Inc. as of December 31, 1997 and September 30, 1998, and the results of its
operations and its cash flows for the period from March 4, 1997 (date of
inception) to December 31, 1997 and for the nine-month period ended
September 30, 1998 in conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
October 5, 1998
New York, New York
F-2
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................................... $ 127,279 $2,175,766
Accounts receivable, net of allowance for doubtful accounts of $7,000 at
September 30, 1998............................................................. -- 107,419
Subscriptions receivable.......................................................... 690,000 --
Prepaid expenses.................................................................. 11,238 140,625
---------- ----------
Total current assets................................................................ 828,517 2,423,810
Property and Equipment, net of accumulated depreciation of $159,304 at
September 30, 1998................................................................ 1,190,251 1,205,033
Deferred Income Tax Asset, net of valuation allowance of $77,000 and $384,000,
respectively...................................................................... -- --
Other Assets........................................................................ 14,292 7,832
Debt Issue Costs.................................................................... 81,903 --
Deferred Offering Costs............................................................. -- 155,000
---------- ----------
Total Assets........................................................................ $2,114,963 $3,791,675
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses............................................. $ 534,648 $ 258,173
Current portion of notes payable.................................................. 210,177 50,000
---------- ----------
Total current liabilities........................................................... 744,825 308,173
Notes Payable, net of current portion............................................... 235,000 --
---------- ----------
Total liabilities................................................................... 979,825 308,173
---------- ----------
Commitments
Stockholders' Equity:
Preferred stock--$.0001 par value; authorized 1,000,000 shares, none issued....... -- --
Common stock--$.0001 par value; authorized 10,000,000 shares, issued and
outstanding 4,658,556 shares and 6,020,314 shares, respectively................ 466 602
Additional paid-in capital........................................................ 1,856,794 6,064,619
Accumulated deficit............................................................... (722,122) (2,581,719)
---------- ----------
Stockholders' equity................................................................ 1,135,138 3,483,502
---------- ----------
Total Liabilities and Stockholders' Equity.......................................... $2,114,963 $3,791,675
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 4, 1997 MARCH 4, 1997 NINE MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) ENDED
TO DECEMBER 31, TO SEPTEMBER 30, SEPTEMBER 30,
1997 1997 1998
------------------- ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
Net revenue............................................... $ -- $ -- $ 174,495
Interest income........................................... -- -- 39,620
----------- ----------- -----------
Total revenue............................................. -- -- 214,115
----------- ----------- -----------
Operating expenses:
Cost of sales........................................... -- -- 147,629
Salaries and benefits................................... 333,661 104,090 1,027,416
Marketing, brochures and student registration costs..... 158,486 -- 314,683
Professional fees....................................... 60,842 6,945 52,963
Interest and financing costs............................ 58,536 7,913 107,822
Depreciation............................................ -- -- 159,304
Other................................................... 110,597 46,054 263,895
----------- ----------- -----------
Operating expenses........................................ 722,122 165,002 2,073,712
----------- ----------- -----------
Net loss.................................................. $ (722,122) $ (165,002) $(1,859,597)
----------- ----------- -----------
----------- ----------- -----------
Basic loss per common share............................... $ (.19) $ (.04) $ (.37)
----------- ----------- -----------
----------- ----------- -----------
Weighted-average number of common shares outstanding...... 3,845,901 3,690,000 5,043,169
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL
NUMBER PAID-IN ACCUMULATED STOCKHOLDERS'
OF SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Period from March 4, 1997 (date of inception)
to December 31, 1997:
Issuance of common stock for cash and
reduction of additional paid-in capital
for stock split........................... 3,690,000 $369 $ (169) $ -- $ 200
Issuance of common stock for cash............ 500,000 50 844,950 -- 845,000
Issuance of common stock for video
conferencing equipment.................... 117,647 12 391,048 -- 391,060
Issuance of common stock for services related
to raising equity......................... 100,000 10 (10) -- --
Issuance of common stock in connection with
private placement......................... 250,909 25 620,975 -- 621,000
Net loss..................................... -- -- -- (722,122) (722,122)
--------- ---- ---------- ----------- ----------
Balance at December 31, 1997................... 4,658,556 466 1,856,794 (722,122) 1,135,138
Nine months ended September 30, 1998:
Issuance of common stock for cash............ 1,066,667 107 3,599,900 -- 3,600,007
Issuance of common stock in connection with
private placement......................... 139,091 14 349,123 -- 349,137
Issuance of common stock upon conversion of
notes payable............................. 132,500 13 248,304 -- 248,317
Issuance of common stock for services
relating to raising equity................ 16,500 2 (2) -- --
Issuance of common stock for services........ 7,000 -- 10,500 -- 10,500
Net loss..................................... -- -- -- (1,859,597) (1,859,597)
--------- ---- ---------- ----------- ----------
Balance at September 30, 1998.................. 6,020,314 $602 $6,064,619 $(2,581,719) $3,483,502
--------- ---- ---------- ----------- ----------
--------- ---- ---------- ----------- ----------
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
MARCH 4, 1997 MARCH 4, 1997 NINE MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) ENDED
TO DECEMBER 31, TO SEPTEMBER 30, SEPTEMBER 30,
1997 1997 1998
------------------- ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (722,122) $ (165,002) $(1,859,597)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation....................................... -- -- 159,304
Amortization of debt issue costs................... 36,819 -- 81,903
Allowance for doubtful accounts.................... -- -- 7,000
Common stock issued for services................... -- -- 10,500
Changes in operating assets and liabilities:
Increase in accounts receivable.................... -- -- (114,419)
Increase in prepaid expenses....................... (11,238) -- (129,387)
(Increase) decrease in other assets................ (14,292) (1,792) 6,460
Increase (decrease) in accounts payable and accrued
expenses........................................ 534,648 25,443 (276,475)
----------- ----------- -----------
Net cash used in operating activities..................... (176,185) (141,351) (2,114,711)
----------- ----------- -----------
Cash flows used in investing activity--purchase of
property and equipment.................................. (695,074) -- (174,086)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable................. 350,000 170,000 --
Debt issue costs........................................ (118,722) (21,754) --
Net proceeds from issuance of common stock.............. 767,260 200 4,639,144
Deferred offering costs................................. -- -- (155,000)
Repayment of notes payable.............................. -- -- (110,177)
Expenses incurred in the conversion of notes payable to
common stock......................................... -- -- (36,683)
----------- ----------- -----------
Net cash provided by financing activities................. 998,538 148,446 4,337,284
----------- ----------- -----------
Net increase in cash and cash equivalents................. 127,279 7,095 2,048,487
Cash and cash equivalents at beginning of period.......... -- 127,279
----------- ----------- -----------
Cash and cash equivalents at end of period................ $ 127,279 $ 7,095 $ 2,175,766
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest................ $ -- $ -- $ 45,289
----------- ----------- -----------
----------- ----------- -----------
Supplemental schedule of noncash investing and financing
activities:
Conversion of notes payable to common stock............. $ -- $ -- $ 285,000
----------- ----------- -----------
----------- ----------- -----------
Issuance of common stock in exchange for video
conferencing equipment............................... $ 400,000 $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
Property and equipment acquired for note payable........ $ 95,177 $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
Subscription receivable for issuance of common stock.... $ 690,000 $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Educational Video Conferencing, Inc. (the "Company") was formed on
March 4, 1997. The Company delivers educational courses and programs to
employees of major corporations via interactive video conferencing systems.
Interactive video conferencing allows the instructor to see, hear and interact
with students as the students see, hear and interact with their instructor and
other students at multiple locations. The Company provides its corporate
customers with access to a number of educational providers and the marketing and
administrative services necessary to recruit, enroll and deliver courses and
programs to the corporation's employees. The Company serves as a marketing and
technology bridge between accredited colleges, universities and training
organizations that want to increase enrollment and tuition revenue from student
populations they otherwise could not serve, and corporations that want to raise
the education and skill levels of their employees.
The Company commenced its planned principal operations in February 1998.
In April 1998, pursuant to an agreement and plan of merger
(reincorporation), Educational Video Conferencing, Inc. ("EVC-NY"), a New York
corporation, merged into and with Educational Video Conferencing, Inc.
("EVC-DE"), a Delaware corporation. EVC-DE is the surviving corporation and
EVC-NY has ceased to exist.
The Company considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts.
The Company recognizes income ratably over the semester in which courses
are given. The Company began offering courses in February 1998. The courses
range from 8-week to 16-week periods meeting 1 or 2 times a week.
During the nine months ended September 30, 1998, two education providers
accounted for 100% (78% and 22%) of the Company's net revenue.
Property and equipment is recorded at cost. Depreciation is provided for by
the straight-line method over the estimated useful lives of the property and
equipment. All property and equipment purchased in 1997 was placed in service in
January 1998. Accordingly, no depreciation is recorded for the period ended
December 31, 1997.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates by management.
Actual results could differ from these estimates.
Debt issue costs associated with the private placement financings described
in Note 4 are being amortized by the straight-line method over the term of the
related debt. Accumulated amortization was $36,819 and $118,722 at December 31,
1997 and September 30, 1998, respectively.
Deferred offering costs represent costs attributable to a proposed initial
public offering (see Note 8). The Company intends to offset these costs against
the proceeds from this transaction. In the event that such offering is not
completed, these costs will be charged to operations.
Advertising costs are expensed as incurred. Marketing, brochures and
student registration costs are capitalized and amortized over the semester to
which the specific courses relate.
The Company employs the liability method of accounting for income taxes
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 109, under
which method recorded deferred income taxes reflect the tax consequences on
future years of temporary differences (differences between the tax basis of
assets and
F-7
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
liabilities and their financial amounts at year-end). The Company provides a
valuation allowance that reduces deferred tax assets to their net realizable
value.
The carrying values of financial instruments, including cash equivalents,
subscriptions receivable and short-and long-term debt, approximate fair market
values because of short maturities on interest rates that approximate current
rates available to a development stage company.
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per
Share, requires dual presentation of basic earnings per share ("EPS") and
diluted EPS on the face of all statements for all entities with complex capital
structures. Basic EPS is computed as net earnings divided by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable
through stock-based compensation including stock options, restricted stock
awards, warrants and other convertible securities. Diluted EPS is not presented
since the effect would be antidilutive.
The Company accounts for employee stock options in accordance with
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees. Under APB No. 25, the Company applies the intrinsic value method
of accounting and therefore does not recognize compensation expense for options
granted, because options are only granted at a price equal to the market price
on the day of grant. SFAS No. 123, Accounting for Stock-Based Compensation,
prescribes the recognition of compensation expense based on the fair value of
options as determined on the grant date. However, SFAS No. 123 allows companies
to continue applying APB No. 25 if certain pro forma disclosures are made
assuming hypothetical fair value method application (see Note 7).
During the nine-month period ended September 30, 1998, the Company adopted
SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 modifies the format
the Company uses to report total nonowner changes in stockholders' equity. These
changes will be shown together with net income in a new financial statement
category entitled "comprehensive income." Adoption of SFAS No. 130 had no effect
on the Company's financial position or results of operations and since the
Company has no items of other comprehensive income, it is not required to report
comprehensive income.
2. PROPERTY AND EQUIPMENT:
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, ESTIMATED
1997 1998 USEFUL LIFE
------------ ------------- -----------
<S> <C> <C> <C>
Furniture and fixtures........................................ $ 10,286 $ 21,460 5 years
Office computers.............................................. 26,439 72,829 5 years
Video teaching equipment...................................... 1,153,526 1,183,779 5 years
Computer software............................................. -- 64,036 5 years
Automobile.................................................... -- 22,233 5 years
---------- ----------- -------
1,190,251 1,364,337
Less accumulated depreciation................................. -- 159,304
---------- ----------- -------
$1,190,251 $ 1,205,033
---------- ----------- -------
---------- ----------- -------
</TABLE>
F-8
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Accounts payable.......................................................... $ 55,258 $ 35,940
Accrued bonuses........................................................... 35,600 100,000
Accrued professional fees................................................. 22,091 100,000
Accrued automobile........................................................ -- 22,233
Payable to video equipment provider....................................... 308,349 --
Accrued interest.......................................................... 21,000 --
Accrued finder's fees..................................................... 92,350 --
-------- ---------
$534,648 $ 258,173
-------- ---------
-------- ---------
</TABLE>
4. NOTES PAYABLE:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Promissory notes payable(a)............................................... $115,000 $ --
Convertible notes payable(b).............................................. 235,000 50,000
Note payable--equipment loan, noninterest-bearing and equipment note
payable due on September 30, 1998....................................... 95,177 --
-------- -------
Total notes payable..................................................... 445,177 50,000
Less current portion...................................................... 210,177 50,000
-------- -------
Notes payable, net of current portion................................... $235,000 $ -0-
-------- -------
-------- -------
</TABLE>
- ------------------
(a) In June 1997, the Company completed a private placement in which it received
in the aggregate gross proceeds of $115,000 from the issuance of its 18%
promissory notes and warrants to purchase 23,000 shares of common stock for
$1.00 per share during the five-year period commencing on the closing of the
private placement. The transaction costs attributable to this private
placement were $36,166. No value was assigned to the warrants due to
immateriality.
In April 1998, $100,000 principal amount of the promissory notes was
converted into 40,000 shares of common stock and warrants to purchase 16,000
shares of common stock for $3.00 per share. Transaction costs incurred in
connection with this conversion were $9,171. The remaining $15,000 principal
amount of promissory notes was repaid in June and July 1998.
(b) Between August and December 1997, the Company completed private placements
for which it received in the aggregate gross proceeds of $235,000 from the
issuance of 18% convertible promissory notes and warrants, expiring in 2002,
to purchase 47,000 shares of common stock at $2.00 per share. No value was
assigned to the warrants due to immateriality. The notes are due and payable
on October 15, 2000 and are convertible into the common stock at the rate of
$2.00 per share. In June and July 1998, $185,000 principal amount of notes
was converted into 92,500 shares of common stock and $50,000 principal
amount is still outstanding. In connection with these private placements,
the Company incurred transaction costs amounting to $82,556 and, upon
conversion, incurred $27,512 of expenses and issued 16,500 shares of common
stock as a broker's commission.
F-9
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
5. INCOME TAXES:
The tax effects of loss carryforwards and the valuation allowance that give
rise to deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Net operating losses...................................................... $ 77,000 $ 384,000
Less valuation allowance.................................................. (77,000) (384,000)
-------- ---------
Deferred tax assets....................................................... $ -0- $ -0-
-------- ---------
-------- ---------
</TABLE>
As of December 31, 1997 and September 30, 1998, the Company had net
operating loss carryforwards available to offset future taxable income of
approximately $516,000 and $2,584,000, respectively, which expire in various
years through 2013. Between October 1997 and August 1998, the Company completed
private offerings of securities. The Company intends to have an initial public
offering ("IPO") of its securities. Under Section 382 of the Internal Revenue
Code, these activities effect an ownership change and thus may severely limit,
on an annual basis, the Company's ability to utilize its net operating loss
carryforwards. The Company uses the lowest marginal U.S. corporate tax of 15% to
determine deferred tax amounts and the related valuation allowance because the
Company had no taxable earnings through September 30, 1998.
6. COMMITMENTS:
The Company leases office space under noncancelable operating leases which
expire in August 2002. The Company also leases space and other services for its
multiport control units that expires in 2000. The leases are subject to
escalations for increases in the Company's share of increases in real estate
taxes and other expenses.
Minimum future obligations under these leases are as follows:
<TABLE>
<S> <C>
Three-month period ending December 31, 1998........................................................... $ 41,238
Year ending December 31,
1999........................................................................................ 199,159
2000........................................................................................ 202,519
2001........................................................................................ 88,916
2002........................................................................................ 61,015
--------
$592,847
--------
--------
</TABLE>
Rent expense charged to operations for the period from March 4, 1997 (date
of inception) to December 31, 1997 and for the nine months ended September 30,
1998 amounted to $7,654 and $35,205, respectively.
The Company has entered into employment agreements with executive officers
of the Company which provide for compensation and other benefits as set forth in
the agreements. Aggregate compensation under the agreements is as follows:
<TABLE>
<S> <C>
Three-month period ending December 31, 1998......................................................... $ 171,000
Year ending December 31,
1999...................................................................................... 682,000
2000...................................................................................... 682,000
2001...................................................................................... 682,000
----------
$2,217,000
----------
----------
</TABLE>
The Company has a consulting agreement with an individual who will become a
director of the Company upon the consummation of the proposed IPO. The agreement
entitles the consultant to 2.5% of payments actually
F-10
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
6. COMMITMENTS:--(CONTINUED)
collected by the Company for services provided by it to corporate customers with
which the Company contracts as a result of the consultant's direct involvement.
The agreement also provides for payment of $5,000 per month to the consultant.
The agreement expires in May 2003, unless earlier terminated, including upon 30
days notice to the consultant.
The Company has a consulting agreement with another individual who will
become a director of the Company upon the consummation of the proposed IPO. The
agreement entitles the consultant to 5% of revenues received by the Company from
activities, if any, with one education provider with which the Company does not
currently have an agreement. The agreement grants the consultant seven year
options to purchase up to 200,000 shares of common stock, at $3.50 per share, of
which options to purchase 50,000 shares vested prior to September 30, 1998 and
options to purchase an additional 50,000 shares of common stock vest each March
of 1999 through 2001.
7. STOCKHOLDERS' EQUITY:
Effective October 1997, the Company's board of directors approved a
20,052-for-1 stock split, whereby the number of shares of outstanding common
stock was increased from 184 to 3,690,000. The stated par value of each share
was changed from no par value to $.0001. A total of $169 was reclassified from
the Company's additional paid-in capital account to the Company's common stock
account. All share and per share amounts have been restated to retroactively
reflect the stock split.
In May 1997, in connection with an employment agreement, the Company issued
options to this employee to purchase 30,000 shares of common stock at $2.40 per
share. The options, which vest at the rate of 10,000 per year, are not
exercisable until one year from the effective date of the Company's proposed IPO
and expire 10 years from the effective date of the IPO.
In May 1997, the Company issued warrants to an unaffiliated entity to
purchase up to 75,000 shares of common stock for $2.72 per share as additional
consideration for entering into a multiyear contract. The warrants are not
exercisable until one year from the effective date of the Company's proposed IPO
and expire six years from the effective date of the proposed IPO.
In October 1997, the Company received gross proceeds of $1,000,000 from the
issuance of 500,000 shares of common stock and warrants, expiring in 2002, to
purchase 300,000 shares of common stock. Of these warrants, 200,000 are
exercisable at $2.00 per share and 100,000 are exercisable at $10.00 per share.
No value was assigned to the warrants due to immateriality. Transaction costs
incurred in connection with this issuance were $155,000. Additionally, in
November 1997, the Company issued 100,000 shares of common stock as a finder's
fee in connection with this transaction.
In October 1997, the Company entered into an agreement, as amended, with a
provider of interactive video equipment (the "Provider") under which the Company
agreed to purchase approximately $1,000,000 of video conferencing systems. The
agreement also obligates the Company to co-market the purchased products, among
other things. The purchase price was $505,163 in cash, $400,000 offset by the
Provider's purchase of 117,647 shares of the Company's common stock and a
$95,177 noninterest-bearing note due on September 30, 1998. At December 31,
1997, the Company owed the Provider $155,163 related to this transaction and
$153,186 for additional purchases which are included in accounts payable and
accrued expenses in the accompanying financial statements.
Between January 1998 and April 1998, the Company received gross proceeds of
$1,072,500 from the issuance of 390,000 shares of common stock and warrants,
expiring in 2003, to purchase 156,000 shares of common stock at $3.00 per share.
As of December 31, 1997, the Company had received subscriptions for an
F-11
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY:--(CONTINUED)
aggregate of $690,000 to purchase 251,000 shares of common stock and warrants,
expiring in 2003, to purchase 100,400 shares of common stock. The $690,000 was
received by the Company by January 13, 1998. Transaction costs incurred in
connection with this private placement were approximately $99,000. Additionally,
warrants to purchase 103,591 shares of common stock for $3.00 per share were
issued as a finder's fee in connection with these transactions.
In March 1998, in connection with the employment of a vice-president, the
Company issued options to purchase 100,000 shares of common stock. The options
vest ratably over 10 years with exercise prices ranging from $10.00 per share to
$20.00 per share.
Between May and August 1998, the Company received gross proceeds of
$4,000,000 for the issuance of 1,066,667 shares of common stock. The transaction
costs incurred in connection with this private placement were approximately
$400,000 and the issuance to a finder of warrants, expiring in 2003, to purchase
50,000 shares of common stock at $6.00 per share.
In October 1998, the Board of Directors of the Company adopted an incentive
stock option plan in which 680,000 shares of common stock have been reserved for
future issuance through September 30, 2008. The plan provides for grants of
incentive stock options, non-qualified stock options and shares of common stock
to employees, non-employee directors and others. The option price cannot be less
than the fair market value of the shares subject to incentive stock options at
the date of grant. Vesting of options and stock awards and certain other
conditions are determined by, or a committee appointed by, the Board of
Directors. To date, no options have been granted under this plan.
The following table represents the warrants outstanding as of December 31,
1997:
<TABLE>
<CAPTION>
WARRANTS OUTSTANDING
EXERCISE -----------------------------
PRICE PER DECEMBER 31, SEPTEMBER 30,
EXPIRATION DATE WARRANT 1997 1998
- ------------------------------------------------------------------------- --------- ------------ -------------
<S> <C> <C> <C>
June 2002................................................................ $ 1.00 23,000 23,000
August 2002.............................................................. 2.00 11,000 11,000
October 2002............................................................. 2.00 200,000 200,000
October 2002............................................................. 10.00 100,000 100,000
December 2002............................................................ 2.00 36,000 36,000
December 2002............................................................ 3.00 172,500 176,500
February 2003............................................................ 3.00 -- 75,000
April 2003............................................................... 3.00 -- 24,000
August 2003.............................................................. 6.00 -- 50,000
Six years from IPO....................................................... 2.72 75,000 75,000
------- -------- -------
617,500 770,500
-------- -------
-------- -------
</TABLE>
F-12
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY:--(CONTINUED)
The following table summarizes information for options currently
outstanding and exercisable at September 30, 1998:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
-------------------------------- ------------------
WTD.- WTD.- WTD.-
AVG. AVG. AVG.
EXERCISE REMAINING EXERCISE EXERCISE
PRICE RANGE NUMBER LIFE PRICE NUMBER PRICE
- ------------------------------------------------------------ ------- --------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
$ 2.40...................................................... 30,000 10 yrs. $ 2.40 -- $ --
$ 3.50...................................................... 200,000 7 yrs. $ 3.50 25,000 $ 3.50
$10.00--$20.00.............................................. 100,000 10 yrs. $15.00 -- $ --
------- ------- ------ ------ ------
$ 2.40--$20.00.............................................. 330,000 8 yrs. $ 6.88 25,000 $ 3.50
------- ------- ------ ------ ------
------- ------- ------ ------ ------
</TABLE>
The Company has elected, in accordance with the provisions of SFAS
No. 123, to apply the current accounting rules under APB Opinion No. 25 and
related interpretations in accounting for stock options, and accordingly, has
presented the disclosure-only information as required by SFAS No. 123. If the
Company had elected to recognize compensation cost based on the fair value of
the options granted at the grant date as prescribed by SFAS No. 123, the
Company's net loss and net loss per common share would approximate the pro forma
amounts shown in the following table.
<TABLE>
<CAPTION>
MARCH 4, 1997 NINE MONTHS
(DATE OF INCEPTION) ENDED
TO DECEMBER 31, SEPTEMBER 30,
1997 1998
------------------- -------------
<S> <C> <C>
Reported net loss............................................................... $(722,122) $(1,859,597)
--------- -----------
Pro forma net loss.............................................................. $(746,018) $(1,936,627)
--------- -----------
Reported net loss per common share.............................................. $ (.19) $ (.37)
--------- -----------
Pro forma net loss per common share............................................. $ (.19) $ (.38)
--------- -----------
</TABLE>
The fair value of options granted (which is amortized to expense over the
option vesting period in determining the pro forma impact) is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted- average assumptions:
<TABLE>
<S> <C>
Expected life of options......................................................................... 7 to 10 yrs.
------------
Risk-free interest rate.......................................................................... 5.6% to 6.7%
------------
Expected volatility.............................................................................. N/A
------------
Expected dividend yield.......................................................................... --
------------
</TABLE>
The weighted-average fair value of options granted is as follows:
<TABLE>
<CAPTION>
MARCH 4, 1997 NINE MONTHS
(DATE OF INCEPTION) ENDED
TO DECEMBER 31, SEPTEMBER 30,
1997 1998
------------------- -------------
<S> <C> <C>
Fair value of each option granted............................................... $ 0.797 $ 0.77
Total number of options granted................................................. 30,000 300,000
------- ---------
Total fair value of all options granted.................................. $23,896 $ 231,089
------- ---------
------- ---------
</TABLE>
F-13
<PAGE>
EDUCATIONAL VIDEO CONFERENCING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY:--(CONTINUED)
In accordance with SFAS No. 123, the weighted-average fair value of stock
options granted is required to be based on a theoretical statistical model using
the preceding Black-Scholes assumptions. In actuality, because the Company's
incentive stock options do not trade on a secondary exchange, employees can
receive no value or derive any benefit from holding stock options under these
plans without an increase in the market price of the Company. Such an increase
in stock price would benefit all stockholders commensurately.
8. INITIAL PUBLIC OFFERING:
The Company intends to file a Registration Statement on Form SB-2 under the
Securities Act of 1933. The Registration Statement contemplates an offering of
common stock having a value of approximately $12,500,000 to $15,000,000.
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated Certificate of Incorporation and By-Laws of the
Registrant provide that the Registrant shall indemnify any person to the full
extent permitted by the Delaware General Corporation Law (the "GCL").
Section 145 of the GCL, relating to indemnification, is hereby incorporated
herein by reference.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Registrant eliminates the personal liability of directors
to the Registrant or its stockholders for monetary damage for breach of
fiduciary duty as a director with certain limited exceptions set forth in
Section 102(a)(7) of the GCL.
The Registrant also intends to enter into indemnification agreements with
each of its officers and directors, the form of which is filed as Exhibit 10.17,
to which reference is hereby made.
Reference is made to Section 9 of the Underwriting Agreement (Exhibit 1.1)
which provides for indemnification by the Underwriter of the Registrant, its
officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses (other than
underwriting discounts and commissions) payable by the Registrant in connection
with the issuance and distribution of the securities being registered. Except
for the SEC and NASD filing fees, all expenses have been estimated and are
subject to future contingencies.
<TABLE>
<S> <C>
SEC registration fee......................................... $4,956.03
NASD fee..................................................... 2,000.00
American Stock Exchange Entry Fee............................ *
Legal fees and expenses...................................... *
Printing and engraving expenses.............................. *
Accounting fees and expenses................................. *
Blue sky fees and expenses................................... *
Transfer agent and registrar fees end expenses............... *
Miscellaneous................................................ *
---------
Total................................................... $
---------
---------
</TABLE>
- ------------------
* To be completed by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since its inception, the Registrant has issued unregistered securities in
the transactions described below:
In connection with its formation in March 1997, the Registrant issued
to eight persons 184 shares, no par value, for services rendered. The 184
shares were exchanged for 3,690,000 shares of Common Stock in connection
with the Registrant's recapitalization and reincorporation in Delaware in
April 1998.
In May 1997, the Registrant issued a warrant to one entity to
purchase up to 75,000 shares of Common Stock, at $2.72 per share, as
partial consideration for that entity's multi-year agreement with the
Company. Such warrant is not exercisable until one year after the effective
date of this offering and expires six years after such effective date.
In June 1997, the Registrant received gross proceeds of $115,000 from
the issuance to three accredited investors of $115,000 principal amount 18%
promissory notes and warrants to purchase 23,000 shares of Common Stock at
$1.00 per share. In connection with such issuance, the Registrant paid
$14,300 in commissions to one entity. In April 1998, $100,000 principal
amount of these notes were converted into 40,000 shares of Common Stock and
warrants to purchase 16,000 shares of Common Stock at $3.00 per share.
II-1
<PAGE>
Between August and December 1997, the Registrant received gross
proceeds of $235,000 from the issuance to 12 accredited investors of
$235,000 principal amount 18% convertible promissory notes and warrants to
purchase 47,000 shares of Common Stock at $2.00 per share. In connection
with such issuances the Registrant paid $24,850 in commissions, and issued
16,500 shares of Common Stock to one entity. In June and July 1998,
$185,000 of these notes were converted into 92,500 shares of Common Stock.
In October 1997, the Registrant received gross proceeds of $1,000,000
from the issuance to one accredited investor of 500,000 shares of Common
Stock and warrants to purchase 300,000 shares of Common Stock. Of these
warrants, 200,000 are exercisable at $2.00 per share and 100,000 are
exercisable at $10.00 per share. In connection with such issuance, the
Registrant paid a fee of $130,000 and issued 100,000 shares of Common Stock
to one person.
In October 1997, the Registrant issued 117,647 shares of Common Stock
valued at $400,000 to a video conferencing systems vendor and applied the
$400,000 to the purchase of $1,000,000 of equipment.
Between January and April 1998, the Registrant received gross proceeds
of $1,072,500 from the issuance to four accredited investors of 390,000
shares of Common Stock and warrants to purchase 156,000 shares of Common
Stock at $3.00 per share. In connection with such issuance, the Registrant
paid fees of $99,000 and issued to two entities warrants to purchase
103,591 shares of Common Stock at $3.00 per share.
In April 1998, the Registrant issued to two persons 7,000 shares of
Common Stock as payment for consulting services in March through October
1997.
Between May and August 1998, the Registrant received gross proceeds of
$4,000,000 for the issuance of 1,066,667 shares of Common Stock. In
connection with such issuance, the Registrant paid a fee of $400,000 and
issued warrants to purchase 50,000 shares of Common Stock at $6.00 per
share to one entity.
Except for the conversions into Common Stock, the foregoing transactions
were transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act of 1933, as amended (the
"Securities Act") pursuant to Section 4(2) thereof. The securities were sold
pursuant to Regulation D, and the certificates evidencing the shares bear a
restrictive legend permitting the transfer thereof only upon registration of the
securities or an exemption under the Securities Act. The shares of Common Stock
issued upon conversion of promissory notes were issued pursuant to
Section 3(a)(9) of the Securities Act, as no remuneration was paid directly or
indirectly for soliciting such conversions.
ITEM 27. EXHIBITS
<TABLE>
<S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Registrant.
3.2 -- By-Laws of the Registrant.
3.3 -- Certificate of Merger of Educational Video Conferencing, Inc. (a New York Corporation) into
Educational Video Conferencing, Inc. (a Delaware Corporation).
3.4 -- Certificate of Correction of the Certificate of Incorporation of the Registrant
4.1 -- Form of Common Stock Purchase Warrant issued to investors in private placements and for services
provided in connection with such private placements.
4.2 -- Tayside Common Stock Purchase Warrant.
4.3 -- Adelphi Common Stock Purchase Warrant.
4.4 -- Form of Representative's Warrant Agreement (including Form of Representative's Warrant).
*5 -- Opinion of Fischbein Badillo Wagner Harding re: validity of securities.
9.1 -- Agreement between Arol I. Buntzman and John J. McGrath dated March 4, 1997.
9.2 -- Supplement to Agreement between Arol I. Buntzman and John J. McGrath dated May 18, 1998.
*+10.1 -- Agreement between Educational Video Conferencing, Inc. and Adelphi University for the Offering of
Interactive Televideo Courses dated May 13, 1997.
*+10.2 -- Agreement between Educational Video Conferencing, Inc. and The College of Insurance for the Offering
of Interactive Televideo Courses dated September 16, 1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
*+10.3 -- Agreement between Educational Video Conferencing, Inc. and Mercy College for the Offering of
Interactive Video Conferenced and Computer Courses dated March 10, 1998.
10.4 -- Agreement between Educational Video Conferencing, Inc. and Reliance National for the Offering of
Interactive Televideo courses and Distance Learning Programs dated October 7, 1998.
10.5 -- Agreement between Educational Video Conferencing, Inc. and Citibank dated May 20, 1997.
10.6 -- Agreement between Educational Video Conferencing, Inc. and American International Group dated
May 21, 1997.
10.7 -- Agreement between Educational Video Conferencing, Inc. and Merrill Lynch for the Offering of
Interactive Televideo Courses and Distance Learning Programs dated June 3, 1998.
*10.8 -- Agreement for Interactive Televideo Courses and Distance Learning Programs between Educational Video
Conferencing, Inc. and Travelers Indemnity Company dated July 24, 1998.
10.9 -- Agreement between Educational Video Conferencing, Inc. and Zurich Insurance Company, U.S. dated
August 12, 1998 Branch for the Offering of Interactive Televideo Courses and Distance Learning
Programs dated August 12, 1998.
10.10 -- Memorandum of Understanding between Educational Video Conferencing, Inc. and VSI Enterprises, Inc.
dated September 30, 1997.
*10.11 -- Lease Agreement between Educational Video Conferencing, Inc. and Realty Co. (doing business as Royal
Realty) dated September 5, 1997.
10.12 -- Employment Agreement between the Registrant and Dr. Arol I. Buntzman dated October 1, 1998.
10.13 -- Employment Agreement between the Registrant and Dr. John J. McGrath dated October 1, 1998.
10.14 -- Employment Agreement between the Registrant and Richard Goldenberg dated October 1, 1998.
10.15 -- Employment Agreement between the Registrant and Wallace J. Caven dated October 1, 1998.
10.16 -- Employment Agreement between the Registrant and James H. Mollitor dated October 1, 1998.
10.17 -- Consulting Agreement between the Registrant and Arthur H. Goldberg dated March 4, 1998.
*10.18 -- Consulting Agreement between the Registrant and William R. Coda dated October 1, 1998.
10.20 -- Chief Executive Officer Change in Control Agreement between the Registrant and Dr. Arol I. Buntzman
dated October 1, 1998.
10.21 -- Form of Indemnification Agreement.
10.22 -- 1998 Incentive Stock Option Plan of the Registrant.
23.1 -- Consent of Goldstein Golub Kessler LLP.
*23.2 -- Consent of Fischbein Badillo Wagner Harding (contained in opinion to be filed as Exhibit 5).
23.3 -- Consent of Arthur H. Goldberg.
23.4 -- Consent of William R. Coda
24.1 -- Power of Attorney (set forth on page II-6).
</TABLE>
- ------------------
* To be filed by amendment
+ Confidential treatment is being requested with respect to portions of this
exhibit.
ITEM 28. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act,
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing,
II-3
<PAGE>
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(b) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(c) File a post-effective amendment to remove form registration any of
the securities that remain unsold at the end of this offering.
(2) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue:
(4) The undersigned Registrant hereby undertakes that it will:
(a) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) of (4), or
497(h) under the Securities Act as part of this registration statement as
of the time it was declared effective.
(b) For determining any liability under the Securities Act, treat each
post effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of such securities at that time as the initial
bona fide offering of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Yonkers, State of New York on the
23rd day of October, 1998.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ AROL I. BUNTZMAN
----------------------------------
Arol I. Buntzman
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints Dr. Arol I.
Buntzman and Dr. John J. McGrath, or either of them, his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
or all amendments to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------------- -------------
<S> <C> <C>
/s/ AROL I. BUNTZMAN Chairman of the Board and October 23, 1998
----------------------------- Chief Executive Officer
Arol I. Buntzman
/s/ JOHN J. MCGRATH Director October 23, 1998
-----------------------------
John J. McGrath
/s/ RICHARD GOLDENBERG Chief Financial Officer, Secretary and Director October 23, 1998
----------------------------- (Principal Financial Officer and Principal
Richard Goldenberg Accounting Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------- ----------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Registrant.
3.2 -- By-Laws of the Registrant.
3.3 -- Certificate of Merger of Educational Video Conferencing, Inc. (a New York Corporation)
into Educational Video Conferencing, Inc. (a Delaware Corporation).
3.4 -- Certificate of Correction of the Certificate of Incorporation of the Registrant
4.1 -- Form of Common Stock Purchase Warrant issued to investors in private placements and for
services provided in connection with such private placements.
4.2 -- Tayside Common Stock Purchase Warrant.
4.3 -- Adelphi Common Stock Purchase Warrant.
4.4 -- Form of Representative's Warrant Agreement (including Form of Representative's Warrant).
*5 -- Opinion of Fischbein Badillo Wagner Harding re: validity of securities.
9.1 -- Agreement between Arol I. Buntzman and John J. McGrath dated March 4, 1997.
9.2 -- Supplement to Agreement between Arol I. Buntzman and John J. McGrath dated May 18, 1998.
*+10.1 -- Agreement between Educational Video Conferencing, Inc. and Adelphi University for the
Offering of Interactive Televideo Courses dated May 13, 1997.
*+10.2 -- Agreement between Educational Video Conferencing, Inc. and The College of Insurance for
the Offering of Interactive Televideo Courses dated September 16, 1997.
*+10.3 -- Agreement between Educational Video Conferencing, Inc. and Mercy College for the Offering
of Interactive Video Conferenced and Computer Courses dated March 10, 1998.
10.4 -- Agreement between Educational Video Conferencing, Inc. and Reliance National for the
Offering of Interactive Televideo courses and Distance Learning Programs dated
October 7, 1998.
10.5 -- Agreement between Educational Video Conferencing, Inc. and Citibank dated May 20, 1997.
10.6 -- Agreement between Educational Video Conferencing, Inc. and American International Group
dated May 21, 1997.
10.7 -- Agreement between Educational Video Conferencing, Inc. and Merrill Lynch for the Offering
of Interactive Televideo Courses and Distance Learning Programs dated June 3, 1998.
*10.8 -- Agreement for Interactive Televideo Courses and Distance Learning Programs between
Educational Video Conferencing, Inc. and Travelers Indemnity Company dated July 24, 1998.
10.9 -- Agreement between Educational Video Conferencing, Inc. and Zurich Insurance Company, U.S.
dated August 12, 1998 Branch for the Offering of Interactive Televideo Courses and
Distance Learning Programs dated August 12, 1998.
10.10 -- Memorandum of Understanding between Educational Video Conferencing, Inc. and VSI
Enterprises, Inc. dated September 30, 1997.
*10.11 -- Lease Agreement between Educational Video Conferencing, Inc. and Realty Co. (doing
business as Royal Realty) dated September 5, 1997.
10.12 -- Employment Agreement between the Registrant and Dr. Arol I. Buntzman dated October 1,
1998.
10.13 -- Employment Agreement between the Registrant and Dr. John J. McGrath dated October 1,
1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------- ----------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
10.14 -- Employment Agreement between the Registrant and Richard Goldenberg dated October 1, 1998.
10.15 -- Employment Agreement between the Registrant and Wallace J. Caven dated October 1, 1998.
10.16 -- Employment Agreement between the Registrant and James H. Mollitor dated October 1, 1998.
10.17 -- Consulting Agreement between the Registrant and Arthur H. Goldberg dated March 4, 1998.
*10.18 -- Consulting Agreement between the Registrant and William R. Coda dated October 1, 1998.
10.20 -- Chief Executive Officer Change in Control Agreement between the Registrant and Dr. Arol
I. Buntzman dated October 1, 1998.
10.21 -- Form of Indemnification Agreement.
10.22 -- 1998 Incentive Stock Option Plan of the Registrant.
23.1 -- Consent of Goldstein Golub Kessler LLP.
*23.2 -- Consent of Fischbein Badillo Wagner Harding (contained in opinion to be filed as
Exhibit 5).
23.3 -- Consent of Arthur H. Goldberg.
23.4 -- Consent of William R. Coda
24.1 -- Power of Attorney (set forth on page II-6).
</TABLE>
- ------------------
* To be filed by amendment
+ Confidential treatment is being requested with respect to portions of this
exhibit.
<PAGE>
______________ Shares
EDUCATIONAL VIDEO CONFERENCING, INC.
Common Stock
UNDERWRITING AGREEMENT
________ __, 1998
Prime Charter Ltd.,
As representative of the
several Underwriters named
in Schedule A hereto
810 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
Educational Video Conferencing, Inc., a Delaware corporation (the
"Company), proposes to issue and sell _________ shares (the "Firm Shares") of
its authorized but unissued common stock, par value $.0001 per share (the
"Common Stock"), to Prime Charter Ltd. (the "Representative") and the other
underwriters listed on Schedule A to this Agreement (the Representative and
the other underwriters being herein collectively called the "Underwriters").
The Company and the persons listed on Schedule B to this Agreement (the
"Selling Stockholders") also propose to grant to the Underwriters an option to
purchase up to an aggregate of ___________ additional shares (the
"Overallotment Shares") of Common Stock on the terms and conditions set forth
in Section 3(c). The Firm Shares and the Overallotment Shares are hereinafter
collectively referred to as the "Shares."
The Company and the Selling Stockholders wish to confirm as follows
their agreements with the Underwriters in connection with the several
purchases by the Underwriters of the Shares.
1. Registration Statement. The Company has prepared and
filed with the Securities and Exchange Commission (the
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"Commission") a registration statement on Form SB-2 (File No. 333- ),
including a prospectus relating to the Shares and each amendment thereto in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"). There have been delivered to you signed copies of such
registration statement and amendments, together with copies of each exhibit
filed therewith. Copies of such registration statement and amendments and of
the related preliminary prospectus have been delivered to you in such
reasonable quantities as you have requested for each of the Underwriters. If
such registration statement has not become effective, a further amendment to
such registration statement, including a form of final prospectus, necessary
to permit such registration statement to become effective will be filed
promptly by the Company with the Commission. If such registration statement
has become effective, a final prospectus containing all Rule 430A Information
(as hereinafter defined) will be filed by the Company with the Commission in
accordance with, and if required by, Rule 424(b) of the rules and regulations
of the Act (the "Rules and Regulations") on or before the second business day
after the date hereof (or such earlier time as may be required by the Rules
and Regulations).
The term "Registration Statement" as used in this Agreement shall
mean such registration statement (including all exhibits and financial
statements) at the time such registration statement becomes or became
effective and, if any post-effective amendment thereto becomes effective prior
to the Closing Date (as hereinafter defined), shall also mean such
registration statement as so amended; provided, however, that such term shall
include all Rule 430A Information deemed to be included in such registration
statement at the time such registration statement becomes effective as
provided by Rule 430A of the Rules and Regulations and shall also mean any
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations with respect to the Shares. The term "Preliminary Prospectus"
shall mean any preliminary prospectus referred to in the preceding paragraph
and any preliminary prospectus included in the Registration Statement at the
time it becomes effective that omits Rule 430A Information. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to
the Shares in the form in which it is first filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations or, if no filing pursuant to Rule
424(b) of the Rules and Regulations is required, shall mean the form of final
prospectus included in the Registration Statement at the time such
registration statement becomes effective. The term "Rule 430A Information"
means information with respect to the Shares and the offering thereof
permitted to
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be omitted from the Registration Statement when it becomes effective pursuant
to Rule 430A of the Rules and Regulations.
2. Representations and Warranties. (a) The Company hereby
represents and warrants as follows:
(i) The Company has not received, and has no notice of, any
order of the Commission preventing or suspending the use of any Preliminary
Prospectus, or the institution of proceedings for that purpose, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the Rules and
Regulations. When the Registration Statement became or becomes, as the case
may be, effective (the "Effective Date") and at all times subsequent thereto
up to and at the Closing Date (as hereinafter defined), any later date on
which Overallotment Shares are to be purchased (the "Overallotment Closing
Date") and when any post-effective amendment to the Registration Statement
becomes effective or any amendment or supplement to the Prospectus is filed
with the Commission, (A) the Registration Statement and Prospectus, and any
amendments or supplements thereto, will contain all statements which are
required to be stated therein by, and will comply with the requirements of,
the Act and the Rules and Regulations and (B) neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
include 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
not misleading. The foregoing representations and warranties in this Section
2(a)(i) do not apply to any statements or omissions made in reliance on and in
conformity with the information contained in the section of the Prospectus
entitled "Underwriting." The Company has not distributed any offering material
in connection with the offering or sale of the Shares other than the
Registration Statement, the Preliminary Prospectus, the Prospectus or any
other materials, if any, permitted by the Act.
(ii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and operate
its properties and conduct its business as described in the Registration
Statement. The Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure so to qualify would not have a
material adverse effect on the business, properties, prospects, financial
condition or results of operations of the
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Company (a "Material Adverse Effect"). The Company has no subsidiaries (as
defined in the Rules and Regulations). The Company does not own, directly or
indirectly, any shares of stock or any other equity or long-term debt
securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity. Complete and correct
copies of the certificates of incorporation and of the bylaws of the Company
and all amendments thereto have been delivered to the Representative and no
changes therein will be made subsequent to the date hereof and prior to the
Closing Date or, if later, the Overallotment Closing Date.
(iii) The Company has full power and authority (corporate
and other) to enter into this Agreement and the agreement between the Company
and the Representative relating to issuance of the Representative's Warrants
(as hereinafter defined) (the "Representative's Warrant Agreement"), which is
being executed concurrently herewith, and to perform the transactions
contemplated hereby and thereby to be performed by it. Each of this Agreement
and the Representative's Warrant Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement on the part
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution hereunder may be limited by
applicable laws or equitable principles and except as enforcement hereof or
thereof may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. The performance of this Agreement and the
Representative's Warrant Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby will not result in
a breach or violation of any of the terms and provisions of, or constitute a
default under, (A) any indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, or any
lease, contract or other agreement or instrument to which the Company is a
party or by which its properties are bound, (B) the certificate of
incorporation or bylaws of the Company or (C) any law, order, rule,
regulation, writ, injunction or decree of any court or governmental agency or
body to which the Company is subject. The Company is not required to obtain or
make (as the case may be) any consent, approval, authorization, order,
designation or filing by or with any court or regulatory, administrative or
other governmental agency or body as a requirement for the consummation by the
Company of the transactions contemplated by this Agreement or the
Representative's Warrant Agreement, except such as may be required under the
Act, the Securities Exchange Act of 1934, as
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amended (the "Exchange Act") or under state securities or blue sky ("Blue
Sky") laws or under the rules and regulations of The American Stock Exchange,
Inc.(the "AMEX").
(iv) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim, proceeding or investigation against the
Company or any of its officers or any of its properties, assets or rights
before any court or governmental agency or body or otherwise which might
result in a Material Adverse Effect or prevent consummation of the
transactions contemplated hereby. There are no statutes, rules, regulations,
agreements, contracts, leases or documents that are required to be described
in the Prospectus, or to be filed as exhibits to the Registration Statement by
the Act or by the Rules and Regulations that have not been accurately
described in all material respects in the Prospectus or filed as exhibits to
the Registration Statement.
