<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1998
REGISTRATION NO. 333-66085
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
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..................................................... $16,560,000 $ 5,710.00
Representative's Warrants........................................................... 120 0.04
Common stock, $0.0001 par value, underlying Representative's Warrants(2)............ 1,728,000 596.00
Total............................................................................... $18,288,120 $ 6,306.04(3)
</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.
(3) $4,956.03 was previously paid.
------------------------
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 DECEMBER 23, 1998
PROSPECTUS
1,200,000 SHARES
EDUCATIONAL VIDEO CONFERENCING, INC.
COMMON STOCK
------------------------
Educational Video Conferencing, Inc. is offering 1,200,000 shares of common
stock. This is our first public offering and no public market currently exists
for our shares. The public offering price is expected to be between $11.00 and
$13.00 per share. EVC has applied to list the common stock on the Pacific
Exchange under the symbol " ," the Boston Stock Exchange under the symbol
" " and on the Nasdaq SmallCap Market 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 EVC
----------- ---------------------- -----------
<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 180,000 additional
shares of common stock to cover over-allotments. Up to 41,666 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 are offering the shares on a firm
commitment basis and expect to deliver them to purchasers on or about
, 1999.
PRIME CHARTER LTD.
, 1999.
<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., American
International Group, Inc., Merrill Lynch, & Co., Inc., Travelers Indemnity
Company, and Zurich Insurance Company (U.S. Branch). 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 began delivering courses to Travelers and
Zurich Insurance employees at a number of U.S. sites. In the first quarter 1999,
we expect to begin offering courses in Europe to employees of some of our
corporate customers and to Reliance National and General Reinsurance Corporation
employees in the United States.
We currently deliver courses given by Adelphi University, The College of
Insurance and Mercy College. In the first quarter of 1999, we expect to begin
delivering executive development courses from the University of Notre Dame and
graduate computer engineering courses given by Manhattan College. Our agreements
with education providers 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, engineering and general studies. In
addition, we offer national exam preparation courses for the insurance industry.
We currently have agreements with AT&T Corp. and VSI Enterprises, Inc. to
co-market our courses and programs with AT&T's telecommunications services and
VSI's interactive video conferencing systems.
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, "EVC," "we," "us" and "our" refer to Educational Video
Conferencing, Inc.
ABOUT THE MARKET FOR OUR SERVICES
Adults represent a substantial segment of the higher education market.
According to the U.S. Department of Education's National Center For Education
Statistics, in 1994 about 40% of adults (76 million) participated in adult
education activities, including work related courses taken by about one-half of
the adult participants. 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
2
<PAGE>
systems enable students to experience more closely an actual classroom
environment than any other distance learning system currently available.
Certain economic, demographic and social trends are contributing to the
growing demand for career-oriented education, such as:
o The recognition of the need for continuing education by
employers. Corporations are investing in intellectual development of
employees in order to gain competitive advantages. According to the
October 1998 issue of Training, corporations with over 100 employees
budgeted approximately $60.7 billion for training in 1997, compared to
approximately $45 billion in 1992.
o Occupations with largest and fastest employment growth. The ongoing
transformation of the U.S. economy from an industrial economy to a
knowledge-based economy requires employees to be better educated. The
Bureau of Labor Statistics' 1998-99 Occupational Handbook indicates that
of the 25 occupations with the largest and fastest employment growth,
high pay, and low unemployment, 18 will require at least a bachelor's
degree and are projected to grow nearly twice as fast as the average for
all occupations.
o Economic value of post-secondary education. We believe there is
increased recognition among adults that post-secondary education leads to
significant improvements in an individual's financial and employment
prospects.
o Education provider's need for additional sources of revenue. Education
providers recognize that adult enrollment is a significant source of
revenue and an important element in their economic growth.
OUR BUSINESS STRATEGY
Our business strategy 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, by:
o targeting major corporations and other organizations with more than 5,000
employees that provide for the reimbursement of at least 80% of tuition
costs;
o making alliances with education providers offering courses and programs
fitting the needs, interests and academic qualifications of the employees
of our corporate customers;
o making alliances with 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, in order to allocate additional resources to market
to, and contract with, a larger number of corporations.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares Offered to Public............................... 1,200,000 shares
Over-allotment Option.................................. Up to 180,000 shares (the last 41,666 shares to be sold
by certain selling stockholders)
Total Shares Outstanding Prior to Offering............. 3,008,907
Total Shares Outstanding After Offering................ 4,208,907 shares
Total Shares Outstanding After Offering and Exercise of
all Options and Warrants............................. 5,017,491 shares (including over-allotment shares and
Representative's warrants)
Assumed Price Per Share to Public...................... $12.00 per share
Total Proceeds Raised by Offering...................... $14,400,000
Underwriting Discounts and Commissions................. $1,440,000 or 7% of the total proceeds plus a 3%
non-accountable expense allowance
Other Expenses of the Offering......................... $900,000 (estimated)
Net Proceeds to EVC.................................... $12,060,000 (estimated)
Use of Proceeds........................................ Purchase of equipment, marketing, hiring additional
personnel and working capital
Proposed PCX Symbol....................................
Proposed BSE Symbol....................................
Proposed Nasdaq Symbol.................................
Dividend Policy........................................ No dividend expected
</TABLE>
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 split of the common stock in October 1997 and a one-for-two
reverse split of the common stock, effective as of the date of this prospectus.
When we qualify statements in this prospectus with the word "believe,"
unless otherwise indicated, we are basing our belief on the knowledge and
experience of our personnel and advisors. Statistical information included in
this prospectus has been obtained by us from publications we deem reliable and
with which we have no relationship.
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 EVC, 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
EVC. In the opinion of EVC, 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................. $ (.38) $ (.09) $ (.74)
----------- ----------- -----------
----------- ----------- -----------
Weighted-average number of shares of common stock
outstanding(1)..................................... 1,922,951 1,845,000 2,521,585
----------- ----------- -----------
----------- ----------- -----------
</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 $ 14,539
Current liabilities................................................... 745 308 208
------- ------ --------
Working capital....................................................... 84 2,116 14,331
Total assets.......................................................... 2,115 3,792 15,752
------- ------ --------
Long-term liabilities................................................. 235 -- --
Total liabilities..................................................... 980 308 208
------- ------ --------
Stockholders' equity.................................................. $ 1,135 $3,484 $ 15,544
------- ------ --------
</TABLE>
- ------------------
(1) Excludes 356,000 shares of common stock reserved for issuance under the 1998
Incentive Plan and an aggregate of 550,250 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 $12.00 per share and the receipt of the
estimated net 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.
OUR LIMITED REVENUES AND LOSSES
From our inception in March 1997 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. There can be no assurance that we will ever
generate sufficient revenues to achieve or sustain profitability and positive
cash flow.
OUR 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.
OUR NEGATIVE CASH FLOW
As a consequence of a protracted billing and collection cycle, we have
experienced, and expect 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.
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, which may take several months.
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. Commencing the first quarter of 1999, we plan to require
students to pay a substantial portion of their tuition prior to the beginning of
courses given by Adelphi and Notre Dame. However, we cannot predict whether this
new policy will adversely impact our student enrollment and, therefore, our cash
flow. Accordingly, the continuation and further implementation of this policy
will depend on its acceptance by students and their employers.
6
<PAGE>
OUR 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. If our strategy of leveraging relationships
with major corporations to generate interest within an industry is not
successful, we may be reliant on a limited number of corporate customers. For
the nine months ended September 30, 1998 tuition payments attributable to
employees of AIG and Citibank accounted for 98% of tuition received by our
education providers. Accordingly, the loss of either one of these corporate
customers will have a material adverse effect on our business and financial
results.
OUR DIFFICULTIES TO OBTAIN CORPORATE CUSTOMERS
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. We rely primarily on our employees, direct mail
marketing, consultants, telemarketing, trade shows and our vendors to initiate
contact with potential customers. Furthermore, 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.
NO CONTROL BY US OVER EDUCATION POLICIES OF OUR CORPORATE 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, among other factors, by:
o limitations imposed by our corporate customers on the number and kind of
courses students can take;
o our corporate customer's acceptance and endorsement of our programs; and
o competition from courses given by our corporate customers or others.
OUR 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 entered into multiyear agreements with Adelphi
University, The College of Insurance, Mercy College and Manhattan College. Our
oral agreement with University of Notre Dame could terminate at any time. There
can be no assurance that such education providers will offer the courses or
programs desired by our corporate customers and their employees. For the nine
months ended September 30, 1998, our share of tuition from courses given by
Adelphi and The College of Insurance accounted for 98% of our net revenue.
Accordingly, the loss of either of these education providers will have a
material adverse effect on our business and financial results.
OUR DIFFICULTIES TO OBTAIN EDUCATION PROVIDERS
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 primarily rely on our employees and
consultants to initiate contact with potential education providers. If we are
unable to contact with additional education providers having reputation,
academic standing and course offerings required by our existing and potential
corporation customer, our business and financial results will be materially and
adversely affected.
7
<PAGE>
NO EXCLUSIVITY AND LIMITED NON-COMPETE PROVISIONS IN OUR AGREEMENTS
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, to
prohibit them from competing with us or from using products or services to
compete with us.
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 interactive video conferencing 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 OF OUR BUSINESS
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 interactive video conferencing 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.
DEPENDENCE ON OUR 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. We maintain key
insurance on the life of Dr. Buntzman in the amount of $2 million and have
employment agreements, expiring December 31, 2001, with each of Dr. Buntzman,
Dr. McGrath and several other key employees.
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 interactive video conferencing 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.
SUBSTANTIAL COMPETITION FROM EDUCATION PROVIDERS AND OTHERS
We face substantial competition from providers of higher education and
others that deliver educational content. Two and four year colleges offering
traditional classroom instruction are our most significant competition. In
addition, alternative methods of delivering courses are proliferating rapidly.
Interactive video conferencing equipment has been used throughout the world for
more than five years, the technology upon which it is based is established and
its cost has been declining. 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 and audio cassettes, CD-roms and Internet-based
instruction. If our interactive video conferencing 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. In addition, recent
amendments to the Higher Education Act include government incentives for
distance learning.
CHANGES IN TELECOMMUNICATIONS OR VIDEO CONFERENCING 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 interactive video conferencing
is accepted as an effective means of providing educational and training
programs, the video
8
<PAGE>
conferencing equipment and telecommunications industries will evolve rapidly. To
remain competitive, we must respond quickly to technological advances in
interactive video conferencing 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 DISTANCE LEARNING
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. Some states accept accreditation from
other states as evidence of meeting minimum state licensing requirements. Other
states do not accept out-of-state accreditation for licensing. Moreover,
licensing requirements and standards are not uniform and can vary significantly
from state to state. Since education using interactive video conferencing
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 accreditation 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 has recently amended and reauthorized the Higher Education Act.
The regulation of distance learning was a major topic in the reauthorization
process. Amendments to the Higher Education Act include new provisions for
federal funding of distance learning pilot projects and grants for partnerships
between education providers or between education providers and others. These
provisions may provide an additional source of funding for businesses like ours.
Distance learning is also under review by the U.S. Copyright Office, which has
been instructed by Congress to consider a distance learning exemption from the
exclusive rights of copyright holders and to recommend, by April of 1999, ways
to promote distance learning in connection with the recently-passed Digital
Millennium Copyright Act. Although these legislative developments reflect a
generally favorable treatment of distance learning by federal lawmakers, there
can be no guarantee that the Department of Education, the Congress or other
federal entities will not impose stricter or additional requirements affecting
our business.
In addition, regulation and accreditation of distance learning programs are
undergoing significant review by the Department of Education, state regulators
and independent 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.
CONTROL BY OUR EXISTING STOCKHOLDERS
If our current stockholders choose to act together after the offering, they
will be able to elect a majority of the directors and exercise control over our
business, policies and affairs. After the offering, our executive officers and
directors will, as a group, own approximately 36.3% of the common stock (34.2%
if the Underwriters fully exercise their over-allotment option) and all of our
current stockholders will, as a group, own approximately 63.7% of the common
stock (65.8% if the Underwriters fully exercise their over-allotment option).
MANAGEMENT'S DISCRETIONARY USE OF OFFERING 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.
POTENTIAL ADVERSE IMPACT ON OUR SHARE PRICE OF FUTURE COMMON STOCK SALES
Sales of substantial amounts of common stock after this offering, or the
belief that such sales may occur, could adversely affect the market price of the
common stock. After this offering, we will have outstanding 4,208,907 shares of
common stock (4,347,247 shares if the Underwriters fully exercise their
over-allotment option) and we will have an additional 356,000 shares of common
stock reserved for issuance pursuant to our
9
<PAGE>
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 2,475,573
shares (2,433,407 shares if the Underwriters fully exercise their over-allotment
option) 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 90 days after the
date of this Prospectus, subject to agreements 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. In
addition, the underwriters or their designees will have warrants to purchase
120,000 shares of common stock that are excercisable for five years commencing
one year after the date of this Prospectus. The holders of these warrants will
have demand and piggyback registration rights. In addition, holders of 1,160,157
shares of common stock and warrants to purchase 385,250 shares of common stock
have piggyback registration rights following this offering.
DETERMINATION OF INITIAL PUBLIC OFFERING PRICE
The initial public offering price was determined through negotiations
between the Underwriters and us. You should read the "Underwriting" section for
a more complete discussion of the factors considered in determining the initial
public offering price.
POSSIBLE VOLATILITY OF OUR SHARE 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 OUR 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. If you purchase common stock in this offering, you will incur
immediate dilution of approximately $8.31 in the net tangible book value per
share of common stock from the price you pay for the common stock.
DIVIDENDS UNLIKELY ON OUR COMMON STOCK
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 OF LAW AND AGREEMENT WITH OUR CHAIRMAN
Certain provisions of Delaware law 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 EVC. 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.
10
<PAGE>
ANTI-TAKEOVER EFFECTS OF OUR CLASSIFIED BOARD
We have 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:
o Class 1, at the first annual meeting of stockholders.
o Class 2, at the second annual meeting of stockholders.
o 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 EVC.
INDEMNIFICATION AND LIMITATION OF LIABILITY OF OUR OFFICERS AND DIRECTORS
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 Delaware law. Our Certificate of Incorporation and
By-Laws also limit, 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 if it is ultimately determined that indemnification is not legally
permitted. These 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 EVC may be adversely affected if we pay the cost of settlement and
damage awards against directors and officers.
FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The words "anticipate," "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.
USE OF PROCEEDS AND PLAN OF OPERATIONS
Assuming an intial public offering price of $12.00 per share, the estimated
net proceeds of this offering will be approximately $12,060,000 (or
approximately $13,554,000 if the Underwriters' over-allotment option is
exercised in full) after deducting the Underwriters' discounts and commissions
and estimated other expenses. EVC intends to apply the net proceeds
approximately as follows:
<TABLE>
<CAPTION>
APPROXIMATE
ANTICIPATED APPLICATION AMOUNT PERCENT
- ------------------------------------------------------------------------------- ----------- -------
<S> <C> <C>
Purchasing and installing video conferencing equipment......................... $ 6,300,000 52%
Marketing...................................................................... 2,800,000 23
Hiring and training additional personnel....................................... 1,200,000 10
Working capital................................................................ 1,760,000 15
----------- -----
$12,060,000 100%
----------- -----
----------- -----
</TABLE>
If the Underwriters' over-allotment option is exercised in full, additional
net proceeds to EVC of $1,494,000 will be added to working capital. EVC 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, EVC intends to invest such funds in short-term,
interest-bearing, investment grade obligations.
11
<PAGE>
EVC anticipates, based on currently proposed plans and assumptions relating
to EVC'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.
EVC reserves the right to change the actual use of proceeds if
unanticipated events cause EVC to change its priorities.
PLAN OF OPERATIONS
During the 12 months following completion of this offering, EVC intends to
focus its efforts on the following:
o Marketing to 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. EVC will continue to create brochures and
catalogs that describe EVC's services and the course offerings of EVC's
education providers.
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 Interactive Video Conferencing
Systems. Equipment purchases and installations will be made 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.
DIVIDEND POLICY
To date, EVC has neither declared nor paid any cash dividends on its common
stock. EVC 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 EVC's earnings
levels, capital requirements, restrictive loan covenants, if any, and other
factors which the Board of Directors may deem relevant.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of EVC as of
September 30, 1998 and as adjusted, to give effect to the sale of 1,200,000
shares of common stock offered hereby at an assumed initial offering price of
$12.00 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
------------------------ -----------
<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 3,008,907 shares and 4,208,907 shares after this offering(1)........ 301 421
Additional paid-in capital......................................................... 6,064,920 18,124,800
Accumulated deficit................................................................ (2,581,719) (2,581,719)
---------- -----------
Stockholders' equity............................................................... $3,483,502 $15,543,502
---------- -----------
Total capitalization............................................................... $3,533,502 $15,593,502
---------- -----------
---------- -----------
</TABLE>
- ------------------
(1) Based on the number of shares outstanding as of September 30, 1998, after
giving effect to a one-for-two reverse split of the common stock. Excludes
356,000 shares of common stock reserved for issuance under the 1998
Incentive Plan and an aggregate of 550,250 shares of common stock issuable
upon the exercise of additional options and warrants.
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<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 $3,328,502 or
$1.11 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 1,200,000 shares of common stock in this offering at an
assumed public offering price of $12.00 per share and the application of the
estimated net proceeds therefrom, the net tangible book value of EVC as of
September 30, 1998 would have been $15,543,502, or $3.69 per share. This
represents an immediate increase in net tangible book value to existing
stockholders of $2.58 per share and an immediate dilution of $8.31 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..................... $12.00
Net tangible book value per share before giving effect to this
offering.................................................................. $1.11
Increase in net tangible book value per share attributable to new
investors................................................................. $2.58
Net tangible book value per share after giving effect to this
offering.................................................................. 3.69
------
Dilution per share to new investors (1)..................................... $ 8.31
------
------
</TABLE>
- ------------------
(1) Dilution to new investors would be $8.08 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
EVC, 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
$12.00 per share, before deducting underwriting discounts and estimated expenses
of this offering payable by EVC:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------ -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. 3,008,907 71.5% $ 6,767,700 32.0% $ 2.25
New investors......................... 1,200,000 28.5 14,400,000 68.0 12.00
--------- ----- ----------- ----
Total............................ 4,208,907 100% $21,167,700 100%
--------- ----- ----------- ----
--------- ----- ----------- ----
</TABLE>
14
<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 EVC, 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 EVC. In the opinion of EVC, 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................... $ (.38) $ (.09) $ (.74)
----------- ---------- ----------
----------- ---------- ----------
Weighted-average number of shares of common stock
outstanding(1)....................................... 1,922,951 1,845,000 2,521,585
----------- ---------- ----------
----------- ---------- ----------
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------
DECEMBER 31, 1997 ACTUAL AS ADJUSTED(2)
----------------- ------------------ ------------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets....................................... $ 829 $ 2,424 $ 14,539
Current liabilities.................................. 745 308 208
----------- ---------- ----------
Working capital...................................... 84 2,116 14,331
----------- ---------- ----------
Total assets......................................... 2,115 3,792 15,752
----------- ---------- ----------
Long-term liabilities................................ 235 -- --
Total liabilities.................................... 980 308 208
----------- ---------- ----------
Stockholders' equity................................. $ 1,135 $ 3,484 $ 15,544
----------- ---------- ----------
</TABLE>
- ------------------
(1) Based on the number of shares outstanding as of September 30, 1998. Excludes
356,000 shares of common stock reserved for issuance under the 1998
Incentive Plan and an aggregate of 550,250 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 $12.00 per share and the receipt of the
estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
15
<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:
o developing and implementing business strategies;
o entering into multi-year contracts with major corporations and education
providers;
o recruiting and hiring management and other personnel;
o acquiring and installing video conferencing equipment;
o entering into co-marketing alliances;
o training instructors and education providers to teach effectively using
interactive video conferencing systems;
o recruiting and enrolling students;
o delivering courses from education providers to multiple locations; and
o raising capital to support its operations.