(v) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any preemptive right,
resale right, right of first refusal or similar right. The authorized and
outstanding capital stock of the Company conforms in all material respects to
the description thereof contained in the Registration Statement and the
Prospectus (and such description correctly states the substance of the
provisions of the instruments defining the capital stock of the Company). The
Shares have been duly authorized for issuance and sale to the Underwriters
pursuant to this Agreement and, when issued and delivered by the Company
against payment therefor in accordance with the terms of this Agreement, will
be duly and validly issued and fully paid and nonassessable. No preemptive
right, co-sale right, right of first refusal or other similar rights of
security holders exists with respect to any of the Shares or the issue and
sale thereof other than those that have been expressly waived prior to the
date hereof. No holder of securities of the Company has the right to cause the
Company to include such holder's securities in the Registration Statement. The
Representative's Warrant Agreement and the Representative's Warrants (as
hereinafter defined) conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. The shares
of Common Stock issuable upon exercise of the Representative's Warrants (the
"Warrant Shares") have been duly authorized for issuance and sale to the
holders of the Representative's Warrants pursuant to the Representative's
Warrant Agreement and, when issued and delivered by the Company
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against payment therefor in accordance with the terms of the Representative's
Warrant Agreement, will be duly and validly issued and fully paid and
nonassessable. No further approval or authorization of any security holder,
the Board of Directors or any duly appointed committee thereof or others is
required for the issuance and sale or transfer of the Shares or the Warrant
Shares, except as may be required under the Act, the Exchange Act or Blue Sky
laws. Except as disclosed in or contemplated by the Prospectus and the
financial statements of the Company and the related notes thereto, included in
the Prospectus, the Company does not have outstanding any options or warrants
to purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the
Company's stock option and other plans or arrangements, and the options or
other rights which may be or have been granted thereunder, set forth in the
Prospectus accurately and fairly presents, in all material respects, the
information required to be shown with respect to such plans, arrangements,
options and rights.
(vi) Goldstein Golub Kessler LLP (the "Accountants") who
have examined the financial statements, together with the related schedules
and notes, of the Company filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
public accountants within the meaning of the Act and the Rules and
Regulations. The financial statements of the Company, together with the
related schedules and notes, forming part of the Registration Statement and
the Prospectus, fairly present the financial position and the results of
operations of the Company at the respective dates and for the respective
periods to which they apply. All financial statements, together with the
related schedules and notes, filed with the Commission as part of the
Registration Statement have been prepared in accordance with generally
accepted accounting principles as in effect in the United States consistently
applied throughout the periods involved except as may be otherwise stated in
the Registration Statement. The selected and summary financial and statistical
data included in the Registration Statement present fairly the information
shown therein and have been compiled on a basis consistent with the financial
statements presented therein. No other financial statements or schedules are
required by the Act or the Rules and Regulations to be included in the
Registration Statement.
(vii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
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Prospectus, there has not been (A) any material adverse change, or any
development which, in the Company's reasonable judgment, is likely to cause a
material adverse change, in the business, prospects, properties or assets
described or referred to in the Registration Statement, or the results of
operations, condition (financial or otherwise), business or operations of the
Company, (B) any transaction which is material to the Company, except
transactions in the ordinary course of business, (C) any obligation, direct or
contingent, which is material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of business, (D) any change in the
capital stock or outstanding indebtedness of the Company or (E) (except as
specifically described in the Prospectus) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company. The Company
has no material contingent obligation which is not disclosed in the
Registration Statement.
(viii) Except as set forth in the Prospectus, (A) the
Company has good and marketable title to all material properties and assets
described in the Prospectus as owned by it, free and clear of any pledge,
lien, security interest, charge, encumbrance, claim, equitable interest or
restriction, (B) the agreements to which the Company is a party described in
the Prospectus are valid agreements, enforceable against the Company in
accordance with their respective terms, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or default
under any of such agreements and (C) the Company has valid and enforceable
leases for the properties described in the Prospectus as leased by it, and
such leases conform in all material respects to the description thereof, if
any, set forth in the Registration Statement.
(ix) The Company now holds and at the Closing Date and any
later Overallotment Closing Date, as the case may be, will hold, all licenses,
certificates, approvals and permits from all state, United States, foreign and
other regulatory authorities that are material to the conduct of the business
of the Company (as such business is currently conducted), except for such
licenses, certificates, approvals and permits the failure of which to hold
would not have a Material Adverse Effect), all of which are valid and in full
force and effect (and there is no proceeding pending or, to the knowledge of
the Company, threatened which may cause any such license, certificate,
approval or permit to be withdrawn, canceled, suspended or not
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renewed). The Company is not in violation of its certificate of incorporation
or bylaws, or, except for defaults or violations which would not have a
Material Adverse Effect, in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any contract, indenture,
mortgage, loan agreement, joint venture or other agreement or instrument to
which it is a party or by which it or any of its properties are bound, or in
violation of any law, order, rule, regulation, writ, injunction or decree of
any court or governmental agency or body.
(x) The Company has filed on a timely basis all necessary
federal, state and foreign income, franchise and other tax returns and has
paid all taxes shown thereon as due, and the Company has no knowledge of any
tax deficiency which has been or might be asserted against the Company which
might have a Material Adverse Effect. All material tax liabilities are
adequately provided for within the financial statements of the Company.
(xi) The Company maintains insurance of the types and in the
amounts adequate for its business and consistent with insurance coverage
maintained by similar companies in similar businesses, including, but not
limited to, business interruption insurance and real and personal property
owned or leased against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is in full
force and effect.
(xii) The Company is not involved in any labor dispute or
disturbance nor, to the knowledge of the Company, is any such dispute or
disturbance threatened.
(xiii) The Company owns or possesses adequate licenses or
other rights to use all patents, trademarks, service marks, tradenames,
copyrights, trade secrets, know-how, franchises, and other material intangible
property and assets (collectively, "Intellectual Property") necessary to the
conduct of its business as conducted and as proposed to be conducted as
described in the Prospectus. The Company has no knowledge that it lacks or
will be unable to obtain any rights or licenses to use any of the Intellectual
Property necessary to conduct the business now conducted or proposed to be
conducted by it as described in the Prospectus. The Prospectus fairly and
accurately describes the Company's rights with respect to the Intellectual
Property. The Company has not received any notice of infringement or of
conflict with rights or claims of others with respect to any Intellectual
Property.
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(xiv) The Company is not an "investment company," or a
"promoter" or "principal underwriter" for a registered investment company, as
such terms are defined in the Investment Company Act of 1940, as amended.
(xv) The Company has not incurred any liability for a fee or
commission or other compensation on account of the employment of a broker or
finder in connection with the transactions contemplated by this Agreement
other than the underwriting discounts and commissions contemplated hereby.
(xvi) The Company (A) is in compliance with any and all
applicable United States, foreign, state and local environmental laws, rules,
regulations, treaties, statutes and codes promulgated by any and all
governmental authorities relating to the protection of human health and
safety, the environment or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (B) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business as currently conducted and (C) is in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permit
licenses or other approvals would not, individually or in the aggregate, have
a Material Adverse Effect. No action, proceeding, revocation proceeding, writ,
injunction or claim is pending or threatened relating to the Environmental
Laws or to the Company's activities involving Hazardous Materials. "Hazardous
Materials" means any material or substance (i) that is prohibited or regulated
by any environmental law, rule, regulation, order, treaty, statute or code
promulgated by any governmental authority, or any amendment or modification
thereto, or (ii) that has been designated or regulated by any governmental
authority as radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment.
(xvii) The Company has not engaged in the generation, use,
manufacture, transportation or storage of any Hazardous Materials on any of
the Company's properties or former properties, except where such use,
manufacture, transportation or storage is in compliance with Environmental
Laws. No Hazardous Materials have been treated or disposed of on any of the
Company's properties or on properties formerly owned or leased by the Company
during the time of such ownership or lease, except in compliance with
Environmental Laws. No spills, discharges, releases, deposits, emplacements,
leaks or disposal of any Hazardous Materials have occurred on or under or have
emanated from any of the Company's properties or former properties.
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(xviii) The Company has not at any time during the last five
years (A) made any unlawful contribution to any candidate for foreign office,
or failed to disclose fully any contribution in violation of law, or (B) made
any payment to any foreign, United States or state governmental officer or
official, or other person charged with similar public of quasi-public duties,
other than payments required or permitted by the laws of the United States.
(xix) The Shares have been duly authorized for listing on
the AMEX upon notice of issuance. The Company has taken no action designed to,
or likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or delisting the Common Stock from the AMEX, nor
has the Company received any notification that the Commission or the AMEX is
contemplating terminating such registration or listing.
(xx) Neither the Company nor, to its knowledge, any of its
officers, directors or affiliates has taken, and at the Closing Date and at
any later Overallotment Closing Date, neither the Company nor, to its
knowledge, any of its officers, directors or affiliates will have taken,
directly or indirectly, any action which has constituted, or might reasonably
be expected to constitute, the stabilization or manipulation of the price of
sale or resale of the Shares.
(xxi) The Company has obtained and delivered to the
Representative agreements (the "Lock-Up Agreements") from each of the persons
and entities listed on Schedule C hereto, representing all of the Company's
executive officers, directors and stockholders (or holders of securities
convertible into or exchangeable or exercisable for equity securities of the
Company), providing that such person or entity will not, commencing on the
date of the Prospectus and continuing for a 12- month period thereafter,
without the Representative's prior written consent, directly or indirectly,
offer to sell, sell, pledge, solicit an offer to buy, contract to sell, grant
any option for the sale thereof, or otherwise encumber, or cause the transfer
or disposition of, any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for, Common Stock, or exercise any
registration rights with respect to any shares of common stock or any
securities convertible into or exchangeable or exercisable for any Shares of
Common Stock.
(xxii) The Company has not distributed and, prior to the
latest to occur of (A) the Closing Date, (B) the Overallotment Closing Date
and (C) the completion of the distribution of the Shares, will not distribute
any offering
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material in connection with the offering and sale of the Shares other than the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or other materials, if
any permitted by the Act.
(b) Each of the Selling Stockholders hereby represents and
warrants as follows:
(i) Such Selling Stockholder has (A) caused a certificate or
certificates for the number of Overallotment Shares which may be sold by such
Selling Stockholder hereunder to be delivered to _________________ (the
"Escrow Agent"), duly endorsed in blank or together with blank stock powers
duly executed, with such Selling Stockholder's signature appropriately
guaranteed, such certificate or certificates to be held in escrow by the
Escrow Agent pursuant to an escrow agreement for delivery, pursuant to the
provisions hereof, on the Closing Date, and (B) granted an irrevocable power
of attorney to the Escrow Agent to purchase all requisite stock transfer tax
stamps, to sign this Agreement (including agreeing on the price at which the
Overallotment Shares are to be sold to the Underwriters) and thereafter to
modify and amend this Agreement, to settle any dispute relating to the terms
of this Agreement, to waive any condition to the obligations of such Selling
Stockholder, and to execute all other instruments and documents and to perform
all other acts necessary to carry out the provisions of this Agreement on
behalf of such Selling Stockholder (such escrow agreement together with such
irrevocable powers of attorney being herein called the "Escrow Agreement").
(ii) Such Selling Stockholder has full power and authority
to enter into this Agreement and the Escrow Agreement and to perform the
transactions contemplated hereby and thereby to be performed by such Selling
Stockholder. This Agreement and the Escrow Agreement have been duly executed
and delivered by such Selling Stockholder. No consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local or other governmental authority or any
court or other tribunal is required by such Selling Stockholder for the
execution, delivery or performance of this Agreement (except filings under the
Act which have been or will be made before the Closing Date and such consents
consisting only of consents under Blue Sky laws which have been obtained at or
prior to the date of this Agreement) or the Escrow Agreement by such Selling
Stockholder. No consent of any party to any contract, agreement, instrument,
lease, license, arrangement or understanding to which such Selling Stockholder
is a party, or to
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which any of such Selling Stockholder's properties or assets are subject, is
required for the execution, delivery or performance of this Agreement or the
Escrow Agreement; and the execution, delivery and performance of this
Agreement and the Escrow Agreement will not violate, result in a breach of,
conflict with or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement or understanding,
or violate, result in a breach of, or conflict with, any law, rule,
regulation, order, judgment or decree binding on such Selling Stockholder.
(iii) Such Selling Stockholder is the lawful owner of the
Overallotment Shares to be sold by him and upon sale and delivery of, and
payment for, such Overallotment Shares, as provided herein, such Selling
Stockholder will convey good and marketable title to such Overallotment
Shares, free and clear of any security interests, liens, encumbrances,
equities, claims or other defects.
(iv) Such Selling Stockholder has not, directly or
indirectly, (A) taken any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (B) since the filing of the
Registration Statement (i) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Shares or (ii) paid or agreed to
pay to any person any compensation for soliciting another to purchase any
other securities of the Company (except for the sale of the Overallotment
Shares by such Selling Stockholder under this Agreement).
(v) To the extent that any statements or omissions are made
in the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
specifically for use therein, such Preliminary Prospectus did, and the
Registration Statement and the Prospectus and any amendments or supplements
thereto, when they become effective or are filed with the Commission, as the
case may be, will conform in all material respects to the requirements of the
Act, the Exchange Act and the respective rules and regulations of the
Commission thereunder and will 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 the light of the circumstances
under which they are made, not misleading. Such
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Selling Stockholder has reviewed the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) and the Registration
Statement, and the information regarding such Selling Stockholder set forth
therein is complete and accurate.
(vi) The sale by such Selling Stockholder of the
Overallotment Shares being sold by him pursuant hereto is not prompted by any
adverse information concerning the Company that is not set forth in the
Registration Statement or the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(vii) The sale of the Overallotment Shares being sold to the
Underwriters by such Selling Stockholder pursuant to this Agreement, the
compliance by the Selling Stockholder with the other provisions of this
Agreement and the consummation of the other transactions herein contemplated
do not (A) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained, such as may be required under Blue Sky laws and, if the registration
statement filed with respect to the Shares (as amended) is not effective under
the Act as of the time of execution hereof, such as may be required (and shall
be obtained as provided in this Agreement) under the Act or (B) conflict with
or result in a breach or violation of any of the terms and provisions of, or
constitute a default under any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which such Selling Stockholder is a party or
by which the Selling Stockholder is bound, or any statute or any judgment,
decree, order, rule or regulation of any court or other governmental authority
or any arbitrator applicable to the Selling Stockholder.
(viii) The Selling Stockholder has not distributed and,
prior to the latest to occur of (A) the Closing Date, (B) the Overallotment
Closing Date and (C) the completion of the distribution of the Shares, will
not distribute any offering material in connection with the offering and sale
of the Shares other than the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or other materials, if any permitted by the Act.
3. Purchase of the Shares by the Underwriters.
(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the
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Company agrees to issue and sell the Firm Shares to the several Underwriters,
and each of the Underwriters agrees to purchase from the Company the
respective aggregate number of Firm Shares set forth opposite its name on
Schedule A, plus such additional number of Firm Shares which such Underwriter
may become obligated to purchase pursuant to Section 3(b) hereof. The price at
which such Firm Shares shall be sold by the Company and purchased by the
several Underwriters shall be $_____ per share. In making this Agreement, each
Underwriter is contracting severally and not jointly; except as provided in
Section 3(b) and Section 3(c), the agreement of each Underwriter is to
purchase only the respective number of Firm Shares specified on Schedule A.
(b) If for any reason one or more of the Underwriters shall
fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10 hereof) to
purchase and pay for the number of Shares agreed to be purchased by such
Underwriter or Underwriters, the non-defaulting Underwriters shall have the
right within 24 hours after such default to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the Shares which such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such Shares
and portion, the number of Shares which each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis (as adjusted by you in such manner as you deem
advisable to avoid fractional shares) to absorb the remaining shares and
portion which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the Shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such Shares exceeds
10% of the total number of Shares which all Underwriters agreed to purchase
hereunder. If the total number of Shares which the defaulting Underwriter or
Underwriters agreed to purchase shall not be purchased or absorbed in
accordance with the two preceding sentences, the Company shall have the right,
within 24 hours next succeeding the 24-hour period referred to above, to make
arrangements with other underwriters or purchasers reasonably satisfactory to
you for purchase of such Shares and portion on the terms herein set forth. In
any such case, either you or the Company shall have the right to postpone the
Closing Date determined as provided in Section 5 hereof for not more than
seven business days after the date originally fixed as the Closing Date
pursuant to said
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Section 5 in order that any necessary changes in the Registration Statement,
the Prospectus or any other documents or arrangements may be made. If the
aggregate number of Shares which the defaulting Underwriter or Underwriters
agreed to purchase exceeds 10% of the total number of Shares which all
Underwriters agreed to purchase hereunder, and if neither the non-defaulting
Underwriters nor the Company shall make arrangements within the 24-hour
periods stated above for the purchase of all the Shares which the defaulting
Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall
be terminated without further act or deed and without any liability on the
part of the Company to any non-defaulting Underwriter and without any
liability on the part of any non-defaulting Underwriter to the Company.
Nothing in this Section 3(b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
(c) On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions herein set
forth, the Company and the Selling Stockholders hereby grant an option to the
several Underwriters to purchase, in the case of the Company, up to ___________
shares of Common Stock, and, in the case of each of the Selling Stockholders, up
to the number of shares of Common Stock set forth opposite such Selling
Stockholder's name on Schedule B at the same price per share as the Underwriters
shall pay for the Firm Shares. Such option may be exercised only to cover
overallotments in the sale of the Firm Shares by the Underwriters and may be
exercised in whole or in part at any time, or from time to time, on or before
the 30th day after the date of the Prospectus upon written or telegraphic notice
by you to the Company and the Selling Stockholders setting forth the aggregate
number of Overallotment Shares as to which the Underwriters are exercising the
option. Delivery of certificates for the Overallotment Shares, and payment
therefor, shall be made as provided in Section 5 hereof. Each Underwriter shall
purchase such percentage of the Overallotment shares as is equal to the
percentage of Firm Shares that such Underwriter is purchasing, the exact number
of shares to be adjusted by the Representative in such manner as you deem
advisable to avoid fractional shares. In the event the options are exercised by
you with respect to less than all the Overallotment Shares, the number of
Overallotment Shares covered by the exercised options shall first be sold by the
Company until all of its Overallotment Shares have been purchased and any excess
shall then be sold by the Selling Stockholders on a pro rata basis until all of
their Overallotment Shares are sold.
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(d) On the Closing Date, the Company shall issue and deliver
to the Representative, or at the direction of the Representative, to its
designees as provided in the Representative's Warrant Agreement, for a
purchase price of $.001 per Representative's Warrant (an aggregate of
$________), the Representative's Warrants entitling the holder thereof to
purchase ___________ shares of Common Stock on the terms and conditions set
forth in the Representative's Warrant Agreement.
4. Offering by Underwriters.
The terms of the offering of the Shares by the Underwriters
shall be as set forth in the Prospectus.
5. Delivery of and Payment for the Shares and the
Representative's Warrants.
(a) Delivery of certificates for the Firm Shares, the
Overallotment Shares (if the option granted pursuant to Section 3(c) hereof
shall have been exercised not later than 1:00 p.m., New York time, on the date
at least two business days preceding the Closing Date) and the
Representative's Warrants, and payment therefor, shall be made at the office
of Proskauer Rose LLP, 1585 Broadway, New York, New York 10036-8299 at 9:00
a.m., New York City time, on the fourth business day after the date of this
Agreement, or at such time on such other day, not later than seven full
business days after such fourth business day, as shall be agreed upon in
writing by the Company and you (the "Closing Date").
(b) If the option granted pursuant to Section 3(c) hereof
shall be exercised after 1:00 p.m., New York City time, on the date two
business days preceding the Closing Date, and on or before the 30th day after
the date of this Agreement, delivery of certificates for the Overallotment
Shares, and payment therefor, shall be made at the office of Proskauer Rose
LLP, 1585 Broadway, New York, New York 10036-8299 at 9:00 a.m., New York City
time, on the third business day after the exercise of such option.
(c) Payment for the Shares shall be made to the Company or
(in the case of Overallotment Shares to be purchased from the Selling
Stockholders) to the Escrow Agent, as agent for the Selling Stockholders, by
either a same day funds check or federal funds wire transfer. Such payment
shall be made upon delivery of certificates for the Shares to you for the
respective accounts of the several Underwriters against receipt therefor
signed by you. Certificates for the Shares to be delivered to you shall be
registered in such name or names and shall be in
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such denominations as you may request at least three business days before the
Closing Date, in the case of Firm Shares, and at least two business days prior
to the Overallotment Closing Date, in the case of the Overallotment Shares.
Such certificates will be made available to the Underwriters for inspection,
checking and packaging at a location in New York, New York, designated by the
Underwriters not less than one full business day prior to the Closing Date or,
in the case of the Overallotment Shares, by 3:00 p.m., New York time, on the
business day preceding the Overallotment Closing Date.
It is understood that you, individually and not on behalf of
the Underwriters, may (but shall not be obligated to) make payment to the
Company or (in the case of Overallotment Shares to be purchased from the
Selling Stockholders) to the Escrow Agent, as agent for the Selling
Stockholders, for shares to be purchased by any Underwriter whose check shall
not have been received by you on the Closing Date or any later Overallotment
Closing Date. Any such payment by you shall not relieve such Underwriter from
any of its obligations hereunder.
(d) Payment for the Representative's Warrants shall be made
to the Company or its order, by either a same day funds check or federal funds
wire transfer. Such payment shall be made upon delivery of certificates for
the Representative's Warrants to you against receipt therefor signed by you.
Certificates for the Representative's Warrants to be delivered to you shall,
subject to the terms and provisions of the Representative's Warrant Agreement,
be registered in such name or names and shall be in such denominations as you
may request at least three business days before the Closing Date.
6. Further Agreements of the Company. The Company covenants and
agrees as follows:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto,
to become effective as promptly as possible; it will notify you, promptly
after it shall receive notice thereof, of the time when the Registration
Statement or any subsequent amendment to the Registration Statement has become
effective or any supplement to the Prospectus has been filed. If the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a), the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time
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period prescribed, with the Commission pursuant to subparagraph (1) or (4) of
Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective
which is declared effective by the Commission. If for any reason the filing of
the final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the
time period prescribed. The Company will notify you promptly of any request by
the Commission for the amending or supplementing of the Registration Statement
or the Prospectus or for additional information. Promptly upon your request,
it will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the reasonable opinion of
counsel to the Representative, may be necessary or advisable in connection
with the distribution of the Shares by the Underwriters. The Company will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if,
at any time when a prospectus relating to the Shares is required to be
delivered under the Act, any event shall have occurred as a result of which
the Prospectus or any other prospectus relating to the Shares as then in
effect would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In case any
Underwriter is required to deliver a prospectus within the nine-month period
referred to in Section 10(a)(3) of the Act in connection with the sale of the
Shares, the Company will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement
and such prospectus or prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act. The Company will file no
amendment or supplement to the Registration Statement or Prospectus that shall
not previously have been submitted to you a reasonable time prior to the
proposed filing thereof or to which you shall reasonably object in writing or
which is not in compliance with the Act and Rules and Regulations or the
provisions of this Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of the Registration Statement
or the use of the Prospectus or of the initiation or threat of any proceeding
for that purpose; and it will promptly use its best efforts to prevent the
issuance of
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any such stop order or to obtain its withdrawal at the earliest possible
moment if such stop order should be issued.
(c) The Company will cooperate with you in endeavoring to
qualify the Shares for offering and sale under the securities laws of such
jurisdictions as you may designate and to continue such qualifications in
effect for so long as may be required for purposes of the distribution of the
Shares, except that the Company shall not be required in connection therewith
or as a condition thereof to qualify as a foreign corporation, or to execute a
general consent to service of process in any jurisdiction, or to make any
undertaking with respect to the conduct of its business. In each jurisdiction
in which the Shares shall have been qualified, the Company will make and file
such statements, reports and other documents in each year as are or may be
reasonably required by the laws of such jurisdictions so as to continue such
qualifications in effect for so long a period as you may reasonably request
for distribution of the Shares, or as otherwise may be required by law.
(d) The Company will furnish to you, as soon as available,
copies of the Registration Statement (three of which will be signed and which
will include all exhibits), each Preliminary Prospectus, the Prospectus, and
any amendments or supplements to such documents, including any prospectus
prepared to permit compliance with Section 10(a)(3) of the Act, all in such
quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its
stockholders as soon as practicable, but in any event not later than the 45th
day following the end of the fiscal quarter first occurring after the first
anniversary of the Effective Date, an earnings statement (which will be in
reasonable detail but need not be audited) complying with the provisions of
Section 11(a) of the Act and Rule 158 of the Rules and Regulations and
covering a 12-month period beginning after the Effective Date, and will advise
you in writing when such statement has been made available.
(f) During a period of five years after the date hereof, the
Company, as soon as practicable after the end of each respective period, will
furnish to its stockholders annual reports (including financial statements
audited by independent certified public accountants) and will furnish to its
stockholders unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will, upon request, furnish to you and
the other several Underwriters hereunder (i) concurrently with making such
reports available to
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its stockholders, statements of operations of the Company for each of the
first three quarters in the form made available to the Company's stockholders;
(ii) concurrently with the furnishing thereof to its stockholders, a balance
sheet of the Company as of the end of such fiscal year, together with
statements of operations, of stockholders' equity and of cash flow of the
Company for such fiscal year, accompanied by a copy of the certificate or
report thereon of nationally recognized independent certified public
accountants; (iii) concurrently with the furnishing of such reports to its
stockholders, copies of all reports (financial or other) mailed to
stockholders; (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or automated quotation system by the Company (except for documents
for which confidential treatment is requested); and (v) every material press
release and every material news item or article in respect of the Company or
its affairs which was generally released to stockholders or prepared for
general release by the Company. During such five-year period, if the Company
shall have any active subsidiaries, the foregoing financial statements shall
be on a consolidated basis to the extent that the accounts of the Company are
consolidated with any subsidiaries, and shall be accompanied by similar
financial statements for any significant subsidiary that is not so
consolidated.
(g) The Company shall not, during the 12 months following
the Effective Date, except with the Representative's your prior written
consent, file, or announce an intent to file, a registration statement
covering any of its shares of capital stock, except that one or more
registration statements on Form S-8 may be filed at any time following the
Effective Date covering the shares of Common Stock reserved for issuance to
employees or directors of the Company pursuant to the 1998 Incentive Plan.
(h) The Company shall not, during the 12 months following
the Effective Date, except with the prior written consent of the
Representative, in its individual capacity and not in its capacity as
representative of the Underwriters, issue, sell, offer or agree to sell,
grant, distribute or otherwise dispose of, directly or indirectly, any shares
of Common Stock, or any options, rights or warrants with respect to shares of
Common Stock, or any securities convertible into or exchangeable for Common
Stock, other than the issuance of (i) the Overallotment Shares, (ii) the
Representative's Warrants and (iii) ________ shares of Common Stock reserved for
issuance to
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employees or directors of the Company pursuant to the 1998 Incentive Plan.
(i) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) The Company will maintain a transfer agent and a
registrar (which may be the same entity as the transfer agent) for the Common
Stock.
(k) The Company will use its best efforts to maintain
listing of its shares of Common Stock on the AMEX.
(l) The Company is familiar with the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder, and has in the
past conducted its affairs, and will in the future conduct its affairs, in
such a manner so as to ensure that the Company was not and will not be an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder.
(m) During a period of five years from the Effective Date,
the Company will, at the option of the Representative, (i) use its best
efforts to nominate and cause to be elected and reelected to the Board of
Directors of the Company a designee of the Representative or (ii) permit an
agent of the Representative to attend all meetings of the Board of Directors
of the Company as a non-voting observer, will give such agent notice of all
meetings of the Board of Directors at the same time and in the same manner
that directors are notified and will reimburse such agent for all expenses
incurred in attending such meetings, including, but not limited to food,
transportation and lodging.
7. Expenses.
The Company agrees with each Underwriter that:
(a) The Company will pay and bear all costs, fees and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including all amendments, supplements, financial
statements, schedules and exhibits), as many Preliminary Prospectuses and
final Prospectuses and any amendments or supplements thereto that the
Representative reasonably deems necessary; the reproduction of this Agreement;
the issuance and delivery of the Shares and the Representative's Warrants,
including stock transfer taxes, if any; the cost of all stock certificates
representing the Shares and transfer agents'
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and registrars' fees; the fees and disbursements of counsel for the Company;
all fees and other charges of the Company's independent public accountants;
the cost of furnishing to the several Underwriters copies of the Registration
Statement (including appropriate exhibits), Preliminary Prospectuses and the
Prospectus; NASD filing fees and expenses incident to securing any required
review; all fees and expenses relating to the listing of the Shares and the
Warrant Shares on the AMEX; all fees, expenses and disbursements relating to
the registration or qualification of the Shares under the securities laws of
such states and other jurisdictions as the Representative may reasonably
designate (including, without limitation, all filing and registration fees and
fees and disbursements of the Representative's counsel in connection with Blue
Sky matters, such as the Preliminary Blue Sky Memoranda and any supplemental
Blue Sky Memoranda and any instruments relating to any of the foregoing; the
fees and disbursements of counsel to the Underwriters (not to exceed $200,000)
in connection with the offering, this Agreement and the transactions
contemplated hereby; the costs of all mailing and printing of the underwriting
documents (including, but not limited to, the Underwriting Agreement, any Blue
Sky surveys and memoranda and, if appropriate, any Agreement Among
Underwriters, Selected Dealers Agreement, Underwriter's Questionnaire and
Power of Attorney); the costs of preparing, printing and delivering
certificates representing the Shares and the Representative's Warrants; and
all other expenses directly incurred by the Company in connection with the
performance of its obligations hereunder.
(b) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, the Company
will, in addition to paying the expenses described in Section 7(a), reimburse
the several Underwriters for all out-of-pocket expenses (including fees and
disbursements of Underwriters' counsel without the limitations therein set
forth in Section 7(a)) incurred by the Underwriters in reviewing the
Registration Statement and the Prospectus and in otherwise investigating,
preparing to market or marketing the Shares.
(c) The Representative, in its individual capacity and not
as representative of the Underwriters, shall also be entitled to a
non-accountable expense allowance equal to 3% of the aggregate offering price
of the Shares. The Company has previously paid the Representative an aggregate
of [$100,000] in partial payment of such non-accountable expense allowance,
which
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amount shall be non-refundable (notwithstanding the termination of this
Agreement for any reason) and will be applied against the non-accountable
expense allowance.
8. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters to purchase and pay for
the Shares, as provided herein, shall be subject: (x) to the accuracy, as of
the date hereof and the Closing Date and any later Overallotment Closing Date,
as the case may be, of the representations and warranties of the Company
herein and to the performance by the Company of its obligations hereunder; (y)
in the event of the purchase of Overallotment Shares from the Selling
Stockholders, the accuracy, as of the Overallotment Closing Date relating to
such purchase, of the representations and warranties of the Selling
Stockholders herein and to the performance of the Selling Stockholders of
their obligations hereunder and (z) to the following additional conditions:
(a) The Registration Statement shall have become effective
not later than 9:00 a.m., New York City time, on the day immediately following
the date of this Agreement, or such later time or date as shall be consented
to in writing by you. If the filing of the Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b) and Rule 430A of the Rules and
Regulations, the Prospectus shall have been filed in the manner and within the
time period required by Rule 424(b) and Rule 430A of the Rules and
Regulations. No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the reasonable satisfaction of
counsel to the Underwriters.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement, and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Shares shall have been reasonably satisfactory to counsel to the
Underwriters, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to herein.
(c) You shall have received, at no cost to you, on the
Closing Date and on any later Overallotment Closing Date, as the
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case may be, the opinion of Fishbein o Badillo o Wagner o Harding, counsel to
the Company, dated the Closing Date or such later Overallotment Closing Date, in
the form attached hereto as Appendix A, addressed to the Underwriters and with
reproduced copies of signed counterparts thereof for the Representative.
(d) In the event of the purchase of any Overallotment Shares
from the Selling Stockholders, you shall have received, in addition to the
opinion described in section 8(c), the opinion of Fishbein o Badillo o Wagner o
Harding, counsel to the Selling Stockholders, dated the Overallotment Closing
Date, in the form attached hereto as Appendix B.
(e) You shall have received from Proskauer Rose LLP,
Underwriters' Counsel, an opinion or opinions, dated the Closing Date or on
any later Overallotment Closing Date, as the case may be, in form and
substance reasonably satisfactory to you, with respect to certain legal
matters as you may reasonably require, and the Company shall have furnished to
such counsel such documents as it may have reasonably requested for the
purpose of enabling it to pass upon such matters.
(f) You shall have received on the Closing Date and on any
later Overallotment Closing Date, as the case may be, a letter from the
Accountants addressed to the Company and the Underwriters, dated the Closing
Date or such later Overallotment Closing Date, as the case may be, confirming
that it is an independent certified public accountant with respect to the
Company within the meaning of the Act and the Rules and Regulations thereunder
and based upon the procedures described in its letter delivered to you
concurrently with the execution of this Agreement (herein called the "Original
Letter"), but carried out to a date not more than three days prior to the
Closing Date or any such later Overallotment Closing Date, as the case may be,
(i) confirming that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later Overallotment Closing
Date, as the case may be; and (ii) setting forth any revisions and additions
to the statements and conclusions set forth in the Original Letter that are
necessary to reflect any changes in the facts described in the Original Letter
since the date of such letter, or to reflect the availability of more recent
financial statements, data or information. The letter shall not disclose any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company which, in your reasonable judgment,
makes it impracticable or inadvisable to proceed with the public offering of
the Shares as contemplated by the Prospectus. In addition, you shall have
received from the
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Accountants a letter addressed to the Company and made available to you for
the use of the Underwriters stating that its review of the Company's system of
internal accounting controls, to the extent it deemed necessary in
establishing the scope of its latest examination of the Company's financial
statements, did not disclose any weaknesses in internal controls that it
considered to be material weaknesses. All such letters shall be in a form
reasonably satisfactory to the Representative and its counsel.
(g) You shall have received on the Closing Date and on any
later Overallotment Closing Date, as the case may be, a certificate of the
President and the Chief Financial Officer of the Company, dated the Closing
Date or such later date, to the effect that as of such date (and you shall be
satisfied that as of such date):
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if made on and as of the
Closing Date or any later Overallotment Closing Date, as the case may be; and
the Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later Overallotment Closing Date, as the case may be;
(ii) The Registration Statement has become
effective under the Act and no stop order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of the Prospectus
has been issued, and no proceedings for that purpose have been instituted or
are pending or, to the best of their knowledge, threatened under the Act;
(iii) They have carefully reviewed the Registration
Statement, and the Prospectus; and, when the Registration Statement became
effective and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Prospectus and any amendments
or supplements thereto contained all statements and information required to be
included therein or necessary to make the statements therein not misleading;
and when the Registration Statement became effective, and at all times
subsequent thereto up to the delivery of such certificate, none of the
Registration Statement, the Prospectus or any amendment or supplement thereto
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; and, since the Effective Date, there has
occurred no event required to be set forth in an amended or supplemented
Prospectus that has not been so set forth; and
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(iv) Subsequent to the respective dates as of
which information is given in the Registration Statement, and the Prospectus,
there has not been (A) any material adverse change in the properties or assets
described or referred to in the Registration Statement and the Prospectus or
in the condition (financial or otherwise), operations, business or prospects
of the Company, (B) any transaction which is material to the Company, except
transactions entered into in the ordinary course of business, (C) any
obligation, direct or contingent, incurred by the Company, which is material
to the Company taken as a whole, (D) any change in the capital stock or
outstanding indebtedness of the Company which is material to the Company taken
as a whole or (E) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company, except as specifically described in
the Prospectus.
(h) In the event of the purchase of Overallotment Shares
from the Selling Stockholders, you shall have received on the Overallotment
Closing Date relating to such purchase a certificate of each of the Selling
Stockholders, dated such Overallotment Closing Date, to the effect that as of
such date (and you shall be satisfied that as of such date):
(i) The representations and warranties of such
Selling Stockholder in this Agreement are true and correct, as if made on and
as of such Overallotment Closing Date; and such Selling Stockholder has
complied with all of the agreements and satisfied all of the conditions on his
part to be performed or satisfied at or prior to such Overallotment Closing
Date; and
(ii) Such Selling Stockholder has carefully
reviewed the Registration Statement and the Prospectus; and, when the
Registration Statement became effective and at all times subsequent thereto up
to the delivery of such certificate, the Registration Statement and the
Prospectus and any amendments or supplements thereto, to the extent that any
statements or omissions are made in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement in
reliance upon and in conformity with information furnished by such Selling
Stockholder to the Company specifically for use therein, contained all
statements and information required to be included therein or necessary to
make the statements therein not misleading; and when the Registration
Statement became effective, and at all times subsequent thereto up to the time
of delivery of such certificate, none of the Registration Statement, the
Prospectus or any amendment or supplement thereto included any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make
26
<PAGE>
the statements therein not misleading; and, since the Effective Date, there
has occurred no event required to be set forth in an amended or supplemented
Prospectus that has not been so set forth.
(i) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request as to the accuracy
of the representations and warranties of the Company herein, as to the
performance by the Company of its obligations hereunder and as to the other
conditions precedent to the obligations of the Underwriters hereunder.
(j) The Firm Shares and the Overallotment Shares, if any,
shall have been approved for listing upon notice of issuance on the AMEX.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to counsel to the Underwriters. The Company will furnish you with such number
of conformed copies of such opinions, certificates, letters and documents as
you shall reasonably request.
9. Indemnification and Contribution.
(a) Subject to the provisions of Section 9(g), the Company
agrees to indemnify and hold harmless each Underwriter and each person
(including each partner or officer thereof) who controls any Underwriter
within the meaning of Section 15 of the Act from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Act, the
Exchange Act, the common law or otherwise, and the Company agrees to reimburse
each such Underwriter and controlling person for any legal or other
out-of-pocket expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any
462(b) registration statement) or any post-effective amendment thereto
(including any 462(b) registration statement), or the omission or alleged
omission to state therein a material fact required to be
27
<PAGE>
stated therein or necessary to make the statements therein not misleading, or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus or the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto) or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that (1) the indemnity agreements of the Company contained
in this Section 9(a) shall not apply to any such losses, claims, damages,
liabilities or expenses if such statement or omission is contained in the
section of the Prospectus entitled "Underwriting," and (2) the indemnity
agreement contained in this paragraph (a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages, liabilities or expenses
purchased the Shares which is the subject thereof (or to the benefit of any
person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented was not sent or delivered to such person
(excluding any documents incorporated therein by reference) and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented unless the failure is the result of noncompliance by the Company
with Section 6(a) hereof. The indemnity agreements of the Company contained in
this Section 9(a) and the representations and warranties of the Company
contained in Section 2(a) hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of any payment for the Shares.
(b) Subject to the provisions of Section 9(g), each of the
Selling Stockholders severally agrees to indemnify and hold harmless the
Company, each of its executive officers, each of its directors, each
Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Act from and
against any and all losses, claims, damages or liabilities, joint or several,
to which such indemnified parties or any of them may become subject under the
Act, the Exchange Act, the common law or otherwise, and each of the Selling
Stockholders severally agrees to reimburse the Company, each of its executive
officers, each of its directors, and each such Underwriter and controlling
person for any legal or other out-of-pocket expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements
28
<PAGE>
of counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding which may
be brought against, the respective indemnified parties, in each case arising
out of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the
Prospectus as part thereof and any 462(b) registration statement) or any
post-effective amendment thereto (including any 462(b) registration
statement), or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that (1) the indemnity agreements of
each of the Selling Stockholders severally contained in this Section 9(b)
shall apply to any such losses, claims, damages, liabilities or expenses only
if such statement or omission was made in reliance upon and in conformity with
written information furnished by such Selling Stockholder to the company for
use therein and (2) the indemnity agreement contained in this Section 9(b)
with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Shares which is the subject
thereof (or to the benefit of any person controlling such Underwriter) if at
or prior to the written confirmation of the sale of such Shares a copy of the
Prospectus (or the Prospectus as amended or supplemented was not sent or
delivered to such person (excluding any documents incorporated therein by
reference) and the untrue statement or omission of a material fact contained
in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented unless the failure is the result of
noncompliance by the Company with Section 6(a) hereof. The indemnity
agreements of the Selling Stockholders contained in this Section 9(b) and the
representations and warranties of the Selling Stockholders contained in
Section 2(b) hereof shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified party
and shall survive the delivery of any payment for the Shares.
29
<PAGE>
(c) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its executive officers, each of its directors,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Act, from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Act, the Exchange Act, the common law
or otherwise and to reimburse each of them for any legal or other expenses
including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties,
in each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any 462(b)
registration statement) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the
omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that in the cases of
clauses (i) and (ii) above, such statement or omission is contained in the
Section of the Prospectus entitled "Underwriting." The indemnity agreement of
each Underwriter contained in this Section 9(c) shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Shares.
(d) Each party indemnified under the provision of Section
9(a),(b)or(c)agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its
receipt of written notification of the commencement of any investigation or
inquiry of, or proceeding against it, in respect of which indemnity may be
sought on account of any indemnity agreement contained in such paragraphs, it
will promptly give written notice (a "Notice") of such service or notification
to the party or parties from whom
30
<PAGE>
indemnification may be sought hereunder. No indemnification provided for in
such Section 9(a), (b) or (c) shall be available to any party who shall fail
so to give the Notice if the party to whom such Notice was not given was
unaware of the action, suit, investigation, inquiry or proceeding to which the
Notice would have related and was prejudiced by the failure to give the
Notice, but the omission so to notify such indemnifying party or parties of
any such service or notification shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (the "Notice of Defense") to the indemnified party, to assume (alone or
in conjunction with any other indemnifying party or parties) the entire
defense of such action, suit, investigation, inquiry or proceeding, in which
event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties
and reasonably satisfactory to the indemnified party or parties; provided,
however, that (i) if the indemnified party or parties reasonably determine
that there may be a conflict between the positions of the indemnifying party
or parties and of the indemnified party or parties in conducting the defense
of such action, suit, investigation, inquiry or proceeding or that there may
be legal defenses available to such indemnified party or parties different
from or in addition to those available to the indemnifying party or parties,
then counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be
necessary to protect the interests of the indemnified party or parties and
(ii) in any event, the indemnified party or parties shall be entitled, at its
or their own expense to have counsel chosen by such indemnified party or
parties participate in, but not conduct, the defense. It is understood that
the indemnifying parties shall not, in respect of the legal defenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for (a) the fees and expenses of more than
one separate firm (in addition to any local counsel) for all of the
Underwriters and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act, and (b) the fees and expenses of more than
one separate firm (in addition to any local counsel) for the Company, its
directors, its officers who sign the Registration Statement and each person,
if any, who controls the Company
31
<PAGE>
within the meaning of Section 15 of the Act. If, within a reasonable time
after receipt of the Notice, an indemnifying party gives a Notice of Defense
and the counsel chosen by the indemnifying party or parties is reasonably
satisfactory to the indemnified party or parties, the indemnifying party or
parties will not be liable under Section 9(a), (b) or (c) for any legal or
other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear the
legal and other expenses incurred in connection with the conduct of the
defense as referred to in clause (i) of the proviso to the preceding sentence
and (B) the indemnifying party or parties shall bear such other expenses as it
or they have authorized to be incurred by the indemnified party or parties.
If, within a reasonable time after receipt of the Notice, no Notice of Defense
has been given, the indemnifying party or parties shall be responsible for any
legal or other expenses incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding. The indemnifying party or parties shall not be liable for any
settlement of any proceeding effected without its or their written consent,
provided such consent has not been unreasonably withheld.
(e) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
Section 9(a), (b) or (c), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in Section 9(a), (b) or (c),(i) in such proportion as
is appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Shares 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 fault of each indemnifying party in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on
the one hand, and the Underwriters, on the other, shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Shares received by the Company and the total underwriting discount received by
the Underwriters, as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the Shares.
Relative fault shall be determined by reference to,
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<PAGE>
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by each indemnifying party and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to Section 9(e) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this Section
9(d). The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities or actions in respect thereof, referred to in
the first sentence of this Section 9(e) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigation, preparation to defend or defense against any action or
claim which is the subject of this Section 9(e). Notwithstanding the
provisions of this Section 9(e), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Shares purchased by such Underwriter. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 9(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom contribution
may be sought from any obligation it may have hereunder or otherwise (except
as specifically provided in Section 9(d)).
(f) The Company will not, without the prior written consent
of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
33
<PAGE>
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding) unless such settlement, compromise or
consent includes an unconditional release of such Underwriter and each such
controlling person from all liability arising out of such claim, action, suit
or proceeding.
(g) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof, including without limitation
the provisions of this Section 9 and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 9
fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Act and the Exchange Act.
10. Termination. This Agreement may be terminated by you at any time
on or prior to the Closing Date or on or prior to any later Overallotment
Closing Date, as the case may be, (i) if the Company shall have failed,
refused or been unable, at or prior to the Closing Date, or on or prior to any
later Overallotment Closing Date, as the case may be, to perform any agreement
on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled, or (ii) if trading on the New York Stock Exchange, the AMEX or
the Nasdaq National Market shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required on the New York Stock Exchange, the AMEX
or the Nasdaq National Market, by such trading exchanges or by order of the
Commission or any other governmental authority having jurisdiction, or if a
banking moratorium shall have been declared by federal or New York
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, accident or other calamity of such character as to have a
Material Adverse Effect regardless of whether or not such loss shall have been
insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets in the United
States as in the judgment of the Representative makes it inadvisable or
impracticable to proceed with the offering, sale and delivery of the Shares,
or (v) if there shall have occurred an outbreak or escalation of hostilities
between the United States and any foreign power or of any other insurrection
or armed conflict involving the United States or other national or
international calamity, hostilities or crisis or the declaration by the United
34
<PAGE>
States of a national emergency which, in the judgment of the Representative,
adversely affects the marketability of the Shares, or (vi) if since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there shall have occurred any material adverse
change or any development involving a prospective material adverse change in
or affecting the condition, financial or otherwise, of the Company or the
business, affairs, management, or prospects of the Company, whether or not
arising in the ordinary course of business, or (vii) if any foreign, federal
or state statute, regulation, rule or order of any court or other governmental
authority shall have been enacted, published, decreed or otherwise promulgated
which in the judgment of the Representative materially and adversely affects
or will materially and adversely affect the business or operations of the
Company, or trading in the Common Stock shall have been suspended, or (viii)
there shall have occurred a material adverse decline in the value of
securities generally on the New York Stock Exchange, the AMEX or the Nasdaq
National Market or (ix) action shall be taken by any foreign, federal, state
or local government or agency in respect of its monetary or fiscal affairs
which, in the judgment of the Representative, has a material adverse effect on
the securities markets in the United States. If this Agreement shall be
terminated in accordance with this Section 10, there shall be no liability of
the Company to the Underwriters and no liability of the Underwriters to the
Company; provided, however, that in the event of any such termination the
Company agrees to indemnify and hold harmless the Underwriters from all costs
or expenses incident to the performance of the obligations of the Company
under this Agreement, including all costs and expenses referred to in Section 7.
If you elect to terminate this Agreement as provided in this Section
10, the Company shall be notified promptly by you by telephone, telecopy or
telegram, confirmed by letter.
11. Reimbursement of Certain Expenses.
(a) In addition to its other obligations under Section 9 of
this Agreement, the Company hereby agrees to reimburse on a monthly basis the
Underwriters for all reasonable legal and other expenses incurred in
connection with investigating or defending any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in Section 9(a),
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be
35
<PAGE>
held to be improper; provided, however, that (i) to the extent any such
payment is ultimately held to be improper, the persons receiving such payments
shall promptly refund them and (ii) such persons shall provide to the Company,
upon request, reasonable assurances of their ability to effect any refund,
when and if due.
(b) In addition to their other obligations under Section 9
of this Agreement, the Underwriters hereby agree to reimburse on a monthly
basis the Company for all reasonable legal and other expenses incurred in
connection with investigating or defending any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in Section 9(b) of
this Agreement, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the obligations under this Section 11 and
the possibility that such payments might later be held to be improper;
provided, however, that (i) to the extent any such payment is ultimately held
to be improper, the Company shall promptly refund it and (ii) the Company
shall provide to the Underwriter, upon request, reasonable assurances of its
ability to effect any refund, when and if due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 9 hereof, the several parties (in
addition to the Company and the several Underwriters) indemnified under the
provisions of said Section 9, and their respective personal representatives,
successors and assigns. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any
provision herein contained. The term "successors and assigns" as herein used
shall not include any purchaser, as such purchaser, of any of the Shares from
any of the several Underwriters.
(a) Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to Prime Charter Ltd., 810 Seventh
Avenue, 9th Floor, New York, New York 10019, Attention: Mr. Philip M. Getter;
and if to the Company, shall be mailed, telegraphed or delivered to it at its
office, Educational Video Conferencing, Inc., 35 East Grassy Sprain Road,
Suite 504, Yonkers, New York, 10710, Attention: Dr. Arol I. Buntzman.
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<PAGE>
(b) Applicable Law. The Company (a) agrees that any legal suit,
action or proceeding arising out of or relating to this letter shall be
instituted exclusively in New York State Supreme Court, County of New York or
in the United States District Court for the Southern District of New York, (b)
waives any objection to the venue of any such suit, action or proceeding, and
(c) irrevocably consents to the jurisdiction of the New York State Supreme
Court, County of New York, and the United States District Court for the
Southern District of New York, in any such suit, action or proceeding. The
Company further agrees to accept and acknowledge service of any and all
process which may be served in any such suit, action or proceeding in the New
York State Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York. The Company further agrees that
service of process upon it mailed by certified mail to its address shall be
deemed in every respect effective service of process upon it in any such suit,
action or proceeding.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Miscellaneous. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and
effect regardless of (i) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company
or its respective directors of officers and (ii) delivery of and payment for
the Shares under this Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO RULES
GOVERNING THE CONFLICT OF LAWS.
Please sign and return to the Company the enclosed duplicate of this
letter, whereupon this letter will become a binding agreement among the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
EDUCATIONAL VIDEO CONFERENCING, INC.
By
---------------------------------
37
<PAGE>
Arol I. Buntzman
Chairman of the Board
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
PRIME CHARTER LTD.
By
------------------------------
Philip M. Getter
Managing Director
Acting on behalf of the several
Underwriters, including themselves,
named on Schedule A hereto.
38
<PAGE>
SCHEDULE A
UNDERWRITERS
Number of
Shares
to be
Underwriters Purchased
- ------------ ---------
Prime Charter Ltd.................................
Total [ ]
========
<PAGE>
SCHEDULE B
Overallotment
Name of Selling Stockholder Shares
- ------------------------------------------------------------ ------------------
<PAGE>
SCHEDULE C
Lock-up Agreements
<PAGE>
APPENDIX A
(i) The Registration Statement has become effective under
the Act and, to such counsel's knowledge after due inquiry, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus has been issued and no proceedings for
that purpose have been instituted or are pending or threatened under the Act;
any required filing of the Prospectus and any supplement thereto pursuant to
Rule 424(b) of the Rules and Regulations has been made in the manner and
within the time period required by such Rule 424(b).
(ii) The Registration Statement, all Preliminary
Prospectuses, the Prospectus, and each amendment or supplement thereto (other
than the financial statements, financial data and supporting schedules
included therein, as to which such counsel need express no opinion), comply as
to form in all material respects with the requirements of the Act and the
applicable Rules and Regulations and to such counsel's knowledge after due
inquiry, there are no agreements, contracts, leases or documents of a
character required to be described in, or filed as an exhibit to, the
Registration Statement which are not described or filed as required by the Act
and the applicable Rules and Regulations.
(iii) The Company is duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
(iv) The Company has full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement.
(v) To such counsel's knowledge after due inquiry, the
Company does not own or control, directly or indirectly, any shares of stock
or any other equity interest in any firm, partnership, joint venture,
association or other entity.
(vi) The Company has full corporate power and authority to
enter into the Underwriting Agreement and the Representative's Warrant
Agreement and to issue, sell and deliver the Firm Shares and the Overallotment
Shares in accordance with the terms of the Underwriting Agreement and the
Representative's Warrants in accordance with the terms of the Representative's
Warrant Agreement.
<PAGE>
(vii) The Underwriting Agreement and the Representative's
Warrant Agreement have been duly authorized by all necessary corporate action
on the part of the Company, have been duly executed and delivered by the
Company and the Representative's Warrant Agreement is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws of general applicability relating to
or affecting creditors' rights or by general principles of equity, whether
considered at law or in equity, and except as rights to indemnity and
contribution thereunder may be limited by federal or state securities laws or
the public policies underlying such laws.
(viii) The execution, delivery and performance of the
Underwriting Agreement and the Representative's Warrant Agreement by the
Company and the consummation of the transactions therein contemplated do not
and will not (a) conflict with or result in a violation or breach of any of
the terms or provisions of, or constitute a default under (i) any indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any lease, contract or other agreement or
instrument known to such counsel after due inquiry to which the Company is a
party or by which its respective properties are bound, (ii) the Certificate of
Incorporation or Bylaws (or other organizational documents) of the Company or
(iii) any applicable license, authorization, approval, permit, judgment,
franchise, law, order, rule, regulation, writ, injunction or decree of any
court or governmental agency or body to which the Company is subject.
(ix) The Company is not required to obtain or make any
consent, approval, authorization, order, designation or declaration of or
filing by or with any court or regulatory, administrative or other
governmental agency or body in connection with the execution and delivery of
the Underwriting Agreement or the Representative's Warrant Agreement by the
Company and the consummation of the transactions therein contemplated except
such as have been obtained under the Act and the Rules and Regulations or such
as may be required under state securities laws, Blue Sky laws or by the rules
and regulations of the AMEX in connection with the purchase and distribution
of the Shares by the Underwriters.
(x) To such counsel's knowledge after due inquiry, there are
no pending or threatened actions, suits, claims, proceedings or investigations
before any court, regulatory body, administrative agency or any other
governmental agency or body,
<PAGE>
domestic or foreign against the Company or any of their respective officers or
any of their respective properties, assets or rights that, if successful,
would have a Material Adverse Effect or would limit, revoke, cancel, suspend,
or cause not to be renewed any existing license, certificate, registration,
approval or permit that is material to the conduct of the business of the
Company as presently conducted, or that is of a character otherwise required
to be disclosed in the Registration Statement or the Prospectus under the Act
or the applicable Rules and Regulations.
(xi) The authorized capital stock of the Company consists of
__________ shares of Common Stock, of which there are outstanding __________
shares and 1,000,000 shares of Preferred Stock. All the issued and outstanding
shares of Common Stock have been duly authorized and validly issued, are fully
paid and non-assessable, have been issued in compliance with the registration
requirements of applicable federal and state securities laws and were not
issued in violation of any preemptive right, resale right, registration right,
right of first refusal or other similar right known to such counsel.
(xii) The issuance and sale of the Shares and the
Representative's Warrants have been duly authorized by the Company. Upon
issuance and delivery against payment therefor in accordance with the terms of
the Underwriting Agreement, the Shares will be validly issued, fully paid and
non-assessable, and, to such counsel's knowledge after due inquiry, the
stockholders of the Company do not have any preemptive right, resale right,
registration right, right of first refusal or other similar right, in
connection with the purchase or sale of any of the Shares. Shares of Common
Stock have been duly and validly authorized and reserved for issuance upon
exercise of the Representative's Warrants and, when issued and delivered by
the Company against payment therefor in the manner set forth in the
Representative's Warrant Agreement, the Warrant Shares will be duly and
validly issued, fully paid, non-assessable and free of preemptive rights. To
such counsel's knowledge after due inquiry, there are no outstanding warrants,
options or other rights granted by the Company to purchase shares of its
Common Stock or other securities, other than as described in the Prospectus.
(xiii) The terms and provisions of the Common Stock conform
in all material respects to the description thereof contained in the
Registration Statement and the Prospectus, and the information in the
Prospectus under the caption "Description of Capital Stock," to the extent
that it constitutes matters of
<PAGE>
law or legal conclusions, has been reviewed by such counsel and is correct,
and the form of certificate evidencing the Common Stock complies with the
applicable provisions of Delaware law.
(xiv) The statements in the Registration Statement and the
Prospectus summarizing statutes, rules and regulations, including the Delaware
General Corporation Law and the description of the Certificate of
Incorporation and Bylaws of the Company are accurate and fairly and correctly
present the information required to be presented by the Act or the Rules and
Regulations in all material respects; and there are no statutes, rules or
regulations required to be described in the Registration Statement or the
Prospectus that are not described or referred to therein as required.
(xv) The statements under the captions "Risk Factors
Outstanding Shares Eligible for Future Sale," "Management Employment and
Agreements," "Management - 1998 Incentive Plan," and "Certain Transactions" in
the Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, are accurate summaries and fairly and
correctly present, in all material respects, the information called for with
respect to such documents and matters.
(xvi) The information required to be set forth in the
Registration Statement in answer to Item 509 of Regulation S-B insofar as it
relates to such counsel is accurately and adequately set forth therein in all
material respects or no response is required with respect to such Item.
(xvii) The Company is not in violation of its Certificate of
Incorporation or Bylaws, and to such counsel's knowledge after due inquiry,
the Company is not in breach of or default with respect to any provision of
any agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument by which it or any of its properties may be bound
or affected.
(xviii) To such counsel's knowledge after due inquiry,
except as set forth in the Registration Statement and Prospectus, no holders
of shares of Common Stock or other securities of the Company have registration
rights with respect to securities of the Company.
(xix) No transfer taxes are required to be paid in
connection with the sale or delivery to the Underwriters of the Firm Shares or
the Overallotment Shares.
<PAGE>
(xx) The Company is not and will not, upon consummation of
the transactions contemplated by the Underwriting Agreement, be an "investment
company," or a "promoter" or "principal underwriter" for, a "registered
investment company," as such terms are defined in the Investment Company Act
of 1940, as amended.
(xxi) The Shares have been approved for listing on the AMEX,
subject to official notice of issuance.
(xxii) Counsel for the Company have participated in
conferences with officials and other representatives of the Company, the
Representative, counsel for the Representative and the independent public
accountants of the Company, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were discussed,
and although such counsel have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which caused them to believe
that, at the time the Registration Statement became effective the Registration
Statement (except as to financial statements, financial and statistical data
and supporting schedules contained therein, as to which such counsel need
express no opinion) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or at the Closing Date or any
later Overallotment Closing Date, as the case may be, the Registration
Statement or the Prospectus (except as aforesaid) contained any untrue
statement of a material fact or omitted 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.
Counsel rendering the foregoing opinion may rely as to questions of
fact upon representations or certificates of officers of the Company and of
governmental officials, as the case may be, in which case its opinion is to
state that it is so doing and that it has no actual knowledge of any material
misstatement or inaccuracy in such opinions, representations or certificates,
and that such counsel believes that it and the Underwriters are justified in
relying on such opinions or certificates. Copies of any opinion,
representation or certificate so relied upon shall be delivered to the
Representative, and to the Representative's counsel.
<PAGE>
Appendix B
(i) The Selling Stockholders have full power and authority
to enter into the Underwriting Agreement and the Escrow Agreement and to sell,
transfer and deliver the Overallotment Shares to be sold by them in the manner
provided in the Underwriting Agreement. The Underwriting Agreement and the
Escrow Agreement have been duly executed and delivered by the Selling
Stockholders.
(ii) Each of the Selling Stockholders is the lawful owner of
the Overallotment Shares to be sold by him upon sale and delivery of, and
payment for, such Overallotment Shares, as provided in the Underwriting
Agreement. Each of the Selling Stockholders will convey good and marketable
title to such Overallotment Shares, free and clear of any security interests,
liens, encumbrances, equities, claims or other defects.
(iii) The execution, delivery or performance of the
Underwriting Agreement or the Escrow Agreement by any of the Selling
Stockholders, the sale of the Overallotment Shares being sold to the
Underwriters by any of the Selling Stockholders pursuant to the Underwriting
Agreement, the compliance by any of the Selling Stockholders with the other
provisions of the Underwriting Agreement and the Escrow Agreement and the
consummation of the other transactions contemplated in the Underwriting
Agreement and the Escrow Agreement do not (A) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained, such as may be required under
Blue Sky laws and, if the registration statement filed with respect to the
Shares (as amended) is not effective under the Act as of the time of execution
hereof, such as may be required (and shall be obtained as provided in this
Agreement) under the Act or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under
any indenture, mortgage, deed of trust, lease or other agreement or instrument
to which any such Selling Stockholder is a party or by which any of the
Selling Stockholders is bound, or any statute or any judgment, decree, order,
rule or regulation of any court or other governmental authority or any
arbitrator applicable to any of the Selling Stockholders.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
EDUCATIONAL VIDEO CONFERENCING, INC.
(a Delaware corporation)
Under Section 102 of the General Corporation Law
FIRST: The name of the corporation is EDUCATIONAL VIDEO
CONFERENCING, INC. (the "Corporation").
SECOND: The registered office of Corporation is located at
9 East Loockerman Street, in the City of Dover, in the County of Kent, in the
State of Delaware. The name of its registered agent at the address is
InterCounty Clearance Corporation.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 11,000,000 shares,
consisting of:
a) 10,000,000 shares of common stock, par value
$0.0001; and
b) 1,000,000 shares of preferred stock, par
value $0.0001.
The board of directors of the Corporation is expressly
authorized to fix by resolution or resolutions the designations and the powers
(including voting powers), preferences, and rights, and the qualifications,
limitations, or restrictions permitted by Section 151 of the Delaware General
Corporation Law in respect of any class or classes of stock or any series of any
class of stock of the Corporation which may be desired but which shall not be
fixed by this Certificate of Incorporation. Such grant of authority includes the
power to specify the number of shares in any series.
FIFTH: The name and address of the sole incorporator is
Ian L. Kelley, Fischbein o Badillo o Wagner o Harding, 909 Third Avenue,
New York, NY 10022.
<PAGE>
SIXTH: The powers of the sole incorporator are to
terminate upon the filing of this Certificate of Incorporation. The board of
directors consists of the four directors named below, each director to serve
until the first annual meeting of stockholders, or until their respective
successors are elected and qualified. The names and mailing addresses of the
persons who are to serve as directors of the Corporation are:
Dr. Arol Buntzman 35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10701
Dr. John J. McGrath 35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10701
Richard Goldenberg 35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10701
Richard Snelling 35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10701
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized to make, alter or repeal all or any of the provisions of the By-Laws
of the Corporation.
NINTH: A director of the Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such exemption from liability
or limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
TENTH: (a) The Corporation shall, to the extent and in
the manner permitted by the General Corporation Law of Delaware, as the same now
exists or may hereafter be amended, indemnify any person against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred in connection with any threatened,
2
<PAGE>
pending or completed action, suit, or proceeding in which such person was or is
a party or is threatened to be made a party by reason of the fact that such
person is or was a director or officer of the Corporation. For purposes of such
indemnification, a "director" or "officer" of the Corporation shall mean any
person (i) who is or was a director or officer of the Corporation, (ii) who is
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise or
(iii) who was a director or officer of a corporation which was a predecessor
corporation of the Corporation or of another enterprise at the request of such
predecessor corporation.
The Corporation shall be required to indemnify a director or
officer in connection with any action, suit, or proceeding (or part thereof)
initiated by such director or officer only if the initiation of such action,
suit, or proceeding (or part thereof) by the director or officer was authorized
by the Board of Directors of the Corporation.
The Corporation shall pay the expenses (including attorney's
fees) incurred by a director or officer of the Corporation entitled to
indemnification hereunder in defending any action, suit or proceeding referred
to in this Article Tenth in advance of its final disposition; provided, however,
that payment of expenses incurred by a director or officer of the Corporation in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by the director or officer to repay all
amounts advanced in the event that it should ultimately be determined that the
director or officer is not entitled to be indemnified under this Article Tenth
or otherwise.
The rights conferred on any person by section (a) of this
Article Tenth shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the Corporation's
Certificate of Incorporation or any agreement, vote of the stockholders or
disinterested directors or other action provided that the same conforms to the
provisions of this Certificate of Incorporation, as the same may be amended from
time to time, and the laws of the State of Delaware.
Any repeal or modification of the foregoing provisions of this
Article shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
(b) The Corporation shall have the power, to the maximum
extent and in the manner permitted by the General
3
<PAGE>
Corporation Law of Delaware, as the same now exists or may hereafter be amended,
to indemnify any person, in addition to directors and officers, against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred in connection with any threatened, pending or
completed action, suit, or proceeding, in which such person was or is a party or
is threatened to be made a party by reason of the fact that such person is or
was an employee or agent of the Corporation. For purposes of this section (b) of
Article Tenth, an "employee" or "agent" of the Corporation (other than a
director or officer) shall mean any person (i) who is or was an employee or
agent of the Corporation, (ii) who is or was serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the Corporation or of another
enterprise at the request of such predecessor corporation.
(c) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.
ELEVENTH: The Corporation reserves the right to amend, alter,
change, or repeal any provision contained in this certificate of incorporation
in the manner now or hereafter prescribed by law, and all rights and powers
conferred herein on stockholders, directors, and officers are subject to this
reserved power.
TWELFTH: The Corporation expressly elects not to be
governed by Section 203 of the Delaware General Corporation Law.
I, THE UNDERSIGNED, to form a corporation for the purposes
hereinabove stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify that the facts
stated herein are true and hereunto set my hand and seal this 23rd day of
October, 1997.
/s/ Ian L. Kelley
------------------------------
Ian L. Kelley, Incorporator
4
<PAGE>
BY-LAWS
OF
Educational Video Conferencing, Inc.
A Delaware Corporation
ARTICLE I - OFFICES
The registered office of the Corporation in the State of Delaware shall be
located in the City and State designated in the Certificate of Incorporation.
The Corporation may also maintain offices at such other places within or without
the State of Delaware as the Board of Directors may, from time to time,
determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings: (Section 211 )
The annual meeting of the shareholders of the Corporation shall be held at the
time fixed, from time to time, by the Directors, at the time fixed from time to
time by the Directors.
Section 2 - Special Meetings: (Section 211)
Special meetings of the shareholders may be called by the Board of Directors or
such person or persons authorized by the Board of Directors shall be held within
or without the State of Delaware.
Section 3 - Court-ordered meeting: (Section 211 )
The Court of Chancery in this State where the Corporation's principal office is
located, or where the Corporation's registered office is located if its
principal office is not located in this state, may after notice to the
Corporation, order a meeting to be held on application of any Director or
shareholder of the Corporation entitled to vote in an annual meeting if an
annual meeting has not been held within any thirteen month period if there is a
failure by the Corporation to hold an annual meeting for a period of thirty days
after the date designated therefor, or if no date has been designated, for a
period of thirteen months after the organization of the Corporation or after its
last annual meeting. The court may fix the time and place of the meeting,
determine the shares entitled to participate in the meeting, specify a record
date for determining shareholders entitled to notice of and to vote at the
meeting, prescribe the form and content of the meeting notice, and enter other
orders a may be appropriate.
- -------------------------------------------------------------------------------
* All references to Sections in these By Laws refer to those sections contained
in the Delaware General Corporation Law.
<PAGE>
Section 4 - Place of Meetings: (Section 211)
Meetings of shareholders shall be held at the registered office of the
Corporation, or at such other places, within or without the State of Delaware as
the Directors may from time to time fix. If no designation is made, the meeting
shall be held at the Corporation's registered office in the state of Delaware.
Section 5 - Notice of Meetings: (Section 222)
(a) Written or printed notice of each meeting of shareholders, whether annual or
special, stating the time when and place where it is to be held, shall be served
either personally or by first class mail, by or at the direction of the
president, the secretary, or the officer or the person calling the meeting, not
less than ten or more than sixty days before the date of the meeting, unless the
lapse of the prescribed time shall have been waived before or after the taking
of such action, upon each shareholder of record entitled to vote at such
meeting, and to any other shareholder to whom the giving of notice may be
required by law. Notice of a special meeting shall also state the business to be
transacted or the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to dissent and receive payment for
their shares pursuant to the Delaware General Corporation Law, the notice of
such meeting shall include a statement of that purpose and to that effect. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail addressed to the shareholder as it appears on the share transfer
records of the Corporation.
Section 6 - Shareholders' List: (Section 219)
(a) After fixing a record date for a meeting, the officer who has charge of the
stock ledger of the Corporation, shall prepare an alphabetical list of the names
of all its shareholders entitled to notice of the meeting, arranged by voting
group with the address of, and the number, class, and series, if any, of shares
held by, each shareholder. The shareholders' list must be available for
inspection by any shareholder for a period of ten days before the meeting or
such shorter time as exists between the record date and the meeting and
continuing through the meeting at the Corporation's principal office, at a place
identified in the meeting notice in the city where the meeting will be held, or
at the office of the Corporation's transfer agent or registrar. Any shareholder
of the Corporation or the shareholder's agent or attorney is entitled on written
demand to inspect the shareholders' list during regular business hours and at
the shareholder's expense, during the period it is available for inspection.
(b) The Corporation shall make the shareholder's list available at the meeting
of shareholders, and any shareholder or the shareholder's agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment.
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<PAGE>
(c) Upon the willful neglect or refusal of the Directors to produce such a list
at any meeting for the election of Directors, such Directors shall be ineligible
for election for any office at such meeting.
(d) The stock ledger shall be the only evidence as to who are the shareholders
entitled to examine the stock ledger, the list required by Section 2 19 of the
Delaware General Corporation Law or the books of the Corporation, or to vote in
person or by proxy at any shareholders' meeting.
Section 7 - Quorum: (Section 2 16)
(a) Except as otherwise provided herein, or by law, or in the Certificate of
Incorporation (such Articles and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), or for meetings
ordered by the Court of Chancery called pursuant to Section 2 11 of the Delaware
General Corporations Law, a quorum shall be present at all meetings of
shareholders of the Corporation, if the holders of a majority of the shares
entitled to vote on that matter are represented at the meeting in person or by
proxy.
(b) The subsequent withdrawal of any shareholder from the meeting, after the
commencement of a meeting, or the refusal of any shareholder represented in
person or by proxy to vote, shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(c) Despite the absence of a quorum at any meeting of shareholders, the
shareholders present may adjourn the meeting.
Section 8 - Voting: (Section 212 & 216)
(a) Except as otherwise provided by law, the Certificate of Incorporation, or
these Bylaws, any corporate action, other than the election of Directors, the
affirmative vote of the majority of shares entitled to vote on that matter and
represented either in person or by proxy at a meeting of shareholders at which a
quorum is present shall be the act of the shareholders of the Corporation.
(b) Unless otherwise provided for in the Articles of Incorporation of this
Corporation, directors will be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present and each shareholder entitled to vote has the right to vote the number
of shares owned by him for a many persons as there are Directors to be elected.
Unless otherwise provided for in the Certificate of Incorporation of this
Corporation, Directors will be elected by a plurality of the votes by the
shares, present in person or by proxy, entitled to vote in the election at a
meeting at which a quorum is present and each shareholder entitled to vote has
the right to vote the number of shares owned by him/her for as may persons as
there are Directors to be elected.
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<PAGE>
(c) Except as otherwise provided by statute, the Certificate of Incorporation,
or these bylaws, at each meeting of shareholders, each shareholder of the
Corporation entitled to vote thereat, shall be entitled to one vote for each
share registered in his name on the books of the Corporation.
Section 9 - Proxies: (Section 212)
Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so either in person or by proxy, so long as such proxy is
executed in writing by the shareholder himself, or by his attorney-in-fact
thereunto duly authorized in writing. Every proxy shall be revocable at will
unless the proxy conspicuously states that it is irrevocable and the proxy is
coupled with an interest. A telegram, telex, cablegram, or similar transmission
by the shareholder, or as a photographic, photostatic, facsimile, shall be
treated as a valid proxy, and treated as a substitution of the original proxy,
so long as such transmission is a complete reproduction executed by the
shareholder. No proxy shall be valid after the expiration of three years from
the date of its execution, unless otherwise provided in the proxy. Such
instrument shall be exhibited to the Secretary at the meeting and shall be filed
with the records of the Corporation.
Section 10 - Action Without a Meeting: (Section 228)
Unless otherwise provided for in the Certificate of Incorporation of the
Corporation, any action to be taken at any annual or special shareholders'
meeting, may be taken without a meeting, without prior notice and without a vote
if a written consent or consents is/are signed by the shareholders of the
Corporation having not less than the minimum number of votes necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereat were present and voted is delivered by hand or by certified or
registered mail, return receipt requested, to the Corporation to its registered
office in the State of Delaware, its principal place of business or an officer
or agent of the Corporation having custody of the book in which proceedings of
share- holders' meetings are. recorded.
Section 11 - Inspectors: (Section 231)
(a) The Corporation shall appoint one or more inspectors, and one or more
alternate inspectors, to act at any shareholder' meeting and make a written
report thereof, so long a such inspectors sign an oath to faithfully execute
their duties with impartiality and to the best of their ability before such
meeting. if no inspector or alternate is able to act a shareholder' meeting, the
presiding officer shall appoint one or more inspectors to act at the meeting.
*(b) The inspector shall:
(I) ascertain the number of shares entitled to vote and the voting
power of each such shareholder;
(II) determine the shares represented at a meeting and the validity of
proxies and ballots;
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<PAGE>
(III) count all votes and ballots;
(IV) determine and retain for a reasonable time a disposition record of
any challenges made to any of the inspectors' determinations; and
(V) certify the inspectors' determinations of the number of shares
represented at the meeting and their count of all votes and ballots.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Term, Election and Qualifications: (Section 141 )(a)(a) The
first Board of Directors and all subsequent Boards of the Corporation shall
consist of 3, unless and until otherwise determined by vote of a majority of the
entire Board of Directors. The Board of Directors or shareholders all have the
power, in the interim between annual and special meetings of the shareholders,
to increase or decrease the number of Directors of the Corporation. A Director
need not be a shareholder of the Corporation unless the Certificate of
Incorporation of the Corporation or these Bylaws require.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation shall be
elected at the first annual shareholders' meeting and at each annual meeting
thereafter, unless their terms are staggered in the Certificate of Incorporation
of the Corporation or these Bylaws, by a majority of the votes cast at a meeting
of shareholders, by the holders of shares entitled to vote in the election.
(c) The first Board of Directors shall hold office until the first annual
meeting of shareholders and until their successors have been duly elected and
qualified or until there is a decrease in the number of Directors. Thereinafter,
Directors will be elected at the annual meeting of shareholders and shall hold
office until the annual meeting of the shareholders next succeeding his
election, or until his prior death, resignation or removal. Any Director may
resign at any time upon written notice of such resignation to the Corporation.
*NOTE: Article II Section 1 Subsection (b) of these Bylaws shall not be used in
the Corporation's Bylaws unless the Corporation has one or more classes of
voting stock that are: (i) listed on a national exchange; (ii) authorized for
quotation on an interdealer quotation system of a registered national securities
association; or (iii) held by more than two thousand shareholder of record of
the Corporation.
Section 2 - Duties and Powers: (Section 141)
The Board of Directors shall be responsible for the control and management of
the business and affairs, property and interests of the Corporation, and may
exercise all powers of the Corporation, except such as those stated under
Delaware state law, are in the Certificate of Incorporation or
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<PAGE>
by these Bylaws, expressly conferred upon or reserved to the shareholders or any
other person or persons named therein.
Section 3 - Regular Meetings; Notice:
(a) A regular meeting of the Board of Directors shall be held either within or
without the State of Delaware at such time and at such place as the Board shall
fix.
(b) No notice shall be required of any regular meeting of the Board of Directors
and, if given, need not specify the purpose of the meeting; provided, however,
that in case the Board of Directors shall fix or change the time or place of any
regular meeting when such time and place was fixed before such change, notice of
such action shall be given to each director who shall not have been present at
the meeting at which such action was taken within the time limited, and in the
manner set forth in these Bylaws with respect to special meetings, unless such
notice shall be waived in the manner set forth in these Bylaws.
Section 4 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held at such time and
place as may be specified in the respective notices or waivers of notice
thereof.
(b) Except as otherwise required statute, written notice of special meetings
shall be mailed directly to each Director, addressed to him at his residence or
usual place of business, or delivered orally, with sufficient time for the
convenient assembly of Directors thereat, or shall be sent to him at such place
by telegram, radio or cable, or shall be delivered to him personally or given to
him orally, not later than the day before the day on which the meeting is to be
held. If mailed, the notice of any special meeting shall be deemed to be
delivered on the second day after it is deposited in the United States mails, so
addressed, with postage prepaid. If notice is given by telegram, it shall be
deemed t be delivered when the telegram is delivered to the telegraph company. A
notice, or waiver of notice, except as required by these Bylaws, need not
specify the business to be transacted at or the purposes or purposes of the
meeting.
(c) Notice of any special meeting shall not be required to be given to any
Director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
(d) Unless otherwise stated in the Articles of Incorporation of the Corporation,
the Chairperson, President, Treasurer, Secretary or any two or more Directors of
the Corporation may call any special meeting of the Board of Directors.
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<PAGE>
Section 5 - Chairperson:
The Chairperson of the Board, if any and if present, shall preside at all
meetings of the Board of Directors. If there shall be no Chairperson, or he or
she shall be absent, then the President shall preside, and in his absence, any
other director chosen by the Board of Directors shall preside.
Section 6 - Quorum and Adjournments: (Section 141 )
(a) At all meetings of the Board of Directors, or any committee thereof, the
presence of a majority of the entire Board, or such committee thereof, shall
constitute a quorum for the transaction of business, except as otherwise
provided by law, by the Certificate of Incorporation, or these Bylaws. (Note: If
the Certificate of Incorporation authorize a quorum to consist of less than a
majority, but no fewer than one-third of the prescribed number of Directors as
permitted by law except that when a card of one Director is authorized under
Section 141 of the Delaware General Corporation Law, then one Director shall
constitute a quorum or if the Certificate of Incorporation and/or Bylaws require
a greater number than a majority as constituting a quorum then these Bylaws
would state that this lesser or greater amount, instead of a majority, will
constitute a quorum.)
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, whether or not a quorum exists. Notice of such adjourned
meeting shall be given to Directors not present at time of the adjournment and,
unless the time and place of the adjourned meeting are announced at the time of
the adjournment, to the other Directors who were present at the adjourned
meeting.
Section 7 - Manner of Acting: (Section 141 )
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by law, by the Certificate of Incorporation, or
these By Laws, action approved by a majority of the votes of the Directors
present at any meeting of the Board or any committee thereof, at which a quorum
is present shall be the act of the Board of Directors or any committee thereof.
(c) Any action authorized in writing made prior or subsequent to such action, by
all of the directors entitled to vote thereon and filed with the minutes of the
Corporation shall be the act of the Board of Directors, or any committee
thereof, and have the same force and effect as if the same had been passed by
unanimous vote at a duly called meeting of the Board or committee for all
purposes and may be stated as such in any certificate or document filed with the
Secretary of the State of Delaware.
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<PAGE>
(d) Where appropriate communications facilities are reasonably available, any or
all directors shall have the right to participate in any Board of Directors
meeting, or a committee of the Board of Directors meeting, by means of
conference telephone or any means of communications by which all persons
participating in the meeting are able to hear each other.
Section 8 - Vacancies: (Section 223)
(a) Any vacancy in the Board of Directors occurring by reason of an increase in
the number of directors, or by reason of the death, resignation,
disqualification, removal or inability to act of any director, or other cause,
shall be filled by an affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board or by a sole remaining Director, at any
regular meeting or special meeting of the Board of Directors called for that
purpose except whenever the shareholders of any class or classes or series
thereof are entitled to elect one or more Directors by the Certificate of
Incorporation of the Corporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the Directors
elected by such class or classes or series thereof then in office, or by a sole
remaining Director so elected.
(b) If at any time, by reason of death or resignation or other cause, the
Corporation shall have no Directors in office, then an officer or any
shareholder or an executor, administrator, trustee, or guardian of a
shareholder, or other fiduciary entrusted with like responsibility for the
person or estate of a shareholder, may call a special meeting of shareholders to
fill such vacancies or may apply to the Court of Chancery for a decree summarily
ordering an election.
(c) If the Directors of the Corporation constitute less than a majority of the
whole Board, the Court of Chancery may, upon application of any shareholder or
shareholders holding at least ten percent of the total number of shares entitled
to vote for Directors, order an election to be held to fill any such vacancies
or newly created directorships.
(d) Unless otherwise provided for by statute, the Certificate of Incorporation
or these Bylaws, when one or more directors shall resign from the board and such
resignation is effective at a future date, a majority of the directors, then in
office, including those who have so resigned, shall have the power to fill such
vacancy or vacancies, the vote otherwise to take effect when such resignation or
resignations hall become effective.
Section 9 - Resignation:
The shareholders may, at any meeting, vote to accept the resignation of any
Director.
Section 10 - Removal: (Section 141)
One or more or all the Directors of the Corporation may be removed with or
without cause at any time by the shareholders, at a special meeting of the
shareholders called for that purpose, unless the Certificate of Incorporation
provide that Directors may only be removed for cause,
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<PAGE>
provided however, such Director shall not be removed if the Corporation's states
in its Certificate of Incorporation that its Directors shall be elected by
cumulative voting and there are a sufficient number of shares cast against his
or her removal, which if cumulatively voted at an election of Directors would be
sufficient to elect him or her. If a Director was elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove that Director.
Section 11 - Compensation: (Section 141 )
The Board of Directors may authorize and establish reasonable compensation of
the Directors for services to the Corporation as Directors, including, but not
limited to attendance at any annual or special meeting of the Board.
Section 12 - Committees: (Section 141)
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members one or more committees,
and alternate members thereof, as they deem desirable, each consisting of one or
more members, with such powers and authority (to the extent permitted by law and
these Bylaws) as may be provided in such resolution. Each such committee shall
serve at the pleasure of the Board and, unless otherwise stated by law, the
Certificate of Incorporation of the Corporation or these Bylaws, shall be
governed by the rules and regulations stated herein regarding the Board of
Directors.
ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications, Election and Term of Office: (Section 142)
(a) The Corporation's officers shall have such titles and duties as shall be
stated in these Bylaws or in a resolution of the Board of Directors which is not
inconsistent with these Bylaws. The officers of the Corporation shall consist an
officer whose duty is to record proceedings of shareholders' and Directors'
meetings and such other officers as the Board of Directors may from time to time
deem advisable. Any officer other than the Chairman of the Board of Directors
may be, but is not required to be, a Director of the Corporation. Any two or
more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
duly elected and qualified, subject to earlier termination by his or her death,
resignation or removal.
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<PAGE>
Section 2 - Resignation: (Section 142)
Any officer may resign at any time by giving written notice of such resignation
to the Corporation.
Section 3 - Removal: (Section 142)
Any officer elected by the Board of Directors may be removed, either with or
without cause, and a successor elected by the Board at any time, and any officer
or assistant officer, if appointed by another officer, may likewise be removed
by such officer.
Section 4 - Vacancies: (Section 142)
(a) A vacancy, however caused, occurring in the Board and any newly created
Directorships resulting from an increase in the authorized number of Directors
may be filled by the Board of Directors.
Section 5 - Bonds: (Section 142)
The Corporation may require any or all of its officers or Agents to post a bond,
or otherwise, to the Corporation for the faithful performance of their positions
or duties.
Section 6 - Compensation:
The compensation of the officers of the Corporation shall be fixed from time to
time by the Board of Directors.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The shares of the Corporation shall be represented by certificates or shall
be uncertificated shares.
(b) Certificated shares of the Corporation shall be signed, (either manually or
by facsimile), by the Chairperson, Vice-Chairperson, President or Vice-President
and Secretary or an Assistant Secretary or the Treasurer or Assistant Treasurer,
or any other Officer designated by the Board of Directors, certifying that the
number of shares owned by him or her in the Corporation, provided however that
where such certificate is signed by a transfer agent or an assistant transfer
agent or by a transfer clerk acting on behalf of the Corporation and a
registrar, any such signature may be a facsimile thereof. In case any officer
who has signed or whose facsimile signature has been placed upon such
certificate, shall have ceased to be such officer before such certificate is
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<PAGE>
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issue.
(c) Certificates shall be issued in such form not inconsistent with the
Certificate of Incorporation and as shall be approved by the Board of Directors.
Such certificates shall be numbered and registered on the books of the
Corporation, in the order in which they were issued.
(d) Except as otherwise provided by law, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of the holders
of certificates representing shares of the same class and series shall be
identical.
Section 2 - Lost or Destroyed Certificates:
The Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed if the owner:
(a) so requests before the Corporation has notice that the shares have been
acquired by a bona fide purchaser,
(b) files with the Corporation a sufficient indemnity bond; and
(c) satisfies such other requirements, including evidence of such loss, theft or
destruction, as may be imposed by the Corporation.
Section 3 - Transfers of Shares: (Section 201)
(a) Transfers or registration of transfers of shares of the Corporation shall be
made on the stock transfer books of the Corporation by the registered holder
thereof, or by his attorney duly authorized by a written power of attorney; and
in the case of shares represented by certificates, only after the surrender to
the Corporation of the certificates representing such shares with such shares
properly endorsed, with such evidence of the authenticity of such endorsement,
transfer, authorization and other matters as the Corporation may reasonably
require, and the payment of all stock transfer taxes due thereon.
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares as the absolute owner thereof for all purposes and, accordingly, shall
not be bound to recognize any legal, equitable or other claim to, or interest
in, such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise expressly
provided by law.
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<PAGE>
Section 4 - Record Date: (Section 213)
(a) The Board of Directors may fix, in advance, which shall not be more than
sixty, nor less than ten days before the meeting or action requiring a
determination of shareholders, as the record date for the determination of
shareholders entitled to receive notice of, or to vote at, any meeting of
shareholders, or to consent to any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any
dividends, or allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for a shareholders entitled to
notice of meeting shall be at the close of business on the day preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held, or if notice is waived, at the close of business on the day
before the day on which the meeting is held.
(b) The Board of Directors may fix a record date, which shall not precede the
date upon which the resolution fixing the record date is adopted for
shareholders entitled to receive payment of any dividend or other distribution
or allotment of any rights of shareholders entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, provided that such record date shall not be more than
sixty days before such action.
(c) The Board of Directors may fix, in advance, a date which shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which date shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date is fixed and no prior action is required by the
Board, the record date for determining shareholders entitled to consent to
corporate action in writing without a meeting, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery by hand or by certified or
registered mail, return receipt requested, to its registered office in this
State, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
shareholders are recorded. If no record date is fixed by the Board of Directors
and prior action is required by law, the record date for determining
shareholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(d) A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date for the adjourned meeting.
ARTICLE VI - DIVIDENDS (Section 173)
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such mounts, and at such time or times as the
Board of Directors may determine.
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<PAGE>
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
changed by the Board of Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL [Section 607.0302(2)]
The corporate seal, if any, shall be in such form as shall be prescribed and
altered, from time to time, by the Board of Directors.
ARTICLE IX - AMENDMENTS
Section 1 - Initial Bylaws:
The initial Bylaws of the Corporation shall be adopted by the Board of Directors
at its organizational meeting.
Section 2 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by a majority vote of the shareholders at the time entitled
to vote in the election of directors even though these Bylaws may also be
altered, mended or repealed by the Board of Directors.
Section 3 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; however, Bylaws made by the Board
may be altered or repealed, and new Bylaws made by the shareholders.
ARTICLE X - WAIVER OF NOTICE: (Section 229)
Whenever any notice is required to be given by law, the Certificate of
Incorporation or these Bylaws of any these Bylaws, meeting of shareholders,
Board of Directors, or committee thereof, or attendance at the meeting by any
person, shall constitute a waiver of notice of such meeting, except when the
person attends the meeting for the express purpose of objecting at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of shareholders, Directors or
committee thereof need by specified in any written waiver of notice.
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<PAGE>
ARTICLE XI - INTERESTED DIRECTORS: (Section 144)
No contract or transaction shall be void or voidable if such contract or
transaction is between the corporation and one or more of its Directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its Directors or
officers, are directors or officers, or have a financial interest, when such
Director or officer is present at or participates in the meeting of the Board of
committee which authorizes the contract or transaction or his, her or their
votes are counted for such purpose, if:
(a) the material facts as to his, her or their relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested Directors, even though the disinterested Directors be less than a
quorum; or
(b) the material facts as to his, her or their relationship or relationships or
interest or interests and as to the contract or transaction are disclosed or are
known to the shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the shareholders;
or
(c) the contract or transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified, by the Board of Directors, a committee or
the shareholders.
Such interested Directors may be counted when determining the presence of a
quorum at the Board of Directors' or committee meeting authorizing the contract
or transaction.
ARTICLE XII - FORM OF RECORDS: (Section 224)
Any records maintained by the Corporation in its regular course of business,
including, but not limited to, its stock ledger, books of account and minute
book, may be kept on, or be in the form of punch cards, magnetic tape,
photographs, micro-photographs or any other information storage device, provided
that the records so kept may be converted into clearly legible written form
within a reasonable time. The Corporation shall so convert any of such records
so kept upon the request of any person entitled to inspect the same.
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<PAGE>
CERTIFICATE OF MERGER
OF
EDUCATIONAL VIDEO CONFERENCING, INC.
(a New York corporation)
INTO
EDUCATIONAL VIDEO CONFERENCING, INC.
(a Delaware corporation)
The undersigned corporation, EDUCATIONAL VIDEO CONFERENCING, INC., does
hereby certify as follows:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
Educational Video Conferencing, Inc. Delaware
Educational Video Conferencing, Inc. New York
SECOND: That an Agreement and Plan of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of Section
252 of the General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation of the merger is
Educational Video Conferencing, Inc., a Delaware corporation.
FOURTH: That the Certificate of Incorporation of Educational Video
Conferencing, Inc., a Delaware corporation which is surviving the merger, shall
be the Certificate of Incorporation of the surviving corporation.
FIFTH: That the executed Agreement and Plan of Merger is on file at the
principal place of business of the surviving corporation, the address of which
is 35 East Grassy Spring Road, Suite 504, Yonkers, New York 10701.
SIXTH: That a copy of the Agreement and Plan of Merger will be
furnished by the surviving corporation, upon request and without cost, to any
stockholder of any constituent corporation.
<PAGE>
SEVENTH: The authorized capital stock of the only foreign constituent
corporation which is a party to the merger is as follows:
Par Value
Corporation Class No. of Shares Per Share
----------- ----- ------------- ---------
Educational Video Common Stock 10,000,000 $.0001 Par
Conferencing, Inc. Value
(New York)
Preferred 1,000,000 $.0001 Par
Stock Value
EIGHTH: The Agreement and Plan of Merger provides that upon the filing
of the Certificates of Merger with respect to the Merger with the Secretary of
State of Delaware and the Secretary of State of New York, each share of Common
Stock of the merged corporation, Educational Video Conferencing, Inc., a New
York Corporation, issued and outstanding immediately prior to the merger and all
rights in respect thereto shall be changed and converted into one share of
Common Stock of the surviving corporation, Educational Video Conferencing, Inc.,
a Delaware corporation.
Dated: October 28, 1997
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Dr. Arol Buntzman
--------------------------------------
Dr. Arol Buntzman
Chairman and Chief Executive Officer
2
<PAGE>
CERTIFICATE OF CORRECTION
OF THE
CERTIFICATE OF INCORPORATION
OF
EDUCATIONAL VIDEO CONFERENCING, INC.
It is hereby certified that:
1. The name of the corporation is Educational Video
Conferencing, Inc (the "Corporation").
2. The Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 24, 1997.
3. The inaccuracy to be corrected in said instrument is as
follows:
Article Sixth of the Certificate of Incorporation mistakenly included Richard
Snelling as a director.
4. The portion of the Certificate of Incorporation of the
Corporation in corrected form is as follows:
"SIXTH: The powers of the sole incorporator are to
terminate upon the filing of this Certificate of Incorporation. The board of
directors consists of the three directors named below, each director to serve
until the first annual meeting of stockholders, or until their respective
successors are elected and qualified. The names and mailing addresses of the
persons who are to serve as directors of the Corporation are:
Dr. Arol Buntzman 35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10701
<PAGE>
Dr. John J. McGrath 35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10701
Richard Goldenberg 35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10701"
Executed on this 3rd day of September, 1998.
/s/ Arol I. Buntzman
------------------------------
Arol I. Buntzman, Chairman and
Chief Executive Officer
2
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS RELATING TO SUCH SECURITIES
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO EDUCATIONAL VIDEO
CONFERENCING, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
COMMON STOCK PURCHASE WARRANT
, 1997
EDUCATIONAL VIDEO CONFERENCING, INC., a corporation organized under the
laws of the State of Delaware (the "Company"), hereby certifies that, for value
received, _______________________, or registered assigns (the "Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company at
any time before 5:00 p.m., New York City time, on ______________, 2002 (the
"Expiration Date"), ____________ fully paid and nonassessable shares of Warrant
Stock (as hereinafter defined), $.0001 par value per share, of the Company, at a
purchase price of $2.00 per share (such purchase price per share as adjusted
from time to time as herein provided is referred to herein as the "Purchase
Price"). The number and character of such shares of Warrant Stock and the
Purchase Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term Company shall include Educational Video
Conferencing, Inc. and any corporation which shall succeed or assume
the obligations of such company hereunder.