Revenue and Accounts Receivable. EVC's revenue is derived from sharing
tuition payments received by education providers based on a contractually agreed
upon formula. The relevant factors in negotiations of the percentage of tuition
payments that an education provider pays to EVC for its services is determined
by negotiation between the education provider and EVC, and depends in large part
upon the reputation and academic standing of, and the tuition charged by, the
education provider. 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. 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.
Steps are being taken by EVC and its education providers to improve tuition
billing and collection, including more prompt billing after the completion of
courses and implementing a policy of requiring students to pay a substantial
portion of the tuition prior to the beginning of their courses. Commencing in
the first quarter of 1999, courses offered by Adelphi and Notre Dame will
require advance tuition payments of 50% and 100%, respectively.
Nevertheless, 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.
16
<PAGE>
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
o salaries and benefits,
o marketing expenses,
o depreciation,
o interest and financing costs related to debt private placements, and
o 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.
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
EVC's 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 11,500 shares
of common stock at $2.00 per share. In April 1998, $100,000 principal amount of
these notes was converted into 20,000 shares of common stock and warrants,
expiring in 2002, to purchase 8,000 shares of common stock at $6.00 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 23,500 shares of common stock at
$4.00 per share. In June and July 1998, $185,000 principal amount of these notes
were converted into 46,250 shares of common stock. The transaction costs were
approximately $110,000 and EVC's issuance of 7,000 shares of common stock.
In October 1997, EVC received gross proceeds of $1,000,000 from the
issuance of 250,000 shares of common stock and warrants, expiring in 2002, to
purchase 150,000 shares of common stock. Of these warrants, 100,000 are
exercisable at $4.00 per share and 50,000 are exercisable at $20.00 per share.
The transaction costs were approximately $155,000 and EVC's issuance of 50,000
shares of common stock.
In October 1997, EVC issued 58,824 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.
17
<PAGE>
Between January and April 1998, EVC received gross proceeds of $1,072,500
from the issuance of 195,000 shares of common stock and warrants, expiring in
2003, to purchase 78,000 shares of common stock at $6.00 per share. The
transaction costs were approximately $99,000 and EVC's issuance of warrants,
expiring in 2003, to purchase 51,796 shares of common stock at $6.00 per share.
Between May and August of 1998, EVC received gross proceeds of $4,000,000
for the issuance of 533,334 shares of common stock. The transaction costs were
approximately $400,000 and EVC's issuance of warrants, expiring in 2003, to
purchase 25,000 shares of common stock at $12.00 per share.
Co-Marketing Agreements. EVC's co-marketing agreement with AT&T requires
EVC and AT&T to mutually agree upon co-marketing activities from time to time,
which will consist primarily of attendance at trade shows and conferences and
preparing and making direct marketing mailings. EVC anticipates that it will not
be required to commit material financial or other resources to fulfill its
commitments under this agreement.
Under its co-marketing agreement with VSI, a vendor of video conferencing
systems, EVC is required to produce brochures advertising EVC's services and
equipment and to arrange demonstrations of VSI's equipment. EVC is fulfilling
these requirements in the course of EVC's normal marketing activities without
incurring any material additional cost.
Employment and Consulting Agreements. EVC has annual commitments under its
employment agreements described under "Management--Employment Agreements" of
$682,000 per year. EVC has agreements with consultants providing for payments of
a percentage of gross revenues received by EVC from tuition payments made by or
on behalf of students employed by corporate customers obtained with the
assistance of the consultant. The percentage of gross revenues is generally
between 2% and 3% and in some instances 5%, EVC is also required to make annual
payments to consultants totalling $178,000. All of the consulting agreements are
terminable on 30-days' notice by EVC. In certain instances, percentage fee
payments are required to continue after termination of a consulting agreement by
EVC, generally for a period not to exceed the initial term of EVC's contract
with the corporate customer to which such fees relate.
EVC's Cash Requirements. 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.
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.
18
<PAGE>
BUSINESS
DISTANCE LEARNING INDUSTRY OVERVIEW
Adults represent a substantial segment of the higher education market.
According to the U.S. Department of Education's National Center For Education
Statistics, in 1994 about 40% of adults (76 million) participated in adult
education activities, including work related courses taken by about one-half of
the adult participants. 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
interactive video conferencing systems enable students to experience more
closely the actual classroom environment than any other distance learning system
currently available.
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.
According to the October 1998 issue of Training, corporations with over
100 employees budgeted approximately $60.7 billion for training in 1997,
compared to approximately $45 billion in 1992.
o Fastest Growing Occupations. 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 U.S.
Bureau of Labor Statistics' 1998-99 Occupational Outlook Handbook
indicates that of the 25 occupations with the largest and fastest
employment growth, high pay, and low unemployment, 18 will require at
least a bachelor's degree and are projected to grow nearly twice as fast
as the average for all occupations.
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 Education 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. EVC 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, EVC believes that they do not provide the same benefits of
traditional classroom learning that fully interactive video conferencing does.
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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 business strategy 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. 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.
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 Telecommunication 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
interactive video conferencing systems. EVC is investigating the
prospects for delivering education content over fiber networks, the
Internet, cellular satellite services and other wireless digital
telecommunication technologies. EVC is also pursuing alliances with
telecommunication providers in order to lower the cost of its
telecommunications usage. In addition, EVC seeks alliances with vendors,
telecommunication 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 EVC's 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.
SERVICES, CORPORATE CUSTOMERS AND EDUCATION PROVIDERS
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:
o offer courses and degree programs from multiple education providers;
o determine corporate employer and employee course and degree program
preferences;
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o recruit and enroll students;
o provide and install video conferencing equipment at education providers;
o install or enhance the video conferencing systems of its corporate customers
when required;
o train teachers how to teach effectively using interactive video conferencing
systems;
o arrange for high speed data lines for signal transmission;
o provide the multi-conferencing units required to permit live, interactive
multimedia communications between multiple parties; and
o coordinate the delivery of courses from the education providers to the
students.
Corporate Customers and Education Providers. 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 Insurance in June, July and August 1998, respectively. In
October and November 1998, EVC entered into multi-year agreements with Reliance
National and General Reinsurance, respectively, to offer courses to their
employees starting in January 1999.
EVC is currently offering courses from Adelphi University, The College of
Insurance and Mercy College to Citibank, AIG, Travelers, Zurich Insurance and
Merrill Lynch employees. In the first quarter of 1999, EVC expects to begin
delivering executive development courses from the University of Notre Dame and
offering graduate computer engineering courses given by Manhattan College.
Corporate Customer Agreements. Generally, EVC's agreements with its
corporate customers have terms of three to five years and are subject to
automatic extensions and 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.
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 Provider Agreements. EVC's agreements with its education
providers enable it 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, EVC offers national exam preparation courses
for the insurance industry.
EVC's education provider agreements generally have terms of three to five
years and are subject to automatic extensions and 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.
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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
interactive video conferencing 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 interactive video conferencing 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.
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
interactive video conferencing 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.
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INTERACTIVE 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. EVC does not develop
the hardware or software for the interactive video conferencing systems it uses
because equipment required for teacher and student stations is readily available
from vendors that include VSI, Polycom, Picturetel and Intel. If EVC's education
providers or corporate customers do not have interactive video conferencing
equipment, EVC will lend them the necessary equipment without charge during the
term of their agreements with EVC. EVC has not encountered any limitation on the
types of subjects that can be taught by interactive video conferencing. From
time-to-time, EVC has encountered instructors who are unwilling to use
interactive video conferencing for teaching their courses, but this has not
materially affected EVC's ability to offer courses.
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 approximately 24 students per class.
The teacher and student stations are connected to each other over high
speed point-to-point or multi-point digital data lines (T-1 or ISDN lines) using
EVC's multi-point conferencing units, which enable live, interactive multimedia
communications between three or more endpoints. These units 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.
GOVERNMENT REGULATION OF DISTANCE LEARNING
Federal Considerations. Congress has recently amended and reauthorized the
Higher Education Act to include new provisions for federal funding of distance
learning pilot projects under the Distance Learning Demonstration Programs and
grants, under the Learning Anytime Anywhere Program, for partnerships between
education providers or between education providers and businesses,
not-for-profit organizations and others. These provisions may provide an
additional source of funding for EVC's and its competitor's businesses. Distance
learning is also under review by the U.S. Copyright Office, which has been
instructed by Congress to consider a distance learning exemption from the
exclusive rights of copyright holders and to recommend, by April 1999, ways to
promote distance learning in connection with the recently-passed Digital
Millennium Copyright Act. Although these legislative developments reflect a
generally favorable treatment of distance learning by federal lawmakers, there
can be no guarantee that the Department of Education, the Congress or other
federal entities will not impose stricter or additional requirements affecting
EVC's business. In addition to federal review, the regulation and accreditation
of distance learning programs are undergoing significant review by state
regulators and independent accreditation organizations. EVC cannot predict the
scope, outcome or impact on EVC of this review.
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State Licensing. Many states require that any entity providing educational
programs obtain a license to operate. At present, these requirements generally
apply to EVC's education providers, but not to EVC, because EVC only provides
the delivery system for a licensed educator's program or course content. This
situation may change. 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. State regulators
may be reluctant to grant licenses to EVC because it is not a traditional
education provider.
Some states accept accreditation from other states as evidence of meeting
minimum state licensing requirements. Other states do not accept out-of-state
accreditation or licensing. Moreover, licensing requirements and standards are
not uniform and can vary significantly from state to state. Some states impose
standards for distance learning. The state in which a college or university is
primarily located may require it to obtain approval to offer distance learning
programs through interactive video conferencing systems, even if delivered to
another state. Moreover, the state receiving the distance learning 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 learning, require specified levels of
student support services, set minimum graduation requirements and otherwise
restrict distance learning 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.
State requirements for distance learning are evolving rapidly, and EVC
cannot predict the nature of new requirements, the effect of new requirements on
the way EVC delivers courses, or the degree to which new requirements may
adversely affect EVC's business. 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 learning programs, which address such aspects of
distance learning as curriculum and instruction, evaluation and assessment,
library and learning resources, student services and facilities and finances. An
accreditation organization may view the implementation of regular distance
learning course offerings as a substantive change to an 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 learning by accreditation
organization, EVC may be unable to offer courses when or as planned.
Federal Student Financial Aid. The Higher Education Act authorizes various
federal student financial aid programs. Students enrolled in correspondence
courses, including some distance learning programs, are ineligible for federal
student financial aid. The Higher Education Act 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. However, the Higher Education Act also provides for a
limited number of waivers of specific restrictions for financial aid purposes in
connection with Distance Learning Demonstration Programs.
Failure of an otherwise eligible institution to comply with state licensing
requirements could render an education provider ineligible to participate in
federal financial aid programs. If an education provider fails to obtain
necessary state approval for distance learning, it could be liable to the
Department of Education for student financial aid to students in the program or
other penalties. Furthermore, the Higher Education Act restricts the ability of
institutions to contract with third parties for educational programming. EVC
believes that these restrictions will not apply to its arrangements with
education providers, but there can be no assurance that federal or state
regulatory changes will not adversely alter the present situation.
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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 EVC 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 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 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 are using interactive video conferencing systems to
deliver their course. Many education providers 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, video
and 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. Numerous
distance learning companies offer courses that are the same as, or substantially
similar to, the courses that EVC offers.
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:
o its business strategy;
o its employees with experience in higher education and distance learning;
o the breadth of EVC's services;
o the similarity of the learning experience using interactive video
conferencing systems to the traditional classroom experience, as a result
of the level of interactivity;
o the quality and reliability of EVC's delivery of educational content over
interactive video conferencing systems; and
o the relevance and range of the courses EVC can deliver.
EMPLOYEES
As of September 30, 1998, EVC had 17 full-time employees. EVC also engages
part time personnel during recruiting periods and, as of September 30, 1998, had
two temporary recruiters. None of EVC's employees is covered by a collective
bargaining agreement. EVC believes that its relationship with its employees is
satisfactory.
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PROPERTIES
EVC are currently utilizes approximately 3,500 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's multi-point conferencing units are
located and serviced in Bohemia New York under an agreement expiring in December
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 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.
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.
Following this offering, EVC will be subject to the reporting and other
requirements of the Securities Exchange Act of 1934 and intends to furnish to
its stockholders annual reports containing audited financial statements and may
furnish such interim reports to its stockholders as it deems appropriate.
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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 EVC
<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 the
completion 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., 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 Educational Televideo. 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 EVC'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 EVC'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 EVC 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 EVC.
As set forth above, each of Drs. Buntzman and McGrath was an executive
officer, director and principal stockholder of Educational Televideo. From
February 1995 through July 1996, Educational Televideo had delivered courses to
one customer, using video conferencing equipment and dedicated phone lines. Drs.
Buntzman and McGrath terminated their affiliation with Educational Televideo in
October 1996 when it became apparent to them that anticipated financing needed
to resume Educational Televideo's business would not be provided. Educational
Televideo's had ceased business operations in September 1996. Drs. Buntzman and
McGrath believe that, when they resigned, Educational Televideo's remaining
liabilities consisted solely of approximately $300,000 of accounts payable to
vendors, primarily for equipment and supplies. To the knowledge of Drs. Buntzman
and McGrath, bankruptcy proceedings have not been commenced or threatened by or
against Educational Televideo.
CLASSIFIED BOARD
In December 1998, EVC adopted a classified Board of Directors effective as
of the date of this prospectus. The directors will be divided into three
classes. The term of office of each class of directors will expire as follows:
o Class 1, at the first annual meeting of stockholders following the
closing of this offering.
o Class 2, at the second annual meeting of stockholders following the
closing of this offering.
o Class 3, at the third annual meeting of stockholders following the
closing of this offering.
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<PAGE>
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
EVC's Board of Directors or require EVC to use its best efforts to elect the
Representative's nominee to EVC's Board of Directors. The Representative has not
designated an observer or a director nominee.
BOARD COMMITTEES
Upon completion of this offering, the Board of Directors will have an Audit
Committee, comprised of two independent directors, 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 EVC and accounting principles and auditing practices and
procedures to be employed in preparation and review of EVC'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 EVC's 1998 Incentive Plan. The
Board of Directors will determine issues relating to Dr. Buntzman's
compensation.
DIRECTOR COMPENSATION
Upon consummation of this offering, those directors who are not officers or
employees of EVC will be paid $1,000 for attendance at each meeting of the Board
of Directors or any committee thereof and travel expenses. EVC 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 OF OFFICERS AND DIRECTORS
Section 102 of Delaware corporation 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 does not change a director's duty of care, it enables corporations
to limit available relief to equitable remedies such as injunction or
rescission. EVC'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 EVC 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 EVC 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.
EVC's Certificate of Incorporation and By-Laws provide that EVC 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
29
<PAGE>
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 EVC or serves or served at the request of EVC as a director,
officer or employee of another corporation or entity.
EVC intends to enter into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in EVC's Certificate
of Incorporation and By-Laws. These agreements, among other things, will
indemnify EVC's directors and officers for certain expenses (including advancing
expenses for attorneys' fees), judgments, fines and settlement amounts incurred
by any such person in any action or proceedings, including any action by or in
the right of EVC, arising out of such person's services as a director or officer
of EVC, any subsidiary of EVC or any other company or enterprise to which the
person provides services at the request of EVC. In addition, EVC intends to
obtain directors' and officers' insurance providing indemnification for EVC's
directors and officers for certain liabilities. EVC 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 EVC'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 EVC and its
stockholders. A stockholder's investment in EVC, furthermore, may be adversely
affected to the extent that EVC pays the costs of settlement and damage awards
against directors and officers pursuant to the indemnification agreements and
the indemnification provisions in EVC's Certificate of Incorporation and By-
Laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of EVC, pursuant
to the foregoing provisions, or otherwise, including pursuant to the
underwriting agreement, EVC has been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by EVC of expenses incurred or paid by a director,
officer or controlling person of EVC in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with this offering, EVC 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 EVC is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
There is no currently pending litigation or proceeding involving any
director, officer or employee of EVC, and EVC 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 EVC's Chief
Executive Officer. None of EVC's other most highly compensated individuals who
were serving as officers of EVC 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.
30
<PAGE>
EMPLOYMENT AGREEMENTS
Each of Dr. Buntzman, Dr. McGrath and Messrs. Goldenberg, Caven and
Mollitor has entered into an employment agreement with EVC.
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 of EVC 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 EVC, the officer may not induce employees to
leave the employ of EVC or participate in any capacity in any business
activities that compete with the business conducted by EVC during the term of
the employment agreement.
EVC may terminate the employment of the officers upon death or extended
disability or for cause (as defined in each respective agreement), except that
Mr. Mollitor's agreement is terminated at any time. If employment is terminated
by EVC without cause, the agreements generally provide EVC 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, EVC entered into an agreement with Dr. Arol I. Buntzman
providing for payments to him, in the event his employment with EVC is
terminated after a change in control of EVC (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, if any, 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, which was adopted by the Board of Directors in
October 1998 and subsequently approved by EVC's stockholders and is intended to
benefit EVC 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
EVC and (iii) associating the interest of employees and consultants with those
of EVC and its stockholders through opportunities for increased stock ownership.
EVC's Board of Directors or the Compensation Committee can administer the
1998 Incentive Plan. Upon completion of this offering, the administration of the
1998 Incentive Plan will be delegated by the Board of Directors to the
Compensation Committee.
EVC's employees, advisors, independent consultants, and directors
areeligible to participate in the 1998 Incentive Plan. The Compensation
Committee will select the individuals who will participate in the 1998 Incentive
Plan. The Compensation Committee may, from time to time, grant stock options or
stock awards.
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<PAGE>
Options granted under the 1998 Incentive Plan may be qualified incentive
stock options or non-qualified stock options. The option price will be fixed by
the Compensation Committee 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 incentive stock option. The option price must be paid in cash or,
if permitted by the Compensation Committee, 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 Compensation Committee will also
determine the vesting and exercisability of options, except that incentive stock
option 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 Compensation Committee, in its discretion, may prescribe that a
participant's right in a stock award shall be nontransferable, forfeitable or
otherwise restricted.
The 1998 Incentive 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 EVC (as defined
in the 1998 Incentive Plan).
All stock options and stock awards granted under the 1998 Incentive Plan
will be evidenced by written agreements between EVC and the participant. The
maximum aggregate number of shares of common stock which may be issued under the
1998 Incentive Plan is 356,000.
No option or stock award may be granted under the 1998 Incentive Plan after
September 30, 2008. The Board may terminate the 1998 Incentive Plan sooner
without further action by stockholders. The Board also may amend the 1998
Incentive 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 optionee remains employed by EVC
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 optionee's employment is terminated for cause or he or she leaves EVC
voluntarily without the consent of EVC. In general, stock options may not be
transferred, assigned, pledged or otherwise transferred.
CERTAIN TRANSACTIONS
In connection with EVC's organization in March 1997, Messrs. Buntzman,
McGrath and Goldenberg, all of whom are executive officers and directors of EVC,
purchased 1,000,000, 500,000 and 100,000 shares of common stock, respectively,
for $.0002 per share. EVC subsequently issued an additional 1,500 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 EVC. In September 1998 Dr. McGrath sold 68,000 shares
of common stock to B&H Investments Limited, a principal stockholder of EVC, at
$8.00 per share. Drs. Buntzman and McGrath may be deemed promoters of EVC.
In January and February 1998, EVC issued warrants to Tayside Trading Ltd.,
a principal stockholder of EVC, to purchase 36,000 shares of common stock at
$6.00 per share as a finder's fee in connection with EVC's receipt of gross
proceeds of $1,072,500 from the issuance in a private placement of 195,000
shares of common and warrants to purchase 78,000 shares of common stock at $6.00
per share. Tayside and B & H acquired their other EVC securities described under
"Principal Stockholders" prior to the foregoing transactions and at a time when
they had no relationship with EVC or any officer or director of EVC.