(b) The term "Common Stock" includes (i) the Company's Common
Stock, $.0001 par value per share, as authorized on the date of the
Agreement, and (ii) any other securities into which or for which any of
the securities described in (i) may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
(c) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the Holder at any time shall be
entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 3
or otherwise.
(d) The term "Warrant Stock" means the shares of Common Stock
and Other Securities owned or to be owned upon exercise of this
Warrant, and all other warrants in substantially the same form as this
Warrant (this Warrant and such other warrants being
<PAGE>
collectively, the "Warrants") referred to in that certain Confidential
Offering Memorandum dated September 4, 1997 and the Subscription
Agreement between the Company and the Holder to whom this Warrant was
originally issued (the "Agreement"). This Warrant is entitled to the
benefits of, and is subject to, the obligations imposed by the
Agreement, including with respect to the registration for resale to the
public of the Common Stock issuable upon exercise of this Warrant.
1. Exercise.
1.1. Preconditions to Exercise. Before this Warrant can be
exercised the following shall occur:
(a) Subject to Section 1.1(c), the Holder shall notify the
Company in writing that the Holder is considering exercising this Warrant. As
soon as practicable after receiving such notice, the Company shall advise the
Holder of the investor suitability requirements, if any, that must be satisfied
by the Holder as a condition of such exercise.
(b) If the Holder satisfies the Company regarding the Holder's
suitability to exercise this Warrant, the Company will, subject to Section
1.1(c), provide the Holder with such information regarding the Company and an
investment in the Warrant Stock as the Company can obtain without unreasonable
effort or expense (the "Warrant Exercise Materials"), in order to permit the
Holder to determine whether to purchase Warrant Stock upon exercise of this
Warrant.
(c) The Company may, at any time, in its sole discretion,
decide to provide all holders of the Warrants with the Warrant Exercise
Materials. Subject to satisfying investor suitability requirements, the Warrants
will be exercisable for 30 days (or such longer period as the Company permits)
after delivery of the Warrant Exercise Materials to the holders of the Warrants.
The Company shall be deemed to have satisfied the requirements of Section
1.1(b), if it has complied with this Section 1.1(c) within six months prior to
receiving a notice from the Holder pursuant to Section 1.1(a).
1.2. Full Exercise. This Warrant may be exercised in full only
by the Holder by surrender of this Warrant, with the form of subscription
agreement required by the Company, duly completed and executed by the Holder, to
the Company at its principal office or at the office of its Warrant agent (as
provided in Section 6), accompanied by payment in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Warrant Stock for which this Warrant is
then exercisable by the Purchase Price then in effect.
1.3. Delivery of Stock Certificates, etc. on Exercise. The
Company agrees that the shares of Warrant Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full, and in any event within
10 business days thereafter, the Company will cause to be issued in the name of
and delivered to the Holder, or as the Holder (upon payment by such Holder of
any applicable transfer taxes) may direct, subject to compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and nonassessable shares of Warrant Stock to which
the Holder shall be entitled on such exercise, plus, in lieu of any
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<PAGE>
fractional share to which the Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then fair market value of one full share, as
determined by the Company in its sole discretion, together with any other stock
or other securities and property (including cash, where applicable) to which the
Holder is entitled upon such exercise.
2. Adjustment for Reorganization, Consolidation, Merger, etc.
2.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Warrant Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which the Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if the Holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Section 3.
2.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets in a transaction contemplated by Section 2.1(c), the Company,
simultaneously with such dissolution, shall distribute or cause to be
distributed to the Holder the stock and other securities and property (including
cash, were applicable) which would be receivable by the Holder if the Holder had
exercised this Warrant in full immediately prior to such dissolution, less an
amount of stock, other securities, property and cash with a value equal to the
Purchase Price.
2.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer referred to in this Section 2, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the properties or
assets of the Company, whether or not such person shall have expressly assumed
the terms of this Warrant.
3. Extraordinary Events Regarding Warrant Stock. In the event
that the Company shall (a) issue additional shares of the Warrant Stock as a
dividend or other distribution on outstanding Warrant Stock, (b) subdivide its
outstanding shares of Warrant Stock, or (c) combine its outstanding shares of
the Warrant Stock into a smaller number of shares of the Warrant Stock, then, in
each such event, the Purchase Price shall, simultaneously with the happening of
such event, be adjusted by multiplying the then Purchase Price by a fraction,
the numerator of which shall be the number of shares of Warrant Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Warrant Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Purchase Price then
in effect. The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 3. The number of shares of Warrant Stock that the Holder shall
thereafter, on the exercise hereof as provided
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<PAGE>
in Section 1, be entitled to receive shall be increased to a number determined
by multiplying the number of shares of Warrant Stock that would otherwise (but
for the provisions of this Section 3) be issuable on such exercise by a fraction
of which (a) the numerator is the Purchase Price that would otherwise (but for
the provisions of this Section 3) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
4. Reservation of Stock, etc. Issuable on Exercise of Warrant.
The Company will at all times reserve and keep available, solely for issuance
and delivery on the exercise of this Warrant, all shares of Warrant Stock from
time to time issuable on the exercise of this Warrant.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
6. Warrant Agent. The Company may, by written notice to each
holder of the Warrant, appoint an agent having an office in New York, NY for the
purpose of issuing Warrant Stock (or Other Securities) on the exercise of this
Warrant or for exchanging or replacing this Warrant, or any of the foregoing,
and, thereafter, any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
7. Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
Holder hereof as the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.
8. Notices, etc. All notices and other communications from the
Company to the Holder or the Holder to the Company shall be delivered by hand
(which shall include overnight delivery by Federal Express or similar service)
or mailed by first class registered or certified mail, postage prepaid, to the
Company at its principal office and to the Holder at such address as may have
been furnished to the Company in writing by the Holder or, until the Holder
furnishes to the Company an address, then to, and at the address of, the last
Holder of this Warrant who has so furnished an address to the Company. Notices
shall be deemed given upon receipt, when delivered by hand, and 48 hours after
mailing, when mailed.
9. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
EDUCATIONAL VIDEO CONFERENCING, INC.
By:
---------------------------------
Title:
------------------------------
Attest:
By:
---------------------------------
Title:
------------------------------
-5-
<PAGE>
Exhibit A
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Warrant Stock of Educational Video Conferencing, Inc. to which the
within Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Educational Video Conferencing, Inc. with full power of substitution in the
premises.
================================================================================
Transferees Percentage Transferred Number
Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Dated: ___________________, 19__ ________________________________
(Signature must conform to name
of Holder as specified on the
Signed in the presence of: face of the warrant)
________________________________ ________________________________
(Name) (Address)
ACCEPTED AND AGREED:
[TRANSFEREE]
________________________________
(Address)
________________________________ ________________________________
(Name) (Address Cont.)
-6-
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS RELATING TO SUCH SECURITIES
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO EDUCATIONAL VIDEO
CONFERENCING, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
COMMON STOCK PURCHASE WARRANT
October 28, 1997
EDUCATIONAL VIDEO CONFERENCING, INC., a corporation organized under the
laws of the State of New York (the "Company"), hereby certifies that, for value
received, TAYSIDE TRADING LTD., a Gibraltar corporation, or registered assigns
(the "Holder"), is entitled, subject to the terms set forth below, to purchase
from the Company at any time before 5:00 p.m., New York City time, on October
27, 2002 (the "Expiration Date"), 200,000 fully paid and nonassessable shares of
Warrant Stock (as hereinafter defined), $.0001 par value per share, of the
Company, at a purchase price of $2.00 per share (such purchase price per share
as adjusted from time to time as herein provided is referred to herein as the
"Purchase Price"). The number and character of such shares of Warrant Stock and
the Purchase Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term Company shall include Educational Video
Conferencing, Inc. and any corporation which shall succeed or assume
the obligations of such company hereunder.
(b) The term "Common Stock" includes (i) the Company's Common
Stock, $.0001 par value per share, as authorized on the date of the
Agreement, and (ii) any other securities into which or for which any of
the securities described in (i) may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
(c) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the Holder at any time shall be
entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 3
or otherwise.
(d) The term "Warrant Stock" means the shares of Common Stock
and Other Securities owned or to be owned upon exercise of this
Warrant. This Warrant is entitled to the benefits of, and is subject
to, the obligations imposed by the Subscription Agreement between the
<PAGE>
Company and the Holder to whom this Warrant was originally issued (the
"Agreement"), including with respect to the registration for resale to
the public of the Common Stock issuable upon exercise of this Warrant.
1. Exercise.
1.1. Preconditions to Exercise. Before this Warrant can be
exercised the following shall occur:
(a) Subject to Section 1.1(c), the Holder shall notify the
Company in writing that the Holder is considering exercising this Warrant. As
soon as practicable after receiving such notice, the Company shall advise the
Holder of the investor suitability requirements, if any, that must be satisfied
by the Holder as a condition of such exercise.
(b) If the Holder satisfies the Company regarding the Holder's
suitability to exercise this Warrant, the Company will, subject to Section
1.1(c), provide the Holder with such information regarding the Company and an
investment in the Warrant Stock as the Company can obtain without unreasonable
effort or expense (the "Warrant Exercise Materials"), in order to permit the
Holder to determine whether to purchase Warrant Stock upon exercise of this
Warrant.
(c) The Company may, at any time, in its sole discretion,
decide to provide the Holder with the Warrant Exercise Materials. Subject to
satisfying investor suitability requirements, the Warrants will be exercisable
for 30 days (or such longer period as the Company permits) after delivery of the
Warrant Exercise Materials to the Holder. The Company shall be deemed to have
satisfied the requirements of Section 1.1(b), if it has complied with this
Section 1.1(c) within six months prior to receiving a notice from the Holder
pursuant to Section 1.1(a).
1.2. Full Exercise. This Warrant may be exercised in full only
by the Holder by surrender of this Warrant, with the form of subscription
agreement required by the Company, duly completed and executed by the Holder, to
the Company at its principal office or at the office of its Warrant agent (as
provided in Section 6), accompanied by payment in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Warrant Stock for which this Warrant is
then exercisable by the Purchase Price then in effect.
1.3. Delivery of Stock Certificates, etc. on Exercise. The
Company agrees that the shares of Warrant Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full, and in any event within
10 business days thereafter, the Company will cause to be issued in the name of
and delivered to the Holder, or as the Holder (upon payment by such Holder of
any applicable transfer taxes) may direct, subject to compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and nonassessable shares of Warrant Stock to which
the Holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then fair market value of one full share, as
determined by the Company in its sole discretion, together with any other stock
or other securities and property (including cash, where applicable) to which
-2-
<PAGE>
the Holder is entitled upon such exercise.
2. Adjustment for Reorganization, Consolidation, Merger, etc.
2.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Warrant Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which the Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if the Holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Section 3.
2.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets in a transaction contemplated by Section 2.1(c), the Company,
simultaneously with such dissolution, shall distribute or cause to be
distributed to the Holder the stock and other securities and property (including
cash, were applicable) which would be receivable by the Holder if the Holder had
exercised this Warrant in full immediately prior to such dissolution, less an
amount of stock, other securities, property and cash with a value equal to the
Purchase Price.
2.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer referred to in this Section 2, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the properties or
assets of the Company, whether or not such person shall have expressly assumed
the terms of this Warrant.
3. Extraordinary Events Regarding Warrant Stock. In the event
that the Company shall (a) issue additional shares of the Warrant Stock as a
dividend or other distribution on outstanding Warrant Stock, (b) subdivide its
outstanding shares of Warrant Stock, or (c) combine its outstanding shares of
the Warrant Stock into a smaller number of shares of the Warrant Stock, then, in
each such event, the Purchase Price shall, simultaneously with the happening of
such event, be adjusted by multiplying the then Purchase Price by a fraction,
the numerator of which shall be the number of shares of Warrant Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Warrant Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Purchase Price then
in effect. The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 3. The number of shares of Warrant Stock that the Holder shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Warrant Stock that would otherwise (but for the provisions of this
Section 3) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but
-3-
<PAGE>
for the provisions of this Section 3) be in effect, and (b) the denominator is
the Purchase Price in effect on the date of such exercise.
4. Reservation of Stock, etc. Issuable on Exercise of Warrant.
The Company will at all times reserve and keep available, solely for issuance
and delivery on the exercise of this Warrant, all shares of Warrant Stock from
time to time issuable on the exercise of this Warrant.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
6. Warrant Agent. The Company may, by written notice to the
Holder, appoint an agent having an office in New York, NY for the purpose of
issuing Warrant Stock (or Other Securities) on the exercise of this Warrant or
for exchanging or replacing this Warrant, or any of the foregoing, and,
thereafter, any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
7. Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
Holder hereof as the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.
8. Notices, etc. All notices and other communications from the
Company to the Holder or the Holder to the Company shall be delivered by hand
(which shall include overnight delivery by Federal Express or similar service)
or mailed by first class registered or certified mail, postage prepaid, to the
Company at its principal office and to the Holder at such address as may have
been furnished to the Company in writing by the Holder or, until the Holder
furnishes to the Company an address, then to, and at the address of, the last
Holder of this Warrant who has so furnished an address to the Company. Notices
shall be deemed given upon receipt, when delivered by hand, and 48 hours after
mailing, when mailed.
9. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
EDUCATIONAL VIDEO CONFERENCING, INC.
By:
----------------------------------
Title:
-------------------------------
Attest:
By:
-----------------------------------
Title:
--------------------------------
-5-
<PAGE>
Exhibit A
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Warrant Stock of Educational Video Conferencing, Inc. to which the
within Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Educational Video Conferencing, Inc. with full power of substitution in the
premises.
================================================================================
Transferees Percentage Transferred Number
Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Dated:__________________, 19__ _______________________________
(Signature must conform to name
of Holder as specified on the
Signed in the presence of: face of the warrant)
______________________________ _______________________________
(Name) (Address)
ACCEPTED AND AGREED:
[TRANSFEREE]
_______________________________
(Address)
______________________________ _______________________________
(Name) (Address Cont.)
-6-
<PAGE>
EXHIBIT A
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE
(COLLECTIVELY, "THE SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("THE ACT") OR UNDER ANY APPLICABLE STATE LAWS ("STATE LAWS").
ACCORDINGLY, THE SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE LAWS OR THE ISSUER
RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of May 13, 1997 between EDUCATIONAL VIDEO
CONFERENCING, INC., a New York corporation (the "Company"), and ADELPHI
UNIVERSITY ("Adelphi").
The Company proposes to issue to Adelphi warrants as hereinafter
described (the "Adelphi Warrants") to purchase up to an aggregate of 75,000
shares, subject to adjustments as hereinafter provided (the "Warrant Shares")
of the Company's Common Stock, par value $.0001 per share, (the "Common
Stock").
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
parties hereto agree as follows:
1. Issues of Warrants; Form of Warrant. The Company will issue,
transfer and deliver the Adelphi Warrants to Adelphi. The text of the Adelphi
Warrants and the form of election to purchase shares to be attached thereto
shall be substantially as set forth in Attachment 1 annexed hereto. The
Adelphi Warrants shall be executed on behalf of the Company by the manual or
facsimile signature of the properly authorized officers, with its seal duly
affixed.
2. Registration. The Adelphi Warrants shall be numbered and shall be
registered. The Company shall be entitled to treat the registered holder of
any Adelphi Warrant or Warrant Shares as the owner in fact thereof for all
purposes (each, a "Holder"). The Adelphi Warrants shall be registered in the
name of Adelphi University.
3. Terms of Warrants; Exercise of Warrants. Each Adelphi Warrant
entitles the registered owner thereof to purchase one share of Common Stock
(as adjusted), at a purchase price per share of $2.72 (the "Exercise Price")
at any time from the first anniversary of the effective date of the
Registration Statement relating to such initial public offering until 5:00
p.m. New York City time, on the date six years from the effective date of such
Registration Statement, (the "Expiration Date"). The Exercisustment upon the
occurrence of certain events, pursuant to the provisions of Section 6 of this
Agreement. Subject to the provisions of this Agreement, each Holder shall have
the right, which may be exercised as set forth in such Adelphi Warrants, to
purchase from the Company (and the Company shall issue and sell to such
Holder) the number of fully paid and nonassessable shares of Common Stock
specified in such Adelphi Warrants, upon surrender to the Company, or its duly
authorized agent, of such Adelphi Warrants, with the form of election to
purchase attached thereto duly completed and signed, and upon payment to the
Company of the Exercise Price, as adjusted in
<PAGE>
accordance with the provisions of Section 6 of this Agreement, for the number
of Warrant Shares in respect of which such Adelphi Warrants are then
exercised. Payment of such Exercise Price may be made in cash or by check
payable to the order of the company. No adjustment shall be made for any
dividends on any shares of stock issuable upon exercise of an Adelphi Warrant.
Upon each surrender of Adelphi Warrants and payment of the Exercise Price as
aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the Holder of such Adelphi
Warrants and (subject to receipt of evidence of compliance with the provisions
of Section 9 of this Agreement) in such name or names as such Holder may
designate, a certificate or certificates for the number of full Warrant Shares
so purchased upon the exercise of such Adelphi Warrants, together with cash,
as provided in Section 7 of this Agreement, in respect of any fractional
Warrant Shares otherwise issuable upon surrender. Such certificate or
certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become the holder of record of
such Warrant Shares as of the date of the surrender of such Adelphi Warrants
and payment of the exercise Price as aforesaid. The rights of purchase
represented by Adelphi Warrants shall be exercisable, at the election of the
Holders thereof, either in full or from time to time in part and, if and
Adelphi Warrant is exercised in respect of less than all of the Warrant Shares
purchasable on such exercise, a new Adelphi Warrant or Adelphi Warrants shall
be issued for the remaining number of Warrant Shares specified in the Adelphi
Warrant so surrendered.
4. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of shares upon the exercise of
Adelphi Warrants.
5. Reservation of Shares, etc. There have been reserved, and the
Company shall at all times keep reserved, out of the authorized and unissued
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding Adelphi
Warrants. The transfer agent for the Common Stock (the "Transfer Agent"), will
be irrevocably authorized and directed at all times until the Expiration Date
to reserve such number of authorized and unissued shares as shall be required
for this purpose. The Company wier Agent. The Company will supply any such
Transfer Agent with duly executed stock certificates for such purpose and will
itself provide or otherwise make available any cash which may be distributable
as provided in Section 7 of this Agreement. All Adelphi Warrants surrendered
in the exercise of the rights thereby evidenced shall be cancelled, and such
cancelled Adelphi Warrants shall constitute sufficient evidence of the number
of shares of Common Stock that have been issued upon the exercise of such
Adelphi Warrants.
6. Adjustments of Exercise Price and Number of Shares. The Exercise
Price and the number and kind of securities purchasable upon exercise of each
Adelphi Warrant shall be subject to adjustment from time to time upon the
happening of certain events that may occur after the date hereof and prior to
the Expiration Date, as follows:
A. In case the Company shall (i) declare a dividend on its
Common Stock in shares of Common Stock or make a
distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock or (iv)
issue a reclassification of its shares of
2
<PAGE>
Common Stock or other securities of the Company (including any
such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation),
the number of Warrant Shares purchasable upon exercise of
each Adelphi Warrant immediately prior thereto shall be
adjusted so that the Holder of each Adelphi Warrant shall be
entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or
have been entitled to receive after the happening of any of
the events described above, had such Adelphi Warrant been
exercised immediately prior to the happening of such event or
any record date with respect thereto. An adjustment made
pursuant to this Paragraph A shall become effective
immediately after the effective date of such event
retroactive to immediately after the record date, if any,
for such event.
B. In the event the Company shall issue rights, options or
warrants to all (or substantially all) holders of its shares
of Common Stock, without any charge to such holders,
entitling them (for a period expiring within 45 days after
the record date mentioned below in this Paragraph B) to
subscribe for or to purchase shares of Common Stock at a
price per share that is lower at the record date mentioned
below than the Exercise Price per share of Common Stock in
effect immediately prior to such issuance or sale, the
number of Warrant Shares thereafter purchasable upon
exercise of each Adelphi Warrant shall be determined by
multiplying the number of Warrant Shares theretofore
purchasable upon exercise of each Adelphi Warrant by a
fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on such record date plus
the number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall
be the number of shares of Common Stock outstanding on such
record date plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock
so offered would purchase at the then current market price
per share of Common Stock. Such adjustment shall be made
whenever such rights, options or warrants are issued, and
shall become effective retroactively to immediately after
the record date for the determination of shareholders
entitled to receive such rights, options or warrants.
C. In case the Company shall distribute to all (or
substantially all) holders of its shares of Common Stock
shares of stock other than Common Stock or evidences of its
indebtedness or assets (excluding cash dividends payable out
of consolidated earnings or retained earnings and dividends
or distributions referred to in Paragraph A above) or
rights, options or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase
shares of
3
<PAGE>
Common Stock (excluding those referred to in Paragraph B
above), then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of each Adelphi
Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon the exercise
of each Adelphi Warrant, by a fraction, of which the
numerator shall be the current market price per share of
Common Stock (as defined in Paragraph D below) on the record
date mentioned below in this Paragraph C, and of which the
denominator shall be the current market price per share of
Common Stock on such record date, less the then fair value
(as determined by the Board of Directors of the Company) of
the portion of the shares of stock other than Common Stock or
assets or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to immediately after the
record date for the determination of shareholders entitled to
receive such distribution.
D. For the purpose of any computation under Paragraph C of
this Section 6, the current market price per share of Common
Stock at any date shall be the average of the daily closing
prices for the 15 consecutive trading days commencing 20
trading days before the date of such computation. The
closing price for each day shall be the last reported sale
price regular way or, in such case no such reported sale
takes place on such day, the average of the closing bid and
asked prices regular way for such day, in either case on the
principal national securities exchange on which the shares
are listed or admitted to trading on any national securities
exchange, but are traded in the over-the-counter market, the
closing sale price of the Common Stock or, in case no sale
is publicly reported, the average of the representative
closing bid and asked quotations for the Common Stock on the
National Association of Securities Dealers Automated
quotation ("NASDAQ") system or any comparable system, or if
the Common Stock is not listed on NASDAQ or a comparable
system, the closing sale price of the Common Stock or, in
case no sale is publicly reported, the average of the
closing bid and asked prices as furnished by two members of
the NASD selected from time to time by the Company for that
purpose.
E. No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would
require an increase or decrease of at least 1% in the number
of Warrant Shares purchasable upon the exercise of each
Adelphi Warrant; provided, however, that any adjustments
which by reason of this Paragraph E are not required to be
made shall be carried forward and taken into
4
<PAGE>
account in any subsequent adjustment. All calculations shall
be made to the nearest one thousandth of a share. Anything in
this Section 6 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such
changes in the number of Warrant Shares purchasable upon the
exercise of each Adelphi Warrant, in addition to those
required by this Section 6, as it in its discretion shall
determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision,
reclassification or combination of shares of Common Stock,
issuance of rights, warrants or options to purchase Common
Stock, or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than
distributions of cash out of consolidated earnings or retained
earnings) or convertible or exchangeable securities hereafter
made by the Company to the holders of its Common Stock shall
not result in any tax to the holders of its Common Stock or
securities convertible into Common Stock.
F. Whenever the number of Warrant Shares purchasable upon
the exercise of each Adelphi Warrant is adjusted, as herein
provided, the Exercise Price shall be adjusted by
multiplying such Exercise Price immediately prior to such
adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise
of each Adelphi Warrant immediately prior to such
adjustment, and of which the denominator shall be the number
of Warrant Shares so purchasable immediately thereafter.
G. For the purpose of this Section 6, the term "shares of
Common Stock" shall mean (i) the class of stock designated
as the Common Stock of the Company as the date of this
Agreement or (ii) any other class of stock resulting from
successive changes or reclassification of such shares
consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the
event that at any time, as a result of an adjustment made
pursuant to Paragraph A above, the Holders shall become
entitled to purchase any shares of Capital Stock of the
Company other than shares of Common Stock, thereafter the
number of such other shares so purchasable upon exercise of
each Adelphi Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in
Paragraphs A through F, inclusive, above, and paragraphs H
through M, inclusive, of this Section 6, and the provisions
of Sections 3, 4, 5 and 8, with respect to the Warrant
Shares, shall apply on like terms to any such shares.
H. Upon the expiration of any rights, options or warrants or
conversion or exchange privileges, if any thereof shall not
have been
5
<PAGE>
exercised, the Exercise Price and the number of shares of
Common Stock purchasable upon the exercise of each Adelphi
Warrant shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it originally
been adjusted (or had the original adjustment not been
required, as the case may be) as if (x) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such
rights, options or warrants or conversion rights and (y)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of
all of such rights, options, warrants or conversion or
exchange rights whether or not exercised; provided, however,
that no such readjustment shall have the effect of increasing
the Exercise Price by an amount in excess of the amount of
the adjustment initially made in respect to the issuance,
sale or grant of such rights, options, warrants or conversion
or exchange rights.
I. The Company may at its option, at any time during the
term of the Adelphi Warrants, reduce the then current
Exercise Price to any amount deemed appropriate by the Board
of Directors of the Company.
J. Whenever the number of Warrant Shares purchasable upon
the exercise of each Adelphi Warrant or the exercise Price
of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class mail, postage
prepaid, to each Holder notice of such adjustment of
adjustments. The Company may retain a firm of independent
public accountants (who may be the regular accountants
employed by the Company) to make any computation required by
this Section 6 and shall cause such accountants to prepare a
certificate setting forth the number of warrant Shares
purchasable upon the exercise of each Adelphi Warrant and
the Exercise Price of such Warrant Shares after such
adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation
by which such adjustment was made. Such certificate shall be
conclusive of the correctness of such adjustment and each
Holder shall have the right to inspect such certificate
during reasonable business hours.
K. Except as provided in this Section 6, no adjustment in
respect of any dividends paid in cash out of earnings and
profits of the Company shall be made during the term of an
Adelphi Warrant or upon the exercise of an Adelphi Warrant.
6
<PAGE>
L. In case of any consolidation of the Company with or
merger of the Company with or into another corporation or in
case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as
an entirety, the Company or each successor or purchasing
corporation (or an affiliate of such successor or purchasing
corporation), as the case may be, agrees that the Adelphi
Warrants shall remain in effect and shall be binding upon
the successor company and that each Holder shall have the
right thereafter upon payment of the Exercise Price in
effect immediately prior to such action to purchase upon
exercise of each Adelphi Warrant the kind and amount of
shares and other securities and property (including cash)
which he would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or
conveyance had such Adelphi Warrant been exercised
immediately prior to such action. The provisions of this
Paragraph L shall similarly apply to successive
consolidations, mergers, sales conveyances.
M. Notwithstanding any adjustment in the Exercise Price or
the number or kind of shares purchasable upon the exercise
of the Adelphi Warrants pursuant to this Agreement,
certificates for Adelphi Warrants issued prior or subsequent
to such adjustment may continue to express the same price
and number and kind of shares as are initially issuable
pursuant to this Agreement, but the Holders may request
replacement Warrants reflecting the correct number of
shares.
7. Fractional Interests. The Company shall not be required to
issue fractions of shares of Common Stock on the exercise of the Adelphi
Warrants.
8. Registration Rights.
(a) Piggyback Registration.
(i) In the event that during the six-year period
following the Company's initial public offering of its Common Stock, the
Company determines to proceed with the preparation and filing of an additional
registration statement under the Securities Act of 1933, as amended ("the
Securities Act"), in connection with the proposed offer and sale for cash of
any of its securities by it or any of its other security holders (other than a
registration statement on Forms S-4, S-8, or other limited purpose form), the
Company shall give written notice of its determination to all record Holders
of the Adelphi Warrants, and Warrant Shares (collectively, the "Registrable
Securities"). Upon the written request of a Holder of Registrable Securities,
given within 20 days after receipt of any such notice from the Company, and
provided the Company receives from such Holder all other information the
Company reasonably requests, the Company shall, subject to the remainder of
this Section 8(a), cause such Holder's Registrable Securities to be included
in such registration statement. Nothing herein shall prevent the Company from,
at any time, abandoning or delaying any registration contemplated by this
Section 8(a).
7
<PAGE>
(ii) If any registration pursuant to this Section
8(a) is underwritten in whole or in part, the Company may also require that
the included Registrable Securities be included in the underwriting on the
same terms and conditions as the other securities being sold through such
underwriter(s) and that each Holder thereof enter into an appropriate
underwriting agreement. If, in the good faith judgement of the managing
underwriter of such public offering, the inclusion of such Registrable
Securities and any other securities having similar piggyback registration
rights for which registration at the same time as such Registrable Securities
has been requested (such Registrable Securities and other securities being
collectively, the "Piggyback Securities") would interfere with the successful
marketing, or require a reduction in the number, of the securities offered by
the Company, the number of the Piggyback Securities otherwise to be included
in such underwritten public offering may be reduced pro rata (as the Company,
in its sole discretion, deems equitable) among the Holders thereof or excluded
in their entirety if so required by the underwriter(s). The excluded
Registrable Securities shall be withheld from the market by the Holders
thereof for a e managing underwriter reasonably determines is necessary in
order to effect the underwritten public offering.
(b) Action to be Taken by the Company. In connection with
the registration of Registrable Securities pursuant hereto, the Company agrees
to:
(i) Bear the expense of any registration or
qualification under (a) of this section, including but not limited to legal,
accounting and printing fees; provided, however, that in no event shall the
Company be obligated to pay (A) any fees or disbursements of special counsel
for Holders of Registrable Securities, or (B) any underwriters' discount or
commission in respect of Registrable Securities;
(ii) Use its best efforts to register or qualify
Registrable Securities for offer or sale under state securities or blues sky
laws of New York and such other jurisdictions in which Adelphi shall
reasonably request;
(iii) Enter into a cross-indemnity agreement, in
customary form, with each underwriter, if any, and each Holder of Registrable
Securities included in such Registration Statement.
9. Notice to Holders.
(a) Nothing contained in this Agreement or in any of the
Adelphi Warrants shall be construed as conferring upon the Holders thereof the
right to vote or to receive dividends or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company; provided, however, that in the event that a
meeting of shareholders shall be called to consider and take action on a
proposal for the voluntary dissolution of the Company, other than in
connection with a consolidation, merger or sale of all , or substantially all,
of its property, assets, business and good will as an entirety, then and in
that event the Company shall cause a notice there of to be sent by first-class
mail, postage prepaid, at least 15 days prior to the date fixed as a record
date or the date of closing the transfer books in relation to such meeting, to
each registered Holder of Adelphi warrants at such Holder's address appearing
on the Adelphi Warrant register; but failure to mail or to receive such notice
or any defect therein or in the mailing thereof shall not affect the validity
of any action taken in connection with such voluntary dissolution. If such
notice shall have
8
<PAGE>
been so given and if such voluntary dissolution shall be authorized at such
meeting or any adjournment thereof, then from and after the date on which such
voluntary dissolution shall have been duly authorized by the shareholders, the
purchase rights represented by the Adelphi Warrants and all other rights with
respect thereto shall cease and terminate.
(b) In the event that the Company intends to make any
distribution on its Common Stock (or other securities which may be purchasable
in lieu thereof upon the exercise of Adelphi Warrants), including, without
limitation, any such distribution to be made in connection with a
consolidation or merger in which the Company is the continuing corporation, or
to issue subscription rights or warrants to holders of its Common Stock, the
Company shall cause a notice of its intention to make such distribution to be
sent by first-class mail, postage prepaid, at least 15 days prior to the date
fixed as a record date or the date of closing the transfer books in relation
to such distribution, to each registered Holder of Adelphi Warrants at such
Holder's address appearing on the Adelphi warrant register, but failure to
mail or to receive such notice or any defect therein or in the mailing thereof
shall not affect the validity of any action taken in connection with such
distribution.
10. Notices. Any notice pursuant to this Agreement to be given or
made by the Holder of any Adelphi Warrant and/or Warrant Share to the Company
shall be sufficiently given or made if sent by first class mail, postage
prepaid, addressed as follows or to such other address as the Company may
designate by notice given in accordance with this Section 10 to the Holders of
Adelphi Warrants and/or Warrant Shares:
EDUCATIONAL VIDEO CONFERENCING, INC.
35 East Grassy Sprain Road
Yonkers, New York 10701
Notices or demands authorized by this Agreement to be made by the
Company to the Holder of any Adelphi Warrant and/or Warrant Share shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to:
ADELPHI UNIVERSITY
Vice President of Finance and Treasurer
South Avenue
Garden City, New York 11530
11. Opinion of Counsel. Counsel to the Company shall deliver to
Adelphi an opinion, dated the date hereof, satisfactory to counsel for
Adelphi, to the effect that (i) the Adelphi Warrants and this Agreement have
been authorized by all necessary corporate action, (ii) the Adelphi Warrants
and this Agreement have been duly authorized, executed and delivered and each
constitutes a legal, valid and binding obligation of the company enforceable
in accordance with its terms, (iii) the Company has reserved out of its
authorized and unissued shares of Common Stock, a number of shares sufficient
to provide for the exercise of the rights of purchase represented by the
Adelphi Warrants and (iv) the Warrant Shares, when issued upon exercise of
Adelphi Warrants in accordance with the terms of the Adelphi Warrants and this
Agreement, will be validly issued, fully paid and non-assessable.
12. Governing Law. This Agreement and each Adelphi Warrant issued
hereunder shall be governed by and construed in accordance with the
substantive laws of the State of New York. The
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<PAGE>
Company hereby agrees to accept service of process by notice given to it
pursuant to the provisions of Section 10.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day, month and year first above written.
(Corporate Seal) EDUCATIONAL VIDEO CONFERENCING, INC.
Attest: By: /s/ Arol Buntzman
-----------------------------------------
Arol Buntzman
/s/ Richard Golden
- -------------------------
ADELPHI UNIVERSITY
(Corporate Seal) By: /s/ Catherine Hennessy
-----------------------------------------
Catherine Hennessy
Attest:
- -------------------------
<PAGE>
ATTACHMENT 1
75,000 Warrants
EDUCATIONAL VIDEO CONFERENCING, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received ADELPHI UNIVERSITY, or
registered assigns, is the owner of the number of Warrants set forth above,
each of which entitles the owner thereof upon presentation and surrender of
this Warrant Certificate with the form of Election to Purchase duly executed,
to purchase at any time from the first anniversary of the effective date of
the Registration Statement until 5:00 p.m., New York City time on the date six
years from the effective date of the Registration Statement (the "Expiration
Date"), one fully paid and non-assessable share of the common stock, par
value, $.0001 per share (the "Common Stock"), of EDUCATIONAL VIDEO
CONFERENCING, INC., a New York Corporation (the "Company"), at a purchase
price per share of$2.72 (the "Exercise Price"). The number of Warrants
evidenced by this Warrant Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Exercise Price per
share set forth above, are the number and Exercise Price as of the date of
original issuance of the Warrants, based on the shares of Common Stock of the
Company as constituted at such date. As provided in the Warrant Agreement
referred to below, the Exercise Price and the number or kind of shares which
may be purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are, upon the happening of certain events, subject to modification
and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement dated as of
May 13, 1997 (the "Warrant Agreement") between the Company and Adelphi
University, which Warrant Agreement is hereby incorporated herein by reference
and made part hereof and to which Warrant Agreement reference is hereby made
for a full description of the rights, limitations of rights, duties and
immunities hereunder of the Company and the holders of the Warrant
Certificates.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number
of shares of Common Stock as the Warrants evidenced by the Warrant Certificate
or Warrant Certificates surrendered entitled such holder to purchase. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or
Warrant Certificates for the number of whole Warrants not exercised.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash
payment will be made, as provided in the Warrant Agreement.
<PAGE>
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained in the Warrant Agreement
or herein be construed to confer upon the holder hereof, or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue of stock, reclassification of stock,
change of par value or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or except as provided in the Warrant Agreementeceive
dividends or subscription rights or otherwise, until the Warrant or Warrants
evidenced by this Warrant Certificate shall have been exercised and payment
for the Warrant Shares shall have been made, and the Warrant Shares shall have
become deliverable as provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for the Company's Common Stock or other class
of stock purchasable upon the exercise of this Warrant are closed for any
purpose, the Company shall not be required to make delivery of certificates
for shares purchasable upon such exercise until the date of the reopening of
said transfer books.
This Warrant, and the rights of the Holder hereof, shall be governed
by the law of the State of New York.
IN WITNESS THEREOF, EDUCATIONAL VIDEO CONFERENCING, INC. has caused the
signature (or facsimile signature) of its President and Secretary to be
printed hereon and its corporate seal (or facsimile) to be printed hereon.
Dated:
EDUCATIONAL VIDEO CONFERENCING, INC.
By
------------------------------------
(Corporate Seal)
Attest:
- -------------------------
Secretary
<PAGE>
WARRANT AGREEMENT, dated as of ______ __, 1998 (the "Effective Date"),
between EDUCATIONAL VIDEO CONFERENCING, INC., a Delaware corporation (the
"Company"), and PRIME CHARTER LTD., a Delaware corporation ("Prime Charter").
The Company proposes to sell to Prime Charter and/or its designee(s)
warrants (the "Warrants") to purchase an aggregate of _______ shares (the
"Warrant Shares") of the Company's common stock, par value $.0001 per share (the
"Common Stock"), in connection with a public offering by the Company of ______
shares of Common Stock (the "Offering") pursuant to a registration statement
(the "Registration Statement") on Form SB-2 (File No. 333-____) filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act").
THEREFORE, in consideration of the mutual undertakings contained
herein, the Company and Prime Charter hereby agree as follows:
1. Issuance of Warrants. Concurrently with the initial closing (the
"Closing") under the Underwriting Agreement of even date herewith between the
Company and Prime Charter, as representative of the several underwriters named
therein (the "Underwriting Agreement"), related to the Offering, the Company
shall issue, sell and deliver the Warrants to Prime Charter and/or, at Prime
Charter's direction, to one or more underwriters or other members of the
National Association of Securities Dealers, Inc. that participate in the
Offering and/or the bona fide officers or partners of Prime Charter or such
other participants (each a "Permitted Designee") for a purchase price of $.001
per Warrant. Each certificate for Warrants (a "Warrant Certificate") shall be
substantially in the form of Annex A attached hereto.
2. Registration. The Company shall maintain a register for the
Warrants at its principal executive offices for the registration of the issuance
and transfer of Warrants. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person. The Warrants shall be
registered initially in the name of Prime Charter and/or one or more Permitted
Designees in such denominations as Prime Charter may request not less than two
business days prior to the scheduled date of the Closing as set forth in the
Underwriting Agreement.
3. Transfer and Exchange of Warrants. Any Warrant shall be
transferable only upon surrender thereof at the Company's principal executive
offices duly endorsed by its Holder or by such Holder's duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment
or authority to transfer. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the persons entitled thereto. In addition,
a Warrant Certificate may be exchanged, at the option of the Holder thereof, for
another Warrant Certificate or Warrant Certificates of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares upon surrender at the Company's principal executive
offices. Notwithstanding the foregoing, the Warrants may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until after the
first anniversary of the Effective Date, except to a Permitted Designee, by
operation of law or by reason of a reorganization of the Company. Thereafter,
the Warrants and any Warrant Shares shall be freely transferable, subject only
to compliance with applicable securities laws.
<PAGE>
4. Exercise of Warrants.
4.1 Exercise Price and Term. Each Warrant shall entitle the Holder
thereof to purchase from the Company one Warrant Share at a purchase price per
share of $ ____ (the "Exercise Price"), as such purchase price and number of
Warrant Shares may be adjusted from time to time pursuant to the provisions of
Section 8 hereof, payable in full at the time of exercise of such Warrant. The
Warrants may be exercised, in whole or in part, at any time or from time to time
during the four-year period commencing on the first anniversary of the Effective
Date and ending at 5:00 p.m., New York City time, on the fifth anniversary of
the Effective Date (the "Expiration Date"). After the Expiration Date, any
unexercised Warrants shall be void and all rights of the Holders with respect
thereto shall cease.
4.2 Payment of Exercise Price. At the election of any Holder, the
aggregate Exercise Price for any Warrants being exercised may be paid: (a) in
cash in the amount of the aggregate Exercise Price then in effect for the number
of Warrants being exercised, (b) by surrender to the Company of shares of Common
Stock having an aggregate Fair Market Value (as defined below) on the date of
exercise equal to the aggregate Exercise Price then in effect for the number of
Warrants being exercised, (c) by a surrender of Warrants covering a number of
Warrant Shares having an aggregate Fair Market Value, net of the applicable
aggregate Exercise Price therefor, equal to the aggregate Exercise Price then in
effect for the number of Warrants being exercised, or (d) by a combination of
the aforementioned methods of payment. For purposes of this Agreement, the "Fair
Market Value" per share of Common Stock on a given date shall be: (i) if the
Common Stock is listed on a national securities exchange or included on the
Nasdaq National Market, the closing price per share of Common Stock on such date
(or, if there was no trading on such date, on the next preceding day on which
there was trading); (ii) if the Common Stock is not listed on a national
securities exchange or included on the Nasdaq National Market, the average of
the closing bid and asked quotations per share of Common Stock as reported by
Nasdaq (or the National Quotation Bureau Incorporated or any similar
organization) on such date (or, if there were no quotations for the Common Stock
on such date, on the next preceding day on which there were quotations) as
provided by such organization; and (iii) if the Common Stock is not traded on a
national securities exchange or included on the Nasdaq National Market and bid
and asked quotations are not provided by Nasdaq (or the National Quotation
Bureau Incorporated or any similar organization), as determined by the agreement
of the parties in good faith or, in the absence of such agreement, as determined
pursuant to arbitration under the auspices of the American Arbitration
Association.
4.3 Exercise Procedure. Warrants may be exercised by their surrender
at the Company's principal executive offices, with the Election to Purchase form
attached thereto duly completed and executed, accompanied by payment of the
aggregate Exercise Price for the Warrant Shares to be purchased upon such
exercise. Payment for the Warrant Shares shall be made (a) if payment is to be
made in cash, by a certified or bank cashier's check payable to the order of the
Company or by wire transfer to an account designated by the Company, (b) if
payment is to be made through a surrender of shares of Common Stock, by
surrender of certificates duly endorsed for transfer (with all transfer taxes
paid or provided for), and (c) if payment is to be made by a surrender of
Warrants, by surrender of certificates representing such Warrants. Promptly
after the exercise of any Warrants, upon compliance with Section 5 hereof, the
Company shall issue a certificate or certificates, for the number of full
Warrant Shares to which the Holder thereof is entitled, registered in accordance
with the instructions set forth in the Election to Purchase, together with cash
as provided in Section 10 of this Warrant Agreement payable in respect of
fractional shares and (if applicable) a new Warrant Certificate or
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<PAGE>
Certificates representing all remaining unexercised Warrants. All Warrant Shares
shall be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights, and free from all liens and charges other than those created
by the Holder. Upon compliance with Section 5 hereof, certificates representing
such Warrant Shares and remaining unexercised Warrants shall be issued by the
Company in such names and denominations, and shall be delivered to such persons,
as are specified by written instructions of the Holder.
4.4 Record Holder. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have become the
holder of record of the Warrant Shares represented thereby on the date upon
which such Warrants were surrendered for exercise, accompanied by payment of the
aggregate Exercise Price as aforesaid, irrespective of the date of issuance or
delivery of such certificate for Warrant Shares; provided, however, that if, at
the date of the surrender of such Warrants and payment of the aggregate Exercise
Price, the transfer books for the Common Stock or any other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares or for shares of such other class of stock in respect of
which such Warrants are then exercisable shall be issuable as of the date on
which such books shall next be opened (whether before or after the Expiration
Date) and, until such date, the Company shall be under no duty to deliver any
certificate for such Warrant Shares or for shares of such other class of stock;
and, provided, further, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 20
days.
5. Payment of Taxes. The Company shall promptly pay all documentary
stamp taxes attributable to the issuance of Warrants or the issuance of Warrant
Shares upon the exercise of any Warrants, except that any transfer taxes payable
in connection with the issuance of Warrants or Warrant Shares in any name other
than that of the Holder of the Warrants surrendered shall be paid by such Holder
and, if any such tax would otherwise be payable by the Company, no such issuance
or delivery shall be made unless and until the person requesting such issuance
has paid to the Company the amount of any such tax or it is established to the
reasonable satisfaction of the Company that any such tax has been paid.
6. Replacement Warrants. In case any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the lost, stolen or destroyed
Warrant Certificate, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate, together with an appropriate agreement regarding indemnification of
the Company relating to the issuance of a replacement Warrant Certificate.
7. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available for issuance the number of its authorized but
unissued shares of Common Stock or other stock sufficient to permit the exercise
in full of the Warrants and any transfer agent for the Common Stock or other
stock issuable upon the exercise of Warrants shall be directed at all times to
reserve such number as shall be sufficient for such purpose. The Company will
keep a copy of this Warrant Agreement on file with each such transfer agent and
will supply such transfer agent with duly executed stock certificates for such
purpose and will provide or otherwise make available any cash that may be
payable as provided in Section 10 hereof. All Warrants surrendered upon the
exercise thereof shall be canceled. After the Expiration Date, no shares shall
be subject to reservation in respect of any unexercised Warrants.
3
<PAGE>
8. Adjustments.
8.1 Adjustment of Exercise Price.
8.1.1 Initial Exercise Price. The Exercise Price, which
initially will be as provided in Section 4.1, shall be adjusted and readjusted
from time to time as provided in this Section 8.1 and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 8.1.
8.1.2 Issuance of Additional Shares of Common Stock. In case
the Company, at any time after the date of the Closing, shall issue additional
shares of Common Stock for no consideration in connection with a dividend, stock
split or other distribution on the Common Stock (including, without limitation,
any distribution of Common Stock by way of spin-off, reclassification or
corporate rearrangement), then, and in each such case, the Exercise Price shall
be reduced concurrently with such issuance to a price (calculated to the nearest
cent) determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance, and
(b) the denominator shall be the number of shares of Common Stock
outstanding immediately after such issuance.
8.1.3 Dividends and Distributions. In case the Company, at any
time after the Effective Date, shall pay or make a dividend or other
distribution on the Common Stock (including, without limitation, any
distribution of stock (other than Common Stock) or other securities, including
securities that are convertible into or exchangeable or exercisable for Common
Stock, property or options by way of dividend, spin-off, reclassification or
corporate rearrangement) then, and in each such case, the Exercise Price in
effect immediately prior to the close of business on the record date fixed for
the determination of the holders of the Common Stock entitled to receive such
dividend or other distribution shall be reduced, effective as of the close of
business on such record date, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to the close of business on such record date minus the value
of such dividend or other distribution (as determined in good faith by the Board
of Directors of the Company) applicable to one share of Common Stock, and
(b) the denominator shall be such Exercise Price in effect
immediately prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this Section
8.1.3 for a dividend payable in shares of Common Stock (which is subject to
Section 8.1.2) or payable in cash or other property and declared out of the
earned surplus (i.e., retained earnings) of the Company (excluding any portion
thereof resulting from a revaluation of property) or which is declared but is
then not paid or made. For purposes of the foregoing, a dividend or distribution
payable other than in cash shall be considered payable out of earned surplus
only to the extent that such earned surplus is charged an
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amount equal to the fair value of such dividend or distribution at the time of
payment as determined in good faith by the Board of Directors of the Company. If
a dividend or distribution covered under this Section 8.1.3 is declared prior to
the Expiration Date but not paid by such date, the Expiration Date shall be
extended until the payment thereof
8.1.4 Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall be
proportionately increased concurrently with the effectiveness of such
combination or consolidation.
8.1.5 Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this Section 8.1 would be
less than $.01, such amount shall be carried forward, and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment that, together with such amount an any other amount or amounts so
carried forward, shall aggregate at least $.01.
8.1.6 Minimum Exercise Price. Notwithstanding anything to the
contrary set forth herein, no adjustment provided for in this Section 8.1 shall
reduce the Exercise Price below the par or stated value of the Common Stock and
the Company shall have no obligation to change such value to permit a further
reduction of the Exercise Price; provided, however, that, except in the event of
any transactions of the type contemplated under Section 8.1.4 hereof, the
Company agrees not to change the par or stated value of the Common Stock.
8.2 Adjustment of Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of Section 8.1, the number of
Warrant Shares that the Holder of a Warrant shall be entitled to receive upon
exercise thereof shall be adjusted to equal that number of Warrant Shares
determined by multiplying the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to such adjustment of the Exercise Price by a
fraction of which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and
(b) the denominator shall be the Exercise Price in effect
immediately following such adjustment of the Exercise Price.
8.3 Notice, Evidence of Adjustments. Whenever the Exercise Price is
adjusted as herein provided, the Company shall promptly cause a notice setting
forth the adjusted Exercise Price and adjusted number of Warrant Shares,
issuable upon exercise of each Warrant to be mailed to the Holders, at their
last addresses appearing in the Warrant register, and shall cause a copy thereof
to be mailed to each transfer agent for the Common Stock. The Company shall
retain a firm of independent public accountants of recognized standing selected
by the Board of Directors (who may be the regular accountants employed by the
Company) to make any computation required by this Section 8, and a certificate
signed by such firm shall accompany said notice and shall be conclusive evidence
of the correctness of such adjustments.
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9. Consolidation, Merger, Sale of Assets, Reorganization, etc.
9.1 General Provisions. In case the Company at any time after the
Effective Date (a) shall consolidate with or merge into any other person and not
be the continuing or surviving person of such consolidation or merger, or (b)
shall permit any other person to consolidate with or merge into the Company and
the Company shall be the continuing or surviving person but, in connection with
such consolidation or merger, the Common Stock or other securities then issuable
upon exercise of the Warrants shall be changed into or exchanged for cash, stock
or other securities or property, or (c) shall transfer, directly or indirectly,
all or substantially all its properties and assets to any other person, or (d)
shall effect a capital reorganization or reclassification of the Common Stock or
other securities then issuable upon exercise of the Warrants (other than a
capital reorganization or reclassification resulting in an adjustment of the
Exercise Price as provided in Section 8.1), then, and in the case of each such
transaction, the Company shall make proper provision such that, upon the terms
and in the manner provided in this Warrant Agreement, the Holder of each
Warrant, upon the exercise thereof at any time after the consummation of such
transaction, shall be entitled to receive, at the Exercise Price then in effect,
in lieu of the Common Stock or other securities issuable upon such exercise
immediately prior to such transaction, the amount of cash, stock or other
securities or property to which such Holder would have been entitled if such
Warrant had been exercised in full immediately prior to such transaction,
subject to adjustments subsequent to such transaction as nearly equivalent as
possible to the adjustments provided for in Section 8 and this Section 9.
9.2 Assumption of Obligations. Notwithstanding anything contained in
this Warrant Agreement to the contrary, the Company shall not effect any of the
transactions described in Section 9.1(a), (b), (c) or (d) unless, prior to the
consummation thereof, the person (other than the Company) that may be required
to deliver any cash, stock or other securities or property upon exercise of any
Warrant as provided herein shall assume, by written instrument delivered to the
Holders of the Warrants, (a) the obligations of the Company under this Warrant
Agreement and the Warrants (and if the Company shall survive the consummation of
any such transaction, such assumption shall not release the Company from any
continuing obligations of the Company under this Warrant Agreement and the
Warrants) and (b) the obligation to deliver to such Holder such cash, stock or
other securities or other property as such Holder may be entitled to receive in
accordance with the provisions of this Section 9; provided, however, that this
Section 9.2 shall not be applicable to any transaction described in Section 9.1
if all such cash, stock, property or other consideration receivable upon
consummation of such transaction is delivered to the Company at such time. Such
person shall similarly deliver to the Company an opinion of counsel to the
effect that this Warrant Agreement and the Warrants shall continue in full force
and effect after any such transaction and that the terms hereof (including,
without limitation all of the provisions of Section 8 and this Section 9.2) and
thereof shall be applicable to the cash, stock or other securities or property
that such person may be required to deliver upon any exercise of the Warrants.
9.3 No Dilution or Impairment. The Company shall not, by amendment of
its certificate of incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant Agreement or
the Warrants, but will at all times, whether or not requested to do so, in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holders against dilution or other impairment. Without limiting the generality of
the foregoing, the Company agrees that it shall take all such reasonable action
as may be necessary
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or appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of stock upon the exercise of all Warrants from
time to time outstanding.
10. Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock upon the exercise of any Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
Holder, the number of Warrant Shares that shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant, the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Fair Market Value of one share
of Common Stock on the date of exercise.
11. Restrictions on Dispositions. The Warrants and the Warrant Shares
have been registered under the Act pursuant to the Registration Statement;
however, Prime Charter acknowledges that the Warrants and the Warrant Shares may
not be transferred except pursuant to (i) a post-effective amendment to the
Registration Statement, (ii) an effective registration statement under the Act
or (iii) any available exemption from registration under the Act permitting such
disposition of securities and upon delivery to the Company of an opinion of
counsel, reasonably satisfactory to counsel for the Company, that such exemption
from registration is available. Prime Charter agrees that the certificates
representing the Warrants and Warrant Shares shall bear an appropriate
restrictive legend to such effect.
12. Registration Rights.
12.1 Demand Registration. Upon written request of the Holder(s) of at
least a majority of the then outstanding Warrants and Warrant Shares made at any
time within the period commencing one year and ending five years after the
Effective Date, the Company shall file within a reasonable period of time and,
in any event within the time period provided in Section 12.3(a) after receipt of
such written request, at its sole expense, on one occasion, a registration
statement under the Act registering the Warrant Shares. Within 15 days after
receiving any such notice, the Company shall give notice to the other Holders of
the Warrants and the Warrant Shares advising that the Company is proceeding with
such registration statement, and offering to include therein the Warrant Shares
of such other Holders. The Company shall not be obligated to include the Warrant
Shares of any such other Holder in such registration unless such other Holder
shall accept such offer by notice in writing to the Company within 15 days after
receipt of such notice from the Company. The Company shall use its reasonable
best efforts to file and cause such registration statement to become effective
as promptly as practicable and to remain effective for the period of time
provided in Section 12.3, to reflect in the registration statement financial
statements that are prepared in accordance with Section 10(a)(3) of the Act, and
to amend or supplement such registration statement to reflect any facts or
events arising that, individually or in the aggregate, represent a material
change in the information set forth in the registration statement to enable any
Holders of Warrants to exercise warrants and/or sell the underlying Warrant
Shares during such time period provided in Section 12.3. If any registration
pursuant to this Section 12.1 is an underwritten offering, the Holders of a
majority of the Warrant Shares to be included in such registration will select
an underwriter (or managing underwriter if such offering should be syndicated)
approved by the Company, such approval not to be unreasonably withheld.
Notwithstanding anything in this Warrant Agreement to the contrary, the Company
shall be entitled to postpone for a reasonable period of time (not exceeding 60
days in any 12-month period) the filing or effectiveness of any registration
statement otherwise required to be prepared and filed by it pursuant to
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this Section 12.1 if the Company's Board of Directors determines, in its
reasonable discretion, that such registration and offering would adversely
affect any financing, acquisition, corporate reorganization or other material
transaction involving the Company and the Company promptly gives the Holders
written notice of such determination specifying the grounds therefor and an
estimate of the anticipated delay. If the Company shall so postpone the filing
of a registration statement, a majority-in-interest of the requesting Holders
shall have the right to withdraw the request for demand registration by giving
written notice to the Company within 30 days after receipt of the notice of
postponement.
12.2 Piggyback Registration. If, at any time within the period
commencing one year and ending seven years after the Effective Date, the Company
proposes to register any voting equity securities under the Act in a primary
registration on behalf of the Company and/or in a secondary registration on
behalf of holders of such securities, and the registration form to be used may
be used for registration of the Warrant Shares, the Company shall give prompt
written notice (which, in the case of a registration pursuant to the exercise of
demand registration rights other than those provided in Section 12.1, shall be
within 10 business days after the Company's receipt of notice of such exercise
and, in any event, shall be at least 30 days prior to the date of such filing)
to the Holders of Warrants and/or Warrant Shares (regardless of whether some of
the Holders shall have theretofore availed themselves of the demand rights
provided in Section 12.1) of its intention to effect registration and shall
offer to include in such registration such number of Warrant Shares with respect
to which the Company has received written requests for inclusion therein within
10 business days after receipt of such, notice from, the Company upon generally
the same terms and conditions as the person or persons for whom such
registration is being effected has agreed to. This Section 12.2 is not
applicable to any registration statement to be filed by the Company on Forms S-4
or S-8 or any successor forms. The Company shall not be obligated to cause to be
effective any registration statement as to which it has given notice to the
Holders of Warrants and/or Warrant Shares and shall have discretion to withdraw
any such registration without liability to Holders of Warrants and/or Warrant
Shares.
Notwithstanding the foregoing, if the managing underwriter of the
offering shall determine in good faith and advise the Company in writing that
the inclusion of the Warrant Shares and other securities being offered in such
registration would materially and adversely affect the marketability of the
offering, then the Company and the managing underwriter may reduce the number of
Warrant Shares to be registered on a pro rata basis proportionate to the
reduction of all other holders of securities participating in such registration
pursuant to the exercise of piggyback registration rights. In such event, the
Company may reduce the number of Warrant Shares to be registered to zero as long
as no other securities are registered in such registration statement pursuant to
an exercise of piggyback registration rights.
12.3 Registration Procedures. If and whenever the Company is required
by the provisions of this Section 12 to use its reasonable best efforts to
effect the registration of any Warrant Shares under the Act, the Company will,
as expeditiously as possible:
(a) in connection with any registration pursuant to Section
12.1, prepare and file with the Commission a registration statement (which shall
be filed as soon as practical after receipt of requisite requests from Holders
of Warrant Shares for registration, but not more than 90 days in the case of a
registration statement on Form S-1 or SB-2, or 45 days in the case of any other
form) with respect to the Warrant Shares and use its reasonable best efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as
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hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 12.3(a) and comply with the provisions of the
Act with respect to the disposition of all Warrant Shares covered by such
registration statement in accordance with the Holders' intended method of
disposition set forth in such registration statement for such period (so long as
such registration statement was filed pursuant to Section 12.1);
(c) furnish to each seller of Warrant Shares and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Warrant Shares covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Warrant Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as each seller shall request, and do any and
all other acts and things which may be necessary under such securities or blue
sky laws to enable such seller to consummate the public sale or other
disposition in such jurisdictions of the securities to be sold by such seller,
except that the Company shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not
qualified or to file any general consent to service of process;
(e) use its reasonable best efforts to list the Warrant Shares
covered by such registration statement with any securities exchange or automated
quotation system on which the Common Stock of the Company is then listed;
(f) immediately notify each seller of Warrant Shares and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Act, of the happening of
any event of which the Company has knowledge as result of which the prospectus
contained in such registration statement, as then in effect, included an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(g) enter into such agreements (including an underwriting
agreement, if applicable) and take all such other actions reasonably necessary
in connection therewith in order to expedite and facilitate the disposition of
the Warrant Shares to be registered;
(h) whether or not the offering is underwritten and at the
request of any seller of Warrant Shares, furnish: (i) such representations and
warranties to such seller and the underwriters, if any, as are customary in
primary underwritten offerings, (ii) an opinion of counsel representing the
Company for the purposes of such registration, addressed to the underwriters, if
any, and to such seller of Warrant Shares in form and substance as is
customarily given to underwriters in an underwritten public offering and to such
other effect as reasonably may be requested by counsel for the underwriters or
by such seller of Warrant Shares or its counsel and (iii) a letter dated such
date from the independent public accountants retained by the Company, addressed
to the underwriters, if any, and to such seller of Warrant Shares, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, and such letter shall
additionally
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cover such other financial matters (including information as to the period
ending no more than five business days prior to the date of such letter) with
respect to such registration as such underwriters reasonably may request;
(i) make available upon reasonable notice for inspection by each
seller of Warrant Shares, any underwriter participating in any distribution
pursuant to such registration statement, and any attorney, accountant or other
agent retained by such seller of Warrant Shares or underwriter, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, but not later than 18 months
after the effective date of the registration statement, an earnings statement
covering the period of at least 12 months beginning with the first full month
after the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Act.
For purposes of Section 12.3(a) and (b), the period of
distribution of Warrant Shares in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed the distribution
of all securities purchased by it, and the period of distribution of Warrant
Shares in any other registration shall be deemed to extend until the earlier of
the sale of all Warrant Shares covered thereby and 120 days after the effective
date thereof.
In connection with each registration hereunder the sellers of
Warrant Shares will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary and shall be requested by the Company in order to comply with
federal and applicable state securities laws.
In connection with each registration pursuant to this Section 12
covering an underwritten public offering, the Company and each seller of Warrant
Shares agree to enter into a written agreement with the managing underwriter
(unless the Holder is the managing underwriter) in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
12.4 Expenses. All expenses incurred by the Company in complying
with Sections 12.1, 12.2 and 12.3, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance and reasonable fees and disbursements of counsel for the Sellers of
Warrant Shares, but excluding any Selling Expenses, are herein referred to as
"Registration Expenses." "Selling Expenses," as used herein, mean all
underwriting discounts and selling commissions applicable to the sale of Warrant
Shares.
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The Company will pay or cause to be paid all Registration
Expenses of the Holders in connection with each registration statement under
Sections 12.1 and 12.2. All Selling Expenses in connection with each
registration statement under Sections 12.1 and 12.2 shall be borne by the
participating sellers of Warrant Shares in proportion to the number of Warrant
Shares sold by each, or by such participating sellers of Warrant Shares other
than the Company (except to the extent the Company shall be a seller of Common
Stock) as they may agree.
12.5 No Conflicts. The Company will not enter into any agreement
granting registration rights to any person or entity on terms which conflict
with the provisions of this Section 12.
12.6 Indemnification and Contribution. (a) In the event of a
registration of any Warrant Shares under the Act pursuant to this Section 12,
the Company will indemnify and hold harmless, to the fullest extent permitted by
law, each Holder selling Warrant Shares thereunder, each underwriter thereunder,
and each other person, if any, who controls such selling Holder of Warrant
Shares or underwriter within the meaning of the Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
damages, liabilities and expenses, joint for several, to which such selling
Holder, underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such Warrant Shares were registered under the Act pursuant to
Section 12, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will pay or reimburse each such selling Holder, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company (i) will not be liable
in any such case if and to the extent that (A) 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 so made in conformity with information
furnished by any such selling Holder, any such underwriter or any such
controlling person, as the case may be, in writing specifically for use in such
registration statement, prospectus, amendment or supplement or (B) in respect to
such statement, alleged statement omission or alleged omission with respect to
which such loss, claim, damage or liability directly relates, the final
prospectus for such registration statement corrected in all material respects
such statement alleged statement, omission or alleged omission and a copy of
such final prospectus was not sent or given by or on behalf of such Holder (or
otherwise delivered in accordance with applicable law or regulation) at or prior
to the confirmation of the sale of Warrant Shares of such Holder and (ii) will
not be liable for amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, such consent not to be unreasonably withheld or delayed.
(b) In the event of a registration of any Warrant Shares under
the Act pursuant to this Section 12, each Holder selling Warrant Shares
thereunder, severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Act, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect
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thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement or omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, made in reliance upon and in conformity with information
pertaining to such selling Holder, as such, furnished in writing to the Company
by such selling Holder specifically for use in such registration statement under
which such Warrant Shares was registered under the Act pursuant to this Section
12, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, and will pay or reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably by them in connection with investigating or defending
any such loss, claim, damage liability or action or (ii) any statement, alleged
statement, omission or alleged omission made by the Company with respect to
which such loss, claim, damage or liability directly relates, if the final
prospectus for such registration statement corrected in all material respects
such statement, alleged statement, omission or alleged omission and a copy of
such final prospectus was not sent or given by or on behalf of such Holder (or
otherwise delivered in accordance with applicable law or regulation) at or prior
to the confirmation of the sale of Warrant Shares of such Holder, provided,
however, that (A) the liability of each selling Holder hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the Warrant
Shares sold by such selling Holder under such registration statement bears to
the total public offering price of all securities sold thereunder, but not in
any event to exceed the net proceeds received by such selling Holder from the
sale of Warrant Shares covered by such registration statement and (B) no selling
Holder shall be liable for amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of such selling Holder, such consent not to be unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of any claim or the commencement of any action or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party,
except to the extent the indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and the indemnified party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 12.6(c) for any legal or
other professional expenses subsequently incurred by such indemnified party in
connection with the defense thereof. No indemnifying party, in the defense of
any such claim or litigation against an indemnified party, shall consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation, unless such indemnified party shall otherwise consent in writing. An
indemnifying party who elects to assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim (in addition
to any local counsel), unless any indemnified party reasonably concludes that
there may be legal defenses available to such indemnified party with respect to
such claim which are different from or additional to those available to any
other of such indemnified parties or that a conflict of interest may exist
between such indemnified party and any other of such
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indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the reasonable fees and expenses of such
additional counsel or counsels.
(d) In order to provide for just and equitable contribution in
any case in which either (i) any Holder exercising registration rights under
this Section 12, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 12.6, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and following the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 12.6 provides for indemnification in
such case or (ii) contribution under the Act may be required on the part of any
such Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 12.6, then, and in each such
case, the Company and such Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect both the relative
benefit received by such Holder and the relative fault of the Company and such
Holder; provided, however, that, in any such case, (A) no Holder will be
required to contribute any amount in excess of the public offering price of all
such Warrant Shares offered by it pursuant to such registration statement and
(B) no person or entity guilty of fraudulent misrepresentation (within, the
meaning of Section 11(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation. For
purposes of the preceding sentence, the relative benefit received by the Holder
of Warrant Shares shall be deemed to be in the same proportion as the public
offering price of its Warrant Shares offered by the registration statement bears
to the public offering price of all securities offered by such registration
statement; and the relative fault of the Company and such Holder shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission of a material fact relates to
information supplied by the Company or by the Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
12.7 Securities Law Compliance. The Company covenants that it will
timely file all reports required to be filed by it under the Act and the
Exchange Act. So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the Company covenants to make publicly
available such information as may be necessary to permit the sale of Warrant
Shares without registration under the Act pursuant to the exemption provided by
Rule 144 under the Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Warrants or Warrant Shares at any time, if applicable the
Company will deliver to such Holder or such Holder's prospective transferee such
information as may be necessary to permit the sale of Warrants or Warrant Shares
pursuant to Rule 144A under the Act, as such rule may be amended from time to
time. Upon request of any Holder of Warrants or Warrant Shares, the Company will
deliver to such Holder a written statement as to whether it has complied with
such information requirements.
13. Notices to Holders.
13.1 Nothing contained in this Warrant Agreement or in any of the
Warrants shall be construed as conferring upon the Holders thereof as such the
right to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter or any other rights whatsoever as
stockholders of the Company.
13
<PAGE>
13.2 In the event the Company intends to:
(a) make any distribution on or with respect to its Common Stock
(or other securities that may then be issuable in lieu thereof upon the exercise
of Warrants), including without limitation any dividend or distribution from
earned surplus, any dividend or distribution of stock, assets or evidences of
indebtedness, or any similar distribution,
(b) issue subscription rights or warrants to holders of its
Common Stock,
(c) consolidate or merge with or into another entity,
(d) liquidate, dissolve or sell or otherwise dispose of
substantially all its assets, or
(e) take any other action that would result in an adjustment to
the Exercise Price or an adjustment to the number of Warrant Shares that the
Holder of a Warrant shall be entitled to receive upon exercise thereof, then the
Company shall cause a notice of its intention to take such action to be sent by
first-class mail, postage prepaid, at least 20 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such distribution or issuance or to vote upon such
proposed consolidation, merger, liquidation, sale or conveyance to each Holder
at its address appearing on the Warrant register, but failure to mail or to
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any action taken in connection with such distribution,
issuance, consolidation, merger, liquidation, sale or conveyance.
14. Notices. Any notice or demand required by this Warrant Agreement
to be given or made by any Holder to or on the Company shall be sufficiently
given or made if sent by registered or certified mail, postage prepaid, or by
facsimile transmission address as follows:
Educational Video Conferencing, Inc.
35 East Grassy Sprain Road
Suite 504
Yonkers, New York 10710
Telephone: 914.395.3501
Facsimile: 914.395.3498
Attention: Dr. Arol I. Buntzman
Any notice or demand required by this Warrant Agreement to be given or made by
the Company to or on the Holder of any Warrant shall be sufficiently given or
made, whether or not such Holder receives the notice, if sent by first-class
mail, postage prepaid, addressed to such Holder at his last address as shown on
the books of the Company.
15. Governing Law. The validity, interpretation and performance of
this Warrant Agreement, of each Warrant issued hereunder and of the respective
terms and provisions thereof shall be governed by the laws of the State of New
York without giving effect to principles of conflicts of law.
16. Counterparts. This Warrant Agreement may be executed in two
counterparts, each of which when so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant
Agreement as of the date first set forth above.
EDUCATIONAL VIDEO CONFERENCING, INC.
By
----------------------------------
Name:
Title:
PRIME CHARTER LTD.
By
----------------------------------
Name:
Title:
15
<PAGE>
ANNEX A
THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"); HOWEVER, NONE OF SUCH SECURITIES MAY BE OFFERED OR SOLD EXCEPT PURSUANT
TO (i) A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT UNDER WHICH SUCH
SECURITIES WERE REGISTERED UNDER THE ACT; (ii) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR (iii) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES AND UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE. IN
ADDITION, THE WARRANTS REPRESENTED HEREBY MAY NOT BE TRANSFERRED OR EXERCISED
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE WARRANT AGREEMENT DATED AS OF
______ ___, 1998 BETWEEN EDUCATIONAL VIDEO CONFERENCING, INC. AND PRIME CHARTER
LTD.
No. 1 _______ Warrants
Void After 5:00 p.m. New York City Time
On ______ ___, 2003
Educational Video Conferencing, Inc.
Warrant Certificate
THIS CERTIFIES THAT, for value received, Prime Charter Ltd., or
registered assigns, is the Holder of the number of Warrants set forth above,
each Warrant entitling the owner thereof to purchase at any time after ______
___, 1999 and prior to 5:00 p.m., New York City time, on ______ ___, 2003 (the
"Expiration Date"), one fully paid and non-assessable share of common stock, par
value $.01 per share ("Common Stock"), of Educational Video Conferencing, Inc.,
a Delaware corporation (the "Company"), at a purchase price per share (the
"Exercise Price") initially equal to $ ___, upon presentation and surrender of
this Warrant Certificate with the Form of Election to Purchase (attached hereto)
duly executed. The number of Warrants evidenced by this Warrant Certificate (and
the number of shares that may be purchased upon exercise hereof (the "Warrant
Shares") set forth above and the Exercise Price set forth above are the number
and Exercise Price as of the date of original issuance of this Warrant
Certificate, based on the Common Stock as constituted at such date. As provided
in the Warrant Agreement referred to below, the Exercise Price and the number or
kind of shares that may be purchased upon the exercise of the Warrants evidenced
by this Warrant Certificate are subject to modification and adjustment upon the
happening of certain events.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of the Warrant Agreement dated
as of _____ ___, 1998 between the Company and Prime Charter Ltd., which Warrant
Agreement is hereby incorporated herein reference and made a part hereof and to
which reference is hereby made for a full description of the rights, limitations
of rights, duties and immunities hereunder of the Company and the Holders of the
Warrant Certificates. A copy of the Warrant Agreement is on file at the
principal office of the Company.
<PAGE>
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor, evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
The Exercise Price may be paid in cash or by surrender of the
appropriate number of Warrants or shares of Common Stock in a cashless exercise
or in a combination thereof as provided in Section 4.2 of the Warrant Agreement.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made as provided in the Warrant Agreement.
No Holder of this Warrant Certificate, as such, shall be entitled to
vote or to receive dividends or to consent or to receive notice as a stockholder
of the meetings of stockholders for the election of directors of the Company or
any other matter or to any rights whatsoever as stockholder of the Company,
until the Warrant or Warrant evidenced by this Warrant Certificate shall have
been exercised and the Warrant Shares shall have been delivered as provided in
the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Common Stock or other class
of stock issuable upon exercise of this Warrant Certificate are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares issuable upon such exercise until the date of the reopening of said
transfer books as provided in the Warrant Agreement.
IN WITNESS WHEREOF, Educational Video Conferencing, Inc. has caused the
signature (or facsimile signature) of its Chairman and Secretary to be printed
hereon.
EDUCATIONAL VIDEO CONFERENCING, INC.
By
----------------------------------
Name:
Title:
Attest:
- ------------------------------------
Secretary
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder desires to transfer this Warrant
Certificate).
TO EDUCATIONAL VIDEO CONFERENCING, INC.
FOR VALUE RECEIVED, __________________________________________ hereby
sells assigns and transfers unto ________________________ this Warrant
Certificate, together with all rights, title and interest therein, and does
hereby irrevocably constitute and appoint ______________________, to transfer
the within Warrant Certificate on the books of the within- named Company, with
full power of substitution.
DATED:_____________________
Signature__________________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants evidenced by this
Warrant Certificate).
TO EDUCATIONAL VIDEO CONFERENCING, INC.
The undersigned hereby (1) irrevocably elects to exercise ______________________
_____________ Warrants represented by this Warrant Certificate to purchase
__________ shares of Common Stock issuable upon the exercise of such Warrants,
(2) makes payment in full of the aggregate Exercise Price for such Warrants by
enclosure of a bank cashier's check or money order therefor or by surrendering
Warrants or shares of Common Stock for application to the aggregate Exercise
Price, upon condition that new Warrants be issued for the balance of the
Warrants remaining, and (3) requests that certificates for shares and Warrants
be issued in the name of.
(Please insert social security or other
identifying number)_________________________
__________________________________________________
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number)_________________________
__________________________________________________
(Please print name and address)
DATED:______________________________, 19/20___
Signature__________________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing election to purchase must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
March 4, 1997
Arol I. Buntzman
325 Mile Square Road
Yonkers, New York 10701
Dear Arol:
This will confirm our agreement regarding the shares of capital stock
of Educational Video Conferencing, Inc. owned by me. Until March 1, 2000 (i) all
of such shares shall be voted as you direct on any matter requiring the vote or
consent of shareholders; (ii) you shall have a right of first refusal to
purchase such shares if I elect to sell all or any portion of them prior to
March 1, 2000; and (iii) if I leave the employ of EVC for any reason prior to
March 1, 2000, you shall have the option to purchase such chares from me for the
lower of $2.00 per share or the average trading price of such shares during the
30 days prior to my leaving EVC.
Sincerely yours,
/s/ John J. McGrath
-------------------
John J. McGrath
AGREED:
/s/ Arol I. Buntzman
- ---------------------------------
Arol I. Buntzman
<PAGE>
May 18, 1998
Arol I. Buntzman
325 Mile Square Road
Yonkers, New York 10701
Dear Arol:
This will supplement our agreement dated March 4, 1997 regarding the
shares of Educational Video Conferencing, Inc. ("EVC") owned by me. You will not
have the option to purchase such shares if I leave the employ of EVC on account
of my death, permanent disability or termination of employment by EVC without
cause.
Sincerely yours,
/s/ John J. McGrath
-------------------
John J. McGrath
AGREED:
/s/ Arol I. Buntzman
- -----------------------------------
Arol I. Buntzman
<PAGE>
AGREEMENT BETWEEN EDUCATIONAL VIDEO CONFERENCING, INC.
AND RELIANCE NATIONAL FOR THE OFFERING OF INTERACTIVE
TELEVIDEO COURSES AND DISTANCE LEARNING PROGRAMS
W I T N E S S E T H
AGREEMENT made this 7th day of October, 1998, between Educational
Video Conferencing Inc. (hereinafter "EVC"), with offices located at 35 East
Grassy Sprain Road, Yonkers, New York 10710, and Reliance National (hereinafter
"Reliance"), with offices located at 77 Water Street, New York, New York 10005.
Whereas, Reliance desires to provide its employees with access to
college courses and programs via Interactive Televideo Distance Learning and
Computer Based Distance Learning at Reliance locations more particularly
specified below, and,
Whereas, EVC has the ability to provide such access to undergraduate
and graduate college courses and programs, subject to the terms and conditions
herein provided,
NOW, THEREFORE, it is hereby agreed as follows:
1. EVC agrees that it will provide access to undergraduate and
graduate college courses and learning programs via Interactive Televideo
Distance Learning and Computer Based Distance Learning to Reliance employees,
commencing with the Spring, 1999 semester.
2. EVC will provide access to undergraduate and graduate college
courses via Reliance's installed base of video conferencing room system units
and telecommunications network and, if enrollment demand meets criteria to be
agreed upon from time to time by the parties, via video enabled desktop
computers at Reliance.
2.1 Reliance agrees that, in the event that desk top computers are
utilized, it will allow EVC to video enable existing computers at Reliance
locations to be mutually agreed upon in writing, at no cost to Reliance.
3. EVC will provide video enabled computers for Reliance locations to
be agreed upon, in the event that such locations do not have computers capable
of being video enabled and, if the student course registrations at said
locations meet EVC projections for each said location.
3.1 In the event that, in the sole opinion of EVC, enrollment
justifies additional video conferencing room systems, EVC will provide such
additional video conferencing room systems that shall be compatible with
Reliance's installed base of video conferencing room systems at no cost to
Reliance. The cost of linking said additional video conferencing room systems to
Reliance's installed base of room systems shall be borne by Reliance.
4. Reliance agrees to allow EVC to transmit courses over its video
conferencing room systems and telecommunications network and /or desktop
computers on a schedule to be agreed upon in the future, but in any event not
less than Monday through Thursday from 5 PM to 11 PM, Friday 5 PM to 8 PM and
Saturdays from 9 AM to 3 PM.
<PAGE>
5. Reliance agrees to allow EVC to offer courses over desktop
computers at locations to be mutually agreed upon and subject to the minimum
college student course registrations; the parties further agree that they will
designate these locations in writing no later than thirty (30) days after the
execution of this agreement.
6. Reliance agrees that it will give its employees access to its
standard tuition reimbursement or advancement plan in connection with EVC
courses and learning programs.
7. EVC shall be permitted to offer such undergraduate and graduate
courses and learning programs as are approved by Reliance for tuition
reimbursement/advancement; such courses are to be offered by accredited
colleges, universities, and other institutions of learning.
7.1 EVC shall offer undergraduate and graduate programs in Insurance,
Management, Marketing, Economics, Finance and Accounting from accredited
colleges and universities. EVC shall also have the right to offer Seminars and
Certificate Programs in Insurance, Risk Management and Actuarial Science from
accredited colleges and universities.
7.2 EVC and Reliance will agree which, if any, additional degrees,
programs, or courses of study will be offered ninety (90) days prior to the
beginning of any academic term.
7.3 Courses which constitute a part of the core curriculum of any
college or university participating in the Reliance /EVC program shall be deemed
approved for tuition reimbursement and/or advancement, so long as the individual
courses are applicable to approved degrees or major plans of study; courses
which are part of an approved major shall also be deemed approved and shall not
require individual approval.
8. EVC agrees that Reliance employees will be charged the standard
tuition charges of the respective college or university, together with all
appropriate college fees and, when applicable, a video conferencing fee; all of
the above tuition and fees shall be payable directly to the respective college
or university.
8.1 Reliance employees will be required to arrange for the purchase of
course books and materials with the individual colleges and universities, and
neither Reliance nor EVC shall have any responsibility in this regard.
9. Reliance acknowledges that its employees will be required to
execute a guarantee of payment from which will bind the individual employee to
pay for tuition, fees, etc., in the event that for any reason they are not
eligible for, or do not receive tuition reimbursement/advancement as
contemplated herein.
10. Reliance agrees that its human resources/personnel department
shall provide EVC with information on employees' applications for tuition
reimbursement/advancement in connection with EVC courses, including, but not
limited to the status of said applications.
11. Except as otherwise indicated in paragraph 12 below, Reliance
agrees that it will allow EVC to utilize its installed base of room systems and
telecommunications network to transmit courses to Reliance employees at no cost
to EVC.
12. EVC agrees that it will pay all telecommunications costs,
including monthly charges, associated with signal transport from any educational
provider to EVC's bridge.
2
<PAGE>
12.1 Reliance agrees that it will pay all telecommunication costs,
including monthly charges associated with signal transport from Reliance 's
video conferencing sites to EVC's bridge.
13. Reliance agrees that it will provide its employees with unfettered
access to suitable and appropriate facilities from which to participate in EVC
courses at no cost to EVC; Reliance shall be responsible for all HVAC,
electricity, maintenance, security (if applicable) and other costs associated
with providing such space to its employees.
14. The parties agree that they will fully cooperate with one another
in promoting the EVC program to Reliance employees and that Reliance senior
management will fully promote this program, including, but not limited to,
mutually agreed upon participation in marketing programs, promotional
photographs and video tapes for use with Reliance employees.
14.1 Reliance will provide EVC with a list of all Reliance employees
each academic term. Whenever possible, this list will be printed on mailing
labels. EVC agrees to keep this list confidential and will utilize same only for
the purposes of marketing this program.
14.2 If possible, Reliance will allow EVC to utilize e-mail to
communicate with those employees who have indicated interest in enrolling in EVC
courses.
14.3 EVC agrees that it shall provide materials from the various
colleges and universities at no cost to Reliance, including but not limited to
brochures, surveys, registration materials and videotapes.
14.4 Reliance agrees to distribute the materials provided by EVC not
less than three (3) times per semester to all its employees.
14.5 Reliance consents to the use by EVC of standard college
registration forms, guarantee of payment forms, site location choice forms and
other necessary forms, and shall not unreasonably withhold approval of other
such forms as may be necessary to carry out the intent of this agreement.
14.6 EVC shall be permitted to conduct open houses and registration
meetings at such Reliance locations as can be mutually agreed upon from time to
time, it being understood that said open houses and registration nights are to
be scheduled at times and places convenient to Reliance employees so as to
maximize potential registrations.
14.7 EVC shall be permitted, with prior approval from Reliance, to
utilize Reliance logos, trademarks and copyrighted materials for promotional
pieces targeted at Reliance employees.
15. Reliance shall not be responsible for, nor shall it be permitted
to exercise control over any of the policies and procedures, academic or
administrative, of the various colleges and universities; the colleges and
universities shall bear the entire burden of their own administrative functions,
including but not limited to, admissions, registration, academic advising, etc.
3
<PAGE>
16. EVC shall compensate a coordinator (preferably a Reliance
employee) who shall be trained in the operation of the video conferencing room
systems and desktop computer video systems, as the case may be, who shall be
available to train Reliance employees on the operation of the systems for one
(1) week prior to the start of each semester as well as during the first week of
each semester; in the event that, in its sole discretion, EVC determines that
certain locations or students require further training, EVC shall provide such
further training by a coordinator as each individual case warrants.
17. Reliance shall grant EVC, its employees and/or agents, such access
to Reliance facilities as shall be reasonably necessary to the installation and
maintenance of any equipment provided by EVC in connection with this agreement,
as well as for the proper administration of the program contemplated hereunder.
18. All equipment installed by EVC in conjunction with this program
shall remain the sole property of EVC and, upon the expiration or termination
thereof, shall be immediately returned to EVC.
18.1 EVC shall maintain all of its equipment in proper working order
and shall enter into service contracts with reliable service companies in order
to ensure proper maintenance and repair of said equipment.
19. Reliance shall be permitted to utilize EVC equipment when same is
not in use by EVC and agrees to hold EVC harmless and indemnify EVC for any loss
or damages resulting from the use of said equipment by Reliance; in addition,
Reliance agrees to immediately reimburse EVC for any costs associated with the
repair or replacement of any equipment lost, damaged, or stolen while in
Reliance's possession.
19.1 In addition, Reliance agrees not to permit any other use, other
than by EVC, of its installed base of room systems, during any regularly
scheduled EVC class or course; Reliance further agrees to promptly repair or
replace, as necessary, any of its equipment or systems which will be utilized by
EVC in delivering access to classes and programs hereunder.
20. The term of this agreement shall be FIVE (5) YEARS from the date
first written above and this agreement shall automatically be extended for one
(1) additional year on the anniversary of the original execution.
20.1 In the event that either party should desire not to automatically
extend this contract, then the party so desiring must notify the other in
writing, by certified mail, return receipt requested, not less than ninety (90)
days prior to the anniversary date of this agreement, in which case this
agreement shall only have FOUR (4) YEARS remaining in its term.
21. It is expressly agreed and understood that neither party shall be
liable for incidental, special or consequential damages for any breach or
violation of this agreement.
22. All notices required to be given hereunder shall be done in
writing and mailed certified, return receipt requested, to the other party at
their last known address, and shall be deemed given when mailed.
23. This agreement shall be construed and interpreted under the laws
of the State of New York.
4
<PAGE>
24. If any portion of this agreement is held to be void or
unenforceable, it shall not effect the validity and enforceability of the
remaining portions.
25. Any disputes arising hereunder shall be determined by way of
arbitration before the American Arbitration Association at their offices located
in White Plains, New York.
26. The foregoing constitutes the entire agreement between the parties
with respect to the matters contained herein and no other such agreements shall
be valid unless in writing and subscribed to with the same formality as this
document.
WHEREFORE, the parties have hereunto affixed their hands and seals the
date first indicated above.
RELIANCE NATIONAL
By: /s/ Carl Sullo
--------------------------------
Carl Sullo
Executive Vice President
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ John J. McGrath
--------------------------------
John J. McGrath, Ph.D.
President
5
<PAGE>
AGREEMENT
AGREEMENT made this 20th day of May, 1997, between Educational Video
Conferencing (hereinafter "EVC"), with offices located at 325 Mile Square Road,
Yonkers, New York 10701, and Citibank, N.A., with offices located at 111 8th
Avenue, New York, New York 10011.
Whereas, Citibank desires to provide its employees with access to
college courses and programs via Interactive Televideo Distance Learning at
certain Citibank locations more particularly specified below, and
Whereas, EVC has the ability to provide such access to college courses
and programs, subject to the terms and conditions herein provided,
NOW, THEREFORE, it is hereby agreed as follows:
1. EVC agrees that it will provide access to various college courses
and programs via Interactive Televideo Distance Learning over desktop computers,
to Citibank employees, commencing with the Fall 1997 semester.
2. Citibank agrees that it will allow EVC to video enable existing
computers at Citibank locations to be mutually agreed upon in writing, at no
cost to Citibank.
3. EVC will provide computers for Citibank locations to be agreed
upon in the event that such locations do not have computers capable of being
video enabled and if the student course registrations at said locations meet EVC
projections for each said location.
4. In the event that Citibank should install a base of room systems
in its facilities, Citibank agrees to allow EVC to transmit courses over such
room systems on a schedule to be agreed upon in the future. Citibank agrees to
use its reasonable best efforts to allow EVC to video conference courses Monday
through Thursday from 5 PM to 11 PM, Friday 5 PM to 8 PM, and Saturdays from 9
AM to 3 PM.
5. Citibank agrees to allow EVC to offer courses over desktop
computers at a minimum of (10) central locations to be mutually agreed upon and
subject to the minimum student course registration limitations below; the
parties further agree that they will designate these ten locations in writing no
later than sixty (60) days after the execution of this agreement. Citibank
agrees to use its reasonable best efforts to allow EVC to video conference
courses Monday through Thursday from 5 PM to 11 PM, Friday 5 PM to 8 PM, and
Saturdays from 9 AM to 3 PM.
6. Citibank agrees that it will give its employees access to its
standard tuition reimbursement or advancement plan in connection with EVC
courses. EVC recognizes that Citibank tuition reimbursement/advancement plans
are determined on a year to year basis. Nothing in this agreement shall bind
Citibank tuition policies and procedures.
7.1. EVC shall be permitted to offer such undergraduate and graduate
courses as are approved by Citibank for tuition reimbursement/advancement such
courses to be offered by accredited colleges, universities and other
institutions of higher learning.
7.2. Courses which constitute a part of the core curriculum of any
college or university participating in the Citibank/EVC program shall be deemed
approved for tuition reimbursement/advancement, regardless of the individual
course's applicability to approved degrees or major plans of study; courses
which are part of an approved major shall also be deemed approved and shall not
require individual approval.
8.1. EVC agrees that Citibank employees will be charged the standard
tuition charges of the respective college or university, together with all
appropriate college fees and, when applicable, a video conferencing fee; all of
the above tuition and fees shall be payable directly to the respective college
or university.
<PAGE>
8.2. Citibank employees will be required to arrange for the purchase
of course book and materials with the individual colleges and universities, and
neither Citibank nor EVC shall have any responsibility in this regard.
9. Citibank acknowledges that its employees will be required to
execute a guarantee of payment from which will bind the individual employee to
pay for tuition, fees, etc., in the event that for any reason they are not
eligible for, or do not receive tuition reimbursement/advancement as
contemplated herein.
10. Citibank agrees that its human resources/personnel department
shall provide EVC with information on employees' applications for tuition
reimbursement/advancement in connection with EVC courses, including, but not
limited to the status of said applications.
11.1. Citibank agrees that it shall pay for the installation and
monthly service charges and call charges associated with telephone lines
necessary for the transmission of EVC courses; the parties acknowledge that for
the purposes of this agreement, the term "telephone lines" shall include regular
telephone lines (POTS), as well as ISDN lines and T1 lines, as the case may be.
11.2. Citibank shall have the exclusive right to determine the video
conferencing transmission mode of delivery of EVC courses (regular telephone
lines, ISDN lines, T1 lines). Citibank agrees that it will initially utilize
regular telephone lines for courses offered over desktop computers. Any EVC
courses offered over existing Citibank video conferencing rooms systems shall
utilize the transmission lines currently installed at no additional cost to
Citibank.
12. In the event that Citibank has, or during the term of this
agreement should install, an internal telephone network capable of transporting
the video conferencing signal, EVC will pay for any costs associated with
connecting the colleges and universities to the internal system bridge, but
Citibank shall still be responsible for all monthly service and call charges.
13. Citibank agrees that it will provide its employees with
unfettered access to suitable and appropriate facilities from which to
participate in EVC courses at no cost to EVC; Citbank shall be responsible for
all HVAC, electricity, maintenance, security (if applicable), and other costs
associated with providing such space to its employees.
14.1. The parties agree that they will fully cooperate with one another
in promoting the EVC program to Citibank employees and that Citibank senior
management will fully promote this program to the best of their ability,
including, but not limited to, participation in marketing programs, promotional
photographs and video tapes for use with Citibank employees only.
14.2. EVC agrees that it shall provide materials from the various
colleges and universities at no cost to Citibank, including but not limited to
brochures, surveys, registration materials and video tapes.
14.3. Citibank agrees to distribute the materials provided by EVC not
less than three (3) times per semester.
14.4. Citibank consents to the use by EVC of standard registration,
guarantee of payment, site location choice and other necessary forms, and shall
not unreasonably withhold approval of other such forms as may be necessary to
carry out the intent of this agreement.
<PAGE>
14.5. EVC shall be permitted to conduct open houses and registration
meetings at such Citibank locations as can be mutually agreed upon from time to
time, it being understood that said open houses and registration nights are to
be scheduled at times and places convenient to Citibank employees so as to
maximize potential registrations.
14.6. EVC shall be permitted to utilize Citibank logos, trademarks and
copyrighted materials for promotional pieces targeted at Citibank employees.
15. Citibank shall not be responsible for, nor shall it be permitted
to exercise control over any of the policies and procedures, academic or
administrative, of the various colleges and universities; the colleges and
universities shall bear the entire burden of their own administrative functions,
including but not limited to, admissions, registration, academic advising, etc.
16. EVC shall hire a facilitator (preferably a Citibank employee) who
shall be trained in operation of the desktop computer video system, who shall be
available to train Citibank employees on the operation of the system for one (1)
week prior to the start of each semester as well as during the first week of
each semester; in the event that, in its sole discretion, EVC determines that
certain locations or students require further indoctrination, EVC shall provide
such further training by a facilitator as each individual case warrants.
17. Citibank shall grant EVC, its employees and/or agents, such
access to Citibank facilities as shall be reasonably necessary to the
installation and maintenance of any equipment provided by EVC in connection with
this agreement, as well as for the proper administration of the program
contemplated hereunder.
18.1. All equipment installed by EVC in conjunction with this program
shall remain the sole property of EVC and, upon the expiration or termination
shall be immediately returned to EVC.
18.2. EVC shall maintain all of its equipment in proper working order
and shall enter into service contracts with reliable service companies in order
to ensure proper maintenance and repair of said equipment.
19. Citibank shall be permitted to utilize EVC equipment when same is
not in use by EVC and agrees to hold EVC harmless and indemnify EVC for any loss
or damages resulting from the use of said equipment by Citibank; in addition,
Citibank agrees to immediately reimburse EVC for any costs associated with the
repair or replacement of any equipment lost damages or stolen while in
Citibank's possession.
20.1. The term of this agreement shall be four (4) years from the date
first written above and this agreement shall automatically be extended for one
(1) additional year on the anniversary of the original execution (EVC recognizes
that Citibank tuition reimbursement/advancement plans are determined on a year
to year basis. Nothing in this agreement shall bind Citibank tuition policies
and procedures).
20.2. In the event that either party should desire not to automatically
extend this contract, then the party so desiring must notify the other in
writing, by certified mail. Return receipt requested, not less than ninety (90)
days prior to the anniversary date of this agreement, in which case this
agreement shall only have three (3) years remaining in its term.
21. All notices required to be given hereunder shall be done in
writing and mailed certified, return receipt requested, to the other party at
their last known address, and shall be deemed given when mailed.
22. This agreement shall be construed and interpreted under the laws
of the State of New York.