As of March 1998, EVC entered into a three year consulting agreement with
Arthur H. Goldberg, who will become a director of EVC upon the consummation of
this offering. The agreement provides that Mr. Goldberg will help EVC 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 EVC from activities, if any, with one
education provider with which EVC does not currently have an agreement. The
agreement also grants Mr. Goldberg seven year options to purchase (i) 25,000
shares of common stock at $7.00 per share, of which options to purchase 12,500
shares vested immediately and options to purchase an additional 12,500 shares
vested in September 1998 and (ii) an additional 75,000 shares of common stock at
32
<PAGE>
$7.00 per share, of which options to purchase 25,000 shares vest on each
anniversary of the agreement while the agreement remains in effect.
As of May 1998, EVC entered into a five year consulting agreement with
William Coda, who will become a director of EVC upon the consummation of this
offering. The agreement provides that Mr. Coda will assist EVC in obtaining
agreements with additional corporate customers. The agreement entitles Mr. Coda
to 2.5% of payments actually collected by EVC for services provided by it to
corporate customers with which EVC 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 EVC upon 30 days notice to Mr. Coda.
The transactions described above between EVC and each of Tayside, B&H,
Mr. Goldberg and Mr. Coda were consummated when such companies and individuals
were, respectively, not affiliates of EVC. EVC believes the terms of such
transactions were as favorable to EVC as it could obtain from unaffiliated third
parties.
Upon completion of this offering, EVC will have, at least two independent
directors on its Board of Directors. Any material transactions, including
material loans with officers, directors, stockholders holding greater than 5% of
EVC's outstanding shares or affiliates, will be ratified or approved by a
majority of the directors who do not have an interest in the transaction, and
will be on terms which are at least as favorable to EVC as those that can be
obtained by unaffiliated third parties. All such transactions will be entered
into by EVC for a bona fide purpose. Such disinterested directors will have full
access, at EVC's expense, to EVC's counsel or other independent counsel in
connection with such ratification or approval of any transaction.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 15, 1998, the beneficial
ownership of common stock by each person (or group of affiliated persons) known
by EVC to own beneficially more than 5% of the outstanding shares of common
stock, each director and director designee and the Chief Executive Officer of
EVC, 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.............................................. 1,518,500(2) 50.5% 36.1%(3)
John J. McGrath............................................... 432,000(2) 14.4 10.3 (3)
Richard Goldenberg............................................ 86,500(2)(4) 2.9 2.1 (3)
Tayside Trading Ltd(5) ....................................... 386,000(6) 12.3 8.9
125/5 Sanhebria Murchevet
Jerusalem, Israel
DEWI Investments Limited(7) .................................. 533,334 17.8 12.7
37 Bar Ilan Street
Jerusalem, Israel
B&H Investments Limited(8) ................................... 268,409(9) 8.8 6.3
50 Town Range
Gibraltar
William R. Coda*.............................................. -- -- --
Arthur H. Goldberg*........................................... 35,000(10) 1.2 .8
All directors, director designees and executive officers as a
group (5 persons)........................................... 1,553,500(4)(10) 51.2 36.7
</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, Yonkers, New York 10710.
(2) Includes the 432,000 and 86,500 shares beneficially owned, respectively, by Dr. McGrath and Mr. and
Mrs. Goldenberg. An agreement between Drs. Buntzman and McGrath, gives Dr. Buntzman the right to direct the
vote of the shares of common stock owned by Dr. McGrath as Dr. Buntzman directs until March 1, 2000, and 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 EVC'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 EVC without cause. The price
to be paid by Dr. Buntzman for such shares will be the lower of $4.00 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." Additionally, Dr. Buntzman has the right to direct the vote of the
shares owned by Mr. and Mrs. Goldenberg until March 1, 2000 pursuant to an agreement with them.
(3) If the Underwriters elect to exercise in full their overallotment option, Dr. Buntzman will beneficially own
1,476,834 shares of common stock, representing 34.0% of the outstanding shares, Dr. McGrath will own 420,146
shares of common stock, representing 9.7% of the outstanding shares, Mr. Goldenberg will own 84,127 shares
of common stock, representing 1.9% of the outstanding shares and all directors and executive officers as a
group will own shares of common stock, representing 34.6% of the outstanding shares. See "Underwriting."
(4) Owned jointly by Mr. Goldenberg and his wife and excludes 15,000 shares of common stock owned by
Mr. Goldenberg's adult children, as to which shares Mr. and Mrs. Goldenberg disclaim beneficial ownership.
(5) The ultimate beneficial owner is Mr. Esriel Pines.
(6) Includes currently exercisable warrants to purchase 136,000 shares of common stock. Excludes warrants to
purchase 50,000 shares of common stock which are not exercisable prior to October 27, 1999. See "Certain
Transactions" and "Shares Eligible for Future Sale."
(7) The ultimate beneficial owner is Mr. Aron Gee.
(8) The ultimate beneficial owners are Mr. Chaim Segal and Mr. Simcha Senerovitch.
(9) Includes currently exercisable warrants to purchase 46,545 shares of common stock. See "Shares Eligible for
Future Sale."
(10) Includes currently exercisable warrants and options to purchase 25,000 shares of common stock. See "Certain
Transactions" and "Shares Eligible for Future Sale."
</TABLE>
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of the material terms of the common stock does not
purport to be complete and is subject in all respects to applicable Delaware law
and to the provisions of EVC'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 EVC 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 3,008,907 currently outstanding shares of EVC
common stock are owned by 36 holders of record. Upon consummation of this
offering, 4,208,907 shares of common stock and no shares of preferred stock will
be issued and outstanding. An additional 138,334 shares of common stock will be
outstanding if the Underwriters' over-allotment option is exercised in full and
an additional 120,000 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 EVC'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 EVC 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 EVC, 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 EVC 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. EVC 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. EVC has no present plans
to issue any preferred stock.
CERTAIN ANTI-TAKEOVER EFFECTS OF LAW AND CERTIFICATE OF INCORPORATION
Following consummation of the offering, EVC will be subject to the
"business combination" provisions of Section 203 of Delaware corporation law. In
general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder"
35
<PAGE>
(in general, a stockholder owning 15% of a corporation'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 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 such outstanding voting stock not owned by the interested stockholder.
EVC has 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
EVC. See "Management--Classified Board."
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company, New York, NY, has been
appointed as transfer agent and registrar for the common stock.
LISTING
EVC has applied for listing of the common stock on the Pacific Exchange
under the symbol " ", the Boston Stock Exchange under the symbol " " and on
the Nasdaq SmallCap Market under the symbol " ."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
stock. EVC 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, EVC will have 4,208,907 shares of
common stock outstanding (4,347,241 shares if the Underwriters' over-allotment
option is exercised in full). Of the shares outstanding after this offering, the
1,200,000 shares of common stock sold in this offering will be freely tradeable
without restriction under the Securities Act of 1933, except that shares owned
by an "affiliate" of EVC will be subject to the volume limitations of Rule 144
under the Securities Act of 1933. 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 3,008,907 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. In addition to the demand and piggyback registration rights of
the holders of the Representatives Warrants, holders of 1,160,157 shares of the
common stock and warrants to purchase 385,250 shares of common stock have
piggyback registration rights following this offering. Such holders include
Tayside Trading Ltd., Dewi Investments Limited, and B & H Investments Limited,
as to a total of 1,005,198 shares of common stock and 232,546 shares of common
stock subject to warrants, and Arthur H. Goldberg as to 20,000 shares of common
stock and 8,000 shares of common stock subject to warrants.
36
<PAGE>
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 EVC or an affiliate of EVC 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 EVC or an
affiliate, a stockholder that is not an affiliate of EVC 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 EVC, 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 670,250 shares of common stock outstanding. Subject to
the provisions of existing lock-up agreements, holders of options to purchase
165,000 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, EVC intends to file a registration
statement on Form S-8 covering non-transferable options granted under the 1998
Incentive 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 EVC or existing lock-up agreements. See
"Management--1998 Incentive Plan."
For information regarding the lock-up agreements restricting transfer of
securities owned by EVC's existing stockholders, see "Underwriting."
37
<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 EVC, and EVC has agreed
to sell to the Underwriters, an aggregate of 1,200,000 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...................................................................... 1,200,000
----------
----------
</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. Until completion of
this offering, the public offering price, the concession and the reallowance
will not be changed.
EVC 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 EVC to cover some of
the due diligence expenses and underwriting costs related to this offering. EVC
has also agreed to pay the fees and expenses of counsel to the Underwriters up
to a maximum of $200,000.
EVC 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 the Representative, on behalf of
itself, has the right to designate a representative to observe meetings of EVC's
Board of Directors or require EVC to use its best efforts to elect the
Representative's nominee to EVC's Board of Directors. See "Management."
EVC has agreed to sell to the Representative or its designees, for nominal
consideration, the Representative's Warrants to purchase an aggregate of 120,000
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 EVC 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, EVC has agreed to include such shares of common stock in any
appropriate registration statement which is filed by EVC. 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.
38
<PAGE>
The Underwriting Agreement provides that EVC 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 EVC or such affiliates at
any time during the three-year period commencing on the Effective Date.
EVC 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 180,000 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
138,334 shares will be sold by EVC and the remaining 41,666 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 EVC and the Representative. Among the factors
considered in determining the public offering price were the services, the
experience of management, the economic conditions of EVC's industry in general,
the general condition of the equity securities market and the demand for similar
securities of companies considered comparable to EVC 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 EVC
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 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 lock-up agreements referred to in the last paragraph of "Shares
Eligible for Future Sale" are described in this paragraph. EVC 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 Incentive Plan or to shares sold to the
Underwriters to cover over-allotment.
39
<PAGE>
LEGAL MATTERS
The legality of the common stock offered hereby will be passed upon for EVC
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 EVC 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.
40
<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 EVC'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
New York, New York
October 5, 1998, except for the third from
last paragraph of Note 1 and the second paragraph
of Note 7, as to which the date is December 22, 1998.
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 2,329,278 shares and 3,008,907 shares, respectively................ 233 301
Additional paid-in capital........................................................ 1,857,027 6,064,920
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............................... $ (.38) $ (.09) $ (.74)
--------- --------- -----------
--------- --------- -----------
Weighted-average number of common shares outstanding...... 1,922,951 1,845,000 2,521,585
--------- --------- -----------
--------- --------- -----------
</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........................... 1,845,000 $184 $ 16 $ -- $ 200
Issuance of common stock for cash............ 250,000 25 844,975 -- 845,000
Issuance of common stock for video
conferencing equipment.................... 58,824 6 391,054 -- 391,060
Issuance of common stock for services related
to raising equity......................... 50,000 5 (5) -- --
Issuance of common stock in connection with
private placement......................... 125,454 13 620,987 -- 621,000
Net loss..................................... -- -- -- (722,122) (722,122)
--------- ---- ---------- ----------- ----------
Balance at December 31, 1997................... 2,329,278 233 1,857,027 (722,122) 1,135,138
Nine months ended September 30, 1998:
Issuance of common stock for cash............ 533,334 53 3,599,954 -- 3,600,007
Issuance of common stock in connection with
private placement......................... 69,545 7 349,130 -- 349,137
Issuance of common stock upon conversion of
notes payable............................. 66,250 7 248,310 -- 248,317
Issuance of common stock for services
relating to raising equity................ 7,000 1 (1) -- --
Issuance of common stock for services........ 3,500 -- 10,500 -- 10,500
Net loss..................................... -- -- -- (1,859,597) (1,859,597)
--------- ---- ---------- ----------- ----------
Balance at September 30, 1998.................. 3,008,907 $301 $6,064,920 $(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. ("EVC") was formed on March 4, 1997.
EVC 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. EVC 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.
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 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 newly formed inactive Delaware corporation owned by the
stockholders of EVC-NY. EVC-DE is the surviving corporation and EVC-NY has
ceased to exist. The merger was accounted for at historical cost in a manner
similar to a pooling of interests.
EVC considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents.
EVC maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. EVC has not experienced any losses in such accounts.
EVC recognizes income ratably over the semester in which courses are given.
EVC 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 EVC'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). EVC 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.
EVC 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
liabilities
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)
and their financial amounts at year-end). EVC 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.
In December 1998, the Company's Board of Directors approved a 1-for-2
reverse stock split which will be effective on the date of the public offering
prospectus. All references to the number of common shares and per share amounts
elsewhere in the financial statements and related footnotes have been restated
as appropriate to reflect the effect of the reverse split for all periods
presented.
EVC 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, EVC 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, EVC adopted SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 modifies the format EVC
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 EVC's
financial position or results of operations and since EVC 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, EVC 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 11,500 shares of common stock for $2.00 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 20,000 shares of common stock and warrants to purchase 8,000
shares of common stock for $6.00 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, EVC 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
23,500 shares of common stock at $4.00 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
$4.00 per share. In June and July 1998, $185,000 principal amount of notes
was converted into 46,250 shares of common stock and $50,000 principal
amount is still outstanding. In connection with these private placements,
EVC incurred transaction costs amounting to $82,556 and, upon conversion,
incurred $27,512 of expenses and issued 7,000 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, EVC 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, EVC completed private offerings of
securities. EVC 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,
EVC's ability to utilize its net operating loss carryforwards. EVC uses the
lowest marginal U.S. corporate tax of 15% to determine deferred tax amounts and
the related valuation allowance because EVC had no taxable earnings through
September 30, 1998.
6. COMMITMENTS:
EVC leases office space under noncancelable operating leases which expire
in August 2002. EVC also leases space and other services for its multiport
control units that expires in 2000. The leases are subject to escalations for
increases in EVC'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.
EVC has entered into employment agreements with executive officers of EVC
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>
EVC has a consulting agreement with an individual who will become a
director of EVC upon the consummation of the proposed IPO. The agreement
entitles the consultant to 2.5% of payments actually collected
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)
by EVC for services provided by it to corporate customers with which EVC
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.
EVC has a consulting agreement with another individual who will become a
director of EVC upon the consummation of the proposed IPO. The agreement
entitles the consultant to 5% of revenues received by EVC from activities, if
any, with one education provider with which EVC does not currently have an
agreement. The agreement grants the consultant seven year options to purchase up
to 100,000 shares of common stock, at $7.00 per share, of which options to
purchase 25,000 shares vested prior to September 30, 1998 and options to
purchase an additional 25,000 shares of common stock vest each March of 1999
through 2001.
7. STOCKHOLDERS' EQUITY:
Effective October 1997, EVC's board of directors approved, prior to the
reverse stock split described in the next paragraph, 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 EVC's additional paid-in
capital account to EVC's common stock account, prior to the reverse stock split
described in the next paragraph.
In December 1998, the Company's Board of Directors approved a 1-for-2
reverse stock split which will be effective on the date of the public offering
prospectus. All references to the number of common shares and per share amounts
elsewhere in the financial statements and related footnotes have been restated
as appropriate to reflect the effect of the reverse split for all periods
presented.
In May 1997, in connection with an employment agreement, EVC issued options
to this employee to purchase 15,000 shares of common stock at $4.80 per share.
The options, which vest at the rate of 5,000 per year, are not exercisable until
one year from the effective date of EVC's proposed IPO and expire 10 years from
the effective date of the IPO.
In May 1997, EVC issued warrants to an unaffiliated entity to purchase up
to 37,500 shares of common stock for $5.44 per share as additional consideration
for entering into a multiyear contract. The warrants are not exercisable until
one year from the effective date of EVC proposed IPO and expire six years from
the effective date of the proposed IPO.
In October 1997, EVC received gross proceeds of $1,000,000 from the
issuance of 250,000 shares of common stock and warrants, expiring in 2002, to
purchase 150,000 shares of common stock. Of these warrants, 100,000 are
exercisable at $4.00 per share and 50,000 are exercisable at $20.00 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, EVC issued 50,000 shares of common stock as a finder's fee in
connection with this transaction.
In October 1997, EVC entered into an agreement, as amended, with a provider
of interactive video equipment (the "Provider") under which EVC agreed to
purchase approximately $1,000,000 of video conferencing systems. The agreement
also obligates EVC 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 58,824 shares of EVC's common stock and a $95,177 noninterest-bearing note
due on September 30, 1998. At December 31, 1997, EVC 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, EVC received gross proceeds of
$1,072,500 from the issuance of 195,000 shares of common stock and warrants,
expiring in 2003, to purchase 78,000 shares of common stock at
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)
$6.00 per share. As of December 31, 1997, EVC had received subscriptions for an
aggregate of $690,000 to purchase 125,500 shares of common stock and warrants,
expiring in 2003, to purchase 50,200 shares of common stock. The $690,000 was
received by EVC by January 13, 1998. Transaction costs incurred in connection
with this private placement were approximately $99,000. Additionally, warrants
to purchase 51,796 shares of common stock for $6.00 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, EVC
issued options to purchase 50,000 shares of common stock. The options vest
ratably over 10 years with exercise prices ranging from $20.00 per share to
$40.00 per share.
Between May and August 1998, EVC received gross proceeds of $4,000,000 for
the issuance of 533,334 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 25,000 shares of
common stock at $12.00 per share.
In October 1998, the Board of Directors of EVC adopted an incentive stock
option plan in which 356,000 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 and September 30, 1998:
<TABLE>
<CAPTION>
WARRANTS OUTSTANDING
EXERCISE -----------------------------
PRICE PER DECEMBER 31, SEPTEMBER 30,
EXPIRATION DATE WARRANT 1997 1998
- ------------------------------------------------------------------------- --------- ------------ -------------
<S> <C> <C> <C>
June 2002................................................................ $ 2.00 11,500 11,500
August 2002.............................................................. 4.00 5,500 5,500
October 2002............................................................. 4.00 100,000 100,000
October 2002............................................................. 20.00 50,000 50,000
December 2002............................................................ 4.00 18,000 18,000
December 2002............................................................ 6.00 86,250 88,250
February 2003............................................................ 6.00 -- 37,500
April 2003............................................................... 6.00 -- 12,000
August 2003.............................................................. 12.00 -- 25,000
Six years from IPO....................................................... 5.44 37,500 37,500
------- -------- -------
308,750 385,250
-------- -------
-------- -------
</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>
$ 4.80...................................................... 15,000 10 yrs. $ 4.80 -- $ --
$ 7.00...................................................... 100,000 7 yrs. $ 7.00 12,500 $ 7.00
$20.00--$40.00.............................................. 50,000 10 yrs. $30.00 -- $ --
------- ------- ------ ------ ------
$ 4.80--$40.00.............................................. 165,000 8 yrs. $13.76 12,500 $ 7.00
------- ------- ------ ------ ------
------- ------- ------ ------ ------
</TABLE>
EVC 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 EVC 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, EVC'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.............................................. $ (.38) $ (.74)
--------- -----------
Pro forma net loss per common share............................................. $ (.39) $ (.77)
--------- -----------
</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............................................... $ 1.59 $ 1.54
Total number of options granted................................................. 15,000 150,000
------- ---------
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 EVC'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 EVC. Such an increase in stock price would
benefit all stockholders commensurately.
8. INITIAL PUBLIC OFFERING:
EVC intends to file a Registration Statement on Form SB-2 under the
Securities Act of 1933. The Registration Statement contemplates an initial
public offering of common stock having a value of approximately $13,200,000 to
$15,600,000.
F-14
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 2
Risk Factors................................... 6
Use of Proceeds and Plan of Operations......... 11
Dividend Policy................................ 12
Capitalization................................. 13
Dilution....................................... 14
Selected Financial Information................. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 16
Business....................................... 19
Management..................................... 27
Certain Transactions........................... 32
Principal Stockholders......................... 34
Description of Capital Stock................... 35
Shares Eligible for Future Sale................ 36
Underwriting................................... 38
Legal Matters.................................. 40
Experts........................................ 40
Index to Financial Statements.................. F-1
</TABLE>
------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
1,200,000 SHARES
EDUCATIONAL VIDEO
CONFERENCING, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
PRIME CHARTER LTD.