23. If any portion of this agreement is held to be void or
unenforceable, it shall not effect the validity and enforceability of the
remaining portions.
<PAGE>
24. Any disputes arising hereunder shall be determined by way of
arbitration before the American Arbitration Association at their offices located
in White Plains, New York.
25. The foregoing constitutes the entire agreement between the
parties with respect to the matters contained herein and no other such
agreements shall be valid unless in writing and subscribed to with the same
formality as this document.
WHEREFORE, the parties have hereunto affixed their hands and seals the
date first indicated above.
CITIBANK, N.A.
By: /s/ Kim R. Con
-------------------------------
Kim R. Con
EDUCATIONAL CONFERENCING, INC.
By: /s/ Dr. John McGrath
-------------------------------
Dr. John McGrath, President
<PAGE>
AGREEMENT BETWEEN EDUCATIONAL VIDEO CONFERENCING, INC.
AND MERRILL LYNCH FOR THE OFFERING OF INTERACTIVE
TELEVIDEO COURSES AND DISTANCE LEARNING PROGRAMS
W I T N E S S E T H
AGREEMENT made this 3rd day of June 1998, between Educational Video
Conferencing Inc. (hereinafter "EVC"), with offices located at 35 East Grassy
Sprain Road, Suite 504, Yonkers, New York 10710, and Merrill Lynch (hereinafter
"MERRILL LYNCH"), with offices located at 101 Hudson Street, Jersey City, New
Jersey 07302-3997.
Whereas, MERRILL LYNCH desires to provide its employees with access to
college courses and programs via Interactive Televideo Distance Learning and
Computer Based Distance Learning at MERRILL LYNCH locations more particularly
specified below, and,
Whereas, EVC has the ability to provide such access to college courses
and programs, subject to the terms and conditions herein provided,
NOW, THEREFORE, it is hereby agreed as follows:
1. EVC agrees that it will provide access to college courses and
learning programs via Interactive Televideo Distance Learning and Computer Based
Distance Learning to MERRILL LYNCH employees, commencing with the Fall 1998
semester.
2. EVC will provide access to college courses via MERRILL LYNCH's
installed base of video conferencing room system units and telecommunications
network and, if enrollment demand meets criteria to be agreed upon from time to
time by the parties, via video enabled desktop computers at MERRILL LYNCH.
2.1 MERRILL LYNCH agrees that, in the event that desk top computers
are utilized, it will allow EVC to video enable existing computers at MERRILL
LYNCH locations to be mutually agreed upon in writing, at no cost to MERRILL
LYNCH.
3. EVC will provide video enabled computers for MERRILL LYNCH
locations to be agreed upon, in the event that such locations do not have
computers capable of being video enabled and, if the student course
registrations at said locations meet EVC projections for each said location.
3.1 In the event that, in the sole opinion of EVC, enrollment
justifies additional video conferencing room systems, EVC will provide and
install such additional room video conferencing systems that shall be compatible
with MERRILL LYNCH's installed base of room video conferencing systems at no
cost to MERRILL LYNCH. The cost of linking said additional room
videoconferencing systems to MERRILL LYNCH's installed base of room systems
shall be borne by MERRILL LYNCH.
4. MERRILL LYNCH agrees to allow EVC to transmit courses over its
video conferencing room systems and telecommunications network and /or desktop
computers on a schedule to be agreed upon in the future, but in any event not
less than Monday through
<PAGE>
Thursday from 5 PM to 11 PM, Friday 5 PM to 8 PM, and Saturday from 9 AM to 3
PM.
5. MERRILL LYNCH agrees to allow EVC to offer courses over desktop
computers at locations to be mutually agreed upon and subject to the minimum
college student course registrations; the parties further agree that they will
designate these locations in writing no later than thirty (30) days after the
execution of this agreement.
6. MERRILL LYNCH agrees that it will give its employees access to its
standard tuition reimbursement or advancement plan in connection with EVC
courses.
7. EVC shall be permitted to offer such undergraduate and graduate
courses and learning programs as are approved by MERRILL LYNCH for tuition
reimbursement/advancement; such courses to be offered by accredited colleges,
universities, and other institutions of learning.
7.1 EVC shall offer undergraduate and graduate courses and programs in
Management, Marketing, Economics, Finance and Accounting to MERRILL LYNCH from
accredited colleges and universities and other institutions of higher learning.
7.2 EVC and MERRILL LYNCH will agree which, if any, additional
degrees, programs, or courses of study will be offered ninety (90) days prior to
the beginning of any academic term.
7.3 Courses which constitute a part of the core curriculum of any
college or university participating in the MERRILL LYNCH/EVC program shall be
deemed approved for tuition reimbursement and/or advancement, so long as the
individual courses are applicable to approved degrees or major plans of study;
courses which are part of an approved major shall also be deemed approved and
shall not require individual approval.
8. EVC agrees that MERRILL LYNCH employees will be charged the
standard tuition charges of the respective college or university, together with
all appropriate college fees and, when applicable, a video conferencing fee; all
of the above tuition and fees shall be payable directly to the respective
college or university.
8.1 MERRILL LYNCH employees will be required to arrange for the
purchase of course books and materials with the individual colleges and
universities, and neither MERRILL LYNCH nor EVC shall have any responsibility in
this regard.
9. MERRILL LYNCH acknowledges that its employees will be required to
execute a guarantee of payment from which will bind the individual employee to
pay for tuition, fees, etc., in the event that for any reason they are not
eligible for, or do not receive tuition reimbursement/advancement as
contemplated herein.
10. MERRILL LYNCH agrees that its human resources/personnel department
shall provide EVC with information on employees' applications for tuition
reimbursement/advancement in connection with EVC courses, including, but not
limited to the status of said applications.
11. Except as otherwise indicated in paragraph 12 below, MERRILL LYNCH
agrees that it will allow EVC to utilize its installed base of room systems and
telecommunications network to transmit courses to MERRILL LYNCH employees at no
cost to EVC.
2
<PAGE>
12. EVC agrees that it will pay all telecommunications costs,
including monthly charges, associated with signal transport from any educational
provider to EVC's bridge.
12.1 MERRILL LYNCH agrees that it will pay all telecommunication costs,
including monthly charges associated with signal transport from MERRILL LYNCH's
video conferencing sites to EVC's bridge.
13. MERRILL LYNCH agrees that it will provide its employees with
unfettered access to suitable and appropriate facilities from which to
participate in EVC courses at no cost to EVC; MERRILL LYNCH shall be responsible
for all HVAC, electricity, maintenance, security (if applicable), and other
costs associated with providing such space to its employees.
14. The parties agree that they will fully cooperate with one another
in promoting the EVC program to MERRILL LYNCH employees and that MERRILL LYNCH
senior management will fully promote this program to the best of their ability,
including, but not limited to, participation in marketing programs, promotional
photographs and video tapes for use with MERRILL LYNCH employees.
14.1 MERRILL LYNCH will provide EVC with a list of all MERRILL LYNCH
employees with each of their home addresses each academic term. Whenever
possible, this list will be printed on mailing labels. EVC agrees to keep this
list confidential and will utilize same only for the purposes of marketing this
program.
14.2 If possible, MERRILL LYNCH will allow EVC to utilize e-mail to
communicate with those employees who have indicated interest in enrolling in EVC
courses.
14.3 EVC agrees that it shall provide materials from the various
colleges and universities at no cost to MERRILL LYNCH, including but not limited
to brochures, surveys, registration materials, and videotapes.
14.4 MERRILL LYNCH agrees to distribute the materials provided by EVC
not less than three (3) times per semester to all its employees.
14.5 MERRILL LYNCH consents to the use by EVC of standard college
registration forms, guarantee of payment forms, site location choice forms and
other necessary forms, and shall not unreasonably withhold approval of other
such forms as may be necessary to carry out the intent of this agreement.
14.6 EVC shall be permitted to conduct open houses and registration
meetings at such MERRILL LYNCH locations as can be mutually agreed upon from
time to time, it being understood that said open houses and registration nights
are to be scheduled at times and places convenient to MERRILL LYNCH employees so
as to maximize potential registrations.
14.7 EVC shall be permitted to utilize MERRILL LYNCH logos, trademarks,
and copyrighted materials for promotional pieces targeted at MERRILL LYNCH
employees.
15. MERRILL LYNCH shall not be responsible for, nor shall it be
permitted to exercise control over any of the policies and procedures, academic
or administrative, of the various colleges and universities; the colleges and
universities shall bear the entire burden of their own administrative functions,
including but not limited to, admissions, registration, academic advising, etc.
3
<PAGE>
16. EVC shall hire a coordinator (preferably a MERRILL LYNCH employee)
who shall be trained in the operation of the video conferencing room systems and
desktop computer video systems, as the case may be, who shall be available to
train MERRILL LYNCH employees on the operation of the systems for one (1) week
prior to the start of each semester as well as during the first week of each
semester; in the event that, in its sole discretion, EVC determines that certain
locations or students require further training, EVC shall provide such further
training by a coordinator as each individual case warrants.
17. MERRILL LYNCH shall grant EVC, its employees and/or agents, such
access to MERRILL LYNCH facilities as shall be reasonably necessary to the
installation and maintenance of any equipment provided by EVC in connection with
this agreement, as well as for the proper administration of the program
contemplated hereunder.
18. All equipment installed by EVC in conjunction with this program
shall remain the sole property of EVC and, upon the expiration or termination
thereof shall be immediately returned to EVC.
18.1 EVC shall maintain all of its equipment in proper working order
and shall enter into service contracts with reliable service companies in order
to ensure proper maintenance and repair of said equipment.
19. MERRILL LYNCH shall be permitted to utilize EVC equipment when
same is not in use by EVC and agrees to hold EVC harmless and indemnify EVC for
any loss or damages resulting from the use of said equipment by MERRILL LYNCH;
in addition, MERRILL LYNCH agrees to immediately reimburse EVC for any costs
associated with the repair or replacement of any equipment lost damages or
stolen while in MERRILL LYNCH's possession.
19.1 In addition, MERRILL LYNCH agrees not to permit any other use,
other than by EVC, of its installed base of room systems, during any regularly
scheduled EVC class or course; MERRILL LYNCH further agrees to promptly repair
or replace, as necessary, any of its equipment or systems which will be utilized
by EVC in delivering access to classes and programs hereunder.
20. The term of this agreement shall be FIVE (5) YEARS from the date
first written above and this agreement shall automatically be extended for one
(1) additional year on the anniversary of the original execution.
20.1 In the event that either party should desire not to automatically
extend this contract, then the party so desiring must notify the other in
writing, by certified mail, return receipt requested, not less than ninety (90)
days prior to the anniversary date of this agreement, in which case this
agreement shall only have FOUR (4) YEARS remaining in its term.
21. It is expressly agreed and understood that neither party shall be
liable for incidental, special or consequential damages for any breach or
violation of this agreement.
22. All notices required to be given hereunder shall be done in
writing and mailed certified, return receipt requested, to the other party at
their last known address, and shall be deemed given when mailed.
23. This agreement shall be construed and interpreted under the laws
of the State of New York.
4
<PAGE>
24. If any portion of this agreement is held to be void or
unenforceable, it shall not effect the validity and enforceability of the
remaining portions.
25. Any disputes arising hereunder shall be determined by way of
arbitration before the American Arbitration Association at their offices located
in White Plains, New York.
26. The foregoing constitutes the entire agreement between the parties
with respect to the matters contained herein and no other such agreements shall
be valid unless in writing and subscribed to with the same formality as this
document.
WHEREFORE, the parties have hereunto affixed their hands and seals the
date first indicated above.
MERRILL LYNCH
By: /s/ William R. Coda
--------------------------------------------
William R. Coda
Vice President
Global Operations Training and Development
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ John J. McGrath, Ph.D.
--------------------------------------------
John J. McGrath, Ph.D.
President
5
<PAGE>
AGREEMENT
AGREEMENT made this 21st day of May, 1997, between Educational Video
Conferencing (hereinafter "EVC"), with offices located at 325 Mile Square Road,
Yonkers, New York 10701, and American International Group (hereinafter "AIG"),
with offices located at 72 Wall Street, New York New York 10005.
Whereas, AIG desires to provide its employees with access to college
courses and programs via Interactive Televideo Distance Learning at certain AIG
locations more particularly specified below, and
Whereas, EVC has the ability to provide such access to college courses
and programs, subject to the terms and conditions herein provided,
NOW, THEREFORE, it is hereby agreed as follows:
1. EVC agrees that it will provide access to various college courses
and programs via Interactive Televideo Distance Learning over desktop computers,
to AIG employees, commencing with the Fall 1997 semester.
2. AIG agrees to allow EVC to transmit courses over such room systems
on a schedule to be agreed upon in the future, but in any event not less than
Monday through Thursday from 5 PM to 11 PM, Friday 5 PM to 8 PM, and Saturdays
from 9 AM to 3 PM.
3. AIG agrees that it will allow EVC to video enable existing computers
at AIG locations to be mutually agreed upon in writing, at no cost to AIG.
4. EVC will provide computers at EVC's expense for AIG locations to be
agreed upon in the event that such locations do not have computers capable of
being video enabled and if the student course registrations at said locations
meet EVC projections for each said location. AIG is not responsible for damage
or wear and tear except as provided in section 19 of this agreement.
5. AIG agrees to allow EVC to offer courses over desktop computers at a
minimum of ten (10) central locations to be mutually agreed upon and subject to
the minimum student course registration limitations below; the parties further
agree that they will designate these ten locations in writing no later than
thirty (30) days after the execution of this agreement.
6. AIG agrees that it will give its employees access to its standard
tuition reimbursement or advancement plan in connection with EVC courses.
7. EVC shall be permitted to offer such undergraduate and graduate
courses as are approved by AIG for tuition reimbursement/advancement such
courses to be offered by accredited colleges, universities and other
institutions of higher learning.
<PAGE>
8.1. EVC agrees that AIG employees will be charged the standard tuition
charges of the respective college or university, together with all appropriate
college fees and, when applicable, a video conferencing fee; all of the above
tuition and fees shall be payable directly to the respective college or
university.
8.2. AIG employees will be required to arrange for the purchase of
course book and materials with the individual colleges and universities, and
neither AIG nor EVC shall have any responsibility in this regard.
9. AIG acknowledges that its employees will be required to execute a
guarantee of payment from which will bind the individual employee to pay for
tuition, fees, etc., in the event that for any reason they are not eligible for,
or do not receive tuition reimbursement/advancement as contemplated herein.
10. AIG agrees that its human resources/personnel department shall
provide EVC with information on employees' applications for tuition
reimbursement/advancement in connection with EVC courses, including, but not
limited to the status of said applications, subject to the written consent of
AIG employees.
11. AIG agrees that it shall pay for the installation and monthly
service charges and call charges associated with telephone lines necessary for
the transmission of EVC courses; the parties acknowledge that for the purposes
of this agreement, the term "telephone lines" shall include regular telephone
lines (POTS), as well as ISDN lines and T1 lines, as the case may be subject to
mutual agreement of the parties dependent upon the type of telecommunications
methodology used to video conference to AIG employees.
12. In the event that AIG has, or during the term of this agreement
should install, on internal telephone network capable of transporting the video
conference signal, and permits EVC to transmit video conferenced courses over
said network, EVC will pay for any costs associated with connecting the colleges
and universities to the internal system bridge, but AIG shall still be
responsible for all monthly service and call charges.
13. AIG agrees that it will provide its employees with unfettered
access to suitable and appropriate facilities from which to participate in EVC
courses at no cost to EVC; AIG shall be responsible for all HVAC, electricity,
maintenance, security (if applicable), and other costs associated with providing
such space to its employees.
14.1. The parties agree that they will fully cooperate with one another
in promoting the EVC program to AIG employees and that AIG Corporate Training
Department will fully promote this program to the best of their ability,
including, but not limited to, participation in marketing programs, promotional
photographs and video tapes for use with AIG employees only.
2
<PAGE>
14.2. EVC agrees that it shall provide materials from the various
colleges and universities at no cost to AIG, including but not limited to
brochures, surveys, registration materials and video tapes.
14.3. AIG agrees to distribute the materials provided by EVC not less
than three (3) times per semester.
14.4. AIG consents to the use by EVC of standard registration,
guarantee of payment, site location choice and other necessary forms, and shall
not unreasonably withhold approval of other such forms as may be necessary to
carry out the intent of this agreement.
14.5. EVC shall be permitted to conduct open houses and registration
meetings at such AIG locations as can be mutually agreed upon from time to time,
it being understood that said open houses and registration nights are to be
scheduled at times and places convenient to AIG employees so as to maximize
potential registrations.
14.6. EVC may prepare promotional pieces targeted at AIG employees and
utilizing AIG logos and trademarks provided that EVC submits all such pieces to
AIG for approval prior to finalizing and printing, such pieces are used for no
purposes other than publicizing the program to AIG employees at AIG locations or
in any other manner approved by AIG in advance, and such pieces are and remain
the sole property of AIG. EVC hereby acknowledges that it has no right or
license to use any AIG logo, trade name or other intellectual property as a
result of this agreement or otherwise.
15. AIG shall not be responsible for, nor shall it be permitted to
exercise control over any of the policies and procedures, academic or
administrative, of the various colleges and universities; the colleges and
universities shall bear the entire burden of their own administrative functions,
including but not limited to, admissions, registration, academic advising, etc.
16. EVC shall hire a facilitator who shall be trained in operation of
the desktop computer video system, who shall be available to train AIG employees
on the operation of the system for one (1) week prior to the start of each
semester as well as during the first week of each semester, in the event that,
in its sole discretion, EVC determines that certain locations or students
require further indoctrination, EVC shall provide such further training by a
facilitator as each individual case warrants.
17. AIG shall grant EVC, its employees and/or agents, such access to
AIG facilities as shall be reasonably necessary to the installation and
maintenance of any equipment provided by EVC in connection with this agreement,
as well as for the proper administration of the program contemplated hereunder.
3
<PAGE>
18.1. All equipment installed by EVC in conjunction with this program
shall remain the sole property of EVC and, upon the expiration or termination
shall be immediately returned to EVC.
18.2. EVC shall maintain all of its equipment in proper working order
and shall enter into service contracts with reliable service companies in order
to ensure proper maintenance and repair of said equipment.
19. AIG shall be permitted to utilize EVC equipment when same is not in
use by EVC and agrees to hold EVC harmless and indemnify EVC for any loss or
damages resulting from the use of said equipment by AIG; in addition, AIG agrees
to immediately reimburse EVC for any costs associated with the repair or
replacement of any equipment lost damages or stolen while in AIG's possession.
20. EVC agrees to keep confidential the terms and conditions of this
agreement in its entirety, including all personnel records and marketing
materials, and will not divulge any information concerning this agreement
without the express written consent of AIG.
21.1. The term of this agreement shall be four (4) years from the date
first written above and this agreement shall automatically be extended for one
(1) additional year on the anniversary of the original execution.
21.2. In the event that either party should desire not to automatically
extend this contract, then the party so desiring must notify the other in
writing, by certified mail. Return receipt requested, not less than ninety (90)
days prior to the anniversary date of this agreement, in which case this
agreement shall only have three (3) years remaining in its term.
22. All notices required to be given hereunder shall be done in writing
and mailed certified, return receipt requested, to the other party at their last
known address, and shall be deemed given when mailed.
23. This agreement shall be construed and interpreted under the laws of
the State of New York.
24. If any portion of this agreement is held to be void or
unenforceable, it shall not effect the validity and enforceability, of the
remaining portions.
25. The parties agree to submit all controversies to arbitration in
accordance with the provisions set forth below and understand that:
Arbitration is final and binding on the parties.
4
<PAGE>
The parties are waiving their right to seek remedies in court,
including the right to a jury trial.
Pro-arbitration discovery is generally more limited and different from
court proceedings.
The arbitrator's award is not required to include factual findings or
legal reasoning and any parties right to appeal or to seek
modifications of rulings by arbitrators is strictly limited.
The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the financial industry.
All controversies which may arise between the parties concerning this Agreement
shall be determined by arbitration in accordance with the Federal Arbitration
Act, to the fullest extent permitted by law. Any arbitrator under this Agreement
shall be determined before and in accordance with then obtaining of either the
New York Stock Exchange, Inc. ("NYSE") or the National Association of Securities
Dealers, Inc. ("NASD"), as the party instituting the arbitration may elect. If
the NYSE or NASD do not accept the arbitration for consideration, the
arbitration shall be submitted to, and determined in accordance with the rules
then obtaining of, the Center for Public Resources, Inc. in New York City.
Judgment on any award of any such arbitration may be entered in the Supreme
Court of the State of New York or in any other court having jurisdiction of the
person or persons against whom such award is rendered. Any notice of such
arbitration for the confirmation of any award in any arbitration shall be
sufficient if given in accordance with the provisions of this Agreement. The
parties agree that the determination of the arbitrators shall be binding and
conclusive upon them.
26. The foregoing constitutes the entire agreement between the parties
with respect to the matters contained herein and no other such agreement shall
be valid unless in writing and subscribed to with the same formality as this
document.
WHEREFORE, the parties have hereunto affixed their hands and seals on
the date first indicated above.
AMERICAN INTERNATIONAL GROUP
By: /s/
----------------------------------------
5
<PAGE>
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Dr. John J. McGrath
----------------------------------------
Dr. John J. McGrath, President
6
<PAGE>
MEMORANDUM OF UNDERSTANDING (MOU)
1) Agreement by and between (A) Educational Video Conferencing, Inc.
(EVC) and (B) VSI Enterprises, Inc. (VSI).
A) EVC is marketing and technological bridge between (a) higher
education institutions seeking increased adult student enrollment ("Educational
Providers") and (b) corporations and governmental entities that want to enhance
employee educational and skill levels by providing them with accredited college
courses and degree programs, continuing education and job-related training
programs.
B) VSI is a leading provider of interactive video conferencing
solutions, offering an array of telecommunications software, products and
service sot customers throughout the world. Customers include Fortune 1000
corporations, governmental entities and higher education institutions.
2) Co-Marketing/Co-Promotion:
A) EVC will promote the use of VSI video conferencing equipment
and services and conduct video conferencing demonstrations at EVC's offices in
Westchester County (35 E. Grassy Sprain Road, Suite 504, Yonkers, NY 10710).
B) EVC agrees, at its sole cost and expense, to develop a two-four
page, two-four color brochure marketing EVC's Telecommute to College Program
which EVC will distribute to potential corporate, governmental and institutional
customers. Said brochure will include promotional photos of VSI's video
conferencing equipment.
C) VSI will promote EVC's Telecommute to College program to VSI's
existing video conferencing equipment customers and prospective purchasers of
video conferencing equipment.
D) VSI agrees, at its sole cost and expense, to develop a two-four
page, four color marketing brochure announcing the VSI/EVC Telecommute to
College Program making EVC's distance learning products and services available
to VSI customers. Said brochure will be distributed by VSI to existing and
potential VSI corporate, governmental and institutional customers, and will be
included in the VSI folder enclosing brochures of VSI's video conferencing
products and services.
E) EVC will provide adequate space, at EVC's expense, to house a dual
monitor Omega Executive video conferencing system and a single monitor Omega
Flex Plus
<PAGE>
video conferencing system. EVC will arrange and pay for the installation of
three ISDN BRI lines in its Westchester office required for said video
conferencing demonstrations.
F) VSI will deliver and install, at VSI's expense, video conferencing
demo systems in EVC's Westchester office consisting of an Omega Executive 35
video conferencing system and a dual monitor Omega Flex Plus video conferencing
system. EVC agrees to include the purchase of said video conferencing demo
systems in its initial purchase order and to pay for said video conferencing
demo systems with a note due in 12 months without interest.
3) Telecommute to College "Open House Demonstrations":
A) EVC agrees to use its best efforts to arrange 6 to 10 "Open
House Demonstrations" per year demonstrating and promoting EVC's Telecommute to
College Program featuring VSI equipment. EVC will be responsible for: (1)
arranging for the venue for each VSI-EVC "Open House Demonstration", (2)
inviting an audience of potential corporate, governmental and institutional
customers, and (3) providing the availability of three ISDN lines or other
telecommunications medium to facilitate multi-point video conferencing.
B) VSI will be responsible, at its sole cost and expense, for
providing and installing a 32" dual monitor Omega Flex Plus system at and for
the use of, the "Open House Demonstrations".
4) Product:
A) EVC agrees to use Omega products in its product offerings and
will issue a valid purchase order to VSI Omega products. Such purchase order, in
the range of $800,000 in the third and fourth quarters of 1997.
B) VSI agrees to sell VSI products to EVC at a price equal to its
most favorable price charged by VSI to any VSI customer. VSI agrees to begin
shipping products ordered within 30 days of receipt of the order.
C) Payment Terms:
Payment terms for EVC's initial purchase order, attached hereto,
shall be as follows:
Total initial purchase order: $800,000
--------
Office Demo Systems 95,177 1 year note
<PAGE>
EVC shares (117,647) applied
as a credit 400,000
To be paid prior to shipment
of equipment 250,000
Balance due on completion of
installation 54,823
--------
Total $800,000
Subsequent purchase orders shall be either (a) pursuant to approved lease
purchase agreement or (b) pursuant to VSI's standard sales agreement: 50% on
acceptance of the purchase order, 40% upon shipment and 10% balance on
completion of installation.
6) Common Stock Purchase:
A) VSI agrees to purchase 117,647 shares of EVC common stock
($400,000/$3.40) pursuant to the subscription agreement attached hereto. Payment
for the stock may be netted against amounts owed to VSI by EVC.
B) EVC agrees to issue warrants to VSI in the same proportion and
ont he same terms as are issued to other parties who enter into subscription
agreement to purchase EVC common stock on similar terms.
7) Including the equipment purchased to paragraph 4 above, EVC
anticipates purchasing approximately 20 VSI video conferencing systems (Omega
Executive, Omega Flex Plus, Omega Flex or, when required by an EVC customer, a
video conferencing system incorporating a code of another manufacturer such as
Picture Tel) and one or more MCU's over a 12-month period.
8) Board Membership: EVC's Chairman agrees to nominate Richard K.
Snelling to fill a position on EVC's Board of Directors.
9) Each party will bear its own costs and expenses in executing the
documents for this transaction.
10) Confidentiality: Each party agrees to abide by the terms of this
paragraph with respect to its treatment of any confidential information
concerning the other party which is furnished by one party to the other
hereunder. All information exchanged will be used solely for the purposes of
evaluating the merits of the transaction contemplated herein, and will be kept
confidential by the receiving party.
<PAGE>
11) Publicity: Neither party will make any announcements nor will any
party discuss this proposal with any third, other than with such party's
accountants, lawyers, investment advisers and investment bankers or similar
representatives, without the prior written consent of the other party.
Acknowledged and Agreed to:
VSI Enterprises, Inc. Educational Video Conferencing, Inc.
/s/ Richard K. Snelling /s/ Dr. Arol I. Buntzman
- ---------------------------- --------------------------------
Richard K. Snelling Dr. Arol I. Buntzman
Chairman & CEO Chairman & CEO
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of October 1,
1998, between Educational Video Conferencing, Inc., a Delaware corporation
("EVC"), and Arol I. Buntzman ("Executive").
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment; Duties.
1.1 EVC hereby employs Executive as its Chairman of the Board of
Directors and Chief Executive Officer. Executive shall report directly and
solely to EVC's Board of Directors ("Board"). EVC agrees to nominate Executive
and a designee of Executive, reasonably acceptable to the Board, for election to
the Board as a member of the management slate at each annual meeting of
stockholders during Executive's employment hereunder at which Executive's and
such designee's director class comes up for election. Executive agrees to serve
on the Board if elected and also to serve on the Board of Directors of
affiliates of EVC, as the Board shall reasonably request.
1.2 Executive agrees to perform and discharge such reasonable
duties and responsibilities as are prescribed from time-to-time by the Board and
as are appropriate for chief executive officers of corporations with the
financial, personnel and other resources that are similar to that of EVC.
Executive shall devote his full business time to, and shall use his best efforts
in, the performance of such duties and responsibilities.
2. Compensation.
2.1 For his services pursuant to this Agreement, EVC will pay
Executive a salary at the annual rate of $240,000 ("Salary"). The Salary may be
increased from time-to-time as the Board determines.
2.2 EVC will pay Executive each bonus, if any, that may be awarded
to Executive by the Board, or a committee of the Board, in its sole discretion.
<PAGE>
3. Employment Term. The term of Executive's employment (the
"Employment Term") will commence as of the date first written above and, unless
sooner terminated as provided in Section 5, will end on December 31, 2001.
4. Benefits, Payments and Withholding.
4.1 Executive will be entitled to vacation of four weeks per year,
and holidays and sick days in accordance with EVC's policy, during which
Executive will be entitled to the full compensation and Benefits (as defined in
Section 4.2) otherwise payable hereunder.
4.2 Executive may participate, on the same basis and subject to
the same qualifications as other executive personnel of EVC, in any pension,
profit sharing, life insurance, health insurance, hospitalization, dental, drug
prescription, disability, accidental death or dismemberment and other benefit
plans and policies EVC provides with respect to its executive personnel.
Executive and his wife and dependent children shall be entitled to 100 percent
reimbursement by EVC of the portion of their medical and dental expenses not
covered by insurance provided by EVC. Notwithstanding the foregoing, EVC shall
provide Executive, at EVC's cost, with long-term disability and accidental death
and dismemberment insurance covering him, that is reasonably acceptable to
Executive and the Board, and term life insurance coverage for the benefit of his
designee(s) equal to three times his Salary. (All of the benefits to which
Executive is entitled under this Section 4.2 are collectively, the "Benefits").
4.3 EVC will pay or promptly reimburse Executive, in accordance
with EVC's normal policies and procedures for its executive personnel, for all
allowances and expenses provided for hereunder and for all reasonable
out-of-pocket business, entertainment and travel expenses (including cellular
telephone and an automobile) incurred by Executive in the performance of his
duties hereunder.
4.4 EVC will pay the Salary at the semimonthly rate of $10,000 and
may withhold from the Salary, the Benefits and any other compensation provided
to Executive hereunder, all Federal, state and local income, employment and
other taxes, as and in such amounts as may be required to be withheld under
applicable law.
5. Termination and Severance Benefits.
5.1 Termination by EVC and Resignation by Executive. The Board may
terminate Executive's employment with EVC, with or without Cause (as defined in
Section 5.5). Termination with Cause shall be effective immediately and
termination without cause shall be effective upon 30 days prior written notice
to Executive. Executive may voluntarily resign his employment with EVC, with
Good Reason (as defined in Section 5.5), upon 30 days prior written notice to
EVC.
5.2 Compensation Upon Termination Without Cause or Upon
Resignation with Good Reason. If the Board terminates Executive's employment
hereunder for any reason other than Cause or Executive's death or Permanent
Disability (as defined in Section 5.5), or if
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<PAGE>
Executive voluntarily resigns his employment with EVC with Good Reason (the
effective date of the first to occur of such termination or his resignation
being the "Termination Date"), then (a) Executive shall be entitled to receive
(i) the Salary and Benefits accrued prior to the Termination Date, (ii) payment
or reimbursement of any expenses, provided for under Section 4.3, that were
incurred by Executive prior to the Termination Date, and (iii) any bonus to
which Executive would be entitled under Sections 2.2 and 2.3 as if the
Employment Term ended on December 31 of the fiscal year in which his resignation
or such termination occurred and (b) after the Termination Date, EVC will also
continue (i) to pay the Salary, in equal semimonthly payments, to Executive
through the third anniversary of the Termination Date and (ii) continue for
Executive and his spouse and dependent children the health insurance coverage
and medical and dental reimbursement referred to in Section 4.2 through the
third anniversary of the Termination Date; provided, however, such Salary
continuation shall terminate if, and when, Severance Payments are made to
Executive pursuant to the Chief Executive Officer Change in Control Agreement
dated today between Executive and EVC or any similar superseding agreement (the
"CIC Agreement"). Executive shall be under no duty to seek other employment
following such Termination Date and any amounts earned by him in connection with
such other employment shall not reduce or offset the amounts otherwise owing
hereunder.
5.3 Compensation Upon Resignation Without Good Reason or Upon
Termination for Cause. If Executive breaches this Agreement by voluntarily
resigning his employment with EVC without Good Reason or Executive's employment
is terminated by the Board for Cause, then Executive shall only be entitled to
receive, except as otherwise required by law, the Salary and Benefits accrued
prior to the effective date of the first to occur of his resignation or such
termination and reimbursement of any expenses, provided for under Section 4.3,
that were incurred by Executive prior to the effective date of his resignation
or such termination of his employment. Nothing in this Section 5.3 shall create
any implication that EVC is waiving any remedy EVC may have for breach by
Executive of this Agreement.
5.4 Compensation Upon Death or Permanent Disability. If Executive
dies or suffers a Permanent Disability, then EVC will (i) promptly pay Executive
or his estate, in one lump sum, six months' Salary and (ii) continue for
Executive's spouse and dependent children (if Executive has died) and for
Executive and his spouse and dependent children (if Executive suffers a
Permanent Disability), all of the Benefits that they were receiving at the time
of his death or Permanent Disability, for 12 months after Executive's death or
Permanent Disability. In addition, EVC will pay Executive or his estate any
bonus to which he would be entitled under Sections 2.2 and 2.3, prorated
according to the portion of the completed fiscal year prior to his death or
Permanent Disability.
5.5 Definitions.
"Cause." For purposes of this Agreement, EVC shall have "Cause" to
terminate the Employment Term upon (i) the determination by the Board that
Executive has ceased to perform his duties hereunder (other than as a result of
his incapacity due to physical or mental incapacity), which cessation amounts to
an intentional and extended breach or neglect of his
-3-
<PAGE>
duties or obligations hereunder, has had a material adverse effect on EVC, and
continues for five business days after notice thereof is given to Executive, or
(ii) Executive's conviction of a felony.
"Good Reason" means (i) a breach by EVC of any of its material
agreements contained herein and the continuation of such breach for five
business days after notice thereof is given to EVC or (ii) as a result of action
taken by the Board, the assignment to Executive of any duties inconsistent with
the Executive's status as the Chief Executive Officer of EVC or a substantial
adverse alteration in the nature or status of Executive's responsibilities. Good
Reason does not include the death or Permanent Disability of Executive.
"Permanent Disability" means the inability of Executive to perform
his duties hereunder, as a result of any physical or mental incapacity, for 45
consecutive days or 90 days during any twelve month period, as reasonably
determined by the Board.
6. Covenants Not to Compete.
6.1 Executive agrees that for 18 months following termination of
his employment with EVC he will not, without its prior written approval, engage
in any business activities in any jurisdiction from or to which EVC is
delivering courses or programs or where EVC is conducting any other business
activities that are competitive with any of the business activities then being
conducted by EVC.
6.2 During the 18 months following termination of his employment
with EVC, Executive shall not, directly or indirectly, hire any employee of EVC,
or solicit or induce, or authorize any other person to solicit or induce, any
employee of EVC to leave such employ during the period of such employee's
employment with EVC or within six-months following such employee's termination
of employment with EVC.
6.3 Sections 6.1 and 6.2 shall not apply to a termination of
Executive's employment pursuant to Section 5.2 or the CIC Agreement.
7. Covenant Regarding Confidentiality. All confidential information
about the business and affairs of EVC (including, without limitation, its
secrets and information about its services, methods, business plans, technology
and advertising programs and plans) constitutes "EVC Confidential Information."
Executive acknowledges that he will have access to, and knowledge of, EVC
Confidential Information, and that improper use or disclosure of EVC
Confidential Information by Executive, whether during or after the termination
of his employment by EVC, could cause serious injury to the business of EVC.
Accordingly, Executive agrees that he will forever keep secret and inviolate all
EVC Confidential Information which has or shall come into his possession and
that he will not use the same for his own private benefit or directly or
indirectly for the benefit of others, and that he will not discuss EVC
Confidential Information with any other person or organization, all for so long
as EVC Confidential Information is not generally known by, or accessible to, the
public.
-4-
<PAGE>
8. General.
8.1 This Agreement will be construed, interpreted and governed by
the laws of the State of New York, without regard to the conflicts of law rules
thereof.
8.2 The provisions set forth in Sections 6 and 7 shall survive
termination of this Agreement. All reference to EVC in Sections 6 and 7 include
EVC's subsidiaries and other affiliates, if any.
8.3 This Agreement will extend to and be binding upon Executive,
his legal representatives, heirs and distributees, and upon EVC, its successors
and assigns regardless of any change in the business structure of EVC, be it
through spinoffs merger, sale of stock, sale of assets or any other transaction.
However, this Agreement is a personal services contract and, as such, Executive
may not assign any of his duties or obligations hereunder.
8.4 This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof. No waiver, modification or change of
any of the provisions of this Agreement will be valid unless in writing and
signed by both parties. Except for the CIC Agreement, any and all prior
agreements between the parties, written or oral, relating to Executive's
employment by EVC are of no further force or effect.
8.5 The waiver of any breach of any duty, term or condition of
this Agreement shall not be deemed to constitute a waiver of any preceding or
succeeding breach of the same or any other duty, term or condition of this
Agreement. If any provision of this Agreement is unenforceable in any
jurisdiction in accordance with its terms, the provision shall be enforceable to
the fullest extent permitted in that jurisdiction and shall continue to be
enforceable in accordance with its terms in any other jurisdiction.
8.6 All notices pursuant to this Agreement shall be in writing and
delivered personally receipt acknowledged (which shall include Federal Express,
Express Mail or similar service) or sent by certified mail, return receipt
requested, addressed to the parties hereto and shall be deemed given upon
receipt, if delivered personally, and three days after mailing, if mailed,
unless received earlier. Notices shall be addressed and sent to EVC at its
principal executive office and to Executive at his home address as it appears in
EVC's personnel records.
8.7 The parties agree that, in the event of any breach or
violation of this Agreement, such breach of violation will result in immediate
and irreparable injury and harm to the innocent party, who shall be entitled to
the remedies of injunction and specific performance or either of such remedies,
if available, as well as all other legal or equitable remedies, if available,
plus reasonable attorneys fees and costs incurred in obtaining any such relief.
8.8 The Section headings contained in this Agreement are for
convenience of reference only and shall not be used in construing this
Agreement.
-5-
<PAGE>
8.9 This Agreement may be executed in counterparts, each of which
will be deemed an original but all of which will together constitute one and the
same agreement.
IN WITNESS HEREOF, the parties have executed this Agreement as of the
date first above written.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ John J. McGrath
--------------------------------
Name: John J. McGrath
Title: President
/s/ Arol I. Buntzman
------------------------------------
Arol I. Buntzman
-6-
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of October 1,
1998, between Educational Video Conferencing, Inc., a Delaware corporation
("EVC"), and John J. McGrath ("Executive").
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment; Duties.
1.1 EVC hereby employs Executive as its President. Executive shall
report directly and solely to EVC's Chief Executive Officer and Board of
Directors ("Board"). EVC agrees to nominate Executive for election to the Board
as a member of the management slate at each annual meeting of stockholders
during Executive's employment hereunder at which Executive's class comes up for
election. Executive agrees to serve on the Board if elected and also to serve on
the Board of Directors of affiliates of EVC, as the Board shall reasonably
request.
1.2 Executive agrees to perform and discharge such reasonable
duties and responsibilities as are prescribed from time-to-time by the Chief
Executive Officer and the Board and as are appropriate for presidents of
corporations with the financial, personnel and other resources that are similar
to that of EVC. Executive shall devote his full business time to, and shall use
his best efforts in, the performance of such duties and responsibilities.
2. Compensation.
2.1 For his services pursuant to this Agreement, EVC will pay
Executive a salary at the annual rate of $138,000 ("Salary"). The Salary may be
increased from time-to-time as the Board determines.
2.2 EVC will pay Executive each bonus, if any, that may be awarded
to Executive by the Board, or a committee of the Board, in its sole discretion.
3. Employment Term. The term of Executive's employment (the
"Employment Term") will commence as of the date first written above and, unless
sooner terminated as provided in Section 5, will end on December 31, 2001.
<PAGE>
4. Benefits, Payments and Withholding.
4.1 Executive will be entitled to vacation of three weeks per
year, and holidays and sick days in accordance with EVC's policy, during which
Executive will be entitled to the full compensation and Benefits (as defined in
Section 4.2) otherwise payable hereunder.
4.2 Executive may participate, on the same basis and subject to
the same qualifications as other executive personnel of EVC, in any pension,
profit sharing, life insurance, health insurance, hospitalization, dental, drug
prescription, disability, accidental death or dismemberment and other benefit
plans and policies EVC provides with respect to its executive personnel.
Notwithstanding the foregoing, EVC shall provide Executive, at EVC's cost, with
term life insurance coverage for the benefit of his designee(s) equal to three
times his salary. All of the benefits to which Executive is entitled under this
Section 4.2 are collectively, the "Benefits."
4.3 EVC will pay or promptly reimburse Executive, in accordance
with EVC's normal policies and procedures for its executive personnel, for all
allowances and expenses provided for hereunder and for all reasonable
out-of-pocket business, entertainment and travel expenses incurred by Executive
in the performance of his duties hereunder.
4.4 EVC will pay the Salary at the semimonthly rate of $5,750 and
may withhold from the Salary, the Benefits and any other compensation provided
to Executive hereunder, all Federal, state and local income, employment and
other taxes, as and in such amounts as may be required to be withheld under
applicable law.
5. Termination and Severance Benefits.
5.1 Termination by EVC and Resignation by Executive. The Board may
terminate Executive's employment with EVC, with or without Cause (as defined in
Section 5.5). Termination with Cause shall be effective immediately and
termination without Cause shall be effective upon 30 days prior written notice
to Executive. Executive may voluntarily resign his employment with EVC, with
Good Reason (as defined in Section 5.5), upon 30 days prior written notice to
EVC.
5.2 Compensation Upon Termination Without Cause or Upon
Resignation with Good Reason. If the Board terminates Executive's employment
hereunder for any reason other than Cause or Executive's death or Permanent
Disability (as defined in Section 5.5), or if Executive voluntarily resigns his
employment with EVC with Good Reason (the effective date of the first to occur
of such termination or resignation being the "Termination Date"), then (a)
Executive shall be entitled to receive (i) the Salary and Benefits accrued prior
to the Termination Date, (ii) payment or reimbursement of any expenses, provided
for under Section 4.3, that were incurred by Executive prior to the Termination
Date, and (iii) any bonus to which Executive would be entitled under Section 2.2
as if the Employment Term ended on December 31 of the fiscal year in which his
resignation or such termination occurred and (b) after the Termination Date, EVC
will also continue (i) to pay the Salary, in equal semimonthly payments, to
Executive
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<PAGE>
through the third anniversary of the Termination Date and (ii) continue for
Executive and his spouse and dependent children the health insurance coverage
and medical and dental reimbursement referred to in Section 4.2 through the
third anniversary of the Termination Date. Executive shall be under no duty to
seek other employment following such Termination Date and any amounts earned by
him in connection with such other employment shall not reduce or offset the
amounts otherwise owing hereunder.
5.3 Compensation Upon Resignation Without Good Reason or Upon
Termination for Cause. If Executive breaches this Agreement by voluntarily
resigning his employment with EVC without Good Reason or Executive's employment
is terminated by the Board for Cause, then Executive shall only be entitled to
receive, except as otherwise required by law, the Salary and Benefits accrued
prior to the effective date of the first to occur of his resignation or such
termination, and reimbursement of any expenses, provided for under Section 4.3,
that were incurred by Executive prior to the effective date of his resignation
or such termination of his employment. Nothing in this Section 5.3 shall create
any implication that EVC is waiving any remedy EVC may have for breach by
Executive of this Agreement.
5.4 Compensation Upon Death or Permanent Disability. If Executive
dies or suffers a Permanent Disability, then EVC will (i) promptly pay Executive
or his estate, in one lump sum, six months' Salary and (ii) continue for
Executive's spouse and dependent children (if Executive has died) and for
Executive and his spouse and dependent children (if Executive suffers a
Permanent Disability), all of the Benefits they were receiving at the time of
his death or Permanent Disability, for 12 months after Executive's death or
Permanent Disability. In addition, EVC will pay Executive or his estate any
bonus to which he would be entitled under Section 2.2, prorated according to the
portion of the completed fiscal year prior to his death or Permanent Disability.
5.5 Definitions.
"Cause." For purposes of this Agreement, EVC shall have "Cause" to
terminate the Employment Term upon (i) the determination by the Board that
Executive has ceased to perform his duties hereunder (other than as a result of
his incapacity due to physical or mental incapacity), which cessation amounts to
an intentional and extended breach or neglect of his duties or obligations
hereunder, has had a material adverse effect on EVC, and continues for five
business days after notice thereof is given to Executive, or (ii) Executive's
conviction of a felony.
"Good Reason" means (i) a breach by EVC of any of its material
agreements contained herein and the continuation of such breach for five
business days after notice thereof is given to EVC or (ii) as a result of action
taken by EVC's Chief Executive Officer or the Board, the assignment to Executive
of any duties inconsistent with the Executive's status as the President of EVC
or a substantial adverse alteration in the nature or status of Executive's
responsibilities. Good Reason does not include the death or Permanent Disability
of Executive.
-3-
<PAGE>
"Permanent Disability" means the inability of Executive to perform
his duties hereunder, as a result of any physical or mental incapacity, for 45
consecutive days or 90 days during any twelve month period, as reasonably
determined by the Board.
6. Covenants Not to Compete.
6.1 Executive agrees that for 18 months following termination of
his employment with EVC he will not, without its prior written approval, engage
in any business activities in any jurisdiction from or to which EVC is
delivering courses or programs or where EVC is conducting any other business
activities that are competitive with any of the business activities then being
conducted by EVC.
6.2 During the 18 months following termination of his employment
with EVC, Executive shall not, directly or indirectly, hire any employee of EVC,
or solicit or induce, or authorize any other person to solicit or induce, any
employee of EVC to leave such employ during the period of such employee's
employment with EVC or within six-months following such employee's termination
of employment with EVC.
6.3 Sections 6.1 and 6.2 shall not apply to a termination of
Executive's employment pursuant to Section 5.2.
7. Covenant Regarding Confidentiality. All confidential information
about the business and affairs of EVC (including, without limitation, its
secrets and information about its services, methods, business plans, technology
and advertising programs and plans) constitutes "EVC Confidential Information."
Executive acknowledges that he will have access to, and knowledge of, EVC
Confidential Information, and that improper use or disclosure of EVC
Confidential Information by Executive, whether during or after the termination
of his employment by EVC, could cause serious injury to the business of EVC.
Accordingly, Executive agrees that he will forever keep secret and inviolate all
EVC Confidential Information which has or shall come into his possession, and
that he will not use the same for his own private benefit or directly or
indirectly for the benefit of others, and that he will not discuss EVC
Confidential Information with any other person or organization, all for so long
as EVC Confidential Information is not generally known by, or accessible to, the
public.