, 1999
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<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 10.21, 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 and the Underwriters 3% non-accountable
expense allowance) 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....................................... $ 6,306.04
NASD fee................................................... 2,165.60
PCX, BSE and Nasdaq Listing Fees........................... 30,000.00
Legal fees and expenses.................................... 500,000.00
Printing and engraving expenses............................ 75,000.00
Accounting fees and expenses............................... 125,000.00
Blue sky fees and expenses................................. 40,000.00
Transfer agent and registrar fees end expenses............. 7,500.00
Miscellaneous.............................................. 114,028.36
-----------
Total................................................. $900,000.00
-----------
-----------
</TABLE>
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 92 shares, no par value, for $2.17 per share. The 92
shares were exchanged for 1,845,000 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 an education provider
to purchase up to 37,500 shares of common stock, at $5.44 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. This
education provider is a sophisticated investor that was given access by the
Registrant to all information it requested about the Registrant.
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 11,500 shares of common stock at
$2.00 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 20,000 shares of common stock and
warrants to purchase 8,000 shares of common stock at $6.00 per share.
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
- ------------------
** Gives effect to the one-for-two reverse stock split.
II-1
<PAGE>
warrants to purchase 23,500 shares of common stock at $4.00 per share. In
connection with such issuances the Registrant paid $24,850 in commissions,
and issued 8,250 shares of common stock to one entity. In June and July
1998, $185,000 of these notes were converted into 46,250 shares of common
stock.
In October 1997, the Registrant received gross proceeds of $1,000,000
from the issuance to one accredited investor of 250,000 shares of common
stock and warrants to purchase 150,000 shares of common stock. Of these
warrants, 100,000 are exercisable at $4.00 per share and 50,000 are
exercisable at $20.00 per share. In connection with such issuance, the
Registrant paid a fee of $130,000 and issued 50,000 shares of common stock
to one person.
In October 1997, the Registrant issued 58,824 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. This vendor is a
sophisticated investor that was given access by the Registrant to all
information it requested about the Registrant.
Between January and April 1998, the Registrant received gross proceeds
of $1,072,500 from the issuance to four accredited investors of 195,000
shares of common stock and warrants to purchase 78,000 shares of common
stock at $6.00 per share. In connection with such issuance, the Registrant
paid fees of $99,000 and issued to two entities warrants to purchase 51,796
shares of common stock at $6.00 per share.
In April 1998, the Registrant issued to two persons 3,500 shares of
common stock as payment for financial consulting services in March through
October 1997. The shares were valued at $3.00 per share. Each such
individual is a sophisticated investor that had complete access to
information regarding the Registrant as a result of his relationship with
the Registrant.
Between June and August 1998, the Registrant received gross proceeds
of $4,000,000 for the issuance of 533,334 shares of common stock to one
accredited investor. In connection with such issuance, the Registrant paid
a fee of $400,000 and issued warrants to purchase 25,000 shares of common
stock at $12.00 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 pursuant to
Section 4(2) thereof. In addition, the securities sold to accredited investors
were sold pursuant to Regulation D. All of the certificates evidencing the
shares issued in each of the foregoing transactions 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>
<C> <C> <S>
**1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Registrant.
*3.1.1 -- Form of Amendment to 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 FischbeinoBadillooWagneroHarding 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.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <C> <S>
+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 as amended.
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 -- Consultant 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.
**10.23 -- ICS Network Systems Equipment Collocation and Services Agreement dated November 20, 1997.
**10.24 -- Agreement between the Registrant and General Reinsurance Corporation for the Offering of Interactive
Televideo Courses and Distance Learning Programs dated November 6, 1998.
+**10.25 -- Agreement between the Registrant and Manhattan College for the Offering of Interactive Video
Conferenced Courses dated November 23, 1998.
**10.26 -- Comarketing Agreements between AT&T Corp. and the Registrant.
**10.27 -- Tariff agreement between the Registrant and AT&T Corp. dated in June 1998.
**10.28 -- Agreement between Arol I. Buntzman and Richard and Bonnie Goldenberg dated December 21, 1998.
**23.1 -- Consent of Goldstein Golub Kessler LLP.
*23.2 -- Consent of FischbeinoBadillooWagneroHarding (contained in opinion to be filed as Exhibit 5).
23.3 -- Consent of Arthur H. Goldberg.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <C> <S>
23.4 -- Consent of William R. Coda.
24.1 -- Power of Attorney (set forth on page II-5).
**27 -- Financial Data Schedule.
</TABLE>
- ------------------
* To be filed by amendment.
** Filed herewith.
*** Refiled as corrected.
+ Confidential treatment has been granted with respect to the redacted
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, 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 December, 1998.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /S/ AROL I. BUNTZMAN
----------------------------------
Arol I. Buntzman
Chairman of the Board and
Chief Executive Officer
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
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
/s/ AROL I. BUNTZMAN Chairman of the Board and December 23, 1998
- ---------------------------------- Chief Executive Officer
Arol I. Buntzman
/S/ JOHN J. MCGRATH President and Director December 23, 1998
- ----------------------------------
John J. McGrath
/s/ RICHARD GOLDENBERG Chief Financial Officer, Secretary and December 23, 1998
- ----------------------------------
Richard Goldenberg Director (Principal Financial Officer and
Principal Accounting Officer)
* December , 1998
- ----------------------------------
Attorney-in-fact
</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.
*3.1.1 -- Form of Amendment to 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 FischbeinoBadillooWagneroHarding 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 as amended.
10.12 -- Employment Agreement between the Registrant and Dr. Arol I. Buntzman dated October 1,
1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- -------- ---------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
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 -- Consultant 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.
**10.23 -- ICS Network Systems Equipment Collocation and Services Agreement dated November 20,
1997.
**10.24 -- Agreement between the Registrant and General Reinsurance Corporation for the Offering of
Interactive Televideo Courses and Distance Learning Programs dated November 6, 1998.
+**10.25 -- Agreement between the Registrant and Manhattan College for the Offering of Interactive
Video Conferenced Courses dated November 23, 1998.
**10.26 -- Comarketing Agreements between AT&T Corp. and the Registrant.
**10.27 -- Tariff agreement between the Registrant and AT&T Corp. dated in June 1998.
**10.28 -- Agreement between Arol I. Buntzman and Richard and Bonnie Goldenberg, dated December 21, 1998.
**23.1 -- Consent of Goldstein Golub Kessler LLP.
*23.2 -- Consent of FischbeinoBadillooWagneroHarding (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-5).
**27 -- Financial Data Schedule.
</TABLE>
- ------------------
* To be filed by amendment.
** Filed herewith.
*** Refiled as corrected
+ Confidential treatment has been granted with respect to portions of this
exhibit.
<PAGE>
DRAFT
12/22/98
_______________ 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.
<PAGE>
1. Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form SB-2 (File No. 333-66085), 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
2
<PAGE>
effective. The term "Rule 430A Information" means information with respect to
the Shares and the offering thereof permitted to 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
3
<PAGE>
have a material adverse effect on the business, properties, prospects, financial
condition or results of operations of the 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
4
<PAGE>
Representative's Warrant Agreement, except such as may be required under the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
under state securities or blue sky ("Blue Sky") laws or under the rules and
regulations of the Pacific Exchange (the "PE"), the Boston Stock Exchange (the
"BSE") and the Nasdaq Small Cap Market ("Nasdaq Small Cap").
(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
5
<PAGE>
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 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.
6
<PAGE>
(vii) 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, 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
except as rights to indemnity and contribution thereunder may be limited by
applicable laws or 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
7
<PAGE>
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 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
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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.
(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
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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.
(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
PE, BSE and Nasdaq Small Cap 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 PE, BSE or Nasdaq Small Cap, nor has the Company received any
notification that the Commission, PE, BSE or Nasdaq Small Cap 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
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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 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
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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 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
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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 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
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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 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
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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 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.
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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.
(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 45th 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.
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(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 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 as permitted by the Representative's Warrant
Agreement 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
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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 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
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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
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.
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(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 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
20
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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 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 PE, BSE and Nasdaq Small Cap.
(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:
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(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' 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 PE, BSE and Nasdaq Small Cap; 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))
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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 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.
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(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 case may be, the
opinion of Fishbeino Badilloo Wagnero 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 Fishbeino Badilloo Wagnero
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
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(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 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
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<PAGE>
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
(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, except obligations incurred in the ordinary course of business in
accordance with past practices,(D) any change in the capital stock or
outstanding indebtedness of the Company which is material to the Company 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
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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 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 PE, BSE and
Nasdaq Small Cap.
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
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<PAGE>
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 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.
(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
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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 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.
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(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."
(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 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,
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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 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
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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, 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,
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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(e). 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(e) 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 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
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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, PE, BSE or Nasdaq Small Cap
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, PE, BSE or Nasdaq Small Cap, 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 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
34
<PAGE>
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, PE, BSE or Small
Cap which, in the judgment of the Representative, has a material adverse effect
on the marketability of the Shares 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 and on the
marketability of the Shares. 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) Subject to 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 held to be
improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving
35
<PAGE>
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) Subject to 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., 499 Park Ave. - 20th
Floor New York, New York, 10022, 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.
(b) Jurisdiction; Venue; Service of Process. Each of you and 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
36
<PAGE>
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.
Each of you and 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. Each of you and 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
---------------------------------
Arol I. Buntzman
Chairman of the Board
37
<PAGE>
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
A-1
<PAGE>
Warrants in accordance with the terms of the Representative's Warrant Agreement.
(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 material 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,
(iii) any statute, rule or regulation applicable to the Company or (iv) any
applicable license, authorization, approval, permit, judgment, franchise, order,
writ, injunction or decree of any court or governmental agency or body known to
such counsel after due inquiry and 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 PE, BSE or Nasdaq Small Cap in connection with the purchase and distribution
of the Shares by the Underwriters.
A-2
<PAGE>
(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, domestic or foreign against the Company or any of
their respective officers or any of their respective properties, assets or
rights that, could reasonably be expected to 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.
A-3
<PAGE>
(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 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 known to such counsel after due inquiry, 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.
A-4
<PAGE>
(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.
(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 PE, BSE
and Small Cap, 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, representation or certificates. Copies of any opinion,
A-5
<PAGE>
representation or certificate so relied upon shall be delivered to the
Representative, and to the Representative's counsel.
A-6
<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) Upon delivery of the Overallotment Shares sold by the
Selling Stockholders and the receipt of payment therefor pursuant to the
Underwriting Agreement, good and marketable title to such Overallotment Shares,
free of any adverse claim (as such term is defined in Section 8-102(a)(1) of the
New York Uniform Commercial Code) will pass to the Underwriters, assuming for
this purpose that the Underwriters have purchased such Overallotment Shares
without notice of any such adverse claim.
(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 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 material indenture,
mortgage, deed of trust, lease or other agreement or instrument, known to such
counsel after due inquiry to which any such Selling Stockholder is a party or by
which any of the Selling Stockholders is bound, or any statute rule or
regulation or any judgment, decree or order, of any court or other governmental
authority or any arbitrator applicable to any of the Selling Stockholders.
B-1
<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 Exercise Price and the
shares of Common Stock issuable upon exercise of Adelphi Warrants are subject
to adjustment 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
<PAGE>
agent, of such Adelphi Warrants, with the form of election to 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 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 will keep a copy of this Agreement on file with
the Transfer 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
2
<PAGE>
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 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
3
<PAGE>
Paragraph A above) or rights, options or warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of 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;
4
<PAGE>
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 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.
5
<PAGE>
H. Upon the expiration of any rights, options or warrants or
conversion or exchange privileges, if any thereof shall not
have been 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 or 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 8A., 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
8A.
7
<PAGE>
(ii) If any registration pursuant to this Section 8A. 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 period, not to exceed 180 days, which the 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
8
<PAGE>
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 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.
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<PAGE>
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 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.
10
<PAGE>
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/ Dr. Arol I. Buntzman
---------------------------------
/s/ Richard Goldenberg
- ---------------------------
ADELPHI UNIVERSITY
(Corporate Seal) By: /s/ Catherine Hennessey
---------------------------------
Attest:
/s/
- ---------------------------
11
<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.
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
12
<PAGE>
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 Agreement, to
receive notice of meetings, or to receive 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: 3/16/98
EDUCATIONAL VIDEO CONFERENCING, INC.
By /s/ Arol I. Buntzman
----------------------------------
(Corporate Seal)
Attest:
/s/ Richard Goldenberg
- --------------------------
Secretary
13
<PAGE>
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificates.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto this Warrant
Certificate, together with all right, 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: , 19
-------------- ---
Signature
-----------------------------------
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the name as
within 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 Warrant Certificate.)
TO EDUCATIONAL VIDEO CONFERENCING, INC.:
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase the shares of Common Stock
issuable. Upon the exercise of such Warrants and requests that certificates
for such shares in the name of:
Please insert your social security number 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 print name and address)
- -------------------------------
Dated:
--------------------------
---------------------------------------
(Signature must conform in all respects
name of holder as specified on the face
of this Warrant Certificate)
15
<PAGE>
AGREEMENT FOR INTERACTIVE TELEVIDEO
COURSES AND DISTANCE LEARNING PROGRAMS
W I T N E S S E T H
AGREEMENT made this 24th day of July, 1998, between Educational
Video Conferencing Inc. (hereinafter "EVC"), with offices located at 35 East
Grassy Sprain Road, Yonkers, New York 10710, and The Travelers Indemnity
Company on behalf of itself its subsidiaries and affiliates (hereinafter
"Travelers"), with offices located at One Tower Square, Hartford, Connecticut
06183.
WHEREAS, Travelers 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 Travelers
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 Travelers employees,
commencing with the Fall 1998 semester.
2. EVC will provide access to college courses via Travelers' 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 Travelers.
3. Travelers 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
Saturday from 9 AM to 3 PM.
3.1 By mutual agreement of the parties in the event that enrollment
justifies additional video conferencing room systems, EVC will
provide such additional video conferencing systems that shall be
compatible with Travelers installed base of video conferencing room
systems at no cost to Travelers. The cost of linking said additional
video conferencing room systems to Travelers installed base of video
conferencing room systems shall be borne by Travelers.
4. Travelers 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.
4.1 Travelers agrees that, in the event that desk top computers are
utilized, it will allow EVC to video enable existing computers at
Travelers locations to be mutually agreed upon in writing, at no
cost to Travelers.
<PAGE>
4.2 EVC will provide video enabled computers for Travelers 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.
5. Provided the employee is approved for tuition reimbursement in accordance
with Travelers standard tuition reimbursement policy, which may change from
time to time, Travelers agrees that it will give its employees access to its
standard tuition reimbursement or advancement plan in connection with EVC
courses and learning programs.
6. EVC shall be permitted to offer such undergraduate and graduate courses and
learning programs as are approved by Travelers for tuition
reimbursement/advancement, such courses to be offered by accredited colleges,
universities, and other institutions of learning.
6.1 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 to Travelers from accredited
colleges and universities.
6.2 EVC and Travelers 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.
6.3 Courses which constitute a part of the core curriculum of any
college or university participating in the Travelers/EVC program, so
long as the individual courses are applicable to approved degrees
and/or advancement or major plans of study, shall be deemed approved
and not require individual approval prior to offering it to
Travelers employees. Notwithstanding the foregoing, Travelers
reserves the right to set its tuition reimbursement policy relating
to the eligibility of the individual employee requesting any course.
Travelers is not liable for payments relating to an employee
enrolling in a course(s) ultimately not approved for tuition
reimbursement.
7. EVC agrees that Travelers 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.
7.1 Travelers' employees will be required to arrange for the
purchase of course books and materials with the individual colleges
and universities, and neither Travelers nor EVC shall have any
responsibility in this regard.
8. Travelers 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.
9. Travelers 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. EVC assumes responsibility for any debts incurred or
payments made by EVC on behalf of a Travelers employee in the event that for
any reason they are not eligible for, or do not receive tuition
reimbursement/advancement as contemplated herein. In no event will Travelers
be liable to EVC or to any educational institution, for any debt or advanced
payment made on behalf of a Travelers employee.
10. Except as otherwise indicated in paragraph 11 below, Travelers agrees that
it will allow EVC to utilize its installed base of video conference room
systems and telecommunications network to transmit courses to Travelers
employees at no cost to EVC.
2
<PAGE>
11. EVC agrees that it will pay all telecommunications costs, including
monthly charges, associated with signal transport from any educational
provider to EVC's bridge.
11.1 Travelers agrees that it will pay all telecommunication costs,
including monthly charges associated with signal transport from
Travelers' video conferencing sites to EVC's bridge.
12. Travelers agrees that it will provide its employees with unfettered access
to suitable and appropriate facilities from which to participate in EVC
courses during the agreed upon scheduled classes, at no cost to EVC; Travelers
shall be responsible for all HVAC, electricity, maintenance, security (if
applicable) and other costs associated with providing such space to its
employees.
13. The parties agree that they will fully cooperate with one another in
promoting the EVC program to Travelers employees and that a Travelers
Representative 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 Travelers employees.
13.1 EVC agrees that it shall provide materials from the various
colleges and universities at no cost to Travelers, including but not
limited to brochures, surveys, registration materials and
videotapes. All costs associated with producing materials shall be
borne entirely by EVC.
13.2 Travelers agrees to distribute the materials provided by EVC
not less than three (3) times per semester to all its employees.
13.3 EVC will provide Travelers with all Travelers approved
promotional materials for Travelers distribution to its employees.
Such distribution will consist of internal mail distribution, which
will be provided at Traveler's cost. If EVC requests promotional
materials distributed to employees via U.S. mail, then EVC will be
responsible for all postage costs.
13.4 Travelers 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.
13.5 EVC shall be permitted to conduct open houses and registration
meetings at such Travelers 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 Travelers employees so as to maximize potential
registrations.
13.6 Provided that travelers reviews and approves all materials
prior to distribution, EVC shall be permitted to utilize Travelers
logos, trademarks and copyrighted materials for promotional pieces
targeted at Travelers employees, however, EVC's use of Travelers
logos, trademarks and copyrighted materials is restricted to use in
the form approved for the purposes of and under this agreement.
14. Travelers 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; EVC represents that
the colleges and universities shall bear the entire burden of their own
administrative functions, including but not limited to, admissions,
registration, academic advising, etc.
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15. EVC shall hire a coordinator or train a Travelers employee 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 Travelers
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, the parties by mutual agreement determine that certain locations
or students require further training, EVC shall provide such further training
by a coordinator as each individual case warrants.
16. Travelers shall grant EVC, its employees and/or agents, such access to
Travelers facilities as shall be reasonably necessary and in accordance with
Travelers internal security policy, 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.
17. 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 cost.
17.1 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.
18. Travelers 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 Travelers; in addition,
except for the cost of repair of the equipment associated with ordinary use
allowed under this agreement, Travelers agrees to immediately reimburse EVC
for any costs associated with the replacement of any equipment lost,
vandalized or stolen while in Travelers' possession.
19. 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..
19.1 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 any annual
anniversary date of this agreement, in which case this agreement
shall only have FOUR (4) YEARS remaining in its term.
20. EVC agrees to hold in confidence any and all information about Travelers
business that Travelers may provide, or to which EVC may be exposed, during
the performance of this Agreement, which includes but is not limited to
personal information about Travelers employees. Contractor shall not release
any information to third parties or the contents of this Agreement without
Travelers prior consent. EVC may not, without prior written approval from
Travelers, indicate in any published matter or otherwise the nature of the
services performed by Contractor under this Agreement. This section shall
survive the cancellation, expiration or termination of this Agreement.
21. EVC represents and warrants that it has complied with all applicable and
relevant laws, rules and regulations in the performance of this Agreement. EVC
shall provide proof of adequate insurance coverages as reasonably requested by
Travelers.
22. EVC shall defend, indemnify and hold Travelers harmless from and against
all costs, claims, expenses, damages, and liability which Travelers may suffer
or be required to pay arising out of any act or omission of the EVC, its
employees or agents, including but not limited to injuries to person
(including death) or damage to property in connection with services rendered
under this Agreement.
23. 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.
24. 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.
25. This agreement shall be construed and interpreted under the laws of the
State of New York.
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26. 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.
27. 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.
28. 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.
The Travelers Indemnity Company Educational Video Conferencing, Inc.
By: /s/ Douglas Willett By: /s/ Dr. Jhon J. McGrath
--------------------------- -------------------------
Title: Senior Vice President Title: President
--------------------------- -------------------------
Date: 7/24/98 Date: 7/24/98
---------------------------- -------------------------
<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 12 months following termination
of his employment with EVC he will not, without its prior written approval,
engage in any business activities in any jurisdiction with any business entity
or governmental body 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.
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
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<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 Employee at his 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
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<PAGE>
CONSULTANT AGREEMENT
AGREEMENT, made as of the 10th day of May, 1998 between Educational Video
Conferencing, Inc., a Delaware corporation with offices at 35 East Grassy
Sprain Road, Yonkers, New York 10710 (hereinafter referred to as "EVC"), and
Mr. William Coda (hereinafter referred to as the "Consultant").
WITNESSETH
WHEREAS, the parties wish to enter into an agreement pursuant to which
the Consultant will act as a Consultant to EVC on the terms and conditions
hereinafter set forth,
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, it is agreed as follows:
1. EVC hereby engages the Consultant as an independent consultant and not
as an employee, on a non-exclusive basis and Consultant hereby accepts such
engagement in accordance with the terms hereof.
2. The Consultant will advise and give EVC the benefit of his knowledge,
information, expertise and contacts in corporations with tuition reimbursement
policies. Such services will include, but will not be limited to, developing
new corporate markets for EVC's services throughout the United States and
abroad, when and if applicable. For the purposes of this agreement, developing
new corporate markets shall mean introducing EVC personnel to senior persons
affiliated with the aforementioned institutions; arranging meetings between
same; if possible, accompanying designated EVC personnel to such meetings and
in general exercising the Consultant's best efforts to bring about a contract
or agreement between EVC and the institutions for EVC's services.
(a) It is understood by the parties that the Consultant will work only on
corporate or government initiatives for EVC and that this work shall not be a
conflict of interest in any way with the Consultant's current position at
Merrill Lynch. The Consultant shall not be compensated by EVC in any manner
for either dealing with EVC on behalf of Merrill Lynch or for the discharge of
his official duties pursuant to his current employment at Merrill Lynch.
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(b) It is further understood that the Consultant shall not solicit any
such corporations without the prior written permission of Dr. John J. McGrath,
President of EVC. In the event that such unauthorized solicitation should
occur, no commissions shall be due and owing the Consultant hereunder.
3. As full compensation for his services hereunder, the Consultant will
be paid, for the period of five (5) years from the date of this agreement, a
fee computed as follows:
(a) For any contract or agreement with an authorized corporate client
brought about through the direct efforts of the Consultant, at a rate of 2
1/2% (TWO AND ONE HALF PER CENT) of the gross amount actually collected by EVC
in connection with services provided under such contract.
(b) In addition to the above amounts, EVC shall pay to the Consultant the
amount of $5,000.00 per month for his work involving new initiatives on behalf
of EVC. This monthly payment shall be over and above any amounts as specified
in paragraph 3a above, which may be due and payable to the Consultant. EVC
reserves the right to cancel this monthly payment in the event that EVC at any
time during the term of this agreement.
4. (a) EVC will pay to the Consultant, on a bi-monthly (every other
month) basis, the amounts due to him, if any, pursuant to paragraph 3a above,
which amounts have actually been collected by EVC during the preceding two
months in connection with contracts or agreements brought about through the
efforts of the Consultant. Such bi-monthly payments shall be accompanied by a
statement reflecting the full amounts collected by EVC in connection with such
contracts or agreements during the preceding two months. In addition, EVC will
provide to Consultant annually a statement of all monies received in
connection with such contracts during the preceding calendar year.
(b) EVC also agree to pay to the Consultant, on a monthly basis, the
amount due to him pursuant to paragraph 3b above. Such payment shall be made
on the first day of each month beginning with the first day of the first month
following the execution of this agreement and shall end concurrently with the
termination of this agreement.
5. This agreement shall commence on the date first indicated above and
will continue for a period of five years thereafter. However, this agreement
may be terminated by EVC at any time prior to the termination date by giving a
minimum of THIRTY (30) days' prior written notice thereof to the Consultant.
In such a case, the Consultant will continue to receive any commissions due
him pursuant to paragraph 3a, for any contracts consummated prior to said
termination.
6. The foregoing constitutes the entire agreement between the parties,
and any other agreements or representations, whether verbal or written, if not
contained herein, are void, of no effect, and are not binding upon the
parties.
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7. No valid modification, amendment, or deletion may be made to this
agreement except in writing and executed by the parties in substantially the
same manner as this agreement.
8. Any and all notices required hereunder shall by Certified Mail, Return
Receipt Requested, to each party's last known address and shall be deemed
given at the time of mailing.
9. If any portion of this agreement shall be found to be void, voidable
or unenforceable, it shall not effect the validity of the remainder of the
agreement.
10. 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.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
date first appearing above.
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/
------------------------------
Dr. John J. McGrath
President
CONSULTANT
By: /s/
------------------------------
Mr. William Coda
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<PAGE>
ICS NETWORK SYSTEMS EQUIPMENT COLLOCATION AND SERVICES AGREEMENT
This Agreement ("Agreement") between ICS Network Systems Incorporated, a New
York Corporation with an office at 620 Johnson Avenue, Bohemia, New York,
("ICS") and Educational Video Conferencing, Inc. a New York Corporation with
offices located at 35 East Grassy Sprain Road, Suite 504, Yonkers, NY 10710,
hereinafter referred to as ("Customer").
ICS and Customer agree that the following terms and conditions apply to the
provision and use, within the United States, of the AT&T ISDN Services and
related products ("Services") referenced in any Attachments to this Agreement
signed by Customer and accepted in writing by ICS. Such Attachments are an
integral part of this Agreement.
1. ISDN Services Contract Period, Monthly Payments, Deposits and Service
Activation Fees
A) This Agreement is effective when signed by Customer and returned with the
first months service charge of $8,246.00 ($589.00 x 14) and accepted in
writing by ICS. The contract period commences on the date the ISDN services
are activated and unless terminated in accordance with the provisions herein,
will continue in effect for 36 months.
B) Customer shall pay ICS the monthly charges of $8,246.00 ($589.00 x 14) due
under this Agreement, without deduction or setoff. All payments shall be
mailed to the address stated on the invoice. Invoices will be issued monthly
for the next months services and are payable within thirty (30) days from the
date of the invoice.
C) Customer agrees to pay any taxes due on the Services, however designated
(excluding taxes on ICS's net income), unless Customer provides a valid tax
exemption certificate.
D) Customer agrees to pay the ISDN Service Activation and Installation fee of
$8,500.00 within thirty days of the ISDN Service activation date.
E) Customer agrees to pay $500.00 per month for each video server collocated
at the facility. Customer will be invoiced net 30 days from the date each
server was received at the facility. For purposes of this agreement, equipment
collocation services will be provided on a 36 month term basis, at Customer's
option, and collocation fees will be fixed at $500.00 per month for each video
server for the 36 month term.
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2. TERMINATION
A) If Customer: (i) fails to pay any outstanding charges within ten (10) days
after receipt of written notice from ICS of delinquency; or (ii) fails to
perform or observe any material term or condition of this Agreement relating
to the content of any transmissions by a User or to interference with,
disruption of, or other improper utilization of network resources after the
provision of written notice from ICS of such failure; or (iii) fails to
perform or observe any other material term or condition of this Agreement
within thirty (30) days after receipt of written notice from ICS of such
failure, ICS may terminate this Agreement. Upon termination, Customer shall be
liable for all charges incurred as of the date of termination and, if
applicable, any termination charges associated with termination of the
Services. All such charges that are not previously due and payable shall be
payable within thirty (30) days from the date shown on ICS's invoice.
B) If ICS fails to perform or observe any material term or condition of this
Agreement within thirty (30) days after receipt of written notice from
Customer of such failure, Customer may terminate the Services materially
affected by the breach. Except for charges incurred as of the date of
termination, Customer shall have no further financial obligations to ICS for
such terminated Services.
C) Customer may terminate this agreement prior to the ISDN service activation
date without any termination liability and Customer's first month's service
deposit will be refunded.
D) Termination of the Services after the service activation date and prior to
the 36 month term of this agreement for any reason other than the provisions
specified in section 2B or 4A of this agreement will require that early
termination charges be paid by Customer to ICS in an amount equal to 100% of
the monthly ISDN service payments remaining for months 1-12, plus 50% of the
monthly ISDN service payments remaining for months 13-24, plus 25% of the
monthly ISDN service payments remaining for months 25-36.
E) Termination charges associated with equipment collocation services are not
applicable as the equipment collocation services, with respect to termination
fees, will be considered a month to month service arrangement.
3. CUSTOMER RESPONSIBILITIES
A) Customer is solely responsible for the content of any transmissions using
the Services, or any other use of the Services by Customer or by any person or
entity Customer permits to access the Services (a "User"). Customer agrees
that it and any User will not use the Services for illegal purposes or to
interfere with or disrupt other network users, network services or network
equipment. Violations of the foregoing by Customer or any User may result in
removal of violative communications and early termination of the Service.
Customer shall defend, indemnify, and hold harmless ICS (as defined in
Paragraph 5A) from and against all liabilities and costs (including reasonable
attorneys' fees) arising from any and all claims by any person based upon the
content of any transmissions by Customer or any User using the Services or any
other use of the Services by Customer or any User.
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B) Customer agrees to comply, and to use best efforts to cause all Users to
comply, with United States law with regard to the transmission of technical
data which is exported from the United States using the Services.
4. ICS RESPONSIBILITIES
A) ICS will provide the Services as described in the Attachments. However,
ICS's policy is to continually improve its products and services, and so may
from time to time change the methods for delivering Services provided to
Customer under this Agreement. In the event that ICS changes the Services in
any way that materially decreases the level of the Services available to
Customer, Customer shall have a one time right to terminate this Agreement
within the thirty (30) day period following notice of such change by ICS and
payment of all charges incurred as of the termination date, but without any
termination liability to ICS.
B) ICS warrants to Customer that its collocation facility is and will continue
to be maintained in good working order, including the UPS(s) (Uninterrupted
Power Supply), standby diesel generator(s), electrical service, switchgear and
HVAC, (Heating, ventilation and air conditioning) equipment. Furthermore, ICS
warrants that these systems are fully operational and are properly configured
to operate in an emergency and are routinely tested by ICS in full cycle, full
load test(s) and that all of the above equipment is insured and covered under
manufacturer's warranty or extended maintenance agreements.
5. WARRANTY AND LIMITATION OF LIABILITY
A) FOR PURPOSES OF THIS PARAGRAPH, ICS INCLUDES ANY AFFILIATED AND SUBSIDIARY
COMPANIES OF ICS, ANY SUBCONTRACTORS AND SUPPLIERS OF THE FOREGOING, AND THE
DIRECTORS, EMPLOYEES, OFFICERS, AGENTS, SUBCONTRACTORS AND SUPPLIERS OF ALL OF
THEM.
B) ICS SHALL NOT BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL
DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR HARM TO BUSINESS, LOST
PROFITS, LOST SAVINGS OR LOST
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REVENUES, WHETHER OR NOT ICS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. ICS SHALL NOT BE LIABLE FOR ANY DAMAGE THAT CUSTOMER MAY SUFFER
ARISING OUT OF USE OF, OR INABILITY TO USE, THE SERVICES OR PRODUCTS PROVIDED
HEREUNDER.
C) ICS SHALL NOT HAVE ANY LIABILITY FOR DAMAGES OR DELAYS DUE TO FIRE,
EXPLOSION, LIGHTNING, POWER SURGES OR FAILURES, STRIKES OR LABOR DISPUTES,
WATER, ACTS OF GOD, THE ELEMENTS, WAR, CIVIL DISTURBANCES, ACTS OF CIVIL OR
MILITARY AUTHORITIES OR THE PUBLIC ENEMY, INABILITY TO SECURE PRODUCTS OR
TRANSPORTATION FACILITIES, FUEL OR ENERGY SHORTAGES, ACTS OR OMISSIONS OF
COMMUNICATIONS CARRIERS, OR OTHER CAUSES BEYOND ITS CONTROL.
6. Equipment Co-location Fees and Service Description
A) ICS provides rack space for Customer equipment co-located at ICS's facility
in Bohemia NY. ICS does not restrict the size of equipment Customer may wish
to co-locate however ICS reserves the right to re-quote Customer to co-locate
equipment which may require specialized racks or dedicated floor space. ICS
typically does not co-locate monitors (CRT displays) at the facility and
provides Customer with the use of a monitor to access their system during
visits to the facility. ICS does not accept Customer supplied UPS's or power
conditioning equipment, and all power supplied to Customer equipment at the
facility is 120V AC/60Hz, unless special arrangements are made with ICS prior
to delivering equipment to be co-located.
B) ICS provides all cabling to connect Customer's equipment to the facility's
power supply systems, LAN or Internet routers or ISDN circuits. Each primary
systems component (server, router) colocated at the facility is charged a
monthly fee. The fee charged is for the physical space allocated to mount or
place Customer's equipment at the facility, the conditioned power supplied to
Customer's equipment through an on-line UPS, emergency standby power supplied
through diesel powered generator, and HVAC of all equipment rooms located at
the facility.
7. Fault Isolation and Problem Resolution
A) ICS maintains a 24 hour hotline for reporting problems. When a problem is
encountered ICS will work to isolate the problem starting from the ISDN
services connection to Customer's co-located equipment at the center to
determine where the problem exists. If the problem is determined as any part
or function of the ISDN service circuit at the facility, ICS will immediately
commence emergency repair operations to resolve and correct the problem, and
will keep Customer appraised regarding the progress and expected completion
time of the repair or resolution of the problem. If Customer supplied
co-located equipment is determined as the cause of the problem ICS will advise
Customer of the problem and will provide telephone support and testing
functions to assist Customer in resolving the problem. If Customer has
arranged with ICS to maintain spare parts or hot spare equipment on site, ICS
will coordinate with Customer any equipment repair or replacement procedure
which can reasonably be expected to be performed at the facility. ICS may also
request that Customer authorizations be transmitted by telephone or through
Customer representatives visiting the facility in response to an emergency
before commencing extraordinary repair procedures on Customer's equipment.
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B) If ICS supplied and maintained co-located equipment is determined as the
cause of the problem ICS will immediately commence operations to repair the
equipment or resolve the problem. ICS will advise Customer of the problem and
will provide Customer with the expected completion time for the repair or
resolution of the problem.
8. Site Security
ICS maintains a secure facility and limits visits to the facility by Customer
personnel to those individuals indicated in advance by Customer as authorized
to visit the facility. There are no unsupervised visits permitted at this
facility. Except for instances when Customers authorized personnel are
visiting the facility in response to an emergency, ICS requires that all
visits be scheduled at least two hours in advance and limited to the hours
between 8:00 AM to 6:00 PM, Monday through Friday. All Customer equipment that
is co-located at the facility must be logged into and out of the facility, and
ICS will record the model, description and serial number of all Customer
equipment moved in or out of the facility.
9. INSURANCE
ICS carries insurance for coverage against theft or physical damage to
Customer's equipment while collocated at the facility. ICS does not provide
any insurance covering loss of use of damaged equipment, lost or damaged data,
lost or damaged application or operating system software or lost revenues due
to theft or damage of Customer equipment located at the facility. Unless
special arrangements are agreed to by Customer and ICS, insurance is limited
to $30,000.00 per Customer, per occurrence. ICS does not warrant that any
claim for damage to Customers equipment will be accepted by ICS's insurance
underwriters.
10. GENERAL
A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW PRINCIPLES.
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B) If any portion of this Agreement is found to be invalid or unenforceable,
the remaining portions shall remain in effect and the parties will begin
negotiations for a replacement of the invalid or unenforceable portion.
C) ICS's performance obligations under this Agreement shall be solely to
Customer and not to any third party. Other than as expressly set forth herein,
this Agreement shall not be deemed to provide third parties with any remedy,
claim, right of action, or other right.
D) No change, modification, or waiver of any of the terms of this Agreement
shall be binding unless included in a written agreement and signed by both
parties.
E) THIS IS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE
SERVICES PROVIDED HEREUNDER AND IT SUPERSEDES ALL PRIOR AGREEMENTS, PROPOSALS,
REPRESENTATIONS, STATEMENTS, OR UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
CONCERNING SUCH SERVICES.
ICS CUSTOMER
By: /s/ By: /s/
--------------------------- -------------------------
(Authorized Signature) Date 11/20/97 (Authorized Signature) Date
Dr. Arol I. Buntzmann Steven Trupp
- ----------------------------- ----------------------------
(Typed or Printed Name) (Typed or Printed Name)
Chairman + CEO C.E.O.
- ----------------------------- ----------------------------
(Title) (Title)
6
<PAGE>
ICS NETWORK SYSTEMS EQUIPMENT COLLOCATION AND SERVICES AGREEMENT
ATTACHMENT A Services Description and Quotation
<TABLE>
<CAPTION>
Product Description Item Qty Unit Cost Extended Recurring Install/
Monthly Activation
<S> <C> <C> <C> <C> <C> <C>
AT&T ISDN PRI T1 1 14 589.00 8,246.00 8,246.00
1.54 mb/s Circuit
Monthly Charge for 36
month term includes a
total of 5 D Channels
and 403 B Channels
PRI Circuit Install/ 2 14 607.14 8,500.00 8,500.00
Activation
Collocation of 2 Accord 3 2 500.00 1,000.00 1,000.00 NC
MCU's
Includes 1 2' x 7'
Mounting rack
Monthly Charge
Collocation of 4 1 500.00 500.00 500.00 1,200.00
1 CUCEEME Server in
same rack as item 3
Monthly Charge
</TABLE>
ICS Network Systems CUSTOMER
By: /s/ By: /s/
------------------------ -------------------------
(Authorized Signature) Date (Authorized Signature) Date 11/20/97
Steven Trupp Dr. Arol I. Buntzmann
- ----------------------------- ----------------------------
(Typed or Printed Name) (Typed or Printed Name)
C.E.O. Chairman + CEO
- ----------------------------- ----------------------------
(Title) (Title)
7
<PAGE>
AGREEMENT BETWEEN EDUCATIONAL VIDEO CONFERENCING, INC. AND
GENERAL REINSURANCE CORPORATION FOR THE OFFERING OF INTERACTIVE
TELEVIDEO COURSES AND DISTANCE LEARNING PROGRAMS
W I T N E S S E T H
AGREEMENT made this 6th day of November 1998, between Educational Video
Conferencing Inc. (hereinafter "EVC"), with offices located at 35 East Grassy
Sprain Road, Yonkers, New York 10710, and General Reinsurance Corporation
(hereinafter "General Re"), with offices located at Financial Centre, P. O. Box
10350, Stamford, Connecticut 06904.
Whereas, General Re desires to provide its associates with access to
undergraduate and graduate college courses and programs via Interactive
Televideo Distance Learning and Computer Based Distance Learning at General Re
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 it will provide access to undergraduate and graduate
college courses and learning programs via Interactive Televideo Distance
Learning and Computer Based Distance Learning to General Re associates,
commencing with the start of the next available semester.
2. EVC will provide access to college courses via General Re'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 General Re.
2.1 General Re agrees, in the event desk top computers are utilized, it
will allow EVC to video enable existing computers at General Re locations to
be mutually agreed upon in writing, at no cost to General Re.
3. In the event mutually agreed locations do not have computers capable
of being video enabled, EVC will provide video enabled computers provided
student course registrations at said locations meet EVC projections.
1
<PAGE>
3.1 If, in the sole opinion of EVC, enrollment justifies additional video
conferencing room systems, and General Re desires the addition of such
systems, then EVC will provide such additional room systems compatible with
General Re's installed base of room video conferencing systems at no cost to
General Re and at a mutually agreed time. The cost of linking said additional
video conferencing room systems to General Re's installed base of room systems
shall be borne by General Re.
4. General Re 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 Mondays through Thursdays from 5 PM to 11 PM, Fridays 5 PM to 8 PM
and Saturdays from 9 AM to 3 PM at the receiving locations.