8. General.
8.1 This Agreement will be construed, interpreted and governed by
the laws of the State of New York, without regard to the conflicts of law rules
thereof.
8.2 The provisions set forth in Sections 6 and 7 shall survive
termination of this Agreement. All reference to EVC in Sections 6 and 7 include
EVC's subsidiaries and other affiliates, if any.
8.3 This Agreement will extend to and be binding upon Executive,
his legal representatives, heirs and distributees, and upon EVC, its successors
and assigns regardless of any
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<PAGE>
change in the business structure of EVC, be it through spinoffs merger, sale of
stock, sale of assets or any other transaction. However, this Agreement is a
personal services contract and, as such, Executive may not assign any of his
duties or obligations hereunder.
8.4 This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof. No waiver, modification or change of
any of the provisions of this Agreement will be valid unless in writing and
signed by both parties. Any and all prior agreements between the parties,
written or oral, relating to Executive's employment by EVC are of no further
force or effect.
8.5 The waiver of any breach of any duty, term or condition of
this Agreement shall not be deemed to constitute a waiver of any preceding or
succeeding breach of the same or any other duty, term or condition of this
Agreement. If any provision of this Agreement is unenforceable in any
jurisdiction in accordance with its terms, the provision shall be enforceable to
the fullest extent permitted in that jurisdiction and shall continue to be
enforceable in accordance with its terms in any other jurisdiction.
8.6 All notices pursuant to this Agreement shall be in writing and
delivered personally receipt acknowledged (which shall include Federal Express,
Express Mail or similar service) or sent by certified mail, return receipt
requested, addressed to the parties hereto and shall be deemed given upon
receipt, if delivered personally, and three days after mailing, if mailed,
unless received earlier. Notices shall be addressed and sent to EVC at its
principal executive office and to Executive at his home address as it appears in
EVC's personnel records.
8.7 The parties agree that, in the event of any breach or
violation of this Agreement, such breach of violation will result in immediate
and irreparable injury and harm to the innocent party, who shall be entitled to
the remedies of injunction and specific performance or either of such remedies,
if available, as well as all other legal or equitable remedies, if available,
plus reasonable attorneys fees and costs incurred in obtaining any such relief.
8.8 The Section headings contained in this Agreement are for
convenience of reference only and shall not be used in construing this
Agreement.
8.9 This Agreement may be executed in counterparts, each of which
will be deemed an original but all of which will together constitute one and the
same agreement.
-5-
<PAGE>
IN WITNESS HEREOF, the parties have executed this Agreement as of the
date first above written.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Arol I. Buntzman
---------------------------------------
Name: Arol I. Buntzman
Title: Chairman and Chief Executive Officer
/s/ John J. McGrath
-------------------------------------------
John J. McGrath
-6-
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of October 1,
1998, between Educational Video Conferencing, Inc., a Delaware corporation
("EVC"), and Richard Goldenberg ("Executive").
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment; Duties.
1.1 EVC hereby employs Executive as its Chief Financial Officer.
Executive shall report directly to EVC's Chief Executive Officer and Board of
Directors ("Board"). Executive agrees to serve on EVC's Board if elected and
also to serve on the Board of Directors of affiliates of EVC, as the Board shall
reasonably request.
1.2 Executive agrees to perform and discharge such duties and
responsibilities as are prescribed from time-to-time by the Board and as are
appropriate for chief financial officers of corporations with the financial,
personnel and other resources that are similar to that of EVC. Executive shall
devote his full business time to, and shall use his best efforts in, the
performance of such duties and responsibilities.
2. Compensation.
For his services pursuant to this Agreement, EVC will pay
Executive a salary at the annual rate of $114,000 ("Salary").
3. Employment Term. The term of Executive's employment (the
"Employment Term") will commence as of the date first written above and, unless
sooner terminated as provided in Section 5, will end on December 31, 2001.
4. Benefits, Payments and Withholding.
4.1 Executive will be entitled to vacation, holidays and sick days
in accordance with EVC's policy, during which Executive will be entitled to the
full compensation and Benefits (as defined in Section 4.2) otherwise payable
hereunder.
4.2 Executive may participate, on the same basis and subject to
the same qualifications as other executive personnel of EVC, in any pension,
profit sharing, life insurance, health insurance, hospitalization, dental, drug
prescription, disability, accidental death or
<PAGE>
dismemberment and other benefit plans and policies EVC provides with respect to
its executive personnel (collectively, the "Benefits").
4.3 EVC will pay or promptly reimburse Executive, in accordance
with EVC's normal policies and procedures for its executive personnel, for all
allowances and expenses provided for hereunder and for all reasonable
out-of-pocket business, entertainment and travel expenses incurred by Executive
in the performance of his duties hereunder.
4.4 EVC will pay the Salary at the semimonthly rate of $4,750 and
may withhold from the Salary, the Benefits and any other compensation provided
to Executive hereunder, all Federal, state and local income, employment and
other taxes, as and in such amounts as may be required to be withheld under
applicable law.
5. Termination and Severance Benefits.
5.1 Termination by EVC and Resignation by Executive. EVC's Chief
Executive Officer or the Board may terminate Executive's employment with EVC,
with or without Cause (as defined in Section 5.5). Termination with Cause shall
be effective immediately and termination without Cause shall be effective upon
30 days prior written notice to Executive. Executive may voluntarily resign his
employment with EVC, with Good Reason (as defined in Section 5.5), upon 30 days
prior written notice to EVC.
5.2 Compensation Upon Termination Without Cause or Upon
Resignation with Good Reason. If EVC's Chief Executive Officer or the Board
terminates Executive's employment hereunder for any reason other than Cause or
Executive's death or Permanent Disability (as defined in Section 5.5), or if
Executive voluntarily resigns his employment with EVC with Good Reason (the
effective date of the first to occur of such termination or his resignation
being the "Termination Date"), then (a) Executive shall be entitled to receive
(i) the Salary and Benefits accrued prior to the Termination Date and (ii)
payment or reimbursement of any expenses, provided for under Section 4.3, that
were incurred by Executive prior to the Termination Date and (b) after the
Termination Date, EVC will also continue (i) to pay the Salary, in equal
semimonthly payments, to Executive for the lesser of the unexpired portion of
the Employment Term and six months after the Termination Date and (ii) continue
for Executive and his spouse and dependent children the health insurance
coverage and medical and dental reimbursement referred to in Section 4.2 for six
months after the Termination Date. Executive shall be under no duty to seek
other employment following termination but any amounts earned by him in
connection with such other employment shall reduce and offset the amounts
otherwise owing hereunder.
5.3 Compensation Upon Resignation Without Good Reason or Upon
Termination for Cause. If Executive breaches this Agreement by voluntarily
resigning his employment with EVC without Good Reason or Executive's employment
is terminated by EVC's Chief Executive Officer or the Board for Cause, then
Executive shall only be entitled to receive, except as otherwise required by
law, the Salary and Benefits accrued prior to the effective date of the first to
occur of his resignation or such termination, and reimbursement of any expenses,
-2-
<PAGE>
provided for under Section 4.3, that were incurred by Executive prior to the
effective date of his resignation or such termination of his employment. Nothing
in this Section 5.3 shall create any implication that EVC is waiving any remedy
EVC may have for breach by Executive of this Agreement.
5.4 Compensation Upon Death or Permanent Disability. If Executive
dies or suffers a Permanent Disability, then EVC will (i) promptly pay Executive
or his estate, in one lump sum, three months' Salary and (ii) continue for
Executive's spouse and dependent children (if Executive has died) and for
Executive and his spouse and dependent children (if Executive suffers a
Permanent Disability), all of the Benefits that they were receiving at the time
of his death or Permanent Disability, for six months after Executive's death or
Permanent Disability.
5.5 Definitions.
"Cause." For purposes of this Agreement, EVC shall have "Cause" to
terminate the Employment Term upon (i) the determination by EVC's Chief
Executive Officer or the Board, in either of their sole discretions, that
Executive has not been performing his duties hereunder in an appropriate or
sufficiently competent manner (other than as a result of his incapacity due to
physical or mental incapacity) or (ii) Executive's conviction of a felony.
"Good Reason" means (i) a breach by EVC of any of its material
agreements contained herein and the continuation of such breach for ten business
days after notice thereof is given to EVC or (ii) as a result of action taken by
the Chief Executive Officer or the Board, the assignment to Executive of any
duties inconsistent with the Executive's status as the Chief Financial Officer
of EVC or a substantial adverse alteration in the nature or status of
Executive's responsibilities. Good Reason does not include the death or
Permanent Disability of Executive.
"Permanent Disability" means the inability of Executive to perform
his duties hereunder, as a result of any physical or mental incapacity, for 30
consecutive days or 60 days during any twelve month period, as determined by the
Board.
6. Covenants Not to Compete.
6.1 Executive agrees that for 18 months following termination of
his employment with EVC he will not, without its prior written approval, engage
in any business activities in any jurisdiction from or to which EVC is
delivering courses or programs or where EVC is conducting any other business
activities that are competitive with any of the business activities then being
conducted by EVC.
6.2 During the 18 months following termination of his employment
with EVC, Executive shall not, directly or indirectly, hire any employee of EVC,
or solicit or induce, or authorize any other person, to solicit or induce, any
employee of EVC to leave such employ during the period of such employee's
employment with EVC or within six-months following such employee's termination
of employment with EVC.
-3-
<PAGE>
6.3 Sections 6.1 and 6.2 shall not apply to a termination of
Executive's employment pursuant to Section 5.2.
7. Covenant Regarding Confidentiality. All confidential information
about the business and affairs of EVC (including, without limitation, its
secrets and information about its services, methods, business plans, technology
and advertising programs and plans) constitutes "EVC Confidential Information."
Executive acknowledges that he will have access to, and knowledge of, EVC
Confidential Information, and that improper use or disclosure of EVC
Confidential Information by Executive, whether during or after the termination
of his employment by EVC, could cause serious injury to the business of EVC.
Accordingly, Executive agrees that he will forever keep secret and inviolate all
EVC Confidential Information which has or shall come into his possession and
that he will not use the same for his own private benefit or directly or
indirectly for the benefit of others, and that he will not discuss EVC
Confidential Information with any other person or organization, all for so long
as EVC Confidential Information is not generally known by, or accessible to, the
public.
8. General.
8.1 This Agreement will be construed, interpreted and governed by
the laws of the State of New York, without regard to the conflicts of law rules
thereof.
8.2 The provisions set forth in Sections 6 and 7 shall survive
termination of this Agreement. All reference to EVC in Sections 6 and 7 include
EVC's subsidiaries and other affiliates, if any.
8.3 This Agreement will extend to and be binding upon Executive,
his legal representatives, heirs and distributees, and upon EVC, its successors
and assigns regardless of any change in the business structure of EVC, be it
through spinoffs merger, sale of stock, sale of assets or any other transaction.
However, this Agreement is a personal services contract and, as such, Executive
may not assign any of his duties or obligations hereunder.
8.4 This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof. No waiver, modification or change of
any of the provisions of this Agreement will be valid unless in writing and
signed by both parties. Any and all prior agreements between the parties written
or oral relating to Executive's employment by EVC are of no further force or
effect.
8.5 The waiver of any breach of any duty, term or condition of
this Agreement shall not be deemed to constitute a waiver of any preceding or
succeeding breach of the same or any other duty, term or condition of this
Agreement. If any provision of this Agreement is unenforceable in any
jurisdiction in accordance with its terms, the provision shall be enforceable to
the fullest extent permitted in that jurisdiction and shall continue to be
enforceable in accordance with its terms in any other jurisdiction.
-4-
<PAGE>
8.6 All notices pursuant to this Agreement shall be in writing and
delivered personally receipt acknowledged (which shall include Federal Express,
Express Mail or similar service) or sent by certified mail, return receipt
requested, addressed to the parties hereto and shall be deemed given upon
receipt, if delivered personally, and three days after mailing, if mailed,
unless received earlier. Notices shall be addressed and sent to EVC at its
principal executive office and to Executive at his home address as it appears in
EVC's personnel records.
8.7 The parties agree that, in the event of any breach or
violation of this Agreement, such breach of violation will result in immediate
and irreparable injury and harm to the innocent party, who shall be entitled to
the remedies of injunction and specific performance or either of such remedies,
if available, as well as all other legal or equitable remedies, if available,
plus reasonable attorneys fees and costs incurred in obtaining any such relief.
8.8 The Section headings contained in this Agreement are for
convenience of reference only and shall not be used in construing this
Agreement.
8.9 This Agreement may be executed in counterparts, each of which
will be deemed an original but all of which will together constitute one and the
same agreement.
IN WITNESS HEREOF, the parties have executed this Agreement as of the
date first above written.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Arol I. Buntzman
---------------------------------------
Name: Arol I. Buntzman
Title: Chairman and Chief Executive Officer
/s/ Richard Goldenberg
-------------------------------------------
Richard Goldenberg
-5-
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of October 1,
1998, between Educational Video Conferencing, Inc., a Delaware corporation
("EVC"), and Wallace J. Caven ("Employee").
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment; Duties.
EVC hereby employs Employee as its Vice President / Director of
Distance Learning. Employee agrees to perform and discharge such duties and
responsibilities as are prescribed from time-to-time by EVC's Chief Executive
Officer or President and as are appropriate for distance learning managers of
corporations with the financial, personnel and other resources that are similar
to that of EVC. Employee shall devote his full business time to, and shall use
his best efforts in, the performance of such duties and responsibilities.
2. Compensation.
For his services pursuant to this Agreement, EVC will pay Employee
a salary at the annual rate of $70,000 ("Salary"). The salary may be increased
and bonuses may be awarded from time-to-time to Employees as the Board
determines in its sole discretion.
3. Employment Term. The term of Employee's employment (the
"Employment Term") will commence as of the date first written above and, unless
sooner terminated as provided in Section 5, will end on December 31, 2001.
4. Benefits, Payments and Withholding.
4.1 Employee will be entitled to vacation, holidays and sick days
in accordance with EVC's policy, during which Employee will be entitled to the
full compensation and Benefits (as defined in Section 4.2) otherwise payable
hereunder.
4.2 Employee may participate, on the same basis and subject to the
same qualifications as other personnel of EVC, in any pension, profit sharing,
life insurance, health insurance, hospitalization, dental, drug prescription,
disability, accidental death or dismemberment and other benefit plans and
policies EVC provides with respect to its personnel (collectively, the
"Benefits").
4.3 EVC will pay or promptly reimburse Employee, in accordance
with EVC's normal policies and procedures for its personnel, for all allowances
and expenses provided for
<PAGE>
hereunder and for all reasonable out-of-pocket business, entertainment and
travel expenses incurred by Employee in the performance of his duties hereunder.
4.4 EVC will pay the Salary at the semimonthly rate of $2,917 and
may withhold from the Salary, the Benefits and any other compensation provided
to Employee hereunder, all Federal, state and local income, employment and other
taxes, as and in such amounts as may be required to be withheld under applicable
law.
5. Termination and Severance Benefits.
5.1 Termination by EVC and Resignation by Employee. EVC's Chief
Executive Officer or President may terminate Employee's employment with EVC,
with or without Cause (as defined in Section 5.5). Termination with Cause shall
be effective immediately and termination without Cause shall be effective upon
30 days prior written notice to Employee. Employee may voluntarily resign his
employment with EVC, with Good Reason (as defined in Section 5.5), upon 30 days
prior written notice to EVC.
5.2 Compensation Upon Termination Without Cause or Upon
Resignation with Good Reason. If EVC's Chief Executive Officer or President
terminates Employee's employment hereunder for any reason other than Cause or
Employee's death or Permanent Disability (as defined in Section 5.5), or if
Employee voluntarily resigns his employment with EVC with Good Reason (the
effective date of the first to occur of such termination or his resignation
being the "Termination Date"), then (a) Employee shall be entitled to receive
(i) the Salary and Benefits accrued prior to the Termination Date and (ii)
payment or reimbursement of any expenses, provided for under Section 4.3, that
were incurred by Employee prior to the Termination Date and (b) after the
Termination Date, EVC will also continue to pay the Salary, in equal semimonthly
payments, to Employee for the lesser of the unexpired portion of the Employment
Term and three months after the Termination Date. Employee shall be under no
duty to seek other employment following termination but any amounts earned by
him in connection with such other employment shall reduce and offset the amounts
otherwise owing hereunder.
5.3 Compensation Upon Resignation Without Good Reason or Upon
Termination for Cause. If Employee breaches this Agreement by voluntarily
resigning his employment with EVC without Good Reason or Employee's employment
is terminated by EVC's Chief Executive Officer or President for Cause, then
Employee shall only be entitled to receive, except as otherwise required by law,
the Salary and Benefits accrued prior to the effective date of the first to
occur of his resignation or such termination, and reimbursement of any expenses,
provided for under Section 4.3, that were incurred by Employee prior to the
effective date of his resignation or such termination of his employment. Nothing
in this Section 5.3 shall create any implication that EVC is waiving any remedy
EVC may have for breach by Employee of this Agreement.
5.4 Compensation Upon Death or Permanent Disability. If Employee
dies or suffers a Permanent Disability, then EVC will (i) promptly pay Employee
or his estate, in one lump sum, three months' Salary and (ii) continue for
Employee's spouse and dependent children
-2-
<PAGE>
(if Employee has died) and for Employee and his spouse and dependent children
(if Employee suffers a Permanent Disability), all of the Benefits that they were
receiving at the time of his death or Permanent Disability, for six months after
Employee's death or Permanent Disability.
5.5 Definitions.
"Cause." For purposes of this Agreement, EVC shall have "Cause" to
terminate the Employment Term upon (i) the determination by EVC's Chief
Executive Officer or President, in either of their sole discretions, that
Employee has not been performing his duties hereunder in an appropriate or
sufficiently competent manner (other than as a result of his incapacity due to
physical or mental incapacity) or (ii) Employee's conviction of a felony.
"Good Reason" means (i) a breach by EVC of any of its material
agreements contained herein and the continuation of such breach for ten business
days after notice thereof is given to EVC.
"Permanent Disability" means the inability of Employee to perform
his duties hereunder as a result of any physical or mental incapacity for 30
consecutive days or 60 days during any twelve month period, as determined by the
Board.
6. Covenants Not to Compete.
6.1 Employee agrees that for 18 months following termination of
his employment with EVC he will not, without its prior written approval, engage
in any business activities in any jurisdiction from or to which EVC is
delivering courses or programs or where EVC is conducting any other business
activities that are competitive with any of the business activities then being
conducted by EVC; provided however, Employee may seek and accept employment by a
Corporation or other entity as a trainer of the employee of such entity ("Entity
Employees") on how to train other Entity Employees to teach, or train other
Entity Employees to teach, using video conferencing systems.
6.2 During the 18 months following termination of his employment
with EVC, Employee shall not, directly or indirectly, hire any employee of EVC,
or solicit or induce, or authorize any other person, to solicit or induce, any
employee of EVC to leave such employ during the period of such employee's
employment with EVC or within six-months following such employee's termination
of employment with EVC.
6.3 Sections 6.1 and 6.2 shall not apply to a termination of
Employee's employment pursuant to Section 5.2.
7. Covenant Regarding Confidentiality. All confidential information
about the business and affairs of EVC (including, without limitation, its
secrets and information about its services, methods, business plans, technology
and advertising programs and plans) constitutes "EVC Confidential Information."
Employee acknowledges that he will have access to, and knowledge of, EVC
Confidential Information, and that improper use or disclosure of EVC
Confidential Information by Employee, whether during or after the termination of
his employment by EVC, could cause serious injury to the business of EVC.
Accordingly, Employee agrees that he will forever keep secret and inviolate all
EVC Confidential Information which has or shall come into
-3-
<PAGE>
his possession, and that he will not use the same for his own private benefit or
directly or indirectly for the benefit of others, and that he will not discuss
EVC Confidential Information with any other person or organization, all for so
long as EVC Confidential Information is not generally known by, or accessible
to, the public.
8. General.
8.1 This Agreement will be construed, interpreted and governed by
the laws of the State of New York, without regard to the conflicts of law rules
thereof.
8.2 The provisions set forth in Sections 6 and 7 shall survive
termination of this Agreement. All reference to EVC in Sections 6 and 7 include
EVC's subsidiaries and other affiliates, if any.
8.3 This Agreement will extend to and be binding upon Employee,
his legal representatives, heirs and distributees, and upon EVC, its successors
and assigns regardless of any change in the business structure of EVC, be it
through spinoffs merger, sale of stock, sale of assets or any other transaction.
However, this Agreement is a personal services contract and, as such, Employee
may not assign any of his duties or obligations hereunder.
8.4 This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof. No waiver, modification or change of
any of the provisions of this Agreement will be valid unless in writing and
signed by both parties. Any and all prior agreements between the parties written
or oral relating to Employee's employment by EVC are of no further force or
effect.
8.5 The waiver of any breach of any duty, term or condition of
this Agreement shall not be deemed to constitute a waiver of any preceding or
succeeding breach of the same or any other duty, term or condition of this
Agreement. If any provision of this Agreement is unenforceable in any
jurisdiction in accordance with its terms, the provision shall be enforceable to
the fullest extent permitted in that jurisdiction and shall continue to be
enforceable in accordance with its terms in any other jurisdiction.
8.6 All notices pursuant to this Agreement shall be in writing and
delivered personally receipt acknowledged (which shall include Federal Express,
Express Mail or similar service) or sent by certified mail, return receipt
requested, addressed to the parties hereto and shall be deemed given upon
receipt, if delivered personally, and three days after mailing, if mailed,
unless received earlier. Notices shall be addressed and sent to EVC at its
principal executive office and to executive at this home address as it appears
in EVC's personnel records.
8.7 The parties agree that, in the event of any breach or
violation of this Agreement, such breach of violation will result in immediate
and irreparable injury and harm to the innocent party, who shall be entitled to
the remedies of injunction and specific performance or either of such remedies,
if available, as well as all other legal or equitable remedies, if available,
plus reasonable attorneys fees and costs incurred in obtaining any such relief.
-4-
<PAGE>
8.8 The Section headings contained in this Agreement are for
convenience of reference only and shall not be used in construing this
Agreement.
8.9 This Agreement may be executed in counterparts, each of which
will be deemed an original but all of which will together constitute one and the
same agreement.
IN WITNESS HEREOF, the parties have executed this Agreement as of the
date first above written.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Arol I. Buntzman
---------------------------------------
Name: Arol I. Buntzman
Title: Chairman and Chief Executive Officer
/s/ Wallace J. Caven
-------------------------------------------
Wallace J. Caven
-5-
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of October 1,
1998, between Educational Video Conferencing, Inc., a Delaware corporation
("EVC"), and James H. Mollitor ("Employee").
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment; Duties.
EVC hereby employs Employee as its Vice President of
Operations. Employee agrees to perform and discharge such duties and
responsibilities as are prescribed from time-to-time by EVC's Chief Executive
Officer or President and as are appropriate for a vice-president of operation of
corporations with the financial, personnel and other resources that are similar
to that of EVC. Employee shall devote his full business time to, and shall use
his best efforts in, the performance of such duties and responsibilities.
2. Compensation.
For his services pursuant to this Agreement, EVC will pay
Employee a salary at the annual rate of $120,000 ("Salary").
3. Employment Term. The term of Employee's employment (the
"Employment Term") will commence as of the date first written above and, unless
sooner terminated as provided in Section 5, will end on December 31, 2001.
4. Benefits, Payments and Withholding.
4.1 Employee will be entitled to vacation, holidays and sick
days in accordance with EVC's policy, during which Employee will be entitled to
the full compensation and Benefits (as defined in Section 4.2) otherwise payable
hereunder.
4.2 Employee may participate, on the same basis and subject to
the same qualifications as other personnel of EVC, in any pension, profit
sharing, life insurance, health insurance, hospitalization, dental, drug
prescription, disability, accidental death or dismemberment and other benefit
plans and policies EVC provides with respect to its personnel generally
(collectively, the "Benefits").
4.3 EVC will pay or promptly reimburse Employee, in accordance
with EVC's normal policies and procedures for its personnel, for all allowances
and expenses provided for
<PAGE>
hereunder and for all reasonable out-of-pocket business, entertainment and
travel expenses incurred by Employee in the performance of his duties hereunder.
4.4 EVC will pay the Salary at the semimonthly rate of $5,000
and may withhold from the Salary, the Benefits and any other compensation
provided to Employee hereunder, all Federal, state and local income, employment
and other taxes, as and in such amounts as may be required to be withheld under
applicable law.
5. Termination.
5.1 Termination by EVC and Resignation by Employee. EVC's
Chief Executive Officer or President may terminate Employee's employment with
EVC, with or without cause. Termination with cause shall be effective
immediately and termination without cause shall be effective upon 30 days prior
written notice to Employee. Employee may voluntarily resign his employment with
EVC upon 30 days prior written notice to EVC.
5.2 Compensation Upon Termination. If EVC's Chief Executive
Officer or President terminates Employee's employment hereunder for any reason
or if Employee voluntarily resigns his employment with EVC (the effective date
of the first to occur of such termination or his resignation being the
"Termination Date"), then (a) Employee shall be entitled to receive (i) the
Salary and Benefits accrued prior to the Termination Date and (ii) payment or
reimbursement of any expenses, provided for under Section 4.3, that were
incurred by Employee prior to the Termination Date.
6. Covenants Not to Compete.
6.1 Employee agrees that for 18 months following termination
of his employment with EVC he will not, without its prior written approval,
engage in any business activities in any jurisdiction from or to which EVC is
delivering courses or programs or where EVC is conducting any other business
activities that are competitive with any of the business activities then being
conducted by EVC.
6.2 During the 18 months following termination of his
employment with EVC, Employee shall not, directly or indirectly, hire any
employee of EVC, or solicit or induce, or authorize any other person, to solicit
or induce, any employee of EVC to leave such employ during the period of such
employee's employment with EVC or within six-months following such employee's
termination of employment with EVC.
6.3 Sections 6.1 and 6.2 shall not apply to a termination of
Employee's employment pursuant to Section 5.2.
7. Covenant Regarding Confidentiality. All confidential
information about the business and affairs of EVC (including, without
limitation, its secrets and information about its services, methods, business
plans, technology and advertising programs and plans) constitutes "EVC
-2-
<PAGE>
Confidential Information." Employee acknowledges that he will have access to,
and knowledge of, EVC Confidential Information, and that improper use or
disclosure of EVC Confidential Information by Employee, whether during or after
the termination of his employment by EVC, could cause serious injury to the
business of EVC. Accordingly, Employee agrees that he will forever keep secret
and inviolate all EVC Confidential Information which has or shall come into his
possession, and that he will not use the same for his own private benefit or
directly or indirectly for the benefit of others, and that he will not discuss
EVC Confidential Information with any other person or organization, all for so
long as EVC Confidential Information is not generally known by, or accessible
to, the public.
8. General.
8.1 This Agreement will be construed, interpreted and governed
by the laws of the State of New York, without regard to the conflicts of law
rules thereof.
8.2 The provisions set forth in Sections 6 and 7 shall survive
termination of this Agreement. All reference to EVC in Sections 6 and 7 include
EVC's subsidiaries and other affiliates, if any.
8.3 This Agreement will extend to and be binding upon
Employee, his legal representatives, heirs and distributees, and upon EVC, its
successors and assigns regardless of any change in the business structure of
EVC, be it through spinoffs merger, sale of stock, sale of assets or any other
transaction. However, this Agreement is a personal services contract and, as
such, Employee may not assign any of his duties or obligations hereunder.
8.4 This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof. No waiver, modification or
change of any of the provisions of this Agreement will be valid unless in
writing and signed by both parties. Any and all prior agreements between the
parties written or oral relating to Employee's employment by EVC are of no
further force or effect.
8.5 The waiver of any breach of any duty, term or condition of
this Agreement shall not be deemed to constitute a waiver of any preceding or
succeeding breach of the same or any other duty, term or condition of this
Agreement. If any provision of this Agreement is unenforceable in any
jurisdiction in accordance with its terms, the provision shall be enforceable to
the fullest extent permitted in that jurisdiction and shall continue to be
enforceable in accordance with its terms in any other jurisdiction.
8.6 All notices pursuant to this Agreement shall be in writing
and delivered personally receipt acknowledged (which shall include Federal
Express, Express Mail or similar service) or sent by certified mail, return
receipt requested, addressed to the parties hereto and shall be deemed given
upon receipt, if delivered personally, and three days after mailing, if mailed,
unless received earlier. Notices shall be addressed and sent to EVC at its
principal executive office and to executive at this home address as it appears
in EVC's personnel records.
-3-
<PAGE>
8.7 The parties agree that, in the event of any breach or
violation of this Agreement, such breach of violation will result in immediate
and irreparable injury and harm to the innocent party, who shall be entitled to
the remedies of injunction and specific performance or either of such remedies,
if available, as well as all other legal or equitable remedies, if available,
plus reasonable attorneys fees and costs incurred in obtaining any such relief.
8.8 The Section headings contained in this Agreement are for
convenience of reference only and shall not be used in construing this
Agreement.
8.9 This Agreement may be executed in counterparts, each of
which will be deemed an original but all of which will together constitute one
and the same agreement.
IN WITNESS HEREOF, the parties have executed this Agreement as of the
date first above written.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Arol I. Buntzman
---------------------------------------
Name: Arol I. Buntzman
Title: Chairman and Chief Executive Officer
/s/ James H. Mollitor
-------------------------------------------
James H. Mollitor
-4-
<PAGE>
March 4, 1998
Arthur Goldberg Esq.
170 Old Country Road
Mineola, N.Y. 11501
This letter shall constitute the Consulting Agreement
(including Exhibit A hereto. this "Agreement") between you ("Consultant") and
Educational Video Conferencing, Inc. (the "Company").
1. The Company hereby retains Consultant and Consultant hereby
agrees to perform such consulting and other services relating to the business of
the Company's as are described in Exhibit A attached hereto (the "Description of
Services and Compensation").
2. For the full and faithful performance of the Services, the
Company shall pay Consultant the fees in the amounts and manner set forth in
Exhibit A.
3. The Company represents and warrants to Consultant that its
Board of Directors has approved the Company's entering into this Agreement and
the transactions contemplated hereby and the Shares, when issued to Consultant,
will have been duly authorized and validly issued fully paid and non-assessable.
4. Consultant represents and warrants to the Company that
Common Stock issued to him pursuant to this Agreement (the "Shares"), will be
acquired by him solely for his own account for investment purposes; that he does
not have the present intention of reselling or distributing the Shares; that he
understands the Shares have not been and will not be registered under the
Securities Act of 1933 (the "Act") in reliance upon an exemption from such
registration; that the Shares cannot be resold or otherwise transferred unless
registered under the Act or exempt from such registration and that the
certificate(s) representing the Shares will bear a restrictive legend to such
effect; that he has received and read the Company's Confidential Offering
Memorandum dated December 24, 1997, and has had the opportunity to ask questions
of and obtain information about the Company to his satisfaction, including
information he deemed necessary to verify and up;date the information contained
in such Memorandum; and that he is an "accredited investor," as defined in
Regulation D under the Act. Consultant also represents and warrants that he is
permitted to enter into this Agreement and perform the obligations contemplated
hereby and that this Agreement and the terms and obligations hereof arc not
inconsistent with any other obligation he may have.
5. This Agreement shall have an initial three-year (3) term
commencing today and ending January 31, 1998 unless this Agreement is not
previously terminated, as provided herein. The expiration or termination of this
Agreement shall not relieve Consultant or the Company of any obligations
<PAGE>
hereinafter which by their terms are intended to survive the termination of this
Agreement, including pursuant paragraphs 7, 9, 10 and 11 below.
6. Except as otherwise provided in Exhibit A hereto,
Consultant agrees to make himself available to render the Services at such time
or times and location or locations as may be requested, from time to time, by
the Company and at such other times reasonably required to perform the services.
Consultant agrees to devote his reasonable efforts to performing the Services.
7. So long as this Agreement continues in effect and for a
period of 24 months following the termination of this Agreement Consultant shall
not, solicit any employees, customers, educational providers of the Company or
engage in any employment, consulting or business activity that is or is intended
to be competitive with the business of the Company (i.e., educational video
conferencing), as being conducted at the time of such termination, or any
products or services which are being considered, developed, marketed and/or sold
at the time of such termination provided, however, that the Consultant's
ownership of any investment in any security shall not be deemed to be a
violation of this Section 9 if such investment does not constitute over one
percent (1%) of the outstanding issue of such security.
8. It is understood and agreed that Consultant's relationship
to the Company is that of an independent contractor and that neither this
Agreement nor the Services to be rendered hereunder shall for any purpose
whatsoever or in any way or manner create any employer-employee relationship
between the parties.
9. (a) Subject to such 9(b) below. Consultant agrees that he
will not at any time publish or disclose to others or use for his own benefit or
the benefit of others any business plans and strategies, trade secrets,
financial information, customer or vendor lists or other information
(individually or collectively, "Information") that becomes known to him as a
result of his consulting relationship with the Company and which is the property
of the Company or any of its clients, customers, consultants, licensors,
licensees, or affiliates, except as may be necessary in the ordinary course of
performing in good faith his particular duties as a consultant of the Company.
(b) The provisions of subparagraph 9(b) shall not apply
(i) to the extent the Information was previously known to Consultant without
breach of subparagraph 9(a); (ii) to the extent Information becomes publicly
available by action of the Company or third parties; (iii) to the extent
Consultant receives such Information from a third party who has rightfully
received such Information and is not under any duty to keep such Information
confidential, and (iv) to the extent Consultant is required to provide
Information to a court of law or pursuant to lawful subpoena or summons.
(c) Upon termination of this Agreement, Consultant shall
return to the Company any and all documents and materials containing Information
that are the property of the Company or its customers, licensees, licensors or
affiliates.
10. Consultant agrees that he will not make any notes or
memoranda relating to the business of the Company otherwise than for the benefit
of the Company and will not at any time use or permit to be used any such notes
or memoranda otherwise than for the benefit of the Company.
-2-
<PAGE>
11. Consultant agrees that any breach of this Agreement by him
could cause irreparable damage to the Company and that, in the event of such
breach. the Company shall have the right to obtain injunctive relief, including,
without limitation, specific performance or other equitable relief to prevent
the violation of his obligations hereunder. It is expressly understood and
agreed that nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available for such breach or threatened
breach, including, without limitation, the recovery. of damages by the Company.
12. The Services to be rendered by Consultant are personal in
nature. Consultant may not assign or transfer this Agreement or any of his
rights or obligations hereunder except to a corporation of which he is the sole
stockholder. In no event shall Consultant assign or delegate responsibility for
actual performance of the Services to any other natural person.
13. Notwithstanding anything to the contrary contained herein,
either party shall have the fight to terminate this agreement at any time on
five days notice, with or without cause.
14. All notices and other communications hereunder shall be
deemed given when delivered by hand against receipt (which shall include
delivery by Federal Express or similar service) or three business days after
being sent by registered or certified mail, return receipt requested, in each
case addressed to the party at his or its address set forth above, or to such
other address as such party may designate in writing to the other.
15. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective legal representatives, successors
and permitted assigns.
16. This Agreement constitutes the entire Agreement between
the parties regarding the subject matter hereof. No provision of this Agreement
shall be waived, altered or cancelled except in writing signed by the party
against whom such waiver, alteration or cancellation is asserted. Any waiver
shall be limited to the particular instance and the particular time when and for
which it is given.
17. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws.
18. The invalidity or enforceability of any provision hereof
as to an obligation of a party shall in no way affect the validity or
enforceability of any other provision of this Agreement. provided that if such
invalidity or unenforceability materially adversely affects the benefits the
other party reasonable expected to receive hereunder, that party shall have the
fight to terminate this Agreement. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope activity or subject so as to be unenforceable at law, such provision
or provisions shall be construed by limiting or reducing it or them, so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.
-3-
<PAGE>
Please indicate your Agreement to the foregoing by signing a copy of this
Agreement where provided below and returning such copy to the Company.
Very truly yours,
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Dr. Arol I. Buntzman
--------------------------------
Dr. Arol I. Buntzman, Chief
Executive Officer
AGREED:
/s/ Arthur Goldberg
- -----------------------------------
Arthur Goldberg, Consultant
-4-
<PAGE>
Exhibit A
Description of Services and Compensation
Consultant shall help the Company obtain financing and
corporate customers along with helping the Company indemnify and acquire
proprietary educational providers. Consultant shall also be available to help in
strategic planning and corporate development.
For the full and faithful performance of the Services, the
Company shall pay Consultant the fees in the amounts and manner set forth below:
(a) 5% percent of all revenue received from any activities with
New York Institute of Technology (NYIT).
(b) 50,000 options exercisable over a seven-year period at a price
of S3.50 per share. Of these options, 25,000 options shall vest after
6 months.
(c) Up to 150,000 options exercisable over a seven-year period at
a price of $3.50 per share. Said options shall vest ratably at the rate
of 50,000 per year long as either party has not canceled the contract.
The options shall contain the customary anti-dilution and payment in kind
provisions.
-5-
<PAGE>
ARTHUR H. GOLDBERG
25 TIDEWAY
KINGS POINT, NY 11024
March 4, 1998
Dr. Arol I. Buntzman
Educational Video Conferencing, Inc.
35 E. Grassy Sprain Road - Suite 504
Yonkers, New York 10710
RE: Consulting Contract dated March 4, 1998
Dear Arol:
It is understood that you have retained the law firm of Ruskin, Moscou, Evans &
Faltischek to act as counsel to the company. I am affiliated with the law firm
in an "of counsel" capacity. It is understood that I will only bill for my time
spent on company matters if it is in the nature of legal matters and not matters
for which I am consulting. Partners and associates of the firm will bill for
their time in the normal course.
Sincerely,
Arthur H. Goldberg
-6-
<PAGE>
AGREEMENT BETWEEN EDUCATIONAL VIDEO CONFERENCING, INC.
AND ZURICH INSURANCE COMPANY, U.S. BRANCH, FOR THE
OFFERING OF INTERACTIVE TELEVIDEO COURSES AND
DISTANCE LEARNING PROGRAMS
W I T N E S S E T H
AGREEMENT made this 12th day of August 1998, between Educational Video
Conferencing Inc. (hereinafter "EVC"), with offices located at 35 East Grassy
Sprain Road, Yonkers, New York 10710, and Zurich Insurance Company, U. S. Branch
(hereinafter "Zurich"), with offices located at 1400 American Lane, Schaumburg,
Illinois 60196-6156.
Whereas, Zurich desires to provide its employees with access to
undergraduate and graduate college courses and programs via Interactive
Televideo Distance Learning and Computer Based Distance Learning at Zurich
locations more particularly specified below, and,
Whereas, EVC has the ability to provide such access to undergraduate
and graduate college courses and programs, subject to the terms and conditions
herein provided,
NOW, THEREFORE, it is hereby agreed as follows:
1. EVC agrees that it will provide access to undergraduate and
graduate college courses and learning programs via Interactive Televideo
Distance Learning and Computer Based Distance Learning to Zurich employees,
commencing with the Fall 1998 semester.
2. EVC will provide access to college courses via Zurich's installed
base of video conferencing room system units and telecommunications network and,
if enrollment demand meets criteria to be agreed upon from time to time by the
parties, via video enabled desktop computers at Zurich.
2.1 Zurich agrees that, in the event that desk top computers are
utilized, it will allow EVC to video enable existing computers at Zurich
locations to be mutually agreed upon in writing, at no cost to Zurich.
3. EVC will provide video enabled computers for Zurich locations to
be agreed upon, in the event that such locations do not have computers capable
of being video enabled and, if the student course registrations at said
locations meet EVC projections for each said location.
3.1 In the event that, in the sole opinion of EVC, enrollment
justifies additional video conferencing room systems, EVC will provide such
additional video conferencing room systems that shall be compatible with
Zurich's installed base of video conferencing room systems at no cost to Zurich.
The cost of linking said additional video conferencing room systems to Zurich's
installed base of room systems shall be borne by Zurich.
3.2 EVC agrees to replace or upgrade the video conferencing room
systems, and if applicable, the video enabled computers it is providing
hereunder, no less than once every three years.
<PAGE>
4. Zurich agrees to allow EVC to transmit courses over its video
conferencing room systems and telecommunications network and /or desktop
computers on a schedule to be agreed upon in the future, but in any event not
less than Monday through Thursday from 5 PM to 11 PM, Friday 5 PM to 8 PM and
Saturdays from 9 AM to 3 PM.
5. Zurich agrees to allow EVC to offer courses over desktop
computers at locations to be mutually agreed upon and subject to the minimum
college student course registrations; the parties further agree that they will
designate these locations in writing no later than thirty (30) days after the
execution of this agreement.
6. Zurich agrees that it will give its employees access to its
standard tuition reimbursement or advancement plan in connection with EVC
courses and learning programs.
7. EVC shall be permitted to offer such undergraduate and graduate
courses and learning programs as are approved by Zurich for tuition
reimbursement/advancement; such courses are to be offered by accredited
colleges, universities, and other institutions of learning.
7.1 EVC shall offer undergraduate and graduate programs in Insurance,
Management, Marketing, Economics, Finance and Accounting from accredited
colleges and universities. EVC shall also have the right to offer Seminars and
Certificate Programs in Insurance, Risk Management and Actuarial Science from
accredited colleges and universities.
7.2 EVC and Zurich will agree which, if any, additional degrees,
programs, or courses of study will be offered ninety (90) days prior to the
beginning of any academic term.
7.3 Courses which constitute a part of the core curriculum of any
college or university participating in the Zurich /EVC program may be eligible
for tuition reimbursement and/or advancement, so long as the individual courses
are applicable to approved degrees or major plans of study.
8. EVC agrees that Zurich employees will be charged the standard
tuition charges of the respective college or university, together with all
appropriate college fees. All of the above tuition and fees shall be payable
directly to the respective college or university.
8.1 Zurich employees will be required to arrange for the purchase of
course books and materials with the individual colleges and universities, and
neither Zurich nor EVC shall have any responsibility in this regard.
9. Zurich acknowledges that its employees will be required to
execute a guarantee of payment from which will bind the individual employee to
pay for tuition, fees, etc., in the event that for any reason they are not
eligible for, or do not receive tuition reimbursement/advancement as
contemplated herein.
10. Zurich agrees that its human resources/personnel department shall
provide EVC with information on employees' applications for tuition
reimbursement/advancement in connection with EVC courses, including, but not
limited to the status of said applications.
11. Except as otherwise indicated in paragraph 12 below, Zurich
agrees that it will allow EVC to utilize its installed base of room systems and
telecommunications network to transmit courses to Zurich employees at no cost to
EVC.
2
<PAGE>
12. EVC agrees that it will pay all telecommunications costs,
including monthly charges, associated with signal transport from any educational
provider to EVC's bridge.
12.1 Zurich agrees that it will pay all telecommunication costs,
including monthly charges associated with signal transport from Zurich 's video
conferencing sites to EVC's bridge.
13. Zurich agrees that it will provide its employees with unfettered
access to suitable and appropriate facilities from which to participate in EVC
courses at no cost to EVC; Zurich shall be responsible for all HVAC,
electricity, maintenance, security (if applicable) and other costs associated
with providing such space to its employees.
14. The parties agree that they will fully cooperate with one another
in promoting the EVC program to Zurich employees and that Zurich will fully
promote this program to the best of their ability.
14.1 If possible, Zurich will allow EVC to utilize e-mail to
communicate with those employees who have indicated interest in enrolling in EVC
courses.
14.2 EVC agrees that it shall provide materials from the various
colleges and universities at no cost to Zurich, including but not limited to
brochures, surveys, registration materials, and videotapes.
14.3 Zurich agrees to distribute the materials provided by EVC not
less than three (3) times per semester to all its employees.
14.4 Zurich consents to the use by EVC of standard college
registration forms, guarantee of payment forms, site location choice forms and
other necessary forms, and shall not unreasonably withhold approval of other
such forms as may be necessary to carry out the intent of this agreement.
14.5 EVC shall be permitted to conduct open houses and registration
meetings at such Zurich locations as can be mutually agreed upon from time to
time, it being understood that said open houses and registration nights are to
be scheduled at times and places convenient to Zurich employees so as to
maximize potential registrations.
14.6 EVC shall be permitted to utilize Zurich logos, trademarks and
copyrighted materials for promotional pieces targeted at Zurich employees, only
upon prior, expressed written authorization.
15. Zurich shall not be responsible for, nor shall it be permitted to
exercise control over any of the policies and procedures, academic or
administrative, of the various colleges and universities; the colleges and
universities shall bear the entire burden of their own administrative functions,
including but not limited to, admissions, registration, academic advising, etc.
16. EVC shall compensate a coordinator (preferably a Zurich employee)
who shall be trained in the operation of the video conferencing room systems and
desktop computer video systems, as the case may be, who shall be available to
train Zurich employees on the operation of the systems for one (1) week prior to
the start of each semester as well as during the first week of each semester; in
the event that, in its sole discretion, EVC determines that certain locations or
students require further training, EVC shall provide such further training by a
coordinator as each individual case warrants.
3
<PAGE>
17. Zurich shall grant EVC, its employees and/or agents, such access
to Zurich facilities as shall be reasonably necessary to the installation and
maintenance of any equipment provided by EVC in connection with this agreement,
as well as for the proper administration of the program contemplated hereunder.
18. All equipment installed by EVC in conjunction with this program
shall remain the sole property of EVC and, upon the expiration or termination
thereof, shall be immediately returned to EVC at EVC's expense.
18.1 EVC shall maintain all of its equipment in proper working order
and shall enter into service contracts with reliable service companies in order
to ensure proper maintenance and repair of said equipment.
19. Zurich shall be permitted to utilize EVC equipment when same is
not in use by EVC and agrees to hold EVC harmless and indemnify EVC for any loss
or damages resulting from the use of said equipment by Zurich; in addition,
Zurich agrees to immediately reimburse EVC for any costs associated with the
repair or replacement of any equipment lost, damaged or stolen while in Zurich's
possession.
19.1 In addition, Zurich agrees not to permit any other use, other
than by EVC, of its installed base of room systems, during any regularly
scheduled EVC class or course; Zurich further agrees to promptly repair or
replace, as necessary, any of its equipment or systems which will be utilized by
EVC in delivering access to classes and programs hereunder.
20. EVC shall maintain during the term of this Agreement the
following insurance:
(a) Workers' Compensation coverage in compliance with the laws
of each State in which the services hereunder or any
portion thereof are to be performed;
(b) Comprehensive General Liability coverage in the amount of
$2,000,000 per occurrence.
20.1 At Zurich's request, EVC shall provide Zurich with certificates
of insurance showing the insurance specified herein.
21. EVC shall indemnify and hold Zurich, its directors, officers,
employees, affiliates and subsidiaries harmless against and will reimburse
Zurich for any payment, loss, cost or expense (including reasonable attorneys'
fees) incurred by Zurich from any claim or suit asserted against Zurich in
respect of the death or bodily injury of any person or damage to real and/or
tangible personal property arising pursuant to the performance of EVC 's
obligations under this Agreement to the extent that the foregoing is caused by
any employee, agent, representative or contractor of EVC.
22. This Agreement may not be assigned by either party, without the
prior written consent of the other party. Notwithstanding the foregoing, Zurich
may assign all its rights, title and interests in and to this agreement to an
organization which succeeds to substantially or all of the business and/or
assets of Zurich, subject to providing written notice thereof to EVC.
23. Should EVC enter into a contract or agreement for the same or
substantially the same services as provided herein with any other Zurich
company, division, affiliate or branch, the terms of such and contract or
agreement shall be at least as favorable as the terms contained in this
Agreement.
4
<PAGE>
24. The term of this agreement shall be FIVE (5) YEARS from the date
first written above and this agreement shall automatically be extended for one
(1) additional year on the anniversary of the original execution.
24.1 In the event that either party should desire not to automatically
extend this contract, then the party so desiring must notify the other in
writing, by certified mail, return receipt requested, not less than ninety (90)
days prior to the anniversary date of this agreement, in which case this
agreement shall only have FOUR (4) YEARS remaining in its term.
25. It is expressly agreed and understood that neither party shall be
liable for incidental, special or consequential damages for any breach or
violation of this agreement.
26. All notices required to be given hereunder shall be done in
writing and mailed certified, return receipt requested, to the other party at
their last known address, and shall be deemed given when mailed.
27. This agreement shall be construed and interpreted under the laws
of the State of New York.
28. If any portion of this agreement is held to be void or
unenforceable, it shall not effect the validity and enforceability of the
remaining portions.
29. Any disputes arising hereunder shall be determined by way of
arbitration before the American Arbitration Association at their offices located
in White Plains, New York.
30. The foregoing constitutes the entire agreement between the
parties with respect to the matters contained herein and no other such
agreements shall be valid unless in writing and subscribed to with the same
formality as this document.
WHEREFORE, the parties have hereunto affixed their hands and seals the
date first indicated above.
ZURICH INSURANCE COMPANY, U. S. BRANCH EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/ Thomas Hite By: /s/ John J. McGrath, Ph.D.
----------------------------------- ----------------------------------
Thomas Hite John J. McGrath, Ph.D.
Executive Vice President President
5
<PAGE>
CHIEF EXECUTIVE OFFICER CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT dated October 1, 1998 is made by and between Educational
Video Conferencing, Inc., a Delaware Corporation (the "Company"), and Dr. Arol
I. Buntzman, 125 Underhill Street, Yonkers, NY 10710 ("Executive").
WHEREAS, the Company was founded on the vision of Executive; and
WHEREAS, the Company considers it essential, to the best interests of
the Company, its stockholders, and its employees, generally, to foster the
continuous employment of the Executive; and
WHEREAS, the Company is currently contemplating an initial public
offering; and
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the resultant uncertainty, may result in the departure or
distraction of the Executive to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to encourage the continued attention and dedication of the Executive to
his assigned duties without distraction in the face of potentially disrupting
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
Company and the Executive hereby agree as follows:
1.0 DEFINED TERMS. Capitalized terms used in this Agreement are defined in
the last Section hereof.
2.0 TERM OF AGREEMENT. This Agreement shall commence on the date hereof and
shall continue in effect through September 30, 2001; provided, however, that
commencing on January 1, 2000 and each January 1st thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than June 30th immediately preceding that January 1st, the Company or the
Executive shall have given notice not to extend this Agreement or a Change in
Control shall have occurred prior to such June 30th; provided, however, if a
Change in Control shall have occurred during the term of this Agreement, this
Agreement shall continue in effect for a period of not less than thirty-six (36)
months beyond the date such Change in Control occurred.
3.0 COMPANY'S COVENANT'S SUMMARIZED. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4.0 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the "Severance Payments"
described in Section 6.1 hereof and the other payments and benefits described
herein in the event the Executive's employment with the Company is terminated
following a Change in Control and during the term of this Agreement. No amount
or benefit shall be payable under this Agreement unless there shall have been
(or, under the terms hereof, there shall be deemed to have been) a termination
of the Executive's employment with the Company following a Change in Control.
This Agreement shall not be construed as creating an express or implied contract
of employment prior to the date of a Change
<PAGE>
in Control and, except as otherwise agreed in writing between the Executive and
the Company, the Executive shall not have any right to be retained in the employ
of the Company.
4.0 THE EXECUTIVE'S COVENANTS. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (A) a date which is six (6) months
from the date of such Potential Change in Control, (B) the date of a Change in
Control, (C) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), or by
reason of the Executive's death or disability, or (D) the termination by the
Company of the Executive's employment for any reason.
5.0 COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 Following a Change in Control during the term of this Agreement,
during any period that the Executive fails to perform the Executive's full-time
duties with the Company as a result of incapacity due to physical or mental
illness, the Company shall pay the Executive's full salary to the Executive at
the rate in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company prior to the Date of Termination.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control during the term of this Agreement, the Company
shall pay the Executive's normal post- termination compensation and benefits to
the Executive as such payments become due. Such post- termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements.
5.4 If there is any conflict between the express terms of this
Agreement and the express terms of any written Employment Agreement between the
Company and the Executive, the terms of such Employment Agreement shall control.
6.0 SEVERANCE PAYMENTS.
6.1 Subject to Section 6.2 hereof, the Company shall pay the Executive
the payments described in this Section 6.1 ("Severance Payments") upon the
termination of the Executive's employment following a Change in Control during
the term of this Agreement, in addition to the payments and benefits described
in Section 5.0 hereof, unless such termination is (A) by the Company for Cause,
or (B) by reason of the Executive's death or disability. The Executive's
employment shall be deemed to have been terminated following a Change in Control
by the Company without Cause if the Executive's employment is terminated prior
to a Change in Control without Cause at the direction (or action which
2
<PAGE>
constitutes a direction) of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control.
(i) Subsequent to the Date of Termination, the Company shall make cash
severance payments to the Executive over a thirty-six (36) month period
in substantially equal bi-weekly installments, in an amount equal to
two and ninety-nine one hundredths (2.99) times the sum of (a) the
higher of the Executive's annual base salary in effect immediately
prior to the occurrence of the event or circumstance upon which the
Notice of Termination is based or in effect immediately prior to the
Change in Control, and (b) the higher of the highest annual bonus paid
to the Executive in the three years preceding the year in which the
Date of Termination occurs or paid in the three years preceding the
year in which the Change in Control occurs.
(ii) For a thirty-six (36) month period after the Date of Termination,
the Company shall arrange to provide the Executive with medical and
dental insurance benefits substantially similar to those which the
Executive is receiving without cost to Executive immediately prior to
the Notice of Termination (without giving effect to any reduction in
such benefits subsequent to a Change in Control). Benefits otherwise
receivable by the Executive pursuant to this Section 6.1 (ii) shall be
reduced to the extent comparable benefits are actually received by or
made available to the Executive without cost, by another Person, during
the thirty-six (36) month period following the Executive's termination
of employment and any such benefits actually received by the Executive
shall be reported to the Company by the Executive. If the benefits
provided to the Executive under this Section 6.1(ii) result in a
decrease pursuant to Section 6.2 in the Change in Control Payments and
this Section 6.1(ii), benefits are thereafter reduced pursuant to the
immediately preceding sentence because of the receipt of comparable
benefits, the Company shall, at the time of such reduction, pay to the
Executive the lesser of, (a) the amount of the decrease made in the
Severance Payments pursuant to Section 6.2, or (b) the maximum amount
which can be paid to the Executive without being, or causing any other
payment to be, nondeductible by reason of Section 280G of the Code.
6.2 Notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by the Executive in
connection with a Change in Control or the termination of the Executive's
employment (whether or not received pursuant to the terms of this Agreement)
(all such payments and benefits, including but not limited to the Severance
Payments, being hereinafter called the "Total Payments") would be subject in
whole or in part to the Excise Tax, then the Severance Payments shall be reduced
to the extent, but only to the extent, necessary so that no portion of the Total
Payments is subject to the Excise Tax; provided, that no such reduction shall be
effected unless the net amount of the total Payments after such reduction in the
Severance Payments and after deduction of the net amount of federal, state and
local income taxes on such reduced Total Payments would be greater than the
excess of (A) the net amount of the Total Payments without such reduction in the
Severance Payments but after deduction of the net amount of federal, state and
local income taxes (other than the Excise Tax) on such unreduced Total Payments,
over (B) the Excise Tax to which the total Payments are subject. The
determination as to whether a reduction in Severance Payments is to be made
under this Section 6.2 and, if so, the amount of any such reduction shall be
made by the Company's auditors or by such other firm of certified public
accountants, benefits consulting firm or legal counsel as the Board may
designate prior to the Change in Control.
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The Company shall provide the executive with its calculations of the
amounts referred to in this Section 6.2 and such supporting materials as are
reasonably necessary for the Executive to evaluate the Company's calculations.
6.3 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of a termination, which entitles
the Executive to the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in seeking in good faith
to obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied by such
evidence of fees and expenses incurred as the Company reasonable may require.
7.0 TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10.0. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
(excluding the Executive) of the Board at a meeting of the Board which was
called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board the Executive was guilty of conduct
set forth in clause D (i) or (ii) of the definition of Cause in Section 15.0,
and specifying the particulars thereof in detail.
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
during the term of this Agreement, shall mean:
(A) if the Executive's employment is terminated for disability, thirty
(30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and
(B) if the Executive's employment is terminated for any other reason,
the date specified in the Notice of Termination (which, in the case of
a termination by the Company, shall not be less than thirty (30) days
(except in the case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15) days,
nor, in any case, more than sixty (60) days after the date such Notice
of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without
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regard to this Section 7.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally resolved,
either by mutual written agreement of the parties, by arbitrator's award, or, to
the extent permitted by Section 14.0, by a final judgment, order or decree of a
court of competent jurisdiction on the arbitrator's award (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the term of this Agreement and such
termination is disputed in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2) and shall not be offset against or reduce any other amounts
due under this Agreement.
8.0 NO MITIGATION. The Company agrees that, if the Executive's employment
by the Company is terminated during the term of this Agreement, the Executive is
not required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Section 6.0 or
Section 7.4. Further, the amount of any payment or benefit provided for in
Section 6.0 (other than Section 6.1(ii)) or Section 7.4 shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
9.0 SUCCESSORS; BINDING AGREEMENT.
9.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination. In any event, this Agreement shall be binding upon the Company and
any successors or assignees.
9.2 This Agreement shall inure to the benefit of, and be enforceable
by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive), if the Executive
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had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's estate.
10.0 NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given upon delivery by hand, receipt acknowledged
(including by Federal Express or similar service), or three business days after
mailing, if mailed by U.S. certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Company:
Educational Video Conferencing, Inc.
35 East Grassy Sprain Road, Suite 504
Yonkers, NY 10710
Attn: Corporate Secretary
To the Executive:
Dr. Arol I. Buntzman
125 Underhill Street
Yonkers, NY 10710
11.0 MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York and the Agreement shall be an instrument
under seal. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 6.0, 7.0, 8.0 and 14.0 shall survive the expiration of the term of this
Agreement.
12.0 VALIDITY. The invalidity or unenforceability or any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. In addition, if any provision of this Agreement is held
invalid or unenforceable by a court of competent jurisdiction, then such
provision shall be deemed modified to the extent necessary to enable such
provision to be valid and enforceable.
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13.0 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
14.0 SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the Executive for
benefits under this Agreement shall be directed to the Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board then shall afford a reasonable opportunity to the Executive for
a review of the decision denying a claim and shall further allow the Executive
to appeal to the Board a decision of the Board within sixty (60) days after
notification by the Board that the Executive's claim has been denied. Any
further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in White Plains, New York
in accordance with the rules of the American Arbitration Association then in
effect. Judgement may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to seek
specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement in such arbitration or by a proceeding in the
federal court in Westchester County, New York.
15.0 DEFINITIONS. For purposes of this Agreement, the following terms shall
have the meanings indicated below:
(A) "Board" shall mean the Board of Directors of the Company.
(B) "Beneficial Owner" shall have the meaning defined in Section
280G(b)(3) of the Code.
(C) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean:
(i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other
than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination for Good Reason by the
Executive pursuant to Section 7.1) for thirty (30) days after a written
demand for substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties,
or
(ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise.
For purposes of clauses (i) and (ii) of this definition, no
act, or failure to act, on the Executive's part shall be deemed
"Willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
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(D) A "Change in Control", shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing twenty-five (25)
percent or more of the combined voting power of the Company's then
outstanding securities;
or
(ii) during any period of not more than three consecutive years
(not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Company to effect a transaction
described in clause (i), (ii) or (iii) of this Section 15(E)), whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof;
or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (a)
a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) fifty (50) percent or more
of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person acquires twenty-five (25) percent or more of the combined voting
power of the Company's then outstanding securities;
or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
(E) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(F) "Company" shall mean Educational Video Conferencing, Inc. and any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise (except in
determining, under Section 15 (E) hereof whether or not any Change in
Control of the Company has occurred in connection with such
succession).
(G) "Date of Termination" shall have the meaning stated in Section
7.2.
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(H) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the
Executive's physical or mental incapacity, the Executive shall have
been unable to perform substantially all of the Executive's duties to
the Company (as such duties existed immediately prior to the onset of
such physical or mental incapacity), for forty-five (45) consecutive
days or ninety (90) days during any twelve-month period, the Company
shall have given the Executive a Notice of Termination for Disability
and, within thirty (30) days after such Notice of Termination is given,
the Executive shall not have returned to the full-time performance of
the Executive's duties.
(I) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(J) "Excise Tax" shall mean any excise tax imposed under Section 4999
of the Code.
(K) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(L) "Good Reason" for termination by the Executive of the Executive's
employment shall mean:
(i) during the period commencing thirty (30) days after the Change
in Control and terminating six (6) months after the Change in Control,
a good faith determination by the Executive that, as a result of the
Change in Control, the Executive is unable to discharge his duties
effectively, or
(ii) the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures
by the Company to act, unless, in the case of any act or failure to act
described in paragraph (a), (e), (f), or (g), below, such act or
failure to act is corrected prior to the Date of Termination given in
respect thereof:
(a) the assignment to the Executive of any duties
inconsistent with the Executive's status as the senior executive
officer of the Company or a substantial adverse alteration in the
nature or status of the Executive's responsibilities from those in
effect immediately prior to the Change in Control;
(b) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be
increased from time to time;
(c) the relocation of the Company's principal executive
officers to a location more that ten (10) miles from the location
of such officers immediately prior to the Change in Control or the
Company's requiring the Executive to be based anywhere other than
the Company's principal executive offices, except for required
travel on the Company's business to an extent substantially
consistent with the Executive's present business travel
obligations;
(d) the failure, not corrected within ten (10) days after
written notice thereof to the Company, by the Company, without the
Executive's consent, to pay to the
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Executive any portion of the Executive's current compensation, or
to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within ten (10) days of the date such compensation is
due;
(e) the failure, not corrected within ten (10) days after
written notice thereof to the Company, by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which is
material to the Executive's total compensation, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative
to other participants, as existed at the time of the Change in
Control;
(f) the failure, not corrected within ten (10) days after
written notice thereof to the Company, by the Company to continue
to provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's pension,
life insurance, medical, health and accident, or disability plans
in which the Executive was participating at the time of the Change
in Control (other than changes required by law), the taking of any
action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of
any material fringe benefit enjoyed by the Executive at the time
of the Change in Control, or the failure by the Company to provide
the Executive with the number of paid vacation days to which the
Executive is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the Change in Control; or
(g) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; for purposes of this
Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
"Notice of Termination" shall have the meaning stated in Section
7.1 hereof.
(M) "Person" shall have the meaning given in Section 3 (a) (9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
however, a person shall not include:
(i) the Company, a trustee or other fiduciary holding securities
under an employee benefit plan of the Company,
or
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(ii) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
(N) "Potential Change in Control", shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall
have been satisfied:
(i) the Company enters into an agreement, the consummation of
which would result in occurrence of a Change in Control;
(ii) the Company or any person publicly announces an intention to
take or to consider taking actions which, if consummated, would
constitute a Change in Control;
(iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(O) "Severance Payments" shall mean those payments described in
Section 6.1 hereof.
(P) "Total Payments" shall mean those payments described in Section
6.2 hereof.
EDUCATIONAL VIDEO CONFERENCING, INC.
/s/ Dr. John J. McGrath /s/ Dr. Arol I. Buntzman
- ------------------------------------- --------------------------
Dr. John J. McGrath Dr. Arol I. Buntzman
President
/s/ Richard Goldenberg
- -------------------------------------
Richard Goldenberg, Secretary
Witnessed:
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EDUCATIONAL VIDEO CONFERENCING, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of October
1, 1998, by and between Educational Video Conferencing, Inc., a Delaware
corporation (the "Company"), and ____________________________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
the advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
(a) "Change in Control" shall mean, and shall be deemed to
have occurred if, on or after the date of this Agreement, (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in such
capacity, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 25% of the total voting power represented by the Company's then
outstanding Voting Securities (as defined below), (ii) during any period of two
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the Board
of Directors of the Company (the "Board") and any new director whose election by
the Board or nomination by the Board for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board, or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 50% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of related transactions) all or substantially all of the
Company's assets.
(b) "Claim" shall mean with respect to a Covered Event (as
defined below): any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution
<PAGE>
mechanism, or any hearing, inquiry or investigation that Indemnitee in good
faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
(c) "Covered Event" shall mean any event or occurrence related
to the fact that Indemnitee is or was, or acted or failed to act while, a
director, officer, employee, agent or fiduciary of the Company, or any
subsidiary of the Company, or has or was serving at the request of the Company
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture trust or other entity or an employee benefit plan.
(d) "Expenses" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld), actually and
reasonably incurred, of any Claim and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(e) "Expense Advance" shall mean a payment to Indemnitee
pursuant to Section 3 of Expenses in advance of the settlement of or final
judgement relating to a Claim.
(f) "Independent Legal Counsel" shall mean an attorney or firm
of attorneys selected in accordance with the provisions of Section 2(d), who
shall not have otherwise performed services for the Company or Indemnitee within
the last three years (other than with respect to matters concerning the rights
of Indemnitee under this Agreement or of any other indemnitee under a similar
indemnification agreement).
(g) "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Board, Independent
Legal Counsel or any other person or body not a party to the particular Claim
for which Indemnitee is seeking indemnification.
(h) "Section" refers to a section of this Agreement unless
otherwise indicated.
(i) "Voting Securities" shall mean any securities that vote
generally in the election of directors.
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<PAGE>
2. Indemnification.
(a) Indemnification of Expenses. Subject to the provisions of
Section 2(b), the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part out of
a Covered Event), including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion pursuant to Section 2(d) if Independent Legal Counsel is the Reviewing
Party) that Indemnitee is not entitled to be indemnified hereunder under
applicable law, (i) the Company shall have no further obligation under Section
2(a) to make any payments to Indemnitee not made prior to such determination,
and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who
hereby agrees to reimburse the Company) for all Expenses theretofore paid in
indemnifying Indemnitee; provided, however, if Indemnitee has commenced legal
proceedings pursuant to Section 2(c), any determination made by any Reviewing
Party that Indemnitee is not entitled to be indemnified hereunder shall not be
binding and Indemnitee shall not be required to reimburse the Company for any
Expenses theretofore paid in indemnifying Indemnitee until a final judicial
determination (as to which all rights of appeal therefrom have been exhausted or
lapsed) is made with respect thereto.
(c) Indemnitee Rights on Unfavorable Determination; Binding
Effect. If any Reviewing Party determines that Indemnitee is not entitled to be
indemnified hereunder in whole or in part under applicable law, Indemnitee shall
have the right to commence litigation seeking an initial determination by the
court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
(d) Selection of Reviewing Party. If there has not been a
Change in Control, the Reviewing Party shall be selected by the Board. If there
has been a Change in Control, the Reviewing Party shall be Independent Legal
Counsel selected by Indemnitee and approved by the Company (which approval shall
not be unreasonably withheld). Such counsel, shall render its written opinion to
the Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion, subject to Section 2(c). The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to
indemnify fully such counsel against any and all expenses (including attorneys'
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto. Notwithstanding any other provision
of this Agreement, the Company shall not be required to pay Expenses of more
than one Independent Legal Counsel in connection with all matters concerning a
single Indemnitee, and, with respect to the same Claim, such Independent Legal
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<PAGE>
Counsel shall be the Independent Legal Counsel for all other Indemnities unless
(i) the Company otherwise determines or (ii) any Indemnitee shall provide a
written statement setting forth in detail a reasonable objection to such
Independent Legal Counsel representing other Indemnities.
(e) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement, other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
(a) Obligation to Make Expense Advances. The Company shall
make Expense Advances to Indemnitee upon receipt of a written undertaking by or
on behalf of the Indemnitee to repay all Expense Advances if it shall ultimately
be determined that the Indemnitee is not entitled to be indemnified therefor by
the Company. Any written undertaking by Indemnitee to repay any Expense Advances
hereunder shall be unsecured and no interest shall be charged thereon.
(b) Determination of Reasonable Expense Advances. All amounts
included in an Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed to be reasonable.
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses by the
Company to the Indemnitee pursuant to this Agreement shall be made to the
fullest extent permitted by law as soon as practicable after written demand by
Indemnitee therefor is presented to the Company, but in no event later than (i)
twenty (20) business days after such demand for an "Expense Advance is given to
the Company and (ii) forty-five (45) business days after any other demand for
Expenses is given to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified and to receive
Expense Advances, give the Company notice in writing as soon as practicable of
any Claim made against Indemnitee for which indemnification will or could be
sought under this Agreement. Notice to the Company shall be directed to the
Chief Executive Officer and Chief Financial Officer of the Company at the
Company's principal executive offices. Indemnitee shall give the Company such
information and otherwise cooperate with the Company as it may reasonably
require and as shall be within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create
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<PAGE>
a presumption that Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that indemnification
is not permitted by this Agreement or applicable law. In addition, neither the
failure of any Reviewing Party to have made a determination as to whether
Indemnitee has met any particular standard of conduct or had any particular
belief, nor an actual determination by any Reviewing Party that Indemnitee has
not met such standard of conduct or did not have such belief, prior to the
commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under this Agreement or
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by any Reviewing
Party or otherwise as to whether the Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 4(b), the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in each applicable policy. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of each such policy.
(e) Selection of Counsel. In the event the Company shall be
obligated to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently employed by
or on behalf of Indemnitee with respect to the same Claim; provided, however,
that (i) Indemnitee shall have the right to employ Indemnitee's separate counsel
in any such Claim at Indemnitee's expense and (ii) if (A) the employment of
separate counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification and Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's certificate of incorporation, the Company's bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
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<PAGE>
corporation to indemnify a member of its Board or an officer, employee, agent or
fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its Board or an officer, employee,
agent or fiduciary, such change, to the extent not otherwise required by such
law, statute or rule to be applied to this Agreement, shall have no effect on
this Agreement or the parties' rights and obligations hereunder except as set
forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of
Expense Advances provided by this Agreement shall be in addition to any rights
to which Indemnitee may be entitled under the Company's certificate of
incorporation, its bylaws, any other agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of Delaware,
or otherwise. The indemnification and the payment of Expense Advances provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments.
The Company shall not be liable under this Agreement to make
any payment in connection with any Claim made against Indemnitee to the extent
Indemnitee has actually received payment (under any insurance policy, provision
of the Company's certificate of incorporation, bylaws or otherwise) of the
amounts otherwise payable hereunder.
7. Partial Indemnification.
If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of Expenses
incurred in connection with any Claim, but not, however, for all of the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgement.
Both the Company and Indemnitee acknowledge that in certain
instances, federal law or applicable public policy may prohibit the Company from
indemnifying its directors, officers, employees, agents or fiduciaries under
this Agreement or otherwise. Indemnitee understands and acknowledges that the
Company may be required to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
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<PAGE>
9. Liability Insurance.
To the extent the Company maintains liability insurance
applicable to directors, officers, employees, agents or fiduciaries, Indemnitee
shall be covered by such policies in such a manner as to provide Indemnitee the
same rights and benefits as are provided to the most favorably insured of the
Company's directors, if Indemnitee is a director; or of the Company's officers,
if Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.
10. Exceptions.
Notwithstanding any other provision of this Agreement, the
Company shall not be obligated pursuant to the terms of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or make
Expense Advances to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, counterclaim or
cross-claim, except (i) with respect to actions or proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other agreement or insurance policy or under the Company's certificate of
incorporation or bylaws now or hereafter in effect relating to Claims for
Covered Events, (ii) in specific cases if the Board has approved the initiation
or bringing of such Claim, or (iii) as otherwise required under Section 145 of
the Delaware General Corporation Law (relating to indemnification of officers,
directors, employees and agents, and insurance), regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification or
insurance recovery, as the case may be.
(b) Lack of Good Faith. To indemnify Indemnitee for any
Expenses incurred by Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by Indemnitee as a basis for such action was not
made in good faith or was frivolous, or (ii) by or in the name of the Company to
enforce or interpret this Agreement, if a court having jurisdiction over such
action determines as provided in Section 13 that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous.
(c) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute; provided,
however, that notwithstanding any limitation set forth in this Section 10(c)
regarding the Company's obligation to provide indemnification, Indemnitee shall
be entitled under Section 3 to receive Expense Advances hereunder with respect
to any such Claim unless and until a court having jurisdiction over the Claim
shall have made a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that Indemnitee has violated such
statute.
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<PAGE>
11. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall constitute an original.
12. Binding Effect; Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors,
assigns (including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business or assets
of the Company), spouses, heirs and personal and legal representatives. The
Company shall require and cause any successor (whether direct or indirect, and
whether by purchase, merger, consolidation or otherwise) to all, substantially
all, or a substantial part, of the business or assets of the Company, by written
agreement in form and substance reasonably satisfactory to Indemnitee, expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director, officer, employee, agent or
fiduciary (as applicable) of the Company or, at the Company's request, of any
other entity or an employee benefit plan.
13. Expenses Incurred in Action Relating to Enforcement or
Interpretation.
In the event any action is instituted by Indemnitee, or by or
in the name of the Company, under this Agreement or under any liability
insurance policy maintained by the Company to enforce or interpret any of the
terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all
Expenses incurred by Indemnitee, and to receive Expense Advances, with respect
to such action (including without limitation attorneys' fees), regardless of
whether Indemnitee is ultimately successful in such action, unless as a part of
such action a court having jurisdiction over such action makes a final judicial
determination (as to which all rights of appeal therefrom have been exhausted or
lapsed) that each of the material assertions made by Indemnitee as a basis for
such action was not made in good faith or was frivolous; provided, however, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action.
14. Notice.
All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand (which shall include Federal Express or similar service) and
signed for by the party addressed, or (ii) if mailed by domestic certified or
registered mail with postage prepaid, on the third business day after the date
postmarked. Addresses for notice to either party are as shown on the signature
page of this Agreement or as subsequently modified by written notice given as
provided in this Section.
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<PAGE>
15. Consent to Jurisdiction.
The Company and Indemnitee each hereby irrevocably consent to
the jurisdiction of the courts of the State of Delaware for all purposes in
connection with any action or proceeding which arises out of or relates to this
Agreement and agree that any action instituted under this Agreement shall be
commenced, prosecuted and continued only in the Court of Chancery of the State
of Delaware in and for New Castle County, which shall be the exclusive and only
proper forum for adjudicating such a claim.
16. Severability.
The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) are held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including without
limitation each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
17. Choice of Law.
This Agreement, and all rights, remedies, liabilities, powers
and duties of the parties to this Agreement, shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.
18. Subrogation.
In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination.
No amendment, modification, termination or cancellation of
this Agreement shall be effective unless it is in writing signed by both the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed to be or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement.
This Agreement sets forth the entire understanding between the
parties hereto and supersedes and merges all previous written and oral
negotiations, commitments, understandings and agreements relating to the subject
matter hereof between the parties hereto.
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<PAGE>
21. No Construction as Employment Agreement.
Nothing contained in this Agreement shall be construed as
giving Indemnitee any right to be retained in the employ of the Company or any
of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
EDUCATIONAL VIDEO CONFERENCING, INC.
By:
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Name:
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Title:
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Address: Educational Video Conferencing, Inc.
35 East Grassy Sprain Road
Suite 504
Yonkers, NY 10710
AGREED TO AND ACCEPTED BY:
INDEMNITEE
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(signature)
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Address:
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<PAGE>
EDUCATIONAL VIDEO CONFERENCING
1998 INCENTIVE PLAN
ARTICLE I.
DEFINITIONS
1.01 Administrator means the Board and any delegate of the
Board that is appointed in accordance with Article III.
1.02 Agreement means a written agreement (including any
amendment or supplement thereto) between the Company and a Participant
specifying the terms and conditions of a Stock Award or Option granted to such
Participant.
1.03 Board means the Board of Directors of the Company.
1.04 Change in Control shall mean an event or series of events
that would be required to be described as a change in control of the Company in
a proxy or information statement distributed by the Company pursuant to Section
14 of the Exchange Act in response to Item 6(e) of Schedule 14A promulgated
thereunder or otherwise adopted. The determination whether and when a change in
control has occurred or is about to occur shall be made by the Board in office
immediately prior to the occurrence of the event or series of events
constituting such change in control.
1.05 Code means the Internal Revenue Code of 1986, and any
amendments thereto.
1.06 Common Stock means the common stock of the Company.
1.07 Company means Educational Video Conferencing, Inc.
1.08 Control Change Date means the occurrence of the event or
series of events constituting a Change in Control as determined by the Board.
1.09 Exchange Act means the Securities Exchange Act of 1934,
as amended and as in effect on the date of this Agreement.
1.10 Fair Market Value means, on any given date, the closing
price (or, if there is none, the average of the closing bid and asked price) of
the Common Stock on such quotation system or principal securities exchange on
which the Common Stock is traded on such day, or, if the Common Stock is not so
traded on such day, then on the next preceding day that the Common Stock was
traded, all as reported by such source as the Administrator may select.
1.11 Forfeitable Shares shall have the meaning set forth in
Section 9.04.
<PAGE>
1.12 Option means a stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the price
set forth in an Agreement.
1.13 Participant means an employee of and non-employee
director, advisor and independent consultant to the Company or a Related Entity,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Administrator to receive a
Stock Award, an Option or a combination thereof.
1.14 Plan means the Company's 1998 Incentive Plan.
1.15 Related Entity means any entity that directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Company.
1.16 Stock Award means Common Stock awarded to a Participant
under Article IX.
1.17 Stockholders means the stockholders of the Company.
ARTICLE II.
PURPOSES
The Plan is intended to assist the Company and Related
Entities in recruiting and retaining employees, directors, officers, consultants
and advisors, and in compensating such individuals by enabling such individuals
to participate in the future success of the Company and the Related Entities and
to associate their interests with those of the Company and its Stockholders. The
Plan is intended to permit the grant of Stock Awards and the grant of both
Options qualifying under Section 422 of the Code ("incentive stock options") and
Options not so qualifying. No Option that is intended to be an incentive stock
option shall be invalid for failure to qualify as an incentive stock option. The
proceeds received by the Company from the sale of Common Stock pursuant to this
Plan shall be used for general corporate purposes.
ARTICLE III.
ADMINISTRATION
The Plan shall be administered by the Administrator. The
Administrator shall have authority to grant Stock Awards and Options upon such
terms (not inconsistent with the provisions of this Plan) as the Administrator
may consider appropriate. Such terms may include conditions (in addition to
those contained in this Plan) on the exercisability of all or any part of an
Option or on the transferability or forfeitability of a Stock Award, including
by way of example and not limitation, conditions on which Participants may defer
receipt of benefits under the Plan, requirements that the Participant complete a
specified period of employment with or service to the Company or a Related
Entity, that the Company achieve a specified level of financial performance or
that the Company achieve a specified level of financial return. Notwithstanding
any such conditions, the Administrator may, in its discretion, accelerate
<PAGE>
the time at which any Option may be exercised, or the time at which a Stock
Award may become transferable or nonforfeitable. In addition, the Administrator
shall have complete authority to interpret all provisions of this Plan, to
prescribe the form of Agreements, to adopt, amend, and rescind rules and
regulations pertaining to the administration of the Plan and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Administrator shall not
be construed as limiting any power or authority of the Administrator. Any
decision made, or action taken, by the Administrator or in connection with the
administration of this Plan shall be final and conclusive. Neither the
Administrator nor any member of the Board shall be liable for any act done in
good faith with respect to this Plan or any Agreement, Option or Stock Award.
All expenses of administering this Plan shall be borne by the Company.
The Board, in its discretion, may appoint a committee of the
Board and delegate to such committee all or part of the Board's authority and
duties with respect to the Plan. The Board may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Board's delegate or delegates that were consistent with the terms of the
Plan.
ARTICLE IV.
ELIGIBILITY
Section 4.01 General. Any employee, director, officer,
consultant or advisor to, the Company or a Related Entity (including a
corporation that becomes a Related Entity after the adoption of this Plan) is
eligible to participate in this Plan if the Administrator, in its sole
discretion, determines that such person has contributed significantly or can be
expected to contribute significantly to the profits or growth of the Company or
a Related Entity. Directors of the Company who are employees of the Company or a
Related Entity may be selected to participate in this Plan.
Section 4.02 Grants. The Administrator will designate
individuals to whom Stock Awards and Options are to be granted and will specify
the number of shares of Common Stock subject to each award or grant. All Stock
Awards and Options granted under this Plan shall be evidenced by Agreements
which shall be subject to the applicable provisions of this Plan and to such
other provisions as the Administrator may adopt. No Participant may be granted
incentive stock options (under all incentive stock option plans of the Company
and any Related Entity) which are first exercisable in any calendar year for
stock having an aggregate Fair Market Value (determined as of the date an Option
is granted) that exceed the limitation prescribed by Code section 422(d). The
preceding annual limitation shall not apply with respect to Options that are not
incentive stock options.
<PAGE>
ARTICLE V.
STOCK SUBJECT TO PLAN
Section 5.01 Shares Issued. Upon the award of shares of Common
Stock pursuant to a Stock Award, the Company may issue shares of Common Stock
from its authorized but unissued Common Stock. Upon the exercise of any Option,
the Company may deliver to the Participant (or the Participant's broker if the
Participant so directs), shares of Common Stock from its authorized but unissued
Common Stock.
Section 5.02 Aggregate Limit. The maximum aggregate number of
shares of Common Stock that may be issued under this Plan shall not exceed
680,000 shares.
Section 5.03 Reallocation of Shares. If an Option is
terminated, in whole or in part, for any reason other than its exercise, or if a
Stock Award is forfeited in whole or in part, the number of shares of Common
Stock allocated to the Option or Stock Award or portion thereof may be
reallocated to other Options and Stock Awards to be granted under this Plan.
ARTICLE VI.
OPTION EXERCISE PRICE
The price per share for Common Stock purchased on the exercise
of an Option shall be determined by the Administrator on the date of grant;
provided, however, that the price per share for Common Stock purchased on the
exercise of an Option that is an incentive stock option shall not be less than
the Fair Market Value on the date the Option is granted.
ARTICLE VII.
EXERCISE OF OPTIONS
Section 7.01 Maximum Option Period. The maximum period in
which an Option may be exercised shall be determined by the Administrator on the
date of grant, except that no Option that is an incentive stock option shall be
exercisable after the expiration of ten years from the date such Option was
granted. The terms of any Option that is an incentive stock option may provide
that it is exercisable for a period less than such maximum period.
Section 7.02 Nontransferability. Any Option granted under this
Plan shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any such transfer, the Option must be transferred
to the same person or person(s). During the lifetime of the Participant to whom
the Option is granted, the Option may be exercised only by the Participant. No
right or interest of a Participant in any Option shall be liable for, or subject
to, any lien, obligation, or liability of such Participant.
<PAGE>
Section 7.03 Employee Status. For purposes of determining the
applicability of Section 422 of the Code (relating to incentive stock options),
or in the event that the terms of any Option provide that it may be exercised
only during employment or within a specified period of time after termination of
employment, the Administrator may decide to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment.
Section 7.04 Change in Control. Section 7.01 to the contrary
notwithstanding, after a Control Change Date each Option shall be fully
exercisable thereafter in accordance with the terms of the applicable Agreement.
If not sooner exercisable under the terms of the applicable Agreement, a
Participant's Option shall be fully exercisable (i) as of his termination of
employment if his employment terminates after a Control Change Date and he is
terminated without cause or following his refusal to move to another location or
(ii) as of the date that there is a material reduction in the Participant's
compensation or duties if such reduction occurs after a Control Change Date. For
purposes of the preceding sentence the term "cause" means a willful neglect of
responsibilities to the Company or a Related Entity.
ARTICLE VIII.
METHOD OF EXERCISE
Section 8.01 Exercise. Subject to the provisions of Articles
VII and XI, an Option may be exercised in whole at any time or in part from time
to time at such times and in compliance with such requirements as the
Administrator shall determine. An Option granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
for which the Option could be exercised. A partial exercise of an Option shall
not affect the right to exercise the Option from time to time in accordance with
this Plan and the applicable Agreement with respect to the remaining shares
subject to the Option.
Section 8.02 Payment. Unless otherwise provided by the
Agreement, payment of the Option exercise price shall be made in cash. If the
Agreement provides, or in the discretion of the Board, payment of all or part of
the Option price may be made by surrendering shares of Common Stock to the
Company, including by allowing the Company to deduct from the number of shares
of Common Stock deliverable upon exercise of the Option, a number of such shares
which has an aggregate Fair Market Value, determined as of the day preceding the
date of exercise of the Option, equal to the aggregate Option exercise price. If
Common Stock is used to pay all or part of the Option price, the shares
surrendered must have a Fair Market Value (determined as of the day preceding
the date of exercise) that is not less than such price or part thereof.
Section 8.03 Installment Payment. If the Agreement provides,
and if the Participant is employed by the Company on the date the Option is
exercised, payment of all or part of the Option price may be made in
installments. In that event the Company may, if so determined by the
Administrator, lend the Participant an amount equal to not more than 90% of the
Option price of the shares acquired by the exercise of the Option. This amount
shall be evidenced by the Participant's promissory note and shall be payable in
not more than five equal annual installments, unless the amount
<PAGE>
of the loan exceeds the maximum loan value for the shares purchased, which value
shall be established from time to time by regulations of the Board of Governors
of the Federal Reserve System. In that event, the note shall be payable in equal
quarterly installments over a period of time not to exceed five years.
The Participant shall pay interest on the unpaid balance at
the minimum rate necessary to avoid imputed interest or original issue discount
under the Code. All shares acquired with cash borrowed from the Company shall be
pledged to the Company as security for the repayment thereof. In the discretion
of the Administrator, shares of stock may be released from such pledge
proportionately as payments on the note (together with interest) are made,
provided the release of such shares complies with the regulations of the Federal
Reserve System relating to securities credit transactions then applicable. While
shares are so pledged, and so long as there has been no default in the
installment payments, such shares shall remain registered in the name of the
Participant, and he shall have the right to vote such shares and to receive all
dividends thereon.
Section 8.04 Shareholder Rights. No Participant shall have any
rights as a stockholder with respect to shares subject to an Option until the
date of exercise of such Option.
ARTICLE IX.
STOCK AWARDS
Section 9.01 Awards. In accordance with the provisions of
Article IV, the Administrator will designate each individual to whom a Stock
Award is to be made and will specify the number of shares of Common Stock
covered by such awards.
Section 9.02 Vesting. The Administrator, on the date of the
award, may prescribe that a Participant's rights in the Stock Award shall be
forfeitable or otherwise restricted for a period of time set forth in the
Agreement. By way of example and not of limitation, the restrictions may
postpone transferability of the shares or may provide that the shares will be
forfeited if the Participant separates from the service of the Company and its
Related Entities before the expiration of a stated term or if the Company and
its Related Entities or the Participant fails to achieve stated objectives.
Section 9.03 Change in Control. Section 9.02 to the contrary
notwithstanding, after a Control Change Date each Stock Award will become
transferable and nonforfeitable in accordance with the terms of the applicable
Agreement. If not sooner transferable and nonforfeitable under the terms of the
applicable Agreement, a Participant's interest in a Stock Award shall be
transferable and nonforfeitable (i) as of his termination of employment if his
employment terminates after a Control Change Date and he is terminated without
cause or following his refusal to move to another location or (ii) as of the
date that there is a material reduction in the Participant's compensation or
duties if such reduction occurs after a Control Change Date. For purposes of the
preceding sentence the term "cause" means a willful neglect of responsibilities
to the Company or a Related Entity.
Section 9.04 Stockholder Rights. If all or any portion of a
Stock Award is forfeitable pursuant to the Agreement, at all times prior to a
forfeiture thereof, a Participant will have all rights of
<PAGE>
a Stockholder with respect to forfeitable shares of the Stock Award (the
"Forfeitable Shares"), including the right to receive dividends and vote the
Forfeitable Shares; provided, however, that (i) a Participant may not sell,
transfer, pledge, exchange, hypothecate, or otherwise dispose of the Forfeitable
Shares, (ii) the Company shall retain custody of the certificates evidencing the
Forfeitable Shares, and (iii) the Participant will deliver to the Company a
stock power, endorsed in blank, with respect to the Forfeitable Shares. The
limitations set forth in the preceding sentence shall not apply after the
Forfeitable Shares are no longer forfeitable.
ARTICLE X.
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options that are
incentive stock options may be granted under this Plan shall be proportionately
adjusted, and the terms of outstanding Stock Awards and Options shall be
adjusted, as the Board shall determine to be equitably required in the event
that (a) the Company (i) effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares or (ii) engages in a transaction to
which Section 424 of the Code applies or (b) there occurs any other event which,
in the judgment of the Board necessitates such action. Any determination made
under this Article X by the Board shall be final and conclusive.
The issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, outstanding Stock Awards or Options.
The Board may make Stock Awards and may grant Options in
substitution for performance shares, phantom shares, stock awards, stock
options, stock appreciation rights, or similar awards held by an individual who
becomes an employee of the Company or a Related Entity in connection with a
transaction described in clause (ii) of the first paragraph of this Article X.
Notwithstanding any provision of the Plan (other than the limitation of Article
V), the terms of such substituted Stock Award(s) or Option grant(s) shall be as
the Board, in its discretion, determines is appropriate.
ARTICLE XI.
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be
issued, no certificates for shares of Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), any listing agreement to which the Company is a
party, and the rules of
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all domestic stock exchanges on which the Company's shares may be listed. The
Company shall have the right to rely on an opinion of its counsel as to such
compliance. Any share certificate issued to evidence Common Stock when a Stock
Award is granted or for which an Option is exercised may bear such legends and
statements as the Administrator may deem advisable to assure compliance with
federal and state laws and regulations. No Common Stock shall be issued, no
certificate for shares shall be delivered and no payment shall be made under
this Plan until the Company has obtained such consent or approval as the
Administrator may deem advisable from regulatory bodies having jurisdiction over
such matters.
ARTICLE XII.
GENERAL PROVISIONS
Section 12.01 Effect on Employment. Neither the adoption of
this Plan, its operation, nor any documents describing or referring to this Plan
(or any part thereof) shall confer upon any individual any right to continue in
the employ or service of the Company or a Related Entity or in any way affect
any right and power of the Company or a Related Entity to terminate the
employment or service of any individual at any time with or without assigning a
reason therefor.
Section 12.02 Disposition of Stock. A Participant shall notify
the Administrator of any sale or other disposition of Common Stock acquired
pursuant to an Option that was an incentive stock option if such sale or
disposition occurs (i) within two years of the grant of an Option or (ii) within
one year of the issuance of the Common Stock to the Participant. Such notice
shall be in writing and directed to the Secretary of the Company.
Section 12.03 Rules of Construction. Headings are given to the
articles and sections of this Plan solely as a convenience to facilitate
reference. The reference to any statute, regulation, or other provision of law
shall be construed to refer to any amendment to or successor of such provision
of law.
Section 12.04 Employee Status. In the event that the terms of
any Stock Award or the grant of any Option provide that shares may be issued or
become transferable and nonforfeitable thereunder only after completion of a
specified period of employment, the Administrator may decide in each case to
what extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
Section 12.05 Limitation on Awards. Notwithstanding any other
provision of the Plan, if any award under this Plan, either alone or together
with payments that a Participant has the right to receive from the Company or a
Related Entity, would constitute a "parachute payment" (as defined in section
280G of the Code), all such payments shall be reduced to the largest amount that
will result in no portion being subject to the excise tax imposed by section
4999 of the Code.
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ARTICLE XIII.
AMENDMENT
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any Stock Award or Option
outstanding at the time such amendment is made.
ARTICLE XIV.
DURATION OF PLAN
No Stock Award or Option may be granted under this Plan more
than ten years after the date the Plan is adopted by the Board.
ARTICLE XV.
EFFECTIVE DATE OF PLAN
Stock Awards and Options may be granted under this Plan upon
its adoption by the Board, provided that no incentive stock option will continue
to be effective unless this Plan is approved by a majority of the votes entitled
to be cast by the Stockholders, voting either in person or by proxy, at a duly
held Stockholders' meeting or by the consent of stockholders owning more than
50% of shares of the Common Stock within twelve months of such adoption.
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EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
To the Board of Directors
Educational Video Conferencing, Inc.
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form SB-2 of our report dated October 5, 1998 on
the financial statements related to the balance sheets of Educational Video
Conferencing, Inc. as of September 30, 1998 and December 31, 1997 and the
related statements of operations, stockholders' equity, and cash flows for
the nine months ended September 30, 1998 and the period from March 4, 1997
(date of inception) through December 31, 1997, which appear in such Prospectus.
We also consent to the reference to our firm under the caption "Experts" in such
Prospectus.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
October 23rd, 1998
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CONSENT OF DIRECTOR DESIGNEE
To The Board of Directors
Educational Video Conferencing, Inc.
The undersigned hereby consents to the use of my name and the
statements with respect to me appearing under the headings "Management,"
"Certain Transactions," "Principal Stockholders" and "Shares Eligible for Future
Sale" included in the Registration Statement.
ARTHUR H. GOLDBERG
New York, New York
October 22, 1998
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CONSENT OF DIRECTOR DESIGNEE
To The Board of Directors
Educational Video Conferencing, Inc.
The undersigned hereby consents to the use of my name and the
statements with respect to me appearing under the headings "Management,"
"Certain Transactions," "Principal Stockholders" included in the Registration
Statement.
WILLIAM R. CODA
New York, New York
October 20, 1998