5. General Re 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 they will designate
these locations in writing no later than thirty (30) days after the execution
of this agreement.
6. General Re agrees it will give its associates access to its
established 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 General Re for its
established tuition reimbursement/advancement program.
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 to
General Re from accredited colleges and universities.
7.2 EVC and General Re 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 General Re/EVC approved 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.
2
<PAGE>
8. EVC agrees that General Re associates 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 General Re associates will be required to arrange for the purchase of
course books and materials with the individual colleges and universities, and
neither General Re nor EVC shall have any responsibility in this regard.
9. General Re acknowledges its associates will be required to execute a
guarantee of payment form which will bind the individual employee to pay for
tuition, and fees (including any additional video conferencing fees), in the
event that for any reason they are not eligible for, or do not receive tuition
reimbursement/advancement as contemplated herein, or do not receive
reimbursement for certain fees.
10. Except as otherwise indicated in paragraph 11 below, General Re
agrees that it will allow EVC to utilize General Re's installed base of room
systems and telecommunications network to transmit courses to General Re
associates at no cost to EVC.
11. EVC agrees it will pay all telecommunications costs, including
monthly charges, associated with signal transport from any educational
provider to EVC's bridge.
11.1 General Re agrees it will pay all telecommunication costs, including
monthly charges associated with signal transport, from General Re video
conferencing sites to EVC's bridge.
12. General Re agrees it will provide its associates with access to
suitable and appropriate facilities from which to participate in EVC courses
at no cost to EVC; General Re shall be responsible for all HVAC, electricity,
maintenance, security (if applicable) and other costs associated with
providing such space to its associates.
13. The parties agree they will fully cooperate with one another in
promoting the EVC program to General Re associates. Company officers selected
by General Re will 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 General Re associates.
3
<PAGE>
14.1 If possible, General Re will allow EVC to utilize e-mail to
communicate with those associates who have indicated interest in enrolling in
EVC courses.
14.2 EVC agrees it shall provide materials from the various colleges and
universities at no cost to General Re, including but not limited to brochures,
surveys, registration materials and videotapes.
14.3 General Re agrees to distribute the materials provided by EVC not
less than one (1) time per semester to all its associates and on request to
interested individuals.
14.4 General Re 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 General Re locations as can be mutually agreed upon and at
agreed times which do not interfere with the normal conduct of business. Open
houses and registration nights are to be scheduled at times and places
convenient to General Re associates so as to maximize potential registrations.
14.6 EVC shall not be permitted to utilize General Re logos,
trademarks and copyrighted materials without the prior approval of General Re.
15. EVC shall hire a coordinator, at no cost to General Re, 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
General Re associates 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.
16. General Re shall grant EVC, its employees and/or agents, such
access to General Re facilities during regular business hours and with prior
notice 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.
17. 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 released to EVC.
4
<PAGE>
17.1 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.
18. General Re 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 General Re; in
addition, General Re agrees to immediately reimburse EVC for any costs
associated with the repair or replacement of any equipment lost, damaged or
stolen while in General Re's possession.
18.1 EVC shall hold General Re harmless and indemnify General Re for any
loss or damages resulting from the housing of EVC equipment at General Re
sites or the networking and video transmissions for the classes to General Re
installed video systems.
18.2 In addition, General Re 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; General Re 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.
19. The term of this agreement shall be FIVE (5) Years from the date
first written above. The agreement may be extended for one (1) additional year
on the anniversary date of the original execution, at the option of General
Re, and at the anniversary of each 12-month period following.
19.1 EVC shall notify General Re, in writing, ninety days prior to the
anniversary date, on an annual basis, the agreement will be extended for an
additional one year term, unless General Re responds in writing to EVC within
thirty days that it no longer wants to continue the agreement. If General Re
at any anniversary date so desires not to renew the agreement, and so informs
EVC, the agreement shall only have four remaining years in its term and shall
terminate thereafter.
20. It is expressly agreed and understood neither party shall be liable
for incidental, special or consequential damages for any breach or violation
of this agreement.
5
<PAGE>
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.
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.
GENERAL REINSURANCE CORPORATION
By: /s/
-----------------------------------------
Tom N. Kellogg
President and Chief Operating Officer
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/
----------------------------------------
John J. McGrath, Ph.D.
President
6
<PAGE>
AGREEMENT BETWEEN EDUCATIONAL VIDEO CONFERENCING,
INC. AND MANHATTAN COLLEGE FOR THE OFFERING OF
INTERACTIVE VIDEO CONFERENCED COURSES
W I T N E S S E T H
AGREEMENT made this 23rd day of November, 1998, between MANHATTAN College
with offices located at, 4513 MANHATTAN College Parkway, Riverdale, New York
10471 (hereinafter referred to as "MANHATTAN"), and Educational Video
Conferencing Inc., (hereinafter "EVC"), with offices located at 35 East Grassy
Sprain Road, Suite 504, Yonkers, New York 10710.
WHEREAS, MANHATTAN is an institution of higher learning duly
chartered and empowered to confer academic degrees by the University of the
State of New York and accredited by the Middle States Association of Colleges
and Schools, and,
WHEREAS, EVC is a domestic corporation engaged in the business of
providing access to such courses to consumers by way of interactive video
conferencing and computer conferencing, and,
WHEREAS, MANHATTAN and EVC wish to enter into a mutually beneficial
agreement whereby EVC will provide access to MANHATTAN courses to such
consumers,
NOW, THEREFORE in consideration of $10.00 in good funds, as well as
the mutual covenants contained herein, the parties hereby agree as follows:
1 a.) EVC shall have the right, for the duration of this agreement
and any renewal hereof, to offer courses necessary to secure a graduate degree
in electrical, computer and mechanical engineering; the first set of courses
which shall be offered by MANHATTAN appear on Schedule I, attached hereto, and
other courses will be scheduled each semester as mutually agreed between
MANHATTAN and EVC; via interactive video conferencing/distance learning
(hereinafter, IVC/DL), commencing January, 1999, or as soon thereafter as
practicable. Said schedule is hereby incorporated by reference and made part
of this agreement. Within ninety (90) days of the start of each academic
semester, or summer session, if any, MANHATTAN shall provide EVC with a list
of mechanical, computer and electrical engineering graduate courses that it
will offer under this agreement during the next semester or summer session.
Said schedule shall include at least ten (10) total course offerings during
each regular academic semester and not fewer than six (6) total course
offerings during each summer session, which EVC may offer to its clients.
1
<PAGE>
b.) For the purposes of this agreement, IVC/DL shall be defined as
live, two way video conferencing, either over desktop computers equipped for
video conferencing or video conferencing room systems, as the case may be, in
which the student, located somewhere other than on MANHATTAN's campus, can see
and hear the professor/instructor and the professor/instructor can see and
hear the individual student. IVC/DL also shall include one-way video and
two-way audio distance learning.
c.) Unless MANHATTAN and EVC agree otherwise in writing, the minimum
class size for the offering of an ITV/DL course shall be fifteen (15) students
and the maximum shall be thirty (30) students in any one IVC/DL course
section.
d.) EVC reserves the right to fill IVC/DL courses through its client
base. If EVC does not reach the maximum set forth in paragraph 1. c, above,
MANHATTAN may fill the balance of the class by video conferencing to its own
students located on MANHATTAN's campus. (Example: EVC secures twenty-five (25)
student course registrations for course x, MANHATTAN could video conference to
five (5) MANHATTAN students at MANHATTAN's campus).
2. a.) EVC will provide all hardware (except personal computers,
modems, keyboards and monitors), software, and video conferencing equipment
(collectively referred to as "equipment") necessary to provide access for
MANHATTAN courses to IVC/DL students. Students taking IVC/DL courses on
desktop computers must have modern computers capable of being video enabled
and function as an IVC/DL desktop system. The parties acknowledge that it is
the primary goal of EVC to solicit students from corporations, governmental
agencies, and institutions (hereinafter "Institutional Employers") with
substantial tuition reimbursement and that EVC shall address all student use
equipment issues with the Institutional Employers and their employees. In any
event, MANHATTAN shall not be responsible for the cost of any equipment
whatsoever at Institutional Employer locations, students' homes, or any other
location not on the campus of MANHATTAN.
b.) IVC/DL students registered for courses at MANHATTAN will be
responsible to obtain all necessary textbooks, materials, or software through
MANHATTAN's bookstore. MANHATTAN and EVC will not have any responsibility
regarding acquisition of such textbooks, materials and software.
c.) EVC shall identify at least one (1) Student Facilitator at each
Institutional Employer site to which courses are being delivered, to serve as
a liaison and contact person between the MANHATTAN Instructor and the students
at that site. The Student Facilitator shall be remunerated for his/her
services by EVC and shall be responsible for distribution of class materials,
exam proctoring, collection of class materials, etc.
3. All IVC/DL students shall be subject to the usual and customary
admissions procedures and entrance qualifications as outlined in the MANHATTAN
College catalogue applicable to the academic year of entry for such students.
EVC is responsible for costs for marketing, advertising, and promotion
(hereinafter, "promotional materials"), regarding EVC's offering of access to
MANHATTAN courses. Unless otherwise agreed, MANHATTAN will provide brochures,
catalogues, course schedules, program and course descriptions, posters, etc.,
to EVC for distribution to employees of EVC's corporate, governmental and
institutional clients promoting the MANHATTAN programs and courses offered
through EVC. MANHATTAN will be responsible for the customary printing costs
for the first five hundred (500) promotional materials, such as standard
catalogues, requested by EVC per semester, thereafter the parties will
mutually agree upon responsibility for additional printing costs.
2
<PAGE>
4. a.) MANHATTAN shall provide rooms capable of becoming teacher
stations. EVC will arrange, on behalf of MANHATTAN, for the installation and
maintenance of adequate telephone lines (ISDN and regular telephone lines),
and MANHATTAN agrees to reimburse EVC for all costs thirty (30) days after
billing by EVC.
b.) EVC will arrange, on behalf of MANHATTAN, for the
telecommunications signal transport for video conferenced courses from teacher
stations to the MCU bridge and MANHATTAN agrees to reimburse EVC for all costs
thirty (30) days after receiving billing from EVC; said costs shall not exceed
$1000 per course via room system video conferencing and $500 per course via
desktop.
c.) EVC assumes responsibility or cost for obtaining, providing, or
paying for telecommunication signal transport for video conferenced courses
from the MCU bridge to corporate locations and/or students' homes.
d.) EVC is responsible for all multi-point bridging costs.
5. EVC will be responsible for installing and maintaining four (4)
teaching stations in the rooms provided by MANHATTAN to video conference
IVC/DL courses offered through EVC, subject to enrollment. All teaching
stations installed and paid for by EVC shall remain the exclusive property of
EVC. EVC shall install one (1) room-based teacher station twenty (20) days
after execution of this agreement. EVC reserves the right to remove such
equipment upon expiration of this agreement.
6. All equipment supplied by EVC is the sole and exclusive property
of EVC, including but not limited to any and all patents, copyrights and
trademarks, if any, associated therewith. All classroom, course and program
materials or other information supplied by MANHATTAN, and all rights and
interests in said materials will remain the sole and exclusive property of
MANHATTAN.
7. a.) EVC is responsible for the necessary maintenance, repair
and/or replacement of video conferencing equipment supplied to MANHATTAN for
IVC/DL courses.
b.) EVC will provide reasonably prompt service for repair or
replacement of defective interactive video conferencing equipment and software
as necessary.
c.) MANHATTAN will be responsible for the reasonable costs of EVC's
prompt repair and/or replacement of interactive video conferencing equipment
located at MANHATTAN, which may be damaged through improper or unauthorized
use.
d.) MANHATTAN is responsible for the repayment to EVC of the cost of
replacement of any EVC equipment, which is lost or stolen while in MANHATTAN's
custody and control. Cost of replacement shall be defined as acquisition cost
less depreciation or fair market value whichever is less.
8. Neither party shall utilize the other's name or any associated
names, trademarks, copyrights, etc., without prior written consent. Such
permission shall not be unreasonably denied.
3
<PAGE>
9. a.) EVC will provide faculty development to MANHATTAN faculty
reasonably required for the offering of MANHATTAN courses through EVC. Such
faculty development shall include, but not be limited to, hands on training
using the teaching stations installed pursuant to the agreement.
b.) MANHATTAN shall be responsible for obtaining the services of all
faculty participating in courses offered through EVC, including but not
limited to said faculty's salary, benefits (if any) and verification of
qualifications. EVC assumes no responsibility for any costs associated
therewith.
10. EVC shall provide site locations for IVC/DL students to
participate in MANHATTAN courses. MANHATTAN assumes no responsibility for
obtaining or maintaining said sites, nor for any rent or other costs
associated therewith.
11. EVC is not responsible for curriculum, course content, faculty
qualifications, course materials or any other aspect of the academic content
of any courses offered hereunder. However, MANHATTAN agrees to be receptive to
and consider EVC input as to course content presentation and delivery of
IVC/DL courses consistent with required academic standards.
12. EVC agrees to make every reasonable effort to maintain its
equipment in good working order. However, EVC is not responsible for service
or repair delays or interruption of service caused by strikes, labor actions,
power outages (other than those limited to site locations alone), acts of God
or other matters beyond EVC's control. EVC shall be responsible for notifying
appropriate personnel at its site locations of any disruptions in services
greater than one hour's duration and for re-scheduling any cancelled classes
after coordination with MANHATTAN. MANHATTAN shall provide EVC, or its site
coordinator, at its site locations with reasonable notice of its need to
cancel any courses due to weather or any other such disruptions caused by
events beyond the control of MANHATTAN.
13. MANHATTAN hereby acknowledges that the IVC/DL programs marketed
by EVC are targeted toward the non-traditional working adult student market
and therefore agrees to offer IVC/DL courses at dates and times appropriate to
the target market, including the hours of 8:00 a.m. to 10:00 p.m., Eastern
Standard Time or Daylight savings Time, six (6) days per week - Monday through
Saturday, including but not limited to, the two (2) academic semesters offered
each year by MANHATTAN, i.e., Fall and Spring and summer sessions, if any.
MANHATTAN shall be receptive to requests for offering courses at such other
times as requested by EVC's Institutional Employers.
14. a.) The parties hereby acknowledge that this agreement is
intended by the parties to facilitate the offering of college courses, degree
programs and/or courses of study.
b.) MANHATTAN shall maintain all accreditation necessary to the
offering of college courses and credits under the applicable law. Should
MANHATTAN lose its accreditation at any time during the term of this agreement
or any renewal hereof, EVC shall have the right to cancel this contract at the
end of the semester in progress, if applicable, or immediately if no semester
is underway.
15. Administrative Functions
a.) MANHATTAN shall be responsible for all of its own administrative
functions (admissions, academic advising, registration, financial aid, etc.)
associated with the offering of IVC/DL courses through EVC.
4
<PAGE>
b.) MANHATTAN will provide to EVC all necessary administrative
forms, applications, written instructions, catalogues, etc. in advance of
marketing courses to any organization. It is understood by the parties that
EVC is merely a conduit and assumes no liability whatever for the accuracy or
correctness of the information in said forms provided by MANHATTAN nor for
return of any of the aforesaid documents to MANHATTAN. Request by EVC for bulk
copies of such printed material shall be in accordance with paragraph 3.
16. Fees
a.) MANHATTAN shall pay to EVC, on the 15th day of each month, [*] of the
gross tuition actually collected by MANHATTAN the preceding month, from any
source whatever, from or on behalf of any student employed by an Institutional
Employer customer of EVC registered for and attending accredited college
degree courses being offered through EVC's, said payments to commence the
month immediately following the collection of any such tuition by MANHATTAN.
All checks for courses taken will be made out to MANHATTAN.
b.) EVC shall have the right, on a semi-annual basis, to examine the
books and records of MANHATTAN, pertaining to all students taking courses
through EVC, in order to audit any accounts due and owing the respective
parties. MANHATTAN shall have the right to audit EVC accounts for students
taking MANHATTAN courses on the same basis. MANHATTAN is subject to the Family
Educational Rights and Privacy Act (FERPA) and certain student records may not
be disclosed or released by MANHATTAN to EVC or other third parties unless
appropriate waivers pursuant to paragraph 16.d are on file at MANHATTAN.
c.) MANHATTAN will supply EVC with a list of all students who have
applied to MANHATTAN, and/or registered, for courses through EVC on a regular
continuing basis to facilitate effective communication between the parties.
Said list to include as available, each student's name, address, telephone
number, social security number, registration, financial aid loans and payment
status. This listing will be updated by MANHATTAN as necessary. EVC shall
provide to MANHATTAN updated information relating to MANHATTAN students on the
same continuing basis.
d.) EVC shall require that each student registering for a course
offered through EVC, sign a waiver and release granting EVC access to said
student's records, said waiver and release form to be provided to MANHATTAN by
EVC, the format of which shall be subject to MANHATTAN's approval, which
approval shall not be unreasonably withheld. Said waiver shall also hold
MANHATTAN harmless for any loss, claim, damage, liability or injury arising
from release of such student records.
e.) Within THIRTY (30) DAYS of the completion of each Fall, Spring,
and Summer Semester, MANHATTAN shall present to EVC, in writing, any requests
for adjustments or credits on monies already paid to EVC, which credits or
adjustments have been made necessary by an EVC student having dropped a
course, bounced a check, etc. EVC will credit any such valid adjustment to
MANHATTAN's account within forty-five (45) days immediately following such
request by MANHATTAN.
f.) Students registering for MANHATTAN courses through EVC who are
employed by an Institutional Employer customer of EVC which have a tuition
reimbursement policy for their employees shall be eligible for tuition
deferment from MANHATTAN until completion of the course, thereby enabling said
students to register for MANHATTAN courses through EVC without payment of
tuition or fees up front. Said students shall be required to sign a tuition
payment guarantee providing that they are fully responsible for 100% of all
tuition in the event that, for any reason, they are not reimbursed by their
employer. EVC shall provide to MANHATTAN, for each participant, a copy of a
completed and signed EVC Registration Form, a copy of a completed and signed
MANHATTAN Registration Form, and a copy of a completed corporate tuition
reimbursement form signed by the student and an authorized supervisor.
g.) Students registering for MANHATTAN courses offered through EVC
who are not employed by an Institutional Employer customer of EVC providing
tuition reimbursement to their employees shall be required to pay tuition and
fees up front when registering.
5
[*] Confidential portion
<PAGE>
17. MANHATTAN will provide a minimum of four (4) dedicated rooms
which will accommodate teaching stations in order to facilitate IVC/DL courses
marketed by EVC emanating from its campus and will grant EVC, its agents and
subcontractors, reasonable access to said facilities as is required for proper
installation, operation, maintenance and repair of all equipment contemplated
herein, including but not limited to IVC/DL equipment. Said room shall be of
adequate size (approximately 10 feet by 16 feet), to house all IVC/DL
equipment, have adequate electrical, air conditioning, lighting, etc., and be
otherwise suitable for use as a video conferencing teacher station. Said rooms
will be provided one at a time subject to registration demand.
18. MANHATTAN's College Relations Department will provide reasonable
cooperation with EVC in promoting EVC/MANHATTAN Telecommute to College Program
and the IVC/DL courses offered through EVC.
19. MANHATTAN and EVC will, whenever practicable, cooperate in
applying for and obtaining, any grants, awards, stipends, fellowships, etc.,
relating to this agreement, which are mutually beneficial to the parties.
20. MANHATTAN shall maintain academic control over all courses and
will be receptive to EVC input as to IVC/DL presentation.
21. MANHATTAN will assign at least one person who at all times will
act as liaison between MANHATTAN and EVC.
22. Term of Agreement
a.) The basic term of this agreement shall be FOUR (4) YEARS.
b.) The parties hereby acknowledge the necessity for allowing IVC/DL
students continuity and ongoing access to courses and programs, so long as
there is adequate registration.
c.) In light of the foregoing, the parties agree that commencing
January 1, 2000, and every January 1st thereafter, this agreement shall
automatically be extended for an additional period of ONE (1) YEAR, subject to
the conditions hereinafter contained.
d.) In the event that either party should desire not to
automatically extend this agreement, then and in that event, such party shall
so notify the other in writing, by Certified Mail, Return Receipt Requested,
no later than April 1 of any given year, after which the agreement will not be
extended for an additional ONE (1) YEAR, but will have only the three (3)
YEARS of the existing term remaining.
23. MANHATTAN shall have the right to offer courses via IVC/DL on
its own to Institutional Employer and/or the employees of any Institutional
Employer not under contract with EVC. In such event, EVC shall not have any
obligation to market, provide any services or equipment, permit the use of
EVC's equipment, or incur any costs in connection with such offerings.
6
<PAGE>
24. a.) MANHATTAN agrees that, for the duration of this agreement
and any extensions hereof, as well as for a period of ONE (1) YEAR immediately
following any termination or expiration thereof, MANHATTAN will not
independently video conference or computer conference its college courses or
programs under this contract to EVC students, clients or their employees.
b. ) Notwithstanding anything to the contrary in paragraph 24. a,
above, MANHATTAN may independently video conference courses under the terms of
this agreement to an EVC corporate client after the second year of this
agreement, only if no employees of said corporate client are enrolled in two
(2) of MANHATTAN courses in the previous semester. In such case, MANHATTAN
must notify EVC, after the second year of this agreement, of its intention to
independently video conference courses to an EVC corporate client and provide
EVC with eight (8) months to remedy the shortage in enrollment from that
specific corporate client. In the event that EVC does not remedy the
enrollment shortage, MANHATTAN could only independently video conference to
that specific EVC client and only after two (2) years and eight (8) months
from the execution of this agreement.
25. The parties agree that neither party shall disclose the terms of
this agreement without the prior written permission of the other party.
26. 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.
27. The foregoing constitutes the entire agreement between the
parties, and any other agreements or representations, whether verbal or
written, if not contained herein, are void, of no effect, and are not binding
upon the parties.
28. No valid modification, amendment, or deletion may be made to
this agreement except in writing and executed by the parties in substantially
the same manner as this agreement.
29. Any and all notices required hereunder shall be by Certified
Mail, Return Receipt Requested, to each party's last known address and shall
be deemed given at the time of mailing.
30. If any portion of this agreement shall be found to be void,
voidable or unenforceable, it shall not effect the validity of the remainder
of the agreement.
31. This agreement shall be binding on the respective parties'
heirs, successors, and assigns.
32. The parties agree that any disputes or disagreements arising
hereunder or in connection herewith shall be settled by binding arbitration
before the American Arbitration Association at their offices located in White
Plains, New York, and that any judgment awarded thereunder may be entered in
any court of appropriate jurisdiction, and will have full force and effect
therein.
33. This agreement shall be construed in accordance with, and
governed by, the laws of the State of New York.
7
<PAGE>
In witness whereof the parties have hereunto set their hands and seal the
date first appearing above.
MANHATTAN COLLEGE
By: /s/
--------------------------------
Brother Thomas Scanlon
President
EDUCATIONAL VIDEO CONFERENCING, INC.
By: /s/
---------------------------------
John J. McGrath, Ph.D.
President
8
<PAGE>
SCHEDULE 1
SPRING, 1999 SEMESTER
IV/DL COURSE OFFERINGS
ELECTRICAL AND COMPUTER ENGINEERING
-----------------------------------
<TABLE>
<CAPTION>
COURSE # COURSE TITLE SOFTWARE PREFERRED
NEEDED DAY/TIME
<S> <C> <C> <C>
ELEG-727 Computer Networks None Wednesday
6:30-9:20
ELEG-710 Probability and Stochastic Processes MathCad Tuesday
6:30-10:20
ELEG-762 Modeling and Stimulation None Thursday
6:30-9:20
ELEG-728 Operating Systems None Monday
6:30-9:20
ELEG-795 Object Oriented Software Design Using C++Compiler Monday-Thursday
(time-open)
MECHANICAL ENGINEERING
----------------------
MECG-505 Nummerical Methods in Engineering* Monday
5:30-8:20
MECG-741 Production Engineering Monday
8:30-11:20
MECG-741 Introduction to Aerodynamics Wednesday
6:30-9:20
MECG-707 Conduction Heat Transfer Thursday
6:30-9:20
MECG-741 Project Economics Wednesday
6:30-9:20
MECG-704 Computational Fluid Mechanics Open
MECG-513 Applied Heat Transfer Open
MECG-510 Finite Element Method Open
</TABLE>
*Only for IVC/DL sites with access to SDRC 1-DEAS Master Series Software
9
<PAGE>
COMARKETING AGREEMENT
BETWEEN
AT&T AND EVC
TABLE OF CONTENTS
ARTICLE PAGE
- -------------------------------------------------------------------
1. PURPOSE OF AGREEMENT 4
2. TERM 4
3. REPRESENTATIVES OF THE PARTIES 4
4. AT&T RESPONSIBILITIES 5
5. EDUCATIONAL VIDEO CONFERENCING RESPONSIBILITIES 5
6. RELATIONSHIP OF THE PARTIES 7
7. PUBLICITY 7
8. USE OF INFORMATION 8
9. TRADEMARKS 9
10. TERMINATION 10
11. EFFECTS OF TERMINATION 11
12. LIMITATION OF LIABILITY 12
13. INDEMNITY 13
14. FORCE MAJEURE 13
15. MISCELLANEOUS PROVISIONS 14
LIST OF APPENDICES
- ------------------
APPENDIX 1 - CO-MARKETING PROGRAM
<PAGE>
This Agreement, entered into as of with Educational Video Conferencing is
between the AT&T Corp. ("AT&T"), a New York corporation with offices at 32
Avenue of the Americas, New York, New York 10013 through its Business
Communications Services business unit, and EDUCATIONAL VIDEO CONFERENCING,
INC. ("EDUCATIONAL VIDEO CONFERENCING") a corporation with offices at 35 East
Grassy Sprain Road, Yonkers, NY 10710. For purposes of this Agreement, AT&T
shall include all of its affiliate companies and interests in which it has a
majority ownership and UNITEL, a Canadian based communications carrier.
RECITALS
1. AT&T seeks suppliers for communication products or system integration or
other professional services or installation and maintenance services of
equipment to be used with the domestic and international telecommunications
services provided by AT&T to meet customers' needs around the world; and
2. EDUCATIONAL VIDEO CONFERENCING has a product presence and the ability to
supply to AT&T customers and/or to AT&T such products or systems integration
capabilities;
THEREFORE, AT&T and EDUCATIONAL VIDEO CONFERENCING agree as follows:
1. Purpose of Agreement
To stimulate sales of AT&T domestic and international telecommunications
services ("Network Services") and sales of EDUCATIONAL VIDEO CONFERENCING's
products or systems integration services, the parties agree to undertake a
co-marketing program, as described in the Appendices.
2. Term
The term of this Agreement shall commence on the Effective Date and shall
continue in effect for a period of three (3) years unless terminated earlier
pursuant to Article 10 of this Agreement. Any extensions of the term of this
Agreement must be expressly agreed to by both parties in writing and neither
party shall have any obligation to agree to extend this Agreement.
3. Representatives of the Parties
Each party shall appoint a Manager to coordinate their respective
activities pursuant to this Agreement. Each Manager shall act as a single
point of contact through who all activities pursuant to this Agreement must be
directed.
4. AT&T Responsibilities
(a) AT&T will be responsible for all expenses it incurs in
connection with its performance of this Agreement, including, but not limited
to, expenses incurred in performing its responsibilities pursuant to this
Article 4 and Appendix 1.
(b) AT&T will not represent that it has any relationship with
EDUCATIONAL VIDEO CONFERENCING other than the relationship described in this
Agreement. AT&T shall have no authority to bind EDUCATIONAL VIDEO CONFERENCING
to any contract or otherwise make representations as to the policies and
procedures of EDUCATIONAL VIDEO CONFERENCING. AT&T assumes full responsibility
for the acts of its employees and for the payment of all unemployment, social
security and other payroll taxes, and will make its personnel aware of the
restrictions on the use of EDUCATIONAL VIDEO CONFERENCING's information set
forth in Article 8.
(c) AT&T will not use any materials referencing EDUCATIONAL VIDEO
CONFERENCING or EDUCATIONAL VIDEO CONFERENCING's products that have not been
prepared or approved by EDUCATIONAL VIDEO CONFERENCING and shall make no
representations or warranties relating to EDUCATIONAL VIDEO CONFERENCING's
Equipment.
(d) AT&T shall comply with all requirements of applicable laws,
ordinances, administrative rules and regulations.
5. EDUCATIONAL VIDEO CONFERENCING Responsibilities
(a) EDUCATIONAL VIDEO CONFERENCING will be responsible for all
expenses it incurs in connection with its performance of this Agreement,
including, but not limited to, expenses incurred in performing its
responsibilities pursuant to this Article 5 and Appendix 1.
<PAGE>
(b) EDUCATIONAL VIDEO CONFERENCING will not represent that it has
any relationship with AT&T other than the relationship described in the
Agreement. EDUCATIONAL VIDEO CONFERENCING shall have no authority to bind AT&T
to any contract or other wise make representations as to the policies and
procedures of AT&T. EDUCATIONAL VIDEO CONFERENCING assumes full responsibility
for the acts of its employees and for the payment of all unemployment, other
payroll taxes, and will make its personnel aware of the restrictions on the
use of AT&T's information set forth in Article 8.
(c) EDUCATIONAL VIDEO CONFERENCING will not use any materials
referencing AT&T Network Services that have not been prepared by AT&T and
shall make no representations or warranties relating to Network Services.
(d) EDUCATIONAL VIDEO CONFERENCING shall comply with all
requirements of applicable laws, ordinances, administrative rules and
regulations of the countries designated in Appendix 5 hereto, and shall take
prompt action to remove or remedy any violation which occurs or is discovered
during the term of this Agreement.
(e) EDUCATIONAL VIDEO CONFERENCING represents that it intends to
continue to develop, enhance and market products as EDUCATIONAL VIDEO
CONFERENCING determines in its sole discretion, and EDUCATIONAL VIDEO
CONFERENCING shall provide technical information to AT&T regarding all
developments, enhancements or changes to its products as EDUCATIONAL VIDEO
CONFERENCING deems appropriate to this relationship.
6. Relationship of the Parties
The parties will have only the rights specifically granted in this
Agreement. The relationship between the parties shall be that of independent
contractors and not of principal and agent, employer and employee, franchisor
and franchisee, partners or joint venturers. Each party agrees that this
Agreement does not establish either party as a dealer, distributor or
franchisee of the other party and that no fee is being paid to either party by
the other party to enter into this Agreement. Each party agrees that the other
party has the right to enter into the same or similar arrangement with other
entities or individuals.
7. Publicity
(a) The parties may jointly prepare and issue a press release
announcing the execution of this Agreement. The particular terms and
conditions of this Agreement are confidential and shall not be disclosed to
any third party by AT&T or EDUCATIONAL VIDEO CONFERENCING without the prior
written consent of the other. No public statements or announcements relating
to this Agreement, other than either party publicly identifying the other as a
co-marketing vendor, shall be issued by either party without the prior,
written consent of the other. Nothing herein shall prevent AT&T or EDUCATIONAL
VIDEO CONFERENCING from making statements or disclosures relating to this
Agreement (or the terms and conditions thereof) as may be required by any
filings with or any proceedings before any competent governmental authority,
court or agency, if such party believes that such statements or disclosures
are necessary in order to satisfy its obligations under applicable laws or
regulations. Such party shall furnish prior notice thereof to the other party.
(b) This Agreement shall be considered Confidential Information as
defined in Article 8 of this Agreement and shall be treated by the parties
accordingly.
8. Use of Information
This Agreement and any information and data of any nature including,
but not limited to, proprietary, technical, marketing, operating, performance,
cost, know-how, business pricing policies, programs, data systems, inventions,
discoveries, trade secrets, techniques, process, computer programming
techniques and all record-bearing media containing or disclosing such
information and techniques furnished by one party to the other in connection
with this Agreement, which has either been stamped or otherwise identified as
confidential
<PAGE>
or proprietary ("Confidential Information") and all copies of Confidential
Information made by the receiving party: (a) shall be held in confidence; (b)
shall be used by the receiving party and those of its employees with a need to
know the information only to perform their responsibilities pursuant to this
Agreement; (c) shall not be reproduced or copied, in whole or in part, except
as necessary for its authorized use; and (d) shall be returned to originating
party or destroyed, together with all copies, when it is no longer needed or
upon termination or expiration of this Agreement. Confidential Information
shall not include any information previously known to the receiving party free
of any obligation to keep it confidential, or is subsequently made public by
the disclosing party or a third party having a legal right to make such
disclosure, or is independently developed by the receiving party. Confidential
Information shall not be disclosed to third parties, including but not limited
to the receiving party's dealers or distributors except with written
permission of the other party, after executing an appropriate non-disclosure
agreement, and for the purpose of performing the obligations of an
end-customer sale. The parties agree to adhere to the requirements of this
Article for two (2) years following the termination or expiration of this
Agreement.
9. Trademarks and Trade Names
(a) Except as otherwise agreed, neither party will display or use,
in advertising or otherwise, any of the other party's trade names, logos,
trademarks, trade devices, service marks, symbols, abbreviations or registered
marks, or contractions or simulations thereof, (hereinafter referred to
collectively as "Marks") and will not authorize the same to be used or
displayed by third parties. Any use by a party of the other party's Mark shall
be subject to the other party's advance approval in writing. Neither party
shall claim ownership or any other rights in the other party's Marks. Upon
termination of this Agreement, any and all rights or privileges of either
party to use the other's Marks shall expire and each party shall immediately
discontinue the use of the other's Marks. For purposes of this Article, the
Marks of either party shall include those of the parent corporation, its
subsidiaries and affiliates.
(b) Upon receipt of a party's proposed materials containing the
other party's Marks, the receiving party's Manager will review the material
and will either approve the material as is, approve, subject to corrections
specified, or reject the material. The written decision of the review of such
material shall be communicated to the other party within twenty-one (21)
calendar days of the receipt of the material.
10. Termination
(a) Either party may terminate this Agreement without cause upon
thirty (30) day's prior written notice to the other party without liability of
any kind to the other party.
(b) Either party may terminate the Agreement effective immediately
by written notice if or when it is discovered that the other party has: (i)
intentionally, or in a willful, wanton or reckless manner, made any material
false representation, report or claim relative hereto; (ii) violated the
other's Marks; (iii) become insolvent, invoked as a debtor any laws relating
to the relief of debtor's or creditor's rights, or had such laws invoked
against it; (iv) become involved in any liquidation or termination of
business; (v) been adjudicated bankrupt; or (vi) made or executed an
assignment for the benefit of its creditors.
(c) Either party may terminate this Agreement upon thirty (30) day's
written notice with an opportunity for the other party to cure the situation
before the date of termination, if or when the other party shall:
(i) fail to fully comply with obligations to maintain the
confidentiality of any proprietary information; or
(ii) fail to perform the material responsibilities and
obligations of the Agreement.
(d) The termination of this agreement shall not affect any legal or
equitable rights that either party may have.
11. Effects of Terminations
(a) Expiration or termination of this Agreement shall not relieve
the parties of any obligations due at the time of such expiration or
termination, nor shall such expiration or termination prejudice any claim of
either party accrued on account of any default or breach by the other.
(b) Upon expiration or termination of this Agreement, each party
shall immediately return to the other party, or, if agreed to by the other
party,
<PAGE>
destroy, all promotional materials and all confidential Information supplied by
the other party, and cease holding itself out, in any manner, as a participant
in the program contemplated by this Agreement.
12. Limitation of Liability
(a) THE LIABILITY OF EITHER PARTY FOR ANY CLAIM ARISING FROM OR
RELATED TO THIS AGREEMENT (EXCEPTING CLAIMS FOR BODILY INJURY AND/OR DEATH, OR
CLAIMS FOR INFRINGEMENT, BREACH OF CONFIDENTIALITY, OR INDEMNITY) REGARDLESS
OF THE CAUSE OF ACTION, WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL IN NO
EVENT EXCEED THE LESSER OF THE DIRECT DAMAGES ACTUALLY PROVEN OR $10,000. IN
NO EVENT SHALL EITHER PARTY OR ITS AFFILIATES BE LIABLE TO THE OTHER OR ITS
AFFILIATES FOR INCIDENTAL, SPECIAL, RELIANCE, CONSEQUENTIAL OR ANY OTHER
INDIRECT LOSS OR DAMAGE OF ANY KIND WHATSOEVER INCLUDING LOST PROFITS OR
REVENUES ARISING OUT OF THIS AGREEMENT. THIS CLAUSE SHALL SURVIVE THE FAILURE
OF ANY EXCLUSIVE REMEDY.
(b) AT&T's tariffs, including limitations on AT&T's liabilities,
shall govern AT&T's entire obligations and liabilities for AT&T's tariffed
services, including any claims for failure to meet installation dates.
13. Indemnity
Each party ("Indemnifying Party") shall defend, indemnify and hold
the other party and its affiliates harmless from any and all claims, suits,
actions, demands, costs, settlements, losses, damages, expenses and all other
liabilities, including attorney's fees, arising out or resulting from the
intentional or negligent acts or omissions on the part of the Indemnifying
Party, its employees, officers, partners, contractors, agents or affiliated
companies in the performance of or failure to perform the activities
contemplated by this Agreement.
14. Force Majeure
Neither party shall be held responsible for any delay or failure in
performance of any part of this Agreement except a failure to make any
payments to the extent such delay or failure is caused by: fire, flood,
explosion, war, strike, power blackout, earthquake, volcanic action, water,
the elements, embargo, labor dispute, government requirement, civil or
military authority, acts of God, nature, public enemy, inability to secure raw
materials, products or transportation facilities; acts or omission or carriers
or suppliers, acts or failure to act of any governmental authority, or any
other causes beyond its reasonable control, whether or not similar to the
foregoing. Each party shall endeavor to give the other reasonable notice of
any such delay or failure.
15. Miscellaneous Provisions
(a) The validity, interpretation and performance of this Agreement
shall be governed by the law of the State of New Jersey, excluding its choice
of law rules. Any legal action arising from or in connection with this
Agreement must be brought within two (2) years after the cause of action
arises.
(b) All notices or other communications provided for under this
Agreement shall be in writing and delivered or sent by telegram, telex,
facsimile or similar same day confirmed communication and shall be addressed
as follows:
To: AT&T To: EDUCATIONAL VIDEO CONFERENCING
Will Davis
Room 3A120V
900 Routes 202/206 North
Bedminster, NJ 07921-0752
FAX: 908-234-7653
PHONE: 908-234-8968
In the event of change of address or representation, written notice of such
change shall be given to the other party. A notice shall be deemed to have
been given on the date it is sent.
<PAGE>
(c) Neither party shall assign any right or interest, or delegate
any obligation, under this Agreement without the prior, written consent of the
other except that either party shall have the right to assign its rights and
delegate its duties under this Agreement in whole or in part, at any time upon
thirty (30) days' prior, written notice to the other, and without the other
party's consent, to any present or future Affiliate of such party.
(d) A waiver of any claim, demand or right based on the breach of
any provision of this Agreement shall not be construed as a waiver of any
other claim, demand or right based on a subsequent breach of the same or any
other provision. No waiver by a party of any breach by the other party under
this Agreement shall be effective unless such waiver is set forth in a written
instrument signed by the non-breaching party. The failure of a party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way affect the
validity of this Agreement, or any part, or the right of any party hereafter
to enforce each and every provision hereof.
(e) Neither party shall require waivers or releases of any personal
rights from representatives of the other in connection with visits to its
premises and both parties agree that no such releases or waivers shall be
pleaded by them in any action or proceeding.
(f) The obligations of the parties under Articles 7, 8, 9, 12, 13
and 15(i) and Appendix 1, Section II.D.8 in this Agreement shall a survive any
expiration, termination or cancellation of this Agreement.
(g) If any part, term or provision of this Agreement shall, for any
reason, be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining parts, terms or provisions shall
not be affected. Such part, term or provision shall be ineffective only to the
extent of such invalidity, illegality or unenforceability without invalidating
the remainder of such part, term or provision or the remaining portions of
this Agreement. The rights and obligations of the parties shall be construed
as if the Agreement did not contain the particular invalid, illegal or
unenforceable part, term or provision, unless such invalid or unenforceable
part, term or provision is material and essential to either one or the
parties, in which event the parties shall immediately negotiate a replacement
therefore.
(h) The Article headings are inserted for convenience only and are
not intended to affect the meaning or interpretation of this Agreement.
(i) The terms and conditions of this Agreement, including its
Appendices, represent the entire understanding and agreement between the
parties as to its subject matter, supersede any prior writing, and merge all
discussions, proposals, understandings and negotiations between the parties
prior to, or contemporaneous with, their signature. In the event of
inconsistency or conflict between the Agreement and the Appendices, the
Appendices shall control.
(j) This Agreement shall not be modified, altered, changed or
amended in any respect, except by a writing signed by the authorized
representatives of both parties. No course of dealing or usage of trade shall
be invoked to modify the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized representatives.
AT&T EDUCATIONAL VIDEO CONFERENCING
By: /s/ By: /s/
------------------------- -------------------------
Linda A. Lunga Dr. Arol I. Buntzman
(Name Printed or Typed) (Name Printed or Typed)
Title: GISDN Division MGR Title: Chairman and CEO
---------------------- -----------------------
Date: September 16, 1998 Date: July 9, 1998
---------------------- -----------------------
<PAGE>
AT&T Co-Marketing Agreement
Exhibit A
1998
AT&T will print and distribute the first direct marketing mailer to all AT&T
corporate & residential customers in the United States in Late November or
early December.
EVC will distribute AT&T Global ISDN brochures at the mini RIMS conference in
Chicago in November.
AT&T and EVC will jointly participate in the Superintendents conference in
January in New York.
1999
AT&T and EVC will mutually agree in early December 1998 or early January 1999
on the list of shows and conferences to attend and the number and timing of
direct marketing mailings for 1999.
/s/ /s/
<PAGE>
[AT&T Logo]
AT&T Contract Tariff Order Form
- --------------------------------------------------------------------------------
Customer Name (Full Legal Name): AT&T Corp.
EDUCATIONAL VIDEO CONFERENCING
("Customer") ("AT&T")
- --------------------------------------------------------------------------------
Customer Address: AT&T Address:
- --------------------------------------------------------------------------------
35 EAST GRASSY SPRAIN ROAD 80 BAYLIS ROAD AT&T Contact Name:
JOHN P. MC CADDEN
- --------------------------------------------------------------------------------
City YONKERS State NY Zip 10710 City MELVILLE State NY Zip 11747 AT&T Contact
Telephone Number:
516 420 3053
- --------------------------------------------------------------------------------
Customer hereby places an order for:
X New AT&T Contract Tariff (attachment required)
[ ] Existing AT&T Contract Tariff No. __________ (attachment required)
- --------------------------------------------------------------------------------
Existing Pricing Plan Replacement/Discontinuance:
[ ] Check here and identify below any AT&T CT or other AT&T pricing plan being
discontinued in conjunction with this order. Also specify
the CT No., Plan ID No. or Main Billed Account No.
(Note: Charges may apply as specified in the plan being discontinued.)
- --------------------------------------------------------------------------------
1. Services will be provided under the Contract Tariff ("CT") ordered
hereunder, subject to the rates, terms and conditions in the CT as well as the
AT&T tariffs (if any) referenced in the CT ("Applicable Tariffs"), as those
Applicable Tariffs may be modified from time to time.
2. This Form (including its addenda, if any), the CT and the Applicable
Tariffs constitute the entire agreement (collectively the "Agreement") between
Customer and AT&T with respect to the services provided under the CT and
supersede any and all prior agreements, proposals, representations,
statements, or understandings, whether written or oral, concerning such
services or the rights and obligations relating to such services. In the event
of any inconsistency between the terms of this Form (including its addenda, if
any) and the CT or Applicable Tariffs, the terms of the Applicable Tariffs and
CT shall prevail. In the event of any inconsistency between the terms of the
CT and the Applicable Tariffs, the terms of the CT shall prevail. Except for
changes to rates (to the extent permitted under the CT) and changes to the
Applicable Tariffs, no change, modification or waiver of any of the terms of
this Agreement shall be binding unless reduced to writing and signed by
authorized representatives of both parties and, to the extent required by law,
filed with the FCC.
3. Except to the extent that federal law applies, the construction,
interpretation and performance of this Agreement shall be governed by the
substantive law of the State of New York, excluding its choice of law rules.
4. EXCEPT FOR ANY WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT, AT&T EXCLUDES
ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AT&T DOES
NOT AUTHORIZE ANYONE TO MAKE A WARRANTY OF ANY KIND ON ITS BEHALF AND CUSTOMER
SHOULD NOT RELY ON ANYONE MAKING SUCH STATEMENTS.
5. As to new CTs, Customer may, as its sole remedy, cancel this order for the
CT without liability before the CT becomes effective if, without Customer's
consent: (a) AT&T fails to file the CT with the FCC within 30 days after the
date this Form is signed by both parties; (b) the CT as filed is not
consistent with the attached illustrative copy; or (c) the CT does not go into
effect within 30 days after filing.
<PAGE>
6. Orders for existing CTs will be accepted and implemented by AT&T only if
the specified CT is available when ordered and Customer is eligible for the
CT.
7. Customer shall provide installation instructions and other information as
required by AT&T.
- --------------------------------------------------------------------------------
YOUR SIGNATURE ACKNOWLEDGES THAT YOU HAVE READ, UNDERSTAND AND AGREE TO THE
PROVISIONS OF THIS AGREEMENT AND THAT YOU ARE DULY AUTHORIZED TO SIGN THIS
AGREEMENT.
- --------------------------------------------------------------------------------
Customer AT&T Corp.
Full Legal Name: Educational Video
Conferencing, Inc.
-----------------------
By: /s/ By:/s/
----------------------------------- ------------------------------------
(Authorized Customer Signature) (Authorized AT&T Signature)
Dr. Arol I. Buntzman Michael Cutler/FMM
----------------------------------- ------------------------------------
(Typed or Printed Name and Title) (Typed or Printed Name and Title)
Date: 6/9/98 Date: 6/11/98
----------------------------------- -------------------------------
021997 AT&T PROPRIETARY
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Title Page
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
CONTRACT TARIFF NO. 9886
TITLE PAGE
This Contract Tariff applies to AT&T Software Defined Network (SDN) Services
consisting of: Custom SDN-Domestic, AT&T ACCUNET T1,5 Service Access
Connections and AT&T Terrestrial 1.544 Mbps Local Channel Services and to AT&T
Software Defined Network Services consisting of: AT&T Custom Software Defined
Network International Service and Global Software Defined Network Service, for
interstate or foreign communications in accordance with the Communications Act
of 1934, as amended.
Telecommunication services provided under this Contract Tariff are furnished
by means of wire, radio, satellite, fiber optics or any suitable technology or
combination of technologies.
Printed in U.S.A.
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Page 1
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
CONTRACT TARIFF NO. 9886
CHECK SHEET
The Title Page and Pages 1 through 7 inclusive of this tariff are effective as
of the date shown.
TABLE OF CONTENTS
Page
----
Check Sheet................................................................ 1
List of Concurring, Connecting and Other Participating Carriers............ 1
Explanation of Symbols - Coding of Tariff Revisions........................ 1
Trademarks and Service Marks............................................... 2
Explanation of Abbreviations............................................... 2
Contract Summary........................................................... 3
LIST OF CONCURRING, CONNECTING AND OTHER PARTICIPATING CARRIERS
Concurring Carriers - NONE
Connecting Carriers - NONE
Other Participating Carriers - NONE
EXPLANATION OF SYMBOLS - Coding of Tariff Revisions
Revisions to this tariff are coded through the use of symbols. These symbols
appear in the right margin of the page. The symbols and their meanings are:
R - to signify reduction.
I - to signify increase.
C - to signify changed regulation.
T - to signify a change in text but no change in rate or
regulation.
S - to signify reissued matter.
M - to signify matter relocated without change.
N - to signify new rate or regulation.
D - to signify discontinued rate or regulation.
Z - to signify a correction.
Other marginal codes are used to direct the tariff reader to a footnote for
specific information. Codes used for this purpose are lower case letters of
the alphabet, e.g., x, y and z. These codes may appear beside the page
revision number in the page header or in the right margin opposite specific
text.
Printed in U.S.A.
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Page 2
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
TRADEMARKS AND SERVICE MARKS - The following markS, to the extent, if any,
used throughout this tariff, are trademarks and service marks of AT&T Corp.
Trademarks Service Marks
---------- -------------
None None
EXPLANATION OF ABBREVIATIONS
Adm. - Administrator
Detariffing - If during the term of this Contract Tariff, the AT&T Tariffs
referenced herein ("Applicable AT&T Tariffs") are detariffed in whole or in
part pursuant to a statutory change, order or requirement of a governmental or
judicial authority of competent Jurisdiction, then following such detariffing:
(i) the tens and conditions for the Services Provided will remain the same as
those in this Contract Tariff, except that the relevant terms and conditions
contained in the Applicable AT&T Tariffs will remain the same as those in
effect as of the date AT&T detariffs in whole or in part those Applicable AT&T
Tariff provisions, and will be incorporated as part of this Contract Tariff,
and
(ii) the rates for the Services Provided will be:
(a) to the extent Applicable AT&T Tariff provisions remain filed and
effective, those rates specified in such Applicable AT&T Tariff
provisions, as amended from time to time; and
(b) to the extent that this Contract Tariff contains specific rates or
rate schedules that would apply in lieu of (or in addition to) the rates
or rate schedules in Applicable AT&T Tariffs, such specific Contract
Tariff rates and rate schedules; and
(c) to the extent Applicable AT&T Tariff provisions are detariffed, and
(b) preceding does not apply, those rates specified in the applicable
AT&T Price Lists, as amended from time to time.
In all cases (a, b or c), the applicable rates shall continue to be subject to
any discounts, waivers, credits, and restrictions on rate changes that may be
contained in this Contract Tariff. Where rates and rate changes (both
increases and decreases) would have been calculated by reference to a tariff
rate that has been detariffed, rates and rate changes shall instead be
calculated during the term of this Contract Tariff by reference to applicable
AT&T Price Lists and (to the extent changes to tariff rates were permitted
under this Contract Tariff) AT&T shall have the right to change its Price
Lists from time to time.
All references to the AT&T Tariffs in this Contract Tariff shall be construed
to mean the AT&T Tariffs specified herein, as well as the documents which will
replace those tariffs, including the AT&T Price Lists, when AT&T cancels those
tariffs.
Printed in U.S.A.
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Page 3
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
CONTRACT TARIFF NO. 9886
1. Services Provided
A. Domestic Services
1. AT&T Software Defined Network (SDN) Services (AT&T Tariff F.C.C. No. 1)
consisting of:
(a) Custom SDN-Domestic
2. AT&T ACCUNET T1.5 Service Access Connections (AT&T Tariff F.C.C. No. 9)
3. AT&T Terrestrial 1.544 Mbps Local Channel Services (AT&T Tariff
F.C.C. No. 11)
B. International Services
1. AT&T Software Defined Network (SDN] Services (AT&T Tariff F.C.C. No. 1)
consisting of:
(a) Custom SDN-International
(b) Global Software Defined Network (GSDN) Service
2. Contract Term; Renewal Options - The term of this Contract Tariff is three
years beginning with the first day of the Customer's first full billing month
under this Contract Tariff, which is referred to as the Customer's Initial
Service Date (CISD). No renewal option is available for this Contract Tariff.
3. Minimum Commitments/Charges - The AT&T SDN Services combined Minimum Annual
Revenue Commitment (MARC) under this Contract Tariff will be satisfied by the
Customer's total domestic Gross Monthly Usage Charges (GMUC) and international
GMUC under this Contract Tariff. The Customer's domestic and international
GMUC is as specified for the SDN Term and Volume Plan (TVP) in AT&T Tariff
F.C.C. No. 1, as amended from time to time.
A. Domestic
1. AT&T SDN Services - The MARC is $200,000 for year one, $500,000 for
year two and $750,000 for year three of the Contract Tariff Term. If, on any
anniversary of the CISD, the Customer has failed to satisfy the applicable
MARC, the Customer will be billed a shortfall charge in an amount equal to the
difference between the applicable MARC and the total of the actual domestic
and international GMUCs for that year.
B. International - None
Printed in U.S.A.
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Page 4
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
4. Contract Price -
A. AT&T SDN Services
1. The Contract Price for the AT&T SDN Services provided under this
Contract Tariff is the same as the undiscounted Recurring and Nonrecurring
Rates and Charges specified in AT&T Tariff F.C.C. No. 1, as amended from time
to time.
B. AT&T ACCUNET T1.5 Service Access Connections
1. The Contract Price for the AT&T ACCUNET T1.5 Service Access
Connections provided under this Contract Tariff is the same as the
undiscounted Recurring and Nonrecurring Rates and Charges specified in AT&T
Tariff F.C.C. No. 9, as amended from time to time.
C. AT&T Terrestrial 1.544 Mbps Local Channel Services
1. The Contract Price for the AT&T Terrestrial 1.544 Mbps Local Channel
Services provided under this Contract Tariff is the same as the undiscounted
Recurring and Nonrecurring Rates and Charges specified in AT&T Tariff F.C.C.
No. 11, as amended from time to time.
5. Discounts - The following discounts are the only discounts for the Services
Provided under this Contract Tariff. No other discounts apply. Unless modified
below, the Base Discounts listed in this section are the same discounts as
specified in AT&T Tariffs referenced in Section 1., preceding, as amended from
time to time.
A. Domestic
1. AT&T SDN Services
(a) Base Discounts - The Customer will receive the same discounts as
a $300,000 Term and Volume Plan as specified in AT&T Tariff F.C.C. No. 1.
(b) Additional Discounts - The Customer will receive the following
additional discounts on the total usage charges under Rate Schedules E, G, H1,
H2 and P.
I. If the MARC is $200,000, the following discounts will apply:
Total Undiscounted
Monthly Usage Charges Additional Discount
--------------------- -------------------
Over $0 up to $85,000 30%
Over $85,000 25%
Printed in U.S.A.
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Page 5
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
5.A.1.(b) Base Discounts (continued)
II. If the MARC is $500,000, the following discounts will apply:
Total Undiscounted
Monthly Usage Charges Additional Discount
--------------------- -------------------
over $0 up to $100,000 30%
Over $100,000 25%
III. If the MARC is $750,000, the following discounts will apply:
Total Undiscounted
Monthly Usage Charges Additional Discount
--------------------- -------------------
Over $0 up to $250,000 30%
Over $250,000 25%
B. International
1. AT&T SDN Services
(a) Base Discounts - The Customer will receive the same discounts as
a $300,000 Term and Volume Plan as specified in AT&T Tariff F.C.C. No. 1.
(b) Additional Discounts - None
6. Classifications, Practices and Regulations
A. Except as otherwise provided in this Contract Tariff, the rates and
regulations that apply to the Services Provided specified in Section 1,
preceding, are as set forth in the Applicable AT&T Tariffs that are referenced
in Section 1., preceding, as such tariffs are amended from time to time.
B. Monitoring Conditions - The Customer must satisfy the following Service
Requirements which will be monitored on each anniversary of the CISD. The
Monitoring Period is the 12 months immediately preceding each anniversary of
the CISD.
1. AT&T SDN Services
(a) The Customer must not exceed 600 Customer Premises which
generate/terminate calling from the Services Provided under this Contract
Tariff using switched access.
(b) The Customer must have at least 1 Customer Premises which
generate/terminate calling from the Services Provided under this Contract
Tariff using dedicated access.
Printed in U.S.A.
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Page 6
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
6.B.1. Monitoring Conditions (continued)
(c) At least 98% of the Customer's total annual minutes of use for the
Services Provided under this Contract Tariff must be AT&T SDN minutes of use
billed under Rate Schedules E, G, H1, and H2 minutes of use.
If the Customer, during the Monitoring Period, has failed to satisfy any of
these Service Requirements, the Customer will be billed an amount equal to the
Discounts as specified in Section 5.A.1.(b), preceding, that were received by
the Customer during the Monitoring Period. Any such bill must be paid by the
Customer within 30 days.
C. Promotions, Credits and Waivers
The following credits and waivers will be applied to the Customer's bill. If
at the end of the Contract Tariff Term the Customer has not fully used any or
all of the waiver(s) specified in this Section, the residual value of any such
waiver(s) will be set to zero and will not be applied to any other AT&T
services.
1. AT&T SDN Services/AT&T 800 Services
(a) AT&T will waive the Service Establishment Charge, not to exceed a
total of $10,000 over the Contract Tariff Term, for the AT&T SDN Services
provided under this Contract Tariff.
D. Discontinuance - In lieu of any Discontinuance With or Without Liability
provisions that are specified in the AT&T Tariffs referenced in Section 1.,
preceding, the following provisions shall apply.
The Customer may discontinue this Contract Tariff prior to the end of the
Contract Tariff Term, provided the Customer replaces the Services Provided
under this Contract Tariff with services provided under a new agreement(s) for
AT&T Services defined in AT&T Tariff No. 1 having: (i) an equal or greater new
annual revenue commitment and (ii) a new term equal to or greater than the
remaining term, but not less than 3 years. However, the Customer will be
billed a Prorated Shortfall Charge equal to the difference between: (1) the
MARC for the year in which the Customer discontinues, divided by 12, times the
number of months the Customer was in this Contract Tariff that year and (2)
the total of the actual domestic and international GMUCs incurred for that
year, provided the amount in (2) is less than the amount in (1).
If the Customer discontinues this Contract Tariff for any reason other than
specified above, prior to the expiration of the Contract Tariff Term, a
Termination Charge will apply. The Termination Charge will be an amount equal
to 100% of the unsatisfied MARC for the year in which the Customer
discontinues this Contract Tariff and 100% of the MARC for each year remaining
in the Contract Tariff Term.
Printed in U.S.A.
<PAGE>
AT&T COMMUNICATIONS CONTRACT TARIFF NO. 9886
Adm. Rates and Tariffs Original Page 7
Bridgewater, NJ 08807
Issued: June 23, 1998 Effective: June 24, 1998
** All material on this page is new. **
6. Classifications, Practices and Regulations (continued)
E. Other Requirements - Not Applicable.
F. Availability - This Contract Tariff is available only to Customers who:
(1) will order this Contract Tariff only once, either by the Customer or any
Affiliate of the Customer, which is any entity that owns a controlling
interest in either the Customer or an Affiliate of the Customer, or any entity
in which a controlling interest is owned by either the Customer or an
Affiliate of the Customer; and (2) order service within 30 days after the
effective date of this Contract Tariff and requests initial installation no
later than 30 days after the date service is ordered.
Printed in U.S.A.
<PAGE>
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, except
for the third from last paragraph of Note 1 and the second paragraph of Note 7,
as to which the date is December 22, 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-month period 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
December 23, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,175,766
<SECURITIES> 0
<RECEIVABLES> 114,419
<ALLOWANCES> (7,000)
<INVENTORY> 0
<CURRENT-ASSETS> 2,423,810
<PP&E> 1,364,337
<DEPRECIATION> (159,304)
<TOTAL-ASSETS> 3,791,675
<CURRENT-LIABILITIES> 308,173
<BONDS> 0
0
0
<COMMON> 301
<OTHER-SE> 3,483,201
<TOTAL-LIABILITY-AND-EQUITY> 3,791,675
<SALES> 174,495
<TOTAL-REVENUES> 214,115
<CGS> 147,629
<TOTAL-COSTS> 1,818,261
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,822
<INCOME-PRETAX> (1,859,597)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,859,597)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,859,597)
<EPS-PRIMARY> 0.74
<EPS-DILUTED> (0.74)
</TABLE>
